Gazprom-AR2014

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Board of Directors’ Report on OAO Gazprom’s Development
in Priority Areas of Operation in 2014
other companies. Under a memorandum signed with OAO Russian Railways, sections of the national
railway network were selected to operate locomotives converted to liquefied natural gas
(LNG), as well as sites for constructing LNG production facilities and railway vehicle filling stations.
In addition, Gazprom has been investing a lot of efforts in growing the number of vehicles
running on natural gas. Agreements are signed with regional governments, with the local authorities
taking commitments to ensure creation (expansion) of NGV fleets in parallel with the construction
of new CNG filling stations. Agreements of intent are also concluded with fleet operators
based within the future areas of the CNG filling network expansion to ensure demand for the
services of the newly constructed stations, as well as cooperation agreements with Russian and
foreign manufacturers and suppliers of NGVs to expand the offering of natural gas vehicles.
Gazprom actively converts its own vehicle fleet to natural gas and continues to assess options for
developing the gas motor fuel segment in foreign markets. OAO Gazprom’s Management Committee
was instructed to continue promotion of natural gas as a motor fuel both domestically and
internationally.
Approval of the Regulation on the Company’s Key Performance Indicators (meeting held
in person on 21 October 2014)
The Board of Directors approved the Regulation on OAO Gazprom’s Key Performance Indicators.
The document was drafted with due regard to the Methodological Guidelines issued by the Russian
Ministry of Economic Development and the Federal Agency for State Property Management,
as well as to OAO Gazprom’s existing key performance indicators (KPIs).
The Regulation defines the KPI metrics and framework, as well as the main KPI groups, and
KPI-related objectives, targets and requirements. The document also establishes KPIs to assess
the performance of the management of OAO Gazprom and its subsidiaries, incentivise members
of the Company’s Board of Directors and inform HR decisions. This group of KPIs included, inter
alia, such metrics as Total Shareholder Return (TSR) and Return on Equity (ROE), with a total
weight assigned in the group being as high as 30%.
The Company’s marketing policy on low- and large-tonnage LNG external markets
(meeting held in person on 26 March 2014)
In 2014, the Board of Directors reviewed the Company’s marketing policy on low- and large-tonnage
LNG external markets.
Currently, the global LNG market demonstrates a sustained growth in demand at an average
of 3% a year. This positive trend is observed primarily in the premium fast-growing Asia-Pacific
markets. In addition, the Company is keen to expand into the emerging markets of South-East
Asia, South America and the Middle East, as well as the European markets not yet covered by
Russian pipeline gas supplies.
In this situation, to gain a stronger foothold in large-tonnage LNG Gazprom’s has focused
on marketing gas from new projects. In particular, the Group is exploring the option to ramp up
natural gas supplies from Sakhalin II LNG plant through the addition of a third production train.
The LNG plant in Vladivostok started marketing its gas and the Baltic LNG project is under development.
By steadily growing its LNG output Gazprom will be able to seize a 15% share of the
global market by 2030.
The Group’s marketing policy on low-tonnage LNG supplies provides for the fullest coverage
of all potential consumer groups and building an established customer portfolio to secure sales.
To promote the use of LNG as a motor fuel Gazprom specifically develops collaboration with major
European motor freight and passenger transport companies, as well as major retailers with
vast vehicle fleets. In addition, the Group aims to develop port infrastructures in the regions where
LNG is used as a marine fuel and seeks cooperation with the housing and utility sector, and smalland
medium-sized industrial consumers.
OAO Gazprom Annual Report 2014