Gazprom-AR2014

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Board of Directors’ Report on OAO Gazprom’s Development in Priority Areas of Operation in 2014 43 Resource base development to ensure gas infrastructure expansion in Russian regions (meeting held in person on 27 November 2014) The Board of Directors took note of the information on the Company’s progress in developing its resource base to ensure the expansion of gas infrastructure in Russian regions. Gazprom Group takes consistent large-scale efforts to develop its mineral resource base. A special focus is made on accelerating preparation of hydrocarbon reserves for commercial development in Eastern Siberia and the Russian Far East, where gas consumption is expected to grow at above the national rate over the next decade. This growth will be driven by new gas chemical and gas processing facilities to be built there, as well as by the expansion of gas infrastructure along the Power of Siberia gas pipeline route. It was also emphasised during the meeting that gas supplies to Russian consumers (with account for intensive gas infrastructure expansion efforts), as well as the Company’s gas export obligations were fully covered by Gazprom’s mineral resource base over the long run. The Company’s relevant business units were instructed to continue their resource base development efforts. Results of monitoring the evolution of shale gas industries around the world (meeting held in person on 27 November 2014) OAO Gazprom’s Board of Directors paid all necessary attention to the evolution of shale gas industries in various regions of the world. In 2013–2014, production growth slowed at US shale gas deposits, with any other country outside North America showing no progress in tapping shale gas reserves. At the same time, shale oil production in Russia is still unlikely to be economically viable. This is due to the vast existing reserves of conventional gas, whose production costs are considerably lower than the estimated costs of shale gas extraction, as well as to the adverse environmental impacts of shale gas production. Prospects for changes in the global gas market structure (meeting held in person on 22 April 2014) OAO Gazprom’s Board of Directors took note of anticipated possible changes in the structure of the global gas market. It was noted during the meeting that the gas industry’s development was increasingly affected by efforts to bolster energy security as investment requirements of gas infrastructure expansion grew, as well as by geopolitical issues. Most of the scenarios considered suggest that in the long run Europe as OAO Gazprom’s key market would show increased demand for natural gas as own production would fall. Possible consumption drivers might include the revived role of natural gas in the power sector and a wider use of gas motor fuel by motor vehicles and marine vessels. Increased demand will drive imports of both pipeline gas and LNG. Another trend assumed in a number of scenarios is growing capex and opex for new international LNG projects. The situation is complicated by government initiatives in a number of countries to restrict LNG exports, which may result in a shortage of natural gas and LNG in the global market. In this situation, the build-up of gas supplies to Europe and the implementation of LNG projects on the Baltic Sea and in the Russian Far East would allow the Company not only to meet the increased demand of European consumers but to offer extra supplies of Russian gas to the premium Asia-Pacific market. OAO Gazprom Annual Report 2014
44 Board of Directors’ Report on OAO Gazprom’s Development in Priority Areas of Operation in 2014 The Company’s efforts to apply for patents and secure patent protection for R&D results (meeting held in person on 25 February 2014) The Board of Directors approved OAO Gazprom’s efforts to obtain patents and secure subsequent patent protection for its R&D results. The Board of Directors was informed, inter alia, about the progress in developing OAO Gazprom’s patent filing strategy to be subsequently used as a guide in prioritising patent applications and optimising patent application procedures, as well as about the Company’s efforts in training and improving capabilities of intellectual property specialists. Competition in the Russian gas market (meeting held in person on 26 March 2014) It was pointed out during the meeting that a fully functional competitive natural gas market in Russia was in line with the state energy policy and benefited Russian consumers. Positive competition between producers is essential primarily for creating economic conditions that enable reliable gas supplies to consumers. It is OAO Gazprom’s consistent stand that level playing field must be provided to each and every player of the Russian gas market. The existing gas market model has a number of fundamental flaws that prevent further competition, including high share of the regulated segment in the gas market, unsustainable wholesale prices, and interregional cross-subsidies affecting regional gas pricing. However, a real competition for consumers that benefits consumers can only be possible if equal opportunities are offered to all market players, with a simultaneous launch of an organised gas trading platform in Russia and introduction of a commercial gas balancing system. OAO Gazprom constantly liaises with federal authorities to improve the existing approaches to state regulation of gas prices. The Company believes that gas supplies to different regions should be made equally profitable. In addition, proposals were submitted for shifting the gas industry to price and tariff regulation based on reasonable costs and include an economically sound standard rate of margin in wholesale prices. OAO Gazprom’s Management Committee was instructed by the meeting to continue its efforts to improve the Company’s competitive ability. Financial and Business Activity, Investment Activity, and Audit Throughout the reporting year, OAO Gazprom’s Board of Directors paid considerable attention to the matters related to maintaining controls over financial and business, and investment activities. Key parameters of OAO Gazprom’s operations in 2014 were approved by the Board of Directors in late 2013 and outlined in the Investment Programme, Budget (Financial Plan) and Cost Optimisation (Reduction) Programme. Amending OAO Gazprom’s Investment Programme, Budget (Financial Plan) and Cost Optimisation (Reduction) Programme 2014 (meeting held in person on 21 October 2014) Based on the Company’s 9M 2014 results, OAO Gazprom’s Board of Directors approved new versions of the Investment Programme, Budget (Financial Plan), and Cost Optimisation (Reduction) Programme for 2014. Adjustments to the 2014 Investment Programme were primarily due to the need to increase long-term financial investments, as well as investments in OAO Gazprom’s top priority strategic gas transportation and production projects. OAO Gazprom’s preliminary results for 2014; performance of the Investment Programme, Budget (Financial Plan), and Cost Optimisation (Reduction) Programme for 2015; and forecasts until 2017 (meeting held in person on 23 December 2014) During its meeting held in December 2014, the Board of Directors, having reviewed the Company’s preliminary results for 2014, approved OAO Gazprom’s Investment Programme, Budget (Financial Plan) and Cost Optimisation (Reduction) Programme for 2015. OAO Gazprom Annual Report 2014
Page 1 and 2: OAO Gazprom Annual Report 2014 The
Page 3 and 4: Contents 4 Statement of OAO Gazprom
Page 5 and 6: 4 Statement of OAO Gazprom’s Chai
Page 7 and 8: 6 Major results Gazprom Group Resul
Page 9 and 10: 8 Company Information OAO Gazprom
Page 11 and 12: 10 Company Information OAO Gazprom
Page 13 and 14: 12 Company Information Track Record
Page 15 and 16: 14 Company Information Gazprom Grou
Page 17 and 18: 16 Company Information Operations a
Page 19 and 20: 18 Business Development Prospects S
Page 21 and 22: 20 Business Development Prospects G
Page 23 and 24: 22 Business Development Prospects E
Page 25 and 26: 24 Business Development Prospects T
Page 27 and 28: 26 Business Development Prospects E
Page 29 and 30: 28 Business Development Prospects P
Page 31 and 32: 30 Business Development Prospects U
Page 33 and 34: 32 Business Development Prospects S
Page 35 and 36: 34 Board of Directors and Managemen
Page 43: 42 Board of Directors’ Report on
Page 47 and 48: 46 Board of Directors’ Report on
Page 49 and 50: 48 Trends and Developments on Oil a
Page 55 and 56: 54 Performance Results Exploration
Page 57 and 58: 56 Performance Results Distribution
Page 59 and 60: 58 Performance Results Distribution
Page 61 and 62: 60 Performance Results The company
Page 63 and 64: 62 Performance Results Hydrocarbon
Page 65 and 66: 64 Performance Results Transportati
Page 67 and 68: 66 Performance Results Gas transpor
Page 69 and 70: 68 Performance Results Gas Infrastr
Page 71 and 72: 70 Performance Results Hydrocarbon
Page 73 and 74: 72 Performance Results Gazprom, on
Page 75 and 76: 74 Performance Results OAO Mezhregi
Page 77 and 78: 76 Performance Results Major invest
Page 79 and 80: 78 Performance Results European gas
Page 81 and 82: 80 Performance Results In accordanc
Page 83 and 84: 82 Performance Results Oil and gas
Page 85 and 86: 84 Performance Results Sales of ref
Page 87 and 88: 86 Innovations In 2014, the budget
Page 89 and 90: 88 Innovations — produced a techn
Page 91 and 92: 90 Innovations 14 meetings of coord
Page 93 and 94: 92 Environment and Social Responsib
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94 Environment and Social Responsib
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100 Environment and Social Responsi
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110 Corporate Governance OAO Gazpro
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112 Corporate Governance Corporate
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114 Corporate Governance Summary of
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116 Corporate Governance Remunerati
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118 Corporate Governance In additio
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120 Corporate Governance Liability
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122 Corporate Governance Audit Comm
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124 Corporate Governance The intern
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126 Corporate Governance Efficient
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128 Corporate Governance Stock Mark
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130 Corporate Governance Dividend P
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132 Risk Management Gazprom has con
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134 Risk Management Customs, curren
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136 Glossary ADR of OAO Gazprom APG
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138 Corporate Governance Units of M
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140 Additional information List of
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142 Additional information 11. Adde
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144 Additional information 27. Bank
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146 Additional information 45. Adde
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148 Additional information 59. Trad
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150 Additional information 68. Trad
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152 Additional information 84. Cont
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154 Additional information 96. Volu
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156 Additional information Inclusio
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158 Additional information Improvem
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160 Additional information These ef
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162 Addresses and Contact Details F
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