Gazprom-AR2014

46
Board of Directors’ Report on OAO Gazprom’s Development
in Priority Areas of Operation in 2014
to remote Russian regions with higher revenues from gas sales to consumers located closer to
its production sites. In fact, the markets in these high-margin regions are dominated by independent
gas producers. They enjoy a number of advantages over Gazprom, in particular the ability to
sell gas at unregulated prices while enjoying a lower tax burden and zero infrastructure maintenance
costs, and offer more flexible sales terms to major and established consumers.
To eliminate cross-subsidies wider divergence from the average gas price growth rate should
be allowed in individual constituent regions of Russia. At the same time, tariffs for gas transportation
services should rise faster for shorter supply routes. This would help gradually eliminate
cross-subsidies and achieve comparable sale margins across regions.
Overall, the development of fair competition in the domestic market requires a significant
change such as a shift from the current practice of regulating prices for industrial consumers (with
price levels prescribed for each region) to contractual pricing within a regulated band.
OAO Gazprom’s Management Committee was instructed by the meeting to continue efforts
to improve pricing in the domestic market and eliminate cross-subsidies between different Russian
regions.
Improving investor and shareholder relations (meeting held in person on 26 March 2014)
The meeting noted that OAO Gazprom was consistently building productive relationships with
investors. The Company is committed to becoming more open to investors and shareholders and
as transparent as practicably possible, and ensuring protection of the rights and interests of its
security holders.
OAO Gazprom is focused on attracting new investors. In a welcome development in the Russian
stock market, Moscow Exchange has transferred OAO Gazprom’s shares from its Non-Listed
Securities Register to Quotation List A, Level 2 (QLA2), which enables a significantly greater number
of Russian investors, including funds managing pension savings and insurance reserves, to
deal in the Company’s securities.
Options for transactions involving OAO Gazprom’s securities are expanded. In February 2014,
Moscow Exchange launched trade in OAO Gazprom’s ADRs, which provided professional players
of the Russian securities market with access to inter-dealer (exchange-traded) repo transactions
in ADRs.
OAO Gazprom will continue to actively develop its interfaces with investors and shareholders.
The Company intends to accelerate publication of its financial statements and enhance information
disclosure, including information about investment projects, in line with best corporate
governance practice. The Company will continue contributing to reform of Russian legislation
to improve the investment climate and protect the rights of investors and ADR holders.
Taxation of the gas industry (meeting held in person on 11 July 2014)
The industry has seen a significant growth in tax burden over the recent years, with regulated
prices in the domestic market prioritised by Gazprom currently growing at lower rates than its tax
burden.
The meeting noted that Gazprom successfully fulfilled its government-set task of supporting
Russia’s energy security. Every year, the Group invests considerable amounts to develop new and
existing fields and consistently expands the Unified Gas Supply System (UGSS). A stable tax regime
is essential for the sustained development of the Russian gas industry. It largely determines
predictability of investments to large-scale capital-intensive gas projects. Therefore, the Company
pro-actively liaises with federal and regional authorities to secure state support for the gas industry.
Progress in implementing urgent measures to improve payment discipline for natural gas
supplies (meeting held in person on 23 December 2014)
OAO Gazprom’s Board of Directors took note of the information about the progress in implementing
urgent measures to strengthen payment discipline for supplies of natural gas to the domestic
market.
OAO Gazprom Annual Report 2014