PJSC Gazprom Annual Report
2018
A Strategic Resource
PJSC Gazprom Annual Report
2018
A Strategic Resource
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PJSC Gazprom Annual Report 2018 This Annual Report has been prepared based
on Resolution No. 1 of PJSC Gazprom’s
Management Committee On Organising
Activities Related to Holding PJSC Gazprom’s
Annual General Shareholders Meeting dated
24 January 2019.
The terms “PJSC Gazprom” and the “Company”
used in this Annual Report refer to the parent
company of Gazprom Group, i.e. to Public
Joint Stock Company Gazprom (Open Joint
Stock Company Gazprom, JSC Gazprom, before
17 June 2015). The terms “Gazprom Group”,
the “Group” or “Gazprom” mean an aggregate
of entities which includes PJSC Gazprom and
its subsidiaries and entities. For the purposes
of this Annual Report, the lists of Gazprom
Group’s subsidiaries and entities, associates
and joint ventures, as well as entities in which
Gazprom has investments classified as joint
operations, were prepared based on the princi-
ples used in the preparation of PJSC Gazprom’s
IFRS consolidated financial statements.
Similarly, the terms “Gazprom Neft Group”
and “Gazprom Neft” refer to PAO Gazprom
Neft and its subsidiaries and entities; “Gazprom
energoholding” refers to OOO Gazprom energo-
holding and its subsidiaries; and “Gazprom
neftekhim Salavat” refers to OOO Gazprom
neftekhim Salavat and its subsidiaries.
This Annual Report determines some operating
and economic parameters in accordance with
the IFRS principles for Gazprom Group’s enti-
ties included in the IFRS consolidated financial
statements of PJSC Gazprom for the year
ended 31 December 2018. Therefore, they may
differ from similar parameters in reports of
PJSC Gazprom prepared under Russian statu-
tory requirements.
Moreover, some operating parameters
of PJSC Gazprom, its subsidiaries, entities,
associates, and joint ventures are determined
in accordance with the principles underlying
management reporting. Parameters calculated
using these methods might be not comparable
between each other due to differences in the
methodologies used for preparing consoli-
dated financial statements and for manage-
ment reporting.
Analysis of financial results should be read
in conjunction with the audited consolidated
financial statements of PJSC Gazprom for
the year ended 31 December 2018 prepared
in accordance with IFRS.
Among other things, the Annual Report
discloses information on the future production
and economic activities of Gazprom Group,
based on Gazprom management’s forecasts
and estimates considering the current situation.
Actual results may differ from the said fore-
casts and estimates due to the effect of various
objective factors.
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Annual Report
2018
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018 Letter to Shareholders
by the Chairman of PJSC Gazprom’s
Board of Directors
and the Chairman of PJSC Gazprom’s
Management Committee
Dear Shareholders,
The reporting year was extremely successful for Gazprom. We delivered on all our targets and
demonstrated an impressive operational performance against key indicators while achieving
strong financial results.
In 2018, Gazprom produced 498.7 bcm of gas,* up 5.6% or 26.6 bcm year-on-year. We
made further substantial progress on expanding our production potential, primarily on the
Yamal Peninsula. In December 2018, the Bovanenkovskoye field — our core field in Yamal —
was ramped up to its design capacity of 115 bcm per year. The field is expected to produce for
more than a hundred years, until 2128. The Kharasaveyskoye field is another of our core assets
in the peninsula. Its full-scale development was launched in March 2019 and is expected to
last until 2131. The field’s launch was an important step towards building Russia’s largest gas
production hub.
During the year, we had a strong focus on expanding Russia’s Northern Gas Transmission
Corridor from Yamal to the Baltic. Compressor plants were launched at four compressor sta-
tions of the Bovanenkovo — Ukhta 2 gas pipeline, and a new high-tech gas pipeline, Ukhta —
Torzhok 2, was commissioned. In 2019, the Group will complete construction of the gas pipe-
line from Gryazovets to the Slavyanskaya CS near the seaport of Ust-Luga — the starting point
of the new Nord Stream 2 gas pipeline running from Russia to Europe. Its deep-water installa-
tion across the Baltic Sea began in September 2018. Combined with the Nord Stream 1
pipeline, already successfully operating to meet high consumer demand, Nord Stream 2 will
double our capacity for gas supply in the region.
The offshore installation of another export gas pipeline, TurkStream, running across the
Black Sea, was completed ahead of schedule in November. TurkStream is the world’s first
trunk pipeline with a pipe diameter of 812 mm installed at a depth of 2,200 metres. The pipe-
line was installed at a rate of up to 6.33 km per day — a world record for deep-water offshore
gas pipelines.
Gazprom has ample resources to fully meet its supply commitments under the Nord
Stream 2 and TurkStream projects, both of which are important for maintaining energy security
in Europe as its domestic gas production declines.
Gazprom supplied 201.9 bcm of gas to European far abroad countries in 2018, hitting
a record high for the third year running. Gazprom’s share in gas supply to Europe also reached
an all-time high of 36.8%.
Gazprom’s pipeline gas will start flowing to the Asian market via China on 1 December
2019. Russian gas will be supplied through the Eastern route of the Power of Siberia gas pipe-
line, first from the Chayandinskoye field and then from the Kovyktinskoye field. Drilling of gas
production wells and installation of on-site equipment were continued at the Chayandinskoye
field during the year, while construction of the linear section of the Power of Siberia gas pipe-
line has mostly been completed. Adjacent to the border between Russia and China, the
Atamanskaya compressor station was also being actively constructed throughout the year.
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* Including the share in the production volumes of entities in which Gazprom has investments classified as joint operations.
PJSC Gazprom Annual Report 2018
Letter to Shareholders
by the Chairman of PJSC Gazprom’s
Board of Directors
and the Chairman of PJSC Gazprom’s
Management Committee
Rapidly increasing its gas imports, China became the world’s largest natural gas importer in
2018. Experts believe that this trend will persist, as gas consumption in China will continue to
outpace the country’s domestic production. Therefore, another two high-potential projects are
on the agenda of Gazprom and CNPC, our Chinese partner: the Western and Far Eastern
routes.
Our strong focus on the oil and power generation sectors generates tremendous long-
term synergies for Gazprom’s business.
PAO Gazprom Neft ranks among the Top 3 Russian companies by oil production and
refining volumes, and is among the industry leaders by efficiency. The Triton field discovered
in the Sea of Okhotsk through exploration by PAO Gazprom Neft was a major discovery in the
global oil and gas industry in 2018.
OOO Gazprom energoholding is Russia’s leading heat and electricity generator. The
launch of Unit 2 at the Grozny TPP in 2019 will be the final step in the ambitious investment
programme to build and upgrade Gazprom energoholding’s assets in line with its obligations
under capacity supply agreements (CSAs). Thirty-six generating facilities with a total installed
electrical capacity of about 9 GW will thus have been constructed and revamped over
12 years.
Active contribution to societal and economic growth across the Russian regions is a top
priority for Gazprom. The Programme for Expansion of Gas Infrastructure in Russian Regions is
the Company’s largest project in this area, connecting 272 locations across 66 Russian re-
gions to the gas grid in 2018, primarily in rural areas. As a result, the gas infrastructure cover-
age in Russia reached 68.6% by 1 January 2019. Gas infrastructure expansion leads to higher
living standards, improved environmental conditions, and a powerful impetus for industrial
growth.
In implementing its major projects, PJSC Gazprom leverages domestic production and its
R&D capabilities. A stronger focus on import substitution in recent years has brought impres-
sive results. Our breakthrough technology solutions deployed across a number of business
areas will help deliver on our import substitution goals and also support the accelerated devel-
opment agenda, while showing potential for both domestic applications and technology ex-
ports. Innovation and technology leadership are essential to maintaining Gazprom’s success
going forward.
Dear Shareholders, Gazprom delivered outstanding financial performance in 2018. Profit
attributable to the owners more than doubled year-on-year, leading to the highest dividends in
the Company’s history recommended by the Board of Directors for the year.
Gazprom is a robust, advanced, and highly efficient business. Our success is driven
by our ambitious goals, smart long-term planning, clear goal-setting, and strong performance
against targets. We are confident that Gazprom will continue to deliver stable growth across
all strategic priorities.
Viktor Zubkov
Chairman of PJSC Gazprom’s Board of Directors
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Alexey Miller
Chairman of PJSC Gazprom’s Management Committee
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018 Contents
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
1
2
3
4
5
6
Company
Information 36
Strategy 66
Performance
Results 90
Environmental
and Social
Responsibility 140
Corporate
Governance 162
Appendices 210
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018 Company
Information
36
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Gazprom Group Today 38
Operations and Marketing Geography 43
Gazprom Group’s Position
in the Global and Russian Energy Industry 46
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Business Model 50
The Company’s History 56
PJSC Gazprom’s Board of Directors 59
PJSC Gazprom’s Management Committee 62
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Gazprom Group Today
Gazprom is one of the world’s largest oil and gas
companies in terms of reserves, production, and market
capitalisation.
Key Figures for 2018
RUB8,224.2 bn
Gazprom Group’s net sales revenue
RUB1,795.9 bn
Capital expenditures
Gazprom Group’s net sales revenue breakdown, RUB bn
Net revenue from gas sales
4,303.7
Net revenue from sales
of refined products
Net revenue from sales
of crude oil and gas condensate
Net revenue from sales
of electricity and heat
Net revenue from gas transportation
sales
Other revenues
2,179.8
734.9
522.1
225.7
258.0
RUB1,456.3 bn
Profit for the year attributable to the owners
of PJSC Gazprom
35,195.3 bcm
Natural gas reserves in Russia as at 31 December 2018*
498.7bcm
Natural and associated gas production in Russia**
466.1thousand people
Total headcount as at 31 December 2018
5.1%
Cost of debt as at 31 December 2018
* Russian classification of reserves. A+B1+C1 gas reserves, including reserves of entities in which Gazprom has investments classified as joint operations.
** Including the Group’s share in the production volumes of entities in which Gazprom has investments classified as joint operations.
PJSC Gazprom Annual Report 201838 Gazprom Group Today
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Mission
Reliable, efficient and balanced supply of natural gas,
other energy resources, and their derivatives
to consumers.
Strategic Goal
Establishing itself as a leader among global energy
companies by diversifying sales markets, ensuring reliable
supplies, driving operational efficiencies, and leveraging
R&D capabilities.
Company’s ranking positions and certification
of PJSC Gazprom’s management systems
to internationally recognised standards
No. 1 in the 2018 Ranking of Russia’s Most Attractive
Employers according to University Students majoring
in Engineering / Natural Science, compiled by
Universum
OHSAS 18001:2007
Certificate of compliance for PJSC Gazprom’s Unified
Occupational Health and Safety Management System
(UOHSMS) also covering 56 of its subsidiaries and entities.
ISO 9001:2015
Certificate of compliance for PJSC Gazprom’s Quality
Management System also covering 64 of its subsidiaries and
entities.
International and national sustainability initiatives
PJSC Gazprom has committed to
UN Global Compact Principles
Transforming Our World: the 2030 Agenda for
Sustainable Development, Resolution adopted
by the UN General Assembly on 25 September 2015
Russian Standard GOST R ISO 26000:2012 —
Guidance on Social Responsibility
Public Non-Financial Reporting Development Concept
and the Concept Implementation Plan approved by
Russian Government Decree No. 876-r dated 5 May
2015
Corporate Governance Code approved by the Board of
Directors of the Bank of Russia on 21 March 2014
ISO 14001:2015
Certificate of compliance for PJSC Gazprom’s Environmental
Management System (EMS) covering 34 of its wholly-owned
subsidiaries and entities.
Anti-Corruption Charter of Russian Business
Social Charter of Russian Business
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PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201839
Gazprom Group Today
Operating Highlights
Financial Highlights
Natural and associated gas production in Russia, bcm*
Net sales revenue, RUB bn
2016
2017
2018
420.1
472.1
498.7
2016
2017
2018
Oil production in Russia, mm tonnes*
Adjusted EBITDA, RUB bn
2016
2017
2018
Gas condensate production in Russia, mm tonnes*
2016
2017
2018
47.2
48.6
48.3
15.9
15.9
15.9
2016
2017
2018
Capital expenditures, RUB bn
2016
2017
2018
Total hydrocarbon production in Russia, mm boe*
Free cash flow, RUB bn
2016
2017
2018
3,202.5
3,550.2
3,720.7
2016
2017
2018
Liquid hydrocarbon processing, mm tonnes**
Net debt / adjusted EBITDA
2016
2017
2018
65.9
64.1
67.4
2016
2017
2018
6,111.1
6,546.1
8,224.2
1,323.3
1,467.7
2,599.3
1,357.3
1,504.6
1,795.9
202.3
−218.8
−22.1
1.5
1.6
1.2
Electricity generation, billion kWh
2016
2017
2018
157.5
156.5
153.2
Note: Calculated as the ratio of net debt to adjusted EBITDA denominated in Russian
roubles.
* Including the Group’s share in the production volumes of entities in which Gazprom has investments classified as joint operations.
** Excluding tolling arrangements.
PJSC Gazprom Annual Report 201840 n
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Share Capital
Shares are listed on:
The Moscow Exchange — ordinary shares
The London Stock Exchange (LSE) — ADRs
Tickers: GAZP, OGZD
Industry: Integrated Oil and Gas
PJSC Gazprom’s shareholding structure as at 31 December 2018, %
The Russian Federation represented by
the Federal Agency for State Property
Management
AO ROSNEFTEGAZ*
AO Rosgazifikatsiya*
ADR holders**
Other registered holders
38.37
10.97
0.89
24.13
25.64
2,829.6
3,266.5
3,863.8
1,932.9
2,397.5
3,014.4
896.7
869.0
849.4
Gazprom Group Today
Debt Capital
Total debt, RUB bn
2016
2017
2018
Net debt, RUB bn
2016
2017
2018
Cash and cash equivalents, RUB bn
2016
2017
2018
Debt maturities as at 31 December 2018, %
Less than 1 year (inclusive)
1–2 years (inclusive)
2–5 years (inclusive)
Over 5 years
15
16
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Credit ratings of PJSC Gazprom
Rating agency
Standard & Poor’s
Fitch Ratings
Moody’s
Dagong
ACRA
Long-term
foreign currency rating
BBB−
(stable outlook)
BBB−
(positive outlook)
Baa2
(stable outlook)
AAA
(stable outlook)
AAA
(stable outlook)
Rating date
27 February 2018
25 September 2018
12 February 2019
30 October 2018
31 January 2019
* The cumulative shareholding in PJSC Gazprom controlled directly or indirectly by the Russian Federation and calculated by direct addition totals 50.23% and is owned through the full
ownership of AO ROSNEFTEGAZ, which also holds a 74.55% stake in AO Rosgazifikatsiya.
** ADRs representing PJSC Gazprom’s shares were issued by The Bank of New York Mellon.
41
PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201841
Gazprom Group Today
Environmental and Social Responsibility
Dividends
PJSC Gazprom is committed to sustainable development
and is guided by Russian laws and internationally recognised
sustainability initiatives.
PJSC Gazprom’s balanced dividend policy reflects the
Company’s commitment to achieve long-term growth targets
while increasing shareholder returns.
The Company is focused on enhancing public
non-financial reporting and supports respective regulatory
initiatives of the Russian Government.
Lost-time injury frequency rate (LTIFR) across entities
covered by the UOHSMS
PJSC Gazprom’s dividend history and dividend yields, 2014–2018*
Dividend per share, RUB
PJSC Gazprom’s
dividend yield, %**
2014
7.20
2015
2016
7.89 8.0397
2017
8.04
2018
**
16.61
5.5
5.8
5.2
6.2
10.8
2016
2017
2018
0.16
0.11
0.17
Relative greenhouse gas emissions from Gazprom Group’s
gas operations vs the 2014 baseline, tonnes of CO2 equivalent
per toe of products sold
2014
2018
0.275
0.259
* Dividend yield for the relevant period is calculated as a ratio of total dividend paid per share for the relevant year to the share price as at 31 December.
** Recommended dividend shown for 2018.
PJSC Gazprom Annual Report 201842Change 2018/2014−5.8% Operations and Marketing Geography
(in 2018 or as at 31 December 2018)
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Gazprom operates in more than 20 countries, and its products
are supplied to more than 130 markets around the world.
Gazprom Group’s operating geography
Gazprom Group’s marketing geography
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PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201843
Operations and Marketing Geography
Gazprom Group’s major production assets and projects in Russia, FSU and European far abroad countries
Dublin
London
Oslo
Murmansk
Apatity
1
2
Paris
Brussels
Amsterdam
Stockholm
Copenhagen
1
Berlin
2
Prague
5
Tallinn
Helsinki
2
Vyborg
Saint Petersburg
Petrozavodsk
1
Riga
Kaliningrad
1
Pskov
Volkhov
6
Warsaw
Vilnius
Vienna
Ljubljana
Zagreb
Bratislava
Budapest
Minsk
Torzhok
2
Vyazma
Moscow
Cherepovets
Gryazovets
8
Yaroslavl
Ryazan
Nizhny Novgorod
Bern
Rome
Ukhta
9
Sosnogorsk
Salekhard
1
Novy Urengoy
Peregrebnoye
Serov
3
Surgut
Khanty-
Mansiysk
10
Sarajevo
Belgrade
Podgorica
Tirana
Skopje
Bucharest
Sofia
Chisinau
Kiev
A
3
Petrovsk
Pisarevka
Pochinki
Yekaterinburg
Tyumen
Salavat
Troitsk
Omsk
Athens
Novocherkassk
Volgograd
Alexandrov Gai
7
Novorossiysk
Dzhubga
Sochi
Stavropol
4
Ankara
6
Astrakhan
Orenburg
5
Grozny
Tbilisi
Yerevan
B
Baku
Cairo
Beirut
Damascus
Amman
Astana
Tashkent
Bishkek
Baghdad
Tehran
Ashgabat
Dushanbe
Tomsk
Krasnoyarsk
Kemerovo
Novosibirsk
Barnaul
Biysk
Gorno-Altaysk
10
to China
Almaty
C
Largest fields
Gas production centres in operation
Underground gas storage facilities
Gas and gas condensate fields
Yamal Peninsula
Existing UGSFs
Oil fields
Nadym-Pur-Taz region
Oil and gas, oil and gas condensate fields
Sakhalin
Major trunk gas pipelines
Gazprom Group’s existing gas pipelines
Other existing gas pipelines
Gas pipelines under construction
and projected gas pipelines
Kamchatka
Orenburg
Astrakhan
Projected gas production centres
Irkutsk
Yakutsk
Other
Existing oil production centres
Existing UGSFs co-invested
by Gazprom Group
UGSFs under construction
and projected UGSFs
Power generation facilities
Existing power generation facilities
Power generation facilities
under construction and projected
power generation facilities
4
Sobolevo
Petropavlosk-Kamchatsky
8
11
Lensk
Aldan
3
Okha
Komsomolsk-on-Amur
Yuzhno-Sakhalinsk
Skovorodino
Svobodny
Blagoveshchensk
2
Khabarovsk
3 2
7
Irkutsk
Magistralny
Zhigalovo
Ulaanbaatar
to China
Vladivostok
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d oth
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of th
Tokyo
Pyongyang
Seoul
Beijing
PJSC Gazprom Annual Report 201844
Gazprom Group’s major production assets and projects in Russia, FSU and European far abroad countries
Dublin
London
Paris
Brussels
Amsterdam
Stockholm
Copenhagen
Berlin
1
2
Prague
Warsaw
Vilnius
5
Tallinn
Helsinki
2
Vyborg
Petrozavodsk
Saint Petersburg
1
Riga
Kaliningrad
1
Pskov
Volkhov
6
Minsk
Torzhok
2
Vyazma
Moscow
Cherepovets
Gryazovets
8
Yaroslavl
Ryazan
Nizhny Novgorod
Kiev
A
Pochinki
Bern
Rome
Vienna
Ljubljana
Zagreb
Bratislava
Budapest
Sarajevo
Belgrade
Podgorica
Tirana
Skopje
Bucharest
Sofia
Chisinau
Athens
7
Novorossiysk
Ankara
Novocherkassk
Volgograd
Alexandrov Gai
Dzhubga
Sochi
Stavropol
6
Astrakhan
Orenburg
5
Oslo
3
4
Murmansk
Apatity
1
Ukhta
9
Sosnogorsk
Salekhard
1
Novy Urengoy
Peregrebnoye
Serov
3
Surgut
Khanty-
Mansiysk
2
10
Petrovsk
Pisarevka
Yekaterinburg
Tyumen
Salavat
Troitsk
Omsk
Grozny
Tbilisi
Yerevan
B
Baku
Cairo
Beirut
Damascus
Amman
Baghdad
Tehran
Ashgabat
Dushanbe
Tashkent
Bishkek
Almaty
C
Tomsk
Krasnoyarsk
Kemerovo
Novosibirsk
Barnaul
Biysk
10
Gorno-Altaysk
to China
Operations and Marketing Geography
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Sobolevo
Petropavlosk-Kamchatsky
Vilnius
Minsk
8
11
Lensk
Aldan
3
Okha
Komsomolsk-on-Amur
Yuzhno-Sakhalinsk
Kiev
A
7
Irkutsk
Magistralny
Zhigalovo
Skovorodino
Svobodny
Blagoveshchensk
2
Khabarovsk
3 2
to China
Vladivostok
Astana
Ulaanbaatar
Pyongyang
Seoul
Beijing
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a
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Yerevan
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J
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Tokyo
Almaty
Bishkek
Tashkent
B
C
Existing refining/processing
and petrochemical assets
GPPs
Refineries
Petrochemical and gas chemical
production
Gazprom Group’s access
to the GPP’s capacity
Gazprom Group’s access
to the refinery’s capacity
Projects in refining/processing,
oil and gas chemistry
Novourengoysky Gas Chemical Complex
Amur GPP
45
LNG production and regasification assets
Key gas export routes
Kaliningrad regasification terminal
Nord Stream gas pipeline
LNG plant, Sakhalin
Yamal — Europe gas pipeline
Baltic LNG —
LNG plant project in Leningrad region
LNG production, storage
and shipping complex
near Portovaya compressor station
Phase 3 of LNG plant, Sakhalin
LNG supply routes
Existing LNG supply routes
Urengoy — Uzhgorod gas pipeline
Blue Stream gas pipeline
Gas transportation projects
Nord Stream 2 gas pipeline
Expansion of UGSS’
gas transportation capacity at the
Gryazovets — Slavyanskaya CS section
in the North-West region
Projected LNG supply routes
TurkStream gas pipeline
Ukhta — Torzhok 2
and Ukhta — Torzhok 3 gas pipelines
Bovanenkovo — Ukhta 2
and Bovanenkovo — Ukhta 3 gas pipelines
Power of Siberia 2 gas pipeline
Power of Siberia gas pipeline
PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201845
Gazprom Group’s Position
in the Global and Russian Energy Industry
(in 2018 or as at 31 December 2018)
Natural Gas
Gazprom is the global leader by natural gas reserves and
gas production, ahead of national oil and gas companies, as
well as major global public oil and gas companies.
PJSC Gazprom is the biggest supplier of natural gas
to European far abroad countries. Gazprom Group is the
absolute leader by sales in the Russian market.
Exploration
Production
No. 1 globally
by natural gas
reserves
No. 1 globally
by natural gas
production
Proved natural gas reserves
of major public oil and gas companies, tcm
Gas production
by major public oil and gas companies, bcm
Gazprom*
NOVATEK
Rosneft
Exxon Mobil
PetroChina
Gazprom***
BP
Exxon Mobil
PetroChina
Royal Dutch Shell
Source: PJSC Gazprom data, Bloomberg data, companies’ reports data
Source: PJSC Gazprom data, Bloomberg data, companies’ reports data
3 6 9 12 15
100 200 300 400 500
16%
of global natural gas reserves**
71%
of Russia’s natural gas reserves**
12%
of global natural gas production**
69%
of Russia’s natural gas production**
* Gazprom Group’s proved natural gas reserves under PRMS, including share in the reserves of entities in which Gazprom has investments classified as joint operations and excluding
share in the reserves of associates and joint ventures. 93.0% of Gazprom Group’s A+B1+C1 reserves (as per the Russian Classification of Reserves and Resources) were estimated under
PRMS standards as totalling 35.2 tcm. Data on other major public oil and gas companies includes share in the reserves of associates and joint ventures.
** Including the Group’s share in the reserves and production volumes of entities in which Gazprom has investments classified as joint operations.
*** Natural and associated gas production of Gazprom Group in Russia including share in the production volumes of entities in which Gazprom has investments classified as joint operations,
and including share in the production volumes of associates and joint ventures for data comparability with major public oil and gas companies.
PJSC Gazprom Annual Report 201846 Gazprom Group’s Position
in the Global and Russian Energy Industry
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Transportation
Marketing
No. 1 globally
by total length
of gas transportation system
(GTS)
172.6 thousand km
total length of GTS in Russia
Processing
No. 1 in Russia
by gas processing
volumes
More than50%
of Russia’s total gas processing volumes
No. 1 globally
by natural gas
exports
Gas sales
by Russia’s major gas suppliers, bcm
Gazprom
NOVATEK
Rosneft
Source: PJSC Gazprom’s IFRS consolidated financial statements
40 80 120 160 200
Gas sales
by major gas suppliers
to European far abroad countries, bcm
Gazprom*
Equinor**
Qatar Petroleum***
Sonatrach***
40 80 120 160 200
Note. PJSC Gazprom data, companies’ reports and website data available as at the time
of writing this Annual Report. Volumes of natural gas are given according to the Russian
standard conditions (calorific value of 8,850 kcal per cu m at 20°C).
36.8 %
of total gas consumption
in European far abroad countries****
* IFRS consolidated financial statements.
** Excluding volumes of gas sold from the SDFI portfolio.
*** Sales volumes of joint ventures are taken into account proportionally to share of participation.
**** Share of PJSC Gazprom’s gas sales under OOO Gazprom export’s contracts and Gazprom Schweiz AG’s direct contracts in the total gas consumption in European far abroad countries.
47
PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201847
Gazprom Group’s Position
in the Global and Russian Energy Industry
Oil and Gas Condensate
PAO Gazprom Neft is one of Russia’s leading oil companies
in terms of production and refining of liquid hydrocarbons.
Production
Refining
No. 3 in Russia
by oil and gas condensate
production
No. 2 in Russia
by oil and stable gas
condensate
refining volumes
Liquid hydrocarbon production in Russia
by largest Russian oil and gas companies, mm tonnes
Oil and stable gas condensate refining in Russia
by largest Russian oil and gas companies, mm tonnes
Gazprom*
Including Gazprom Neft*
LUKOIL**
Rosneft**
Surgutneftegas
Gazprom
Including Gazprom Neft
LUKOIL
Rosneft
Surgutneftegas
40 80 120 160 200
20 40 60 80 100
Source: PJSC Gazprom data, companies’ reports and website data available as at the time
of writing this Annual Report
Source: PJSC Gazprom data, companies’ reports and website data available as at the time
of writing this Annual Report
12%
of Russia’s oil and gas condensate production***
18%
of Russia’s total oil and stable gas condensate
refining volumes
* For data comparability with Russian oil and gas majors, Gazprom Group figures include share in the liquid hydrocarbon production volumes of associates and joint ventures.
** Including share in the production volumes of associates and joint ventures.
*** Including the Group’s share in the reserves and production volumes of entities in which Gazprom has investments classified as joint operations.
PJSC Gazprom Annual Report 201848 Gazprom Group’s Position
in the Global and Russian Energy Industry
Electricity and Heat Generation
Gazprom Group includes Russia’s largest power generation
holding company and market leader by installed capacity
in heat generation.
Electricity Generation
Heat Generation
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No. 1 in Russia
by heat generation
No. 1 in Russia
by installed
electrical capacity
and electricity output
in heat generation
Installed electrical capacity
of largest Russian generating companies in Russia, GW
Gazprom*
Inter RAO**
Rosenergoatom**
RusHydro**
7 14 21 28 35
Source: PJSC Gazprom data, companies’ reports and website data available as at the time
of writing this Annual Report
14 %
of Russia’s total electricity generation
* Installed electrical capacity of Gazprom energoholding and other generating assets of Gazprom Group in Russia.
** Including subsidiaries.
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PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201849
Business Model
(in 2018 or as at 31 December 2018)
Gazprom Group encompasses all types of activities required
to ensure uninterrupted supply of energy to consumers.
Its comprehensive vertically integrated business model is
aligned with Gazprom’s strategic goal, driving operational
efficiencies, improving reliability of supplies, and leveraging
the existing production and R&D capabilities.
All elements of Gazprom Group’s business complement
one another. At the same time, each element represents
a complex system, an aggregate of tangible assets, human
resources, and accumulated experience and knowledge
in relevant areas.
Consumers are the focus of the Group’s business. Stable,
trust-based relationships with our consumers are the founda-
tion for building long-term business value.
Gazprom Group is a major global energy company
whose performance results influence a great number of
stakeholders. These stakeholders include shareholders
and investors, federal and local authorities of the Russian
Federation, EU regulators and other gas market participants,
local communities, business partners, mass media, NGOs,
and employees.
Production and marketing of Gazprom Group
Geological
exploration
Oil
production
Crude
oil
transportation
Pipeline
oil
sales
Gas
and condensate
production
Gas
transportation
Oil
storage
Oil
products
sales
Underground
gas
storage
Oil refining
and petrochemical
production
Gas processing
and gas chemical
production
Electric power
and heat energy
production
Gas
products
sales
Electric power
and heat energy
sales
LNG
sales
Gas distribution
and supply
Pipeline
gas
sales
PJSC Gazprom Annual Report 20185050PJSC Gazprom Annual Report 2018 Business Model
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Competitive Advantages
The Company’s Extensive Resource Base
and Robust Production Infrastructure
An Established Portfolio of Long-term Contracts
for Gas Supplies to European and Asian Consumers
Unique Unified Gas Supply System (UGSS) of Russia
Access to International Capital Markets on Terms
acceptable to the Company
Vertical Integration of the Company
Favourable Geographical Position
between Europe and Asia
Track Record of Cooperation with Foreign Partners
and a Strong Reputation as a Reliable Supplier
Extensive Production, Research and Design
Capabilities
Social Policy that makes the Company
an Attractive Employer
for Highly Skilled Professionals
Gas processing
and gas chemical
production
Electric power
and heat energy
production
Gas
products
sales
Electric power
and heat energy
sales
LNG
sales
Gas distribution
and supply
Pipeline
gas
sales
51
Production and marketing of Gazprom Group
Geological
exploration
Oil
production
Crude
oil
transportation
Pipeline
oil
sales
Gas
and condensate
production
Gas
transportation
Oil
storage
Oil
products
sales
Underground
gas
storage
Oil refining
and petrochemical
production
PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 20185151PJSC Gazprom Annual Report 2018
Business Model
Exploration and Production
Resources and capital
35,195.3 bcm
of natural gas reserves in Russia*,**
3,620.1 mm tonnes
of oil and gas condensate reserves in Russia*,**
7,418
active gas production wells in Russia
8,489
active oil production wells in Russia
Performance highlights
498.7 bcm
of natural and associated gas production in Russia**
64.2 mm tonnes
of oil and gas condensate production in Russia**
1.60
natural gas reserve replacement ratio**
0.69
crude oil and gas condensate reserve replacement ratio**
Gas Transportation and Underground Storage
Resources and capital
Performance highlights
693.1 bcm
of gas transported via Gazprom’s GTS in Russia,
including 136.4 bcm of gas supplied by companies outside the Group
172.6 thousand km
total length of trunk gas pipelines in Russia
75.0 bcm
of aggregate working gas capacity
across 27 underground gas storage facilities in Russia
6.0 bcm
of working gas capacity across OOO Gazprom export’s
underground storage facilities (UGSFs)
by the start of the autumn and winter period 2018/2019
Processing/Refining
Resources and capital
Performance highlights
3 gas processing plants, a helium plant, condensate pretransportation
preparation plant, and condensate stabilisation plant in Russia
3 refineries in Russia and 2 refineries abroad
Gas chemical and petrochemical plants
31.1 bcm
natural and associated gas processing volumes***
67.4 mm tonnes
oil and gas condensate refining volumes***
51.4 mm tonnes
output of oil products
* A+B1+C1 reserves under the Russian classification.
** Including the Group’s share in the reserves and production volumes of entities in which Gazprom has investments classified as joint operations.
*** Excluding tolling arrangements.
PJSC Gazprom Annual Report 201852For more details see the Exploration and Production section For more details see the Transportation and Underground Storage sectionFor more details see the Hydrocarbon Processing and Petrochemicals section Business Model
Power Generation
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Resources and capital
Performance highlights
40.0 GW
total installed electrical capacity of generating assets
in Russia and abroad
153.2 billion kWh
total electricity generation
in Russia and abroad
131.2 mm Gcal
total heat generation
Marketing
Resources and capital
An established portfolio of long-term contracts for gas supplies
to European and Asian consumers
Reputation as a reliable supplier
Performance highlights
521.1 bcm
of gas sales
25.6 mm tonnes
of oil and gas condensate sales
68.9 mm tonnes
of refined products sales
Other Important Aspects of Activities
Resources and capital
Performance highlights
Access to international capital markets on terms acceptable
to the Company
Human capital
Integrated corporate R&D capabilities
Significant contribution to the energy security of the Russian Federation
Ensuring reliable and stable supplies of gas and other high-quality
products and services to consumers in Russia and abroad
Gas infrastructure expansion across Russian regions, and developing
their social and economic potential, paying taxes, and contributing
to investment activity and improved business environment; job creation
Ensuring demand for Russian products; supporting SMEs
Providing safe working environment for employees
Staff training and social programmes
Involvement in the efforts to improve tax, land, natural resources,
and environmental protection laws
Sustainable use of natural resources, improved energy efficiency of
operations, and better environment in Russian regions through extending
gas infrastructure to communities and energy and transport facilities
Support for vulnerable groups; constructing and developing sports
and social and economic infrastructure
Cooperation with indigenous small-numbered peoples of the North
Support for education, science, culture, arts, and sports
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PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201853For more details see the Power Generation section For more details see the Gas Distribution, Gas Infrastructure Expansion, and NGV Fuel Markets section and the Marketing section For more details see the sections: Gas Distribution, Gas Infrastructure Expansion, and Development of NGV Fuel Markets; Marketing; Financial Performance; Innovations and Import Substitution; Environmental and Social Responsibility; Procurement Performance; and Share Capital and Securities Market
Business Model
Supply Chain
Inventory
Procurement
Procurement
of Work and Services
Gas, Energy and Liquid Hydrocarbons
Construction and Installation
Large-diameter Pipes
Processing Equipment
Gas Pumping Units and Components
Electrical Equipment
Valves and Fittings
Overhauls
Well Construction
(Production Drilling
and Associated Operations)
Gas and Liquid Hydrocarbon
Transportation and Storage
Maintenance and Repair
Exploration
FEED Services
Transportation and Logistics Services
Lease
Acquisition of Real Property
Insurance
Gazprom Group
Products and Services
Natural Gas
Refined Products
Electricity and Heat
Crude Oil and Gas Condensate
Gas Transportation Services
PJSC Gazprom Annual Report 201854 Business Model
Quality control of materials and equipment, works and services
Manufacturers
of Equipment and Materials
Standartization System
PJSC Gazprom’s Requirements
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Acceptance System for Inventory, Works, and Services
Manufacturer’s
Business Reputation Assessment
On-site Testing
of a Limited Batch
Product Certification
for Compliance
with PJSC Gazprom’s
Requirements
The System
of Voluntary Certification
INTERGAZCERT
Certification
of the Manufacturer’s
Quality Management System
for Compliance
with STO Gazprom
Standards
Production Conditions
Analysis
PJSC Gazprom’s
Acceptance Procedures
at the Manufacturer’s Site
Unified Registries of Inventory, Works, and Services
Inventory, Works, and Services
Use Experience (Claims)
PJSC Gazprom’s
Production Facilities
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PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201855The Quality Assurance Policy of PJSC Gazprom is available on PJSC Gazprom’s website www.gazprom.com
The Company’s History
Over the 25 years since it was founded in 1993, the Company
has grown into one of the global energy market leaders.
Gazprom has successfully diversified its core business.
In addition to its gas business, the Group has been suc-
cessfully operating in the oil and power markets, ranking
among Russia’s top oil companies and number one in Russia
by installed heat generation capacity.
Gazprom has significantly expanded the geography
of its operations: it entered the high-potential Asia Pacific
market, launched operations in the Central Asia, Africa, and
Latin America, and is a player in the global LNG trade.
Gazprom pioneered the development of the Russian Arctic
shelf, launched a fundamentally new gas production hub in
the Yamal Peninsula, and is building large-scale gas infra-
structure in eastern Russia. Gazprom was the first in Russia
to introduce underwater production technology enabling gas
extraction without above-water structures, and teamed up
with its foreign partners to launch Russia’s first large-scale
LNG plant.
This success is underpinned by the Company’s long-term
strategy, tight vertical integration, and sound governance
providing a firm foundation for Gazprom’s continued success
in competing on equal footing against global majors, imple-
menting ambitious projects, and achieving impressive results.
Milestones
17 February
According to the
Russian Government’s
Resolution pursuant to
the Presidential Decree,
Gazprom State Gas
Concern was reorganised
into Gazprom Russian
Joint Stock Company
(RAO Gazprom).
31 May
RAO Gazprom’s first
annual General
Shareholders Meeting
was held.
November
Gas supply started via
the Yamal — Europe gas
pipeline, running across
four countries: Russia,
Belarus, Poland, and
Germany.
20 February
Commercial gas supplies
started via Blue Stream,
Russia’s first gas export
offshore pipeline and one
of the world’s deepest
undersea pipelines.
18 August
Gazprom’s first LNG
shipment to an Asian
market, purchased by
Japan.
1993
1994
1995
1998
1999
2001
2003
2005
2006
2007
April
Privatisation of
RAO Gazprom started.
26 June
Pursuant to the
resolution of its General
Shareholders Meeting,
Gazprom Russian
Joint Stock Company
(RAO Gazprom)
was reorganised into
Gazprom Open Joint
Stock Company
(JSC Gazprom).
30 May
Alexey Miller was
elected Chairman of the
Company’s Management
Committee.
2 September
Gazprom’s first LNG
shipment; the gas tanker
arrived at a US LNG
regasification terminal.
31 October
Gas production started
at the Zapolyarnoye field,
one of the largest in the
world.
21 October
Gazprom Group took
control of 75.679% of
OAO Sibneft, which
provided a platform for
further development of
Gazprom’s oil business.
December
The law prohibited the
State from holding less
than 50% plus one share
in the Company.
Restrictions were lifted on
the acquisition of shares
in the Company by foreign
investors.
25 April
The Board of Directors
approved JSC Gazprom’s
Power Generation
Strategy, the implemen-
tation of which transformed
the Company into one
of Russia’s largest power
producers and number
one heat producer in the
world.
18 December
The Yuzhno-Russkoye
field came on stream,
Russia’s first international
gas production project
based on asset swap.
PJSC Gazprom Annual Report 201856 The Company’s History
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6 June
The Dzhubga — Lazarevs-
koye — Sochi, Russia’s
first offshore gas pipeline,
was commissioned.
8 September
First section of the Sakha-
lin — Khabarovsk —
Vladivostok gas transmis-
sion system, the Far
East’s first interregional
GTS, was inaugurated.
8 November
Commercial gas supplies
started via the first string
of the Nord Stream
pipeline, a fundamentally
new Russian gas export
supply route to Europe
through the Baltic Sea.
15 January
The Zapolyarnoye field
ramped up to full design
capacity of 130 bcm of
gas per year, becoming
Russia’s largest produc-
ing field.
23 October
Gazprom was the first in
Russia to produce gas
by using an underwater
production system without
recurring to above-water
structures on the Kirin-
skoye field in the Sea of
Okhotsk.
25 November
The Company closed
the deal to acquire 100%
of OAO Beltransgaz,
becoming the owner of
Belarus GTS.
20 December
Oil production started
at the Prirazlomnoye field
in the Pechora Sea. It
is Russia’s first ever Arctic
shelf project.
14 October
The Company launched
the construction of the
(laid the foundation stone)
of the Amur GPP, Russia’s
largest gas processing
facility, which will be an
essential part of the pro-
cess chain of natural gas
supply to China via the
Power of Siberia gas
pipeline.
27 October
The Company com-
menced the construction
of the Ukhta — Torzhok 2
gas pipeline to supply
additional gas to north-
western Russia, expand
the gas infrastructure to
domestic consumers, and
support export supplies
via Nord Stream 2.
18 January
Launch events were held
for the commissioning
of the Bovanenkovo —
Ukhta 2 gas pipeline
increasing the supplies
of gas from the Yamal
Peninsula to Russia’s
UGSS.
7 May
The construction of the
TurkStream gas pipeline’s
offshore section com-
menced for Russian gas
supplies to Turkey and
Europe as a new route
to avoid transit through
third countries.
25 September
Gazprom Group was
ranked number one in the
annual S&P Global Platts
Top 250 Global Energy
Company Rankings.
18 February
Russia’s first large-scale
LNG plant was put into
operation in Sakhalin.
26 August
The Dzuarikau — Tskhin-
vali pipeline was commis-
sioned, running over
the mountainous part of
the Greater Caucasus at
altitudes of over 1,500 m.
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
12 February
Russia’s first coal bed
methane project was
launched in the Kemerovo
Region.
29 September
The Sobolevo — Petro-
pavlovsk-Kamchatsky
trunk pipeline was put
into operation, bringing
first natural gas supplies
to the capital of the Kam-
chatka Territory.
23 March
An 800 MW CCGT plant
was launched at the
Kirishskaya GRES. It was
the largest heat genera-
tion plant commissioned
in 30 years, and Russia’s
most powerful combined
cycle gas turbine unit at
the time.
23 October
A new major gas produc-
tion hub was launched
in Russia, in the Yamal
Peninsula. The Bovanen-
kovskoye field and the
Bovanenkovo — Ukhta
trunk gas pipeline came
on stream.
21 May
The Company and China’s
CNPC signed a contract
for gas supplies — the
30-year gas supply con-
tract for over 1 tcm is the
largest of its kind in the
entire history of the Rus-
sian gas industry.
1 September
Welding of the first joint
of the Power of Siberia
trunk pipeline to transport
gas from the Yakutia and
Irkutsk gas production
hubs to consumers in the
Far East and China.
25 May
The Arctic Gate (“Vorota
Arktiki”), a unique oil load-
ing terminal, was commis-
sioned enabling, for the
first time ever, year-round
oil shipments from the
Yamal Peninsula by sea.
16 September
With Gazprom’s involve-
ment, commercial
production was launched
at the Incahuasi field,
one of the largest gas and
condensate fields in
Bolivia.
5 September
Work started to install
the deep-water section of
the Nord Stream 2 gas
pipeline.
19 November
Gazprom completed the
offshore installation of the
TurkStream gas pipeline.
5 December
The third and final gas
production site was com-
missioned at the core
Bovanenkovskoye field.
The Ukhta — Torzhok 2
trunk gas pipeline was
commissioned within the
Northern Gas Transmis-
sion Corridor of Russia’s
UGSS.
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PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201857
The Company’s History
2018 in the Company’s History
In 2018, PJSC Gazprom’s gas exports to Europe reached an
all-time high of 201.9 bcm, with the Company’s share of sup-
ply amounting to 36.8%, far ahead of other companies ex-
porting gas to the region.
In September, work started in the Baltic Sea to install the
deep-water section of the Nord Stream 2 gas pipeline, a new
export route to Europe. Just like Nord Stream, the new
pipeline will provide a direct connection between Russian
gas fields and European gas consumers, ensuring the high
reliability of Russian gas supplies.
Gazprom continued its efforts to create Russia’s main pro-
spective gas production hub on the Yamal Peninsula.
In December, the third and final gas production site with a
design capacity of 30 bcm per year was commissioned at the
core Bovanenkovskoye field. This will help ramp up gas pro-
duction from the field’s Cenomanian-Aptian deposits to
a design capacity of 115 bcm per year.
In December, Gazprom commissioned the linear part of the
new high-tech 970 km Ukhta — Torzhok 2 trunk gas pipeline
with an annual design capacity of 45 bcm. The new Northern
Gas Transmission Corridor pipeline will be the key route of
the Unified Gas Supply System (UGSS) of Russia.
In November, Gazprom completed the offshore installation of
both strings of the TurkStream gas pipeline. The pipeline is
scheduled for commissioning in late 2019. The project will
significantly increase reliability of gas supplies to Turkey, and
to Southern and South-Eastern Europe. Construction of a
receiving terminal near Kiyikoy in Turkey is in progress.
New Neptune and Triton oil fields were discovered in the Sea
of Okhotsk and included into the State Register of Mineral
Reserves of the Russian Federation, and the construction of
production wells commenced at the Yuzhno-Kirinskoye field
using the Polyarnaya Zvezda (Polar Star) and Severnoye Si-
yaniye (Northern Lights) semi-submersible drilling rigs.
Construction of the linear section of the Power of Siberia
gas pipeline, from the Chayandinskoye field to the Chinese
border in the Amur Region, was mostly completed. Construc-
tion at the Chayandinskoye field is in progress, including
drilling of gas production wells and installation of on-site
equipment. The Company also continued construction of the
Amur GPP, an essential part of the process chain of natural
gas supply via the Power of Siberia gas pipeline. With a pro-
duction capacity of 42 bcm per year, the plant will become
Russia’s No. 1 and the world’s No. 2 gas processing facility.
The projects are part of Gazprom’s efforts to ensure Russian
gas supplies to China via the eastern route.
In June 2018, PJSC Gazprom’s Board of Directors approved
PJSC Gazprom’s Power Generation Strategy for 2018–2027.
Also, in December, Gazprom energoholding commissioned
the first (with a capacity of 176 MW) of the two generating
units at the Grozny TPP, which is crucial for power supply to
Russia’s southern regions.
PJSC Gazprom Annual Report 201858 PJSC Gazprom’s Board of Directors
(as at 31 December 2018)
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Viktor
Alekseevich
Zubkov
Alexey
Borisovich
Miller
Andrey
Igorevich
Akimov
Timur
Askarovich
Kulibaev
Chairman
of the Board of Directors
Deputy Chairman
of the Board of Directors
Non-executive director
Independent director
Non-executive director
Executive director
Born in 1962.
Graduate of N.A. Voznesensky
Leningrad Finance and Economics
Institute.
Candidate of Economics.
Since 2001 —
Chairman of the Company’s
Management Committee.
Deputy Chairman of the Company’s
Board of Directors
since 2002.
Born in 1941.
Graduate of Leningrad Agricultural
Institute.
Doctor of Economics.
2007–2008:
Prime Minister of the Russian
Federation.
2008–2012:
First Deputy Prime Minister
of the Russian Federation.
Since 2012 —
Russian Special Presidential
Representative for Cooperation
with Gas Exporting Countries Forum.
2012–2014:
member of the Board of Directors,
Director General, Chairman of
the Management Committee of
OOO Gazprom gazomotornoe
toplivo.
Since 2014 —
Deputy Chairman of the Board
of Directors of OOO Gazprom
gazomotornoe toplivo.
Chairman of the Company’s
Board of Directors
since 2008.
Born in 1953.
Graduate of Moscow Finance
Academy.
Since 2002 —
Chairman of the Management
Board of Joint Stock Bank of Gas
Industry Gazprombank (Closed
Joint Stock Company), since
2007 — Gazprombank (Open Joint
Stock Company), since 2014 —
Gazprombank (Joint Stock
Company).
Member of the Company’s
Board of Directors
since 2011.
Born in 1966.
Graduate of M.V. Lomonosov
Moscow State University.
Candidate of Economics.
Since 2007 —
Head of the Association of Legal
Entities the Kazenergy Kazakh
Association of Oil, Gas and Energy
Companies.
Since 2010 —
Chairman of the Presidium of the
Atameken National Chamber of
Entrepreneurs of the Republic of
Kazakhstan.
In 2011 —
member of the Board of Directors,
and Chairman of the Management
Board of AO Samruk-Kazyna
National Welfare Fund.
Member of the Company’s
Board of Directors
since 2011.
There were no changes to the Board of Directors in 2018
Note. The independent status of members of the Board of Directors is determined in compliance with criteria for assessing independence of members of the board of directors (nominees to
the board of directors) set forth in the Corporate Governance Code recommended by the Bank of Russia, and Appendix 4 to the Listing Rules of the Moscow Exchange.
59
PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201859
PJSC Gazprom’s Board of Directors
Denis
Valentinovich
Manturov
Vitaly
Anatolievich
Markelov
Viktor
Georgievich
Martynov
Vladimir
Alexandrovich
Mau
Non-executive director
Executive director
Independent director
Independent director
Born in 1969.
Graduate of M.V. Lomonosov
Moscow State University.
Candidate of Economics.
Born in 1963.
Graduate of S.P. Korolev Kuibyshev
Aviation Institute.
Candidate of Technical Sciences.
Since 2012 —
Minister of Industry and Trade
of the Russian Federation.
Member of the Company’s
Board of Directors
since 2017.
2003–2011:
Director General
of OOO Tomsktransgaz (since
2008 — OOO Gazprom transgaz
Tomsk).
In 2011 —
Director General of OOO Gazprom
invest Vostok.
Since 2011 —
Deputy Chairman of the Company’s
Management Committee.
Member of the Company’s
Board of Directors
since 2012.
Chairman of the Board
of Directors’ Audit Committee,
member of the Board
of Directors’ Nomination
and Remuneration Committee
Member of the Board
of Directors’ Audit Committee,
member of the Board
of Directors’ Nomination
and Remuneration Committee
Born in 1953.
Graduate of the I.M. Gubkin
Moscow Institute of the
Petrochemical and Gas Industry.
Candidate of Geology and
Mineralogy, Doctor of Economics.
Born in 1959.
Graduate of the G.V. Plekhanov
Moscow Institute of National
Economy.
Doctor of Economics.
Since 2008 —
Rector of I.M. Gubkin Russian
State Oil and Gas University
(a federal budget-funded
educational institution of higher
professional education, national
research university).
Member of the Company’s
Board of Directors
since 2013.
2002–2010:
Rector of the State Educational
Institution of Higher Professional
Education, the Academy
of National Economy under
the Government of the Russian
Federation.
Since 2010 —
Rector of the Russian Presidential
Academy of National Economy
and Public Administration (a federal
state budget-funded institution
of higher education).
Member of the Company’s
Board of Directors
since 2011.
PJSC Gazprom Annual Report 201860 PJSC Gazprom’s Board of Directors
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Alexander
Valentinovich
Novak
Dmitry
Nikolaevich
Patrushev
Mikhail
Leonidovich
Sereda
Non-executive director
Non-executive director
Executive director
Born in 1971.
Graduate of Norilsk Industrial
Institute.
2010–2012:
Deputy Minister of Finance
of the Russian Federation.
Since 2012 —
Minister of Energy of the Russian
Federation.
Member of the Company’s
Board of Directors
since 2015.
Born in 1977.
Graduate of the State University
of Management, and of the
Diplomatic Academy of the
Russian Ministry of Foreign Affairs.
Doctor of Economics.
2007–2010:
Senior Vice-President
of OAO Vneshtorgbank.
2010–2018:
member of the Supervisory Board
of AO Russian Agricultural Bank,
Chairman of the Management
Board of AO Russian Agricultural
Bank.
Since 2018 —
Minister of Agriculture
of the Russian Federation.
Member of the Company’s
Board of Directors
since 2016.
Member of the Board
of Directors’ Audit Committee,
Chairman of the Board
of Directors’ Nomination
and Remuneration Committee
Born in 1970.
Graduate of Saint Petersburg
State University of Economics
and Finance.
Since 2004 —
Deputy Chairman of the
Management Committee, Head
of the Management Committee
Administration of the Company.
Member of the Company’s
Board of Directors
since 2002.
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PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201861The biographical details of the members of PJSC Gazprom’s Board of Directors are also available on PJSC Gazprom’s website www.gazprom.com
PJSC Gazprom’s Management Committee
(as at 31 December 2018)
Alexey
Borisovich
Miller
Chairman
of the Management
Committee
Born in 1962.
Graduate of N.A. Voznesensky
Leningrad Finance and Economics
Institute.
Candidate of Economics.
Elena
Alexandrovna
Vasilieva
Valery
Alexandrovich
Golubev
Andrey
Vyacheslavovich
Kruglov
Deputy Chairwoman
of the Management
Committee — Chief Accountant
of PJSC Gazprom
Born in 1959.
Graduate of N.A. Voznesensky
Leningrad Finance and Economics
Institute.
Deputy Chairman
of PJSC Gazprom’s
Management Committee
Deputy Chairman
of PJSC Gazprom’s
Management Committee
Born in 1952.
Graduate of V.I. Ulyanov (Lenin)
Leningrad Electrotechnical Institute.
Doctor of Economics.
Born in 1969.
Graduate of the Saint Petersburg
Technological Institute of the
Refrigeration Industry.
Doctor of Economics.
Member of the Company’s
Management Committee
since 2003.
Member of the Company’s
Management Committee
since 2002.
Chairman of the Company’s
Management Committee
since 2001.
Member of the Company’s
Management Committee
since 2001.
Changes in the Management Committee in 2018
Mikhail Evgenievich Putin
was elected by Resolution of the Board of Directors No. 3089 dated 23 March 2018
PJSC Gazprom Annual Report 201862 PJSC Gazprom’s Management Committee
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Vitaly
Anatolievich
Markelov
Alexander
Ivanovich
Medvedev
Mikhail
Evgenievich
Putin
Sergey
Fyodorovich
Khomyakov
Deputy Chairman
of PJSC Gazprom’s
Management Committee
Deputy Chairman
of PJSC Gazprom’s
Management Committee
Deputy Chairman
of PJSC Gazprom’s
Management Committee
Born in 1963.
Graduate of S.P. Korolev Kuibyshev
Aviation Institute.
Candidate of Technical Sciences.
Born in 1955.
Graduate of the Moscow Institute
of Physics and Technology.
Candidate of Economics.
Member of the Company’s
Management Committee
since 2012.
Member of the Company’s
Management Committee
since 2002.
Born in 1967.
Graduate of A.S. Bubnov Ivanovo
State Medical Institute and
the S. Ordzhonikidze State
Academy of Management.
Candidate of Medical Sciences.
Member of the Company’s
Management Committee
since 2018.
Deputy Chairman
of PJSC Gazprom’s
Management Committee,
Director General
of PJSC Gazprom’s Corporate
Security Service Branch
Born in 1953.
Graduate of V.I. Ulyanov (Lenin)
Leningrad Electrotechnical Institute.
Candidate of Economics.
Member of the Company’s
Management Committee
since 2007.
63
PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201863
PJSC Gazprom’s Management Committee
Oleg
Evgenievich
Aksyutin
Vladimir
Konstantinovich
Markov
Elena
Vladimirovna
Mikhailova
Vyacheslav
Alexandrovich
Mikhalenko
Head of Department
(Prospective Development)
Head of Department
(Government Relations)
Born in 1967.
Graduate of S.P. Korolev Kuibyshev
Aviation Institute.
Doctor of Technical Sciences.
Member of the Company’s
Management Committee
since 2008.
Born in 1955.
Graduate of Ryazan Radio
Engineering Institute.
Candidate of Law, Candidate
of Economics.
Member of the Company’s
Management Committee
since 2012.
Head of Department
(Asset Management
and Corporate Relations),
Deputy Director General
for Corporate Relations
and Asset Management at
OOO Gazprom mezhregiongaz
Born in 1977.
Graduate of Moscow State
Industrial University.
Member of the Company’s
Management Committee
since 2012.
Head of Department
(Gas Transportation
and Underground Storage)
Born in 1965.
Graduate of Bryansk Transport
Machine-Building Institute.
Candidate of Technical Sciences.
Member of the Company’s
Management Committee
since 2015.
PJSC Gazprom Annual Report 201864 PJSC Gazprom’s Management Committee
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Sergey
Frolovich
Prozorov
Kirill
Gennadievich
Seleznev
Igor
Yurievich
Fyodorov
Head of Department
(managing the construction
of production facilities)
Born in 1958.
Graduate of Bryansk Transport
Machine-Building Institute.
Member of the Company’s
Management Committee
since 2014.
Head of Department
(marketing; gas and liquid
hydrocarbons processing;
development of power
and heat generation), Director
General of OOO Gazprom
mezhregiongaz
Born in 1974.
Graduate of D.F. Ustinov Baltic
State Technical University, and
Saint Petersburg State University.
Candidate of Economics.
Member of the Company’s
Management Committee
since 2002.
Head of Department
(Legal Support)
Born in 1965.
Graduate of A.A. Zhdanov
Leningrad State University,
and the Saint Petersburg State
Academy of Service and
Economics.
Candidate of Economics.
Member of the Company’s
Management Committee
since 2007.
Vsevolod
Vladimirovich
Cherepanov
Head of Department
(Hydrocarbon Exploration
and Production)
Born in 1966.
Graduate of M.V Lomonosov
Moscow State University.
Candidate of Geology
and Mineralogy.
Member of the Company’s
Management Committee
since 2010.
65
PJSC Gazprom Annual Report 2018PJSC Gazprom Annual Report 201865The biographical details of the members of PJSC Gazprom’s Management Committee are also available on PJSC Gazprom’s website www.gazprom.com
Strategy
66
6666
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Trends and Developments on Gas Markets 68
Strategic Priorities 74
Capex Programmes 82
Long-Term Development Programme
and Key Performance Indicators 85
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018 Trends and Developments on Gas Markets
Key trends and developments in the gas and oil sectors
of the energy market continue to provide additional
potential for strengthening Gazprom’s long-term market
position and competitive advantage.
Expected Global Energy Demand
and a Rising Share of Natural Gas
in the Global Energy Mix
Global demand for fossil fuels, 2018 and forecast for 2035, bn toe
Natural gas
The International Energy Agency (IEA) forecasts a steady
long-term increase in the global energy consumption,
expected to grow by 15% from the 2018 level between now
and 2035, with almost two thirds of this incremental growth
coming from Asia. In addition, significant energy consump-
tion growth will be seen in the regions comprised mostly
of emerging markets, i.e. Africa, the Middle East, and South
America.
This significant energy demand will make Asia the world’s
largest energy importer: the region’s oil and coal imports will
increase by more than a third by 2035 while its natural gas
imports will more than double from the 2018 levels.
By 2035, Asia will be the world’s biggest natural gas
consumer.
The growth in global energy consumption will be accompa-
nied by structural changes in the global energy mix. As
a clean burning, cost-efficient fuel, natural gas is a solid
competitor to other fossil fuels — oil and coal.
2018
2035
2018
2035
2018
2035
Coal
Oil
Source: IEA
3.3
4.1
3.7
3.8
4.5
4.8
Until 2035, natural gas will account for the largest share of
the incremental global energy consumption in absolute
terms. Rising environmental awareness and the need to re-
duce CO2 emissions drive upwards the global consumption of
natural gas, the cleanest fossil fuel. Global gas consumption
will grow at a rate between 1.5% and 2% per year, exceeding
5 tcm by 2035, or ca. 25% of the global fuel energy mix.
Asia will show the highest growth rate in natural gas
consumption.
68
PJSC Gazprom Annual Report 2018 Trends and Developments on Gas Markets
25 %
Expected share of natural gas in the global energy mix
by 2035
Key drivers of gas consumption growth
— Global economy growth and the resulting increase in energy
consumption
— Global population growth, leading to higher gas consumption
in the utilities and electricity generation sectors
— The relative environmental benefits of natural gas compared to other
fossil fuels
— Natural gas-fired power plants are dispatchable and can flexibly
adjust their load to efficiently to balance the grid in the context
of a growing share of intermittent renewables in the power sector
— Greater focus on transport decarbonisation and incentives to use
natural gas as motor fuel
A Growing Gap Between Natural Gas Consumption
and Domestic Gas Production in European
Far Abroad Countries
Declining domestic production will increase Europe’s reli-
ance on gas imports, making PJSC Gazprom, the largest
gas supplier to Europe, well positioned to further strengthen
its market position in the region.
Following three straight years of natural gas consumption
growth in Europe, demand in 2018 was at 548.6 bcm, down
3.5% or 20.1 bcm year-on-year. The decrease was mostly
due to weather conditions. However, the fundamentals that
have been driving gas consumption in the previous years,
such as industrial development and the growing use of gas in
electricity generation, have continued to bolster Europe’s gas
demand. In particular, the growth in average global coal pric-
es in 2018 and higher carbon prices make gas more com-
petitive than coal for power generation.
Higher carbon permit prices in Europe
Carbon permit prices in Europe grew rapidly during 2018: whereas in
December 2017, carbon emission allowances in the EU’s Emissions
Trading System (ETS) had traded at EUR 7.7 per tonne of CO2 equivalent,
the price more than tripled to EUR 23.0 by December 2018.
The growth in carbon permit prices is an important driver of gas
competitiveness in the European power sector. Higher permit prices
make coal-fired generation less attractive, potentially leading to
increased utilisation of gas-fired capacity.
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Continued declines in domestic production have been an im-
portant trend in the European gas market. In the reporting
year, a decision was taken to accelerate output cuts at the
Groningen gas field in the Netherlands. Due to more frequent
earthquakes, the Dutch Government had repeatedly capped
production from the Groningen field and then in March 2018
decided to reduce the output to 12 bcm per year by the end
of 2022 and to shut it down completely by 2030. This deci-
sion will have significant implications for the European natural
gas balance as the declining gas production will have to be
offset by higher imports.
A consensus forecast based on data from international
energy companies, market analysts, and policy and energy
departments suggests that by 2035, Europe’s incremental
demand for gas imports will grow by ca. 89 bcm from the
2010–2018 average level.
89 bcm
European countries’ incremental demand
for gas imports by 2035
In the reporting year, increased gas injection volumes com-
bined with declines in domestic production (−10.8 bcm or
−4.1%) led to higher net imports (+14.5 bcm or +4.7%).
Among major gas exporters, PJSC Gazprom demonstrated
the largest growth in gas supplies to European far abroad
countries, with gas exports under OOO Gazprom export’s
contracts and Gazprom Schweiz AG’s direct contracts grow-
ing in 2018 by 7.5 bcm (+3.8%) year-on-year to 201.9 bcm.
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PJSC Gazprom Annual Report 2018 Trends and Developments on Gas Markets
Breakdown of gas supplies to European far abroad countries, 2012–2018, bcm
2012
2013
2014
2015
2016
2017
2018
Supplies by major gas exporters
PJSC Gazprom (under OOO Gazprom export’s contracts
and Gazprom Schweiz AG’s direct contracts)
Algeria (incl. LNG)
Qatar
Nigeria
Iran
Supplies by major European producers
Norway
UK
The Netherlands
Other supplies (excluding re-export)
Total
2012
2013
2014
2015
2016
2017
2018
139.9
162.7
147.6
159.4
179.3
194.4
201.9
49.2
31.6
12.0
8.5
43.4
24.2
6.7
9.0
38.9
23.7
6.2
9.2
38.1
28.6
8.0
8.1
51.2
49.4
23.7
9.8
8.0
24.1
12.6
9.6
48.5
23.4
13.1
8.1
120.6
114.1
115.1
124.5
124.1
134.8
130.8
43.8
72.1
64.4
41.2
77.7
61.4
41.2
65.4
38.2
44.6
48.9
46.4
44.9
45.5
55.2
45.0
39.5
59.3
43.6
35.7
43.5
542.1
540.4
485.5
506.6
541.7
568.7
548.6
Note. Calculated based on the International Energy Agency data, with natural gas volumes converted to Russian standards (calorific value of 8,850 kcal/cu m at 20°C). Figures for 2017 and
previous years may differ from the data in Annual Report 2017 since international statistics may be subsequently updated.
Sources: IEA, IHS Markit
Gas consumption, domestic production, and imports in European
far abroad countries, 2012–2018, bcm
For more details on Gazprom Group’s sales of natural gas to European far abroad
countries in 2018 see the Marketing section
700
600
500
400
300
200
100
542.1
540.4
485.5
506.6
541.7
568.7
548.6
290.1
282.8
268.8
264.1
287.7
311.5
326.0
259.5
261.3
243.6
258.9
260.3
264.1
253.3
2012
2013
2014
2015
2016
2017
2018
Consumption
Production
Imports
Note. Calculated based on the International Energy Agency data, with natural gas volumes
converted to Russian standards (calorific value of 8,850 kcal/cu m at 20°C). Figures for
2017 and previous years may differ from the data in Annual Report 2017 since international
statistics may be subsequently updated.
Sources: IEA, IHS Markit
In 2018, domestic gas production in Europe declined, with
the largest producers — Norway, the UK, and the Nether-
lands — reducing their supplies to the European market by
a total of 9.2 bcm. Official forecasts by national gas industry
authorities suggest that domestic production declines in
Europe will continue into the future.
In the reporting year, crude oil prices increased by over
30% to a yearly average of USD 72 per barrel. Coal prices in-
creased by 27% and averaged USD 88 per ton for the year.
The increases in prices for competing energy sources led to
higher prices at Europe’s gas hubs. The average TTF month-
ahead and NCG month-ahead prices grew to USD 270 per
mcm (+34.6% and +33.0% year-on-year, respectively). Most
of Europe’s gas hubs saw a year-on-year increase in trading
volumes in 2018.
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PJSC Gazprom Annual Report 2018
Trends and Developments on Gas Markets
Brent crude oil price in 2017 to early 2019, USD per barrel
80
75
70
65
60
55
50
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02
03
04
05
06
07
08
09
10
11
12
01
02
03
04
05
06
07
08
09
10
11
12
01
02
2017
2018
2019
Source: Bloomberg
Asia-Pacific countries remained the largest center of demand
growth for LNG in 2018, while China accounted for more than
half the increase in global demand. China’s LNG imports
grew by 15.9 mm tonnes, or 41%, to 54.9 mm tonnes. Signifi-
cant growth of LNG imports also took place in South Korea
(+6.5 mm tonnes, or +17%), India (+3.3 mm tonnes, or
+17%), and Pakistan (+2.3 mm tonnes, or +48%). In 2018,
Bangladesh and Panama received their first-ever LNG deliv-
eries.
Spot LNG prices in 2018 were generally higher year-on-
year: the average LNG price was USD 9.7 per mm BTU in the
Northeast Asian markets (USD 7.1 per mm BTU in 2017) and
USD 7.9 per mm BTU at the NBP hub (USD 5.9 per mm BTU
in 2017).
Growing Gas Consumption and Imports in China
China is one of the world’s fastest growing gas markets. The
country’s gas consumption is far outpacing domestic produc-
tion, pushing Chinese companies to boost gas imports.
According to China’s National Development and Reform
Commission, the country’s gas consumption in 2018 was at
280 bcm, up 18% (more than 40 bcm) year-on-year. The
significant increase in gas consumption from 2017 was attrib-
utable to higher demand from the industry, power generation,
and utilities as well as to the national government’s continued
policy of growing the share of natural gas in the country’s
energy mix.
At the same time, as in prior years, China’s domestic gas
production in 2018 was lagging behind gas consumption.
According to the National Bureau of Statistics of China,
domestic gas production in 2018 increased by 8% to 161 bcm.
Month-ahead gas prices on TTF and NCG (weekly), 2008–2018,
USD per mcm
450
400
350
300
250
200
150
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
TTF
NCG
Source: Bloomberg
Global LNG Trade Growth
In 2018, the global net LNG imports for the first time passed
the 300 mm tonnes mark, reaching 319 mm tonnes (+27 mm
tonnes, or +9%, year-on-year).
Global LNG trade volume, 2012–2018, mm tonnes
2012
2013
2014
2015
2016
2017
2018
238
239
241
248
262
292
319
Note. Data for actual LNG deliveries (including boil-off gas), less any re-exports. Figures
for 2014, 2016, and 2017 differ from the data in Annual Report 2017 since the data source
has changed the methodology used to calculate these metrics.
Source: IHS Markit
71
PJSC Gazprom Annual Report 2018
Trends and Developments on Gas Markets
As a result of the above factors, China’s gas imports reached
126 bcm in 2018 (an increase of over 30 bcm, or over 30%).
LNG accounted for the bulk of this growth: China’s LNG im-
ports increased by 22 bcm to 75 bcm, up by over 40% year-
on-year. Given the insufficient domestic production growth
and unstable pipeline gas imports from Central Asia and
Myanmar in 2018, LNG imports were China’s key lever for
growing and levelling out gas supplies.
Gas Consumption Growth in Russia,
and Initiatives to Develop the Domestic Market
In 2018, Russia’s total gas consumption was 493.2 bcm, up
5.3% year-on-year. The increase was mainly driven by colder
weather in Q1 and Q4 2018 compared to similar periods in
2017.
Russia’s gas consumption, 2014–2018, bcm
Ca.126 bcm
Natural gas imports to China in 2018
2014
2015
2016
2017
2018
458.4
444.3
456.7
468.0
493.2
China became the world’s largest natural gas
importer in 2018 (by combined pipeline gas and LNG
imports), overtaking Japan.
The demand for natural gas in China is expected to continue
growing at a relatively high pace over the next few years: ac-
cording to the national gas industry 2016–2020 development
plan, China’s natural gas consumption may reach 360 bcm
by 2020, with the share of natural gas in China’s energy mix
growing significantly from 8% in 2018 to 10% in 2020.
China’s natural gas consumption is expected to grow
further over the longer term horizon. An estimate by CNPC
(China’s largest gas importer and PJSC Gazprom’s key
partner in the Chinese market) suggests that China’s gas
demand may exceed 600 bcm by 2035, with gas imports
accounting for approximately half of this amount.
The development of gas transportation infrastructure in
eastern Russia will make the Company one of China’s key
gas suppliers and gain a solid foothold in the world’s fastest
growing gas market.
493.2 bcm
Natural gas consumption in Russia in 2018
In 2018, natural gas accounted for ca. 54% in Russia’s energy
mix, remaining virtually flat over the past few years.
The largest consumers of natural gas in Russia include
electricity and heat generators (36%), household consumers
(12%), the oil industry (9%), the housing and utilities sector
(9%), and metallurgy (6%).
Gazprom’s contribution to covering domestic gas consumption in Russia, 2014–2018
Domestic gas consumption in Russia, bcm
2014
2015
2016
2017
2018
458.4
444.3
456.7
468.0
493.2
Supplies to Russian consumers via Gazprom’s GTS (excluding GTS process needs), bcm
353.7
339.4
348.8
351.3
361.7
share of Gazprom Group’s production, bcm
share of Gazprom Group’s production, %
237.0
211.2
210.2
216.3
224.9
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60
62
62
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PJSC Gazprom Annual Report 2018 Trends and Developments on Gas Markets
62 %
The share of Gazprom Group’s production
in total gas supplies to Russian consumers
via Gazprom’s GTS
In Russia, gas is sold and purchased using two different pric-
ing approaches, which results in the existence of two gas
sales sectors — with prices fixed by the Government or un-
regulated prices.
Gas produced by PJSC Gazprom subsidiaries is sold
mostly at prices fixed by the Government. In accordance with
applicable Russian laws, wholesale prices of gas produced
by PJSC Gazprom and its affiliates are subject to regulation.
These prices are differentiated between consumer groups
(households vs industrial consumers), as well as by price
zone, based on the relative distance from the gas production
region to the consumer.
As per the Forecast of Russia’s Socio-economic Devel-
opment drafted by the Russian Ministry of Economic Develop-
ment and approved by the Government in September 2018,
a rise in regulated domestic wholesale gas prices is expected.
Changes in regulated wholesale gas prices as per the 2019–2021
Forecast of the Ministry of Economic Development
of the Russian Federation, year-on-year average, %
An average across all consumer groups
For industrial consumers
For household consumers
2019
2020
2021
1.4
1.4
1.4
3.0
3.0
3.0
3.0
3.0
3.0
Note. Indexation has been scheduled as of 1 July in accordance with the Forecast
of Russia’s Socio-economic Development drafted by the Russian Ministry of Economic
Development and approved by the Government in September 2018.
As part of the efforts to create a level playing field in the do-
mestic market, PJSC Gazprom works toward partial deregu-
lation of wholesale gas prices. These efforts resulted in Res-
olution of the Government of the Russian Federation No.
1663 dated 27 December 2017, which allows PJSC Gazprom
and its affiliates to use unregulated wholesale prices in re-
spect of natural gas produced by these entities as of 1 Janu-
ary 2018 when selling it in a gaseous state to LNG producers
for liquefaction and export.
In 2018, further decisions were made concerning this matter.
PJSC Gazprom and its affiliates are now allowed to use un-
regulated wholesale prices in respect of natural gas produced
by these entities when selling it under gas supply agreements
signed after 1 November 2018 and providing for first natural
gas supplies after 1 January 2020 to methanol producers for
producing methanol from natural gas in a gaseous state for
exports (Resolution of the Government of the Russian Feder-
ation No. 1282 dated 29 October 2018). Moreover, in 2018,
government regulation of gas prices was abandoned in re-
spect of natural gas supplied to industrial consumers with the
use of liquefaction and/or regasification technology (Resolu-
tion of the Government of the Russian Federation No. 1442
dated 30 November 2018).
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13.6 bcm
The volume of natural gas sold
under PJSC Gazprom’s contracts
signed through the St Petersburg International
Mercantile Exchange
To promote market-driven pricing principles, PJSC Gazprom
is actively engaged in exchange-based gas trade at Saint
Petersburg International Mercantile Exchange (AO SPIMEX).
Thus, in 2018, PJSC Gazprom’s gas volumes sold through
the exchange totalled 13.6 bcm (87% of the total exchange-
traded gas volumes supplied to the domestic market in
the reporting year), which is within the allowable limits of
17.5 bcm placed on PJSC Gazprom’s gas sales through the
exchange-based trading channel. The key destination areas
for PJSC Gazprom’s gas supplies are those with predominant-
ly industrial consumers and those located near gas produc-
ing regions. In 2018, the natural gas purchased through
exchange-based trading channel was supplied to 42 Russian
regions. Factoring in the costs of purchasing exchange-
traded natural gas and the gas transportation costs, the aver-
age ratio of exchange-traded gas price to the regulated
regional wholesale price remained flat at 97% in 2018.
PJSC Gazprom also continues to be actively involved in
promoting exchange trade in the Russian market, including
improvements to trading arrangements for month-ahead and
day-ahead gas contracts.
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PJSC Gazprom Annual Report 2018 Strategic Priorities
Gas Business
No significant adjustments were made to PJSC Gazprom’s
strategy in the reporting year. Commissioning dates for
certain fields and major project timelines were adjusted
based on the current market forecasts, including commis-
sioning dates for the Kruzenshternskoye field and a full ramp-
up timeline for the Bovanenkovo — Ukhta 2 gas pipeline.
Gazprom took a decision to start a full-scale development of
the Kharasaveyskoye field in the Yamal Peninsula in 2019.
Risks affecting the achievement of PJSC Gazprom’s strategic goals
— Risks related to the global economy slowdown
— Political risk
— Risks related to changes in government regulation of the gas
industry in Russia
— Unconventional gas development risks
— Renewable energy risks
— Market risks
For details on Gazprom Group’s prospective projects across all segments see
Gazprom in Figures 2014–2018 Factbook
For more details on the key risk drivers see the Risk Management section
Exploration and Production
Strategic priorities
Activities to support the strategic priorities in 2018
Building gas production hubs in eastern Russia
Field construction continued to develop the Chayandinskoye OGCF
Bringing into development the Yamal Peninsula’s unique, large fields
Bringing online new fields in the Nadym-Pur-Taz region
Development of the Cenomanian-Aptian deposits continued
at the Bovanenkovskoye OGCF
Further exploration of the deposits in deep-lying Achimov and Jurassic
sediments and above the Cenomanian sediments in fields under
development in the Yamal-Nenets Autonomous Area
Bringing into development continental shelf fields in Russian northern seas
Preparations continued to move the Kovyktinskoye gas and condensate
field from pilot development to the commercial production phase
Revamps and retrofits of gas production facilities carried out at the
Yamburgskoye, Urengoyskoye, Medvezhye, Yubileynoye, Yamsoveiskoye,
Orenburgskoye, and Astrakhanskoye fields
Exploration-based gas reserve growth achieved at the levels exceeding
production volumes
Further exploration of the Achimov and Jurassic sediments
at the Urengoyskoye, Yamburgskoye, and other fields in the Yamal-
Nenets Autonomous Area
Feasibility studies of developing deposits above the Cenomanian
sediments carried out at the Yuzhno-Russkoye, Medvezhye,
Yamburgskoye, Zapolyarnoye, Vyngapurovskoye, and other fields
in the Yamal-Nenets Autonomous Area
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PJSC Gazprom Annual Report 2018 Strategic Priorities
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2019 and mid-term objectives in the context of strategic priorities
Ensuring increased reserve replacement rates
Further building of new gas production hubs in Russia
Revamps and retrofits of existing gas production facilities to maintain target gas production levels
2019
2020
2021
2022
2023
Chayandinskoye field
(start of commercial
development)
Blocks 4 and 5
of the Achimov deposits
in the Urengoyskoye field
(start of commercial
development)
Bovanenkovskoye field
(completion of well
commissioning to provide
for the ramp-up to design
capacity of the
Cenomanian-Aptian
deposits)
Kirinskoye field
(ramp-up to design
capacity)
Kovyktinskoye field
(start of commercial
development)
Kharasaveyskoye field
(start of commercial
development of the
Cenomanian-Aptian
deposits)
Yuzhno-Kirinskoye field
(start of commercial
development)
Note. Timelines for commissioning and ramp-up may be adjusted subject to the energy market environment.
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PJSC Gazprom Annual Report 2018 Strategic Priorities
Transportation
Strategic priorities
Activities to support the strategic priorities in 2018
Comprehensive expansion in tandem with the expansion of gas production
and storage, taking into account the degree of readiness to receive gas
shown by new consumers, as well as export projects
Diversification of gas export routes
Construction of new gas transportation capacity
Revamps and retrofits of existing gas transportation facilities
Construction of the Power of Siberia gas pipeline continued: construction
of the linear section of the gas pipeline, from the Chayandinskoye field
to the Chinese border in the Amur Region, including a two-line crossing
of the Amur River, was mostly completed; construction of the
Atamanskaya compressor station adjacent to the border was continued
Expansion of the GTS in Russia continued to support gas supplies to the
Nord Stream 2 gas pipeline
Implementation of the Nord Stream 2 and TurkStream projects continued:
as at 31 December 2018, a total of 423 km of the Nord Stream 2 gas
pipeline was installed; installation of the deep-water offshore section
of the TurkStream pipeline was completed
Revamps of gas transportation infrastructure carried out
Underground Gas Storage
Strategic priorities
Activities to support the strategic priorities in 2018
Sustaining the capacity levels achieved for the UGSF network, improving
the flexibility of the UGSF system, and providing UGSF capacity to Russian
regions where such capacity is in short supply
Projects carried out in Russia to expand and revamp existing UGSFs,
as well as identify geological structures suitable for new UGSF
construction
Expansion of Gazprom Group’s UGSF capacity outside Russia
Gas and Condensate Processing, and Gas Chemical
Strategic priorities
Activities to support the strategic priorities in 2018
Construction of new gas processing facilities to support hydrocarbon
developments in Eastern Siberia and the Far East
Processing of the projected volumes of liquid hydrocarbons produced
at fields in Western Siberia
Construction of the Amur GPP continued
Projects continued to enable liquid hydrocarbon transportation
from the Nadym-Pur-Taz region
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PJSC Gazprom Annual Report 2018 Strategic Priorities
2019 and mid-term objectives in the context of strategic priorities
Construction of gas transportation capacity to ensure diversification of gas export routes
Construction of new gas transportation capacity in Russia to ensure gas supplies to the domestic market and meet obligations under export contracts,
including gas transportation capacity intended to carry gas from the Yamal fields to the Nord Stream 2 gas pipeline
Implementation of comprehensive programmes for revamping and retrofitting existing gas transportation facilities
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Decommissioning of excess capacity of the Central Gas Transmission Corridor
2019
2020
2021
Power of Siberia
gas pipeline
(commissioning)
Ukhta — Torzhok 2
gas pipeline
(ramp-up to full capacity)
Bovanenkovo — Ukhta 2
gas pipeline
(ramp-up to full capacity)
TurkStream gas pipeline
(commissioning)
Nord Stream 2 gas pipeline
(commissioning)
Development
of GTS facilities
at the Gryazovets —
Slavyanskaya CS section
(commissioning)
2023
Bovanenkovo — Ukhta 3
gas pipeline
(start of the phased
commissioning)
Ukhta — Torzhok 3
gas pipeline
(commissioning)
2019 and mid-term objectives in the context of strategic priorities
Revamps and replacement of worn-out and obsolete fixed assets at existing UGSFs
Construction and expansion of the peak-shaving Kaliningradskoye, Volgogradskoye, and Novomoskovskoye UGSFs, as well as the Udmurtia Reserving
Complex
Providing UGSF capacity to regions where such capacity is in short supply. The prospective areas for the construction of new UGSFs are Russia’s
Northwestern, Siberian, and Far Eastern Federal Districts
2019
2020
2021
Volgogradskoye UGSF
(capacity commissioning,
deliverability increases)
Kaliningradskoye UGSF
(capacity commissioning)
Udmurtia Reserving
Complex
(capacity commissioning,
deliverability increases)
2019 and mid-term objectives in the context of strategic priorities
Construction of new gas processing facilities to support hydrocarbon developments in Eastern Siberia and the Far East as well as processing
of the projected volumes of liquid hydrocarbons produced at fields in Western Siberia
Revamps of existing facilities
2019
Projects to enable
liquid hydrocarbon
transportation
from the Nadym-Pur-Taz
region
(commissioning)
2021
Amur GPP
(commissioning)
Note. Timelines for commissioning and ramp-up may be adjusted subject to the energy market environment.
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PJSC Gazprom Annual Report 2018 Strategic Priorities
LNG Production and Trading
Strategic priorities
Activities to support the strategic priorities in 2018
Expansion of own LNG production capacity
Oil Business
The high volatility in the energy markets, the increased com-
petition and its changing nature, and the energy industry
transformation are posing new challenges for the oil and gas
industry. PAO Gazprom Neft’s Development Strategy has
been updated to reflect these challenges, as well as the
company’s evolving scale and role in the industry.
The new 2030 Strategy approved by the company’s
Board of Directors in late 2018 builds upon the 2025 Strategy,
which focused on growing the company into a major industry
player while maintaining operational efficiency. PAO Gazprom
Neft’s key 2030 objective is to evolve into a next-generation
business, an oil industry leader across its core business seg-
ments.
Exploration and Production
Strategic priorities
Efficient development of mature assets
Developing the resource base of the Yamal Peninsula
Bringing into development and monetising the uniquely vast liquid
hydrocarbon reserves in the Nadym-Pur-Taz region
Building a hydrocarbon production hub in the Sea of Okhotsk
Developing technology for cost-effective development of the Bazhenov
suite, Domanic and Paleozoic deposits
Bringing into development the remaining recoverable reserves that are
currently economically unrecoverable through development and deployment
of new technologies
Building up the resource base to support production beyond 2025
Within the Sakhalin-2 T3 project, Sakhalin Energy completed the
development and approval process for design documents developed to
Russian standards, and positive opinions were obtained from the Main
Department of State Expertise Federal Autonomous Institution
(Glavgosexpertiza of Russia)
Construction of an LNG production, storage, and shipping complex
continued near the Portovaya compressor station in the Leningrad Region
In October 2018, PJSC Gazprom and Shell signed a Joint Design Concept
Framework Agreement for the Baltic LNG project (pre-FEED)
Gazprom started a pre-investment study for a project to construct an LNG
plant near Vladivostok with an annual capacity of up to 1.5 mm tonnes of
LNG
2030 strategic goals:
— maintain the company’s position as a top 10 global pro-
ducer of liquid hydrocarbons among public companies,
sustaining at or above market growth rates
— maximise value creation for each barrel through the ef-
fective management of the entire value chain
— achieve leadership in returns on capital employed
through the effective management of project/asset port-
folio with a focus on profit maximisation
— achieve leadership in efficiency, technology, and safety,
setting the benchmark for other global industry players
Activities to support the strategic priorities in 2018
The development of the Novoportovskoye OGCF and the Prirazlomnoye
oil field continued, with Gazprom Neft’s overall hydrocarbon production
reaching 92.9 mm toe*
The Triton field discovered in the Sea of Okhotsk
Industry’s first digital model of the Achimov strata built
* Including share in the production volumes of entities in which Gazprom has investments
classified as joint operations, as well as associates and joint ventures, and in international
projects.
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PJSC Gazprom Annual Report 2018 Strategic Priorities
2019 and mid-term objectives in the context of strategic priorities
Implementation of LNG projects in Russia
2019
LNG production,
storage, and shipping
complex near the
Portovaya compressor
station
(commissioning)
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2019 and mid-term objectives in the context of strategic priorities
Driving mature asset performance and implementing the enhanced oil recovery programme
Further exploration of blocks in the Sea of Okhotsk
Development of the Novoportovskoye field and the Vostochno-Messoyakhskoye OGCF in the Nadym-Pur-Taz region, including the infrastructure
development
Developing technology for cost-effective development of hard-to-recover hydrocarbon reserves
2020
2021
Novoportovskoye field
(ramp-up to design
capacity)
Eastern block
of the Orenburgskoye field
(ramp-up to design
capacity)
Vostochno-
Messoyakhskoye field
(ramp-up to design
capacity)
Note. Timelines for commissioning and ramp-up may be adjusted subject to the energy market environment.
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PJSC Gazprom Annual Report 2018 Strategic Priorities
Logistics, Refining, and Marketing
Strategic priorities
Activities to support the strategic priorities in 2018
Increasing the refining depth and yields for light products
Enhancing the efficiency of processing and marketing
Improving conventional business sustainability through developing
petrochemical businesses
Maintaining leadership and growing market shares in existing and new
markets for the company’s products
Power Generation Business
By 2018, Gazprom Group had achieved the key objectives set
out upon entering into the electricity sector: target assets in
electricity generation were acquired, investment obligations
were successfully met, and Gazprom energoholding’s finan-
cial stability was achieved. In 2018, the Company approved
its Power Generation Strategy for 2018–2027, setting out
steady profit growth while maintaining reliable energy supply
to consumers as the Company’s key strategic goal in this
business.
The strategy involves constructing new and upgrading
existing generating capacity, and decommissioning low-per-
forming facilities. In addition, the document outlines the areas
for further operational efficiency improvements, driving tech-
nological advances, and diversifying the power business by
entering promising markets in Russia and abroad.
Gazprom Neft continued its refinery upgrade programmes in Russia and
abroad: Omsk Refinery completed the construction of a process
condensate treatment unit and on-spot automatic loading station to load
oil products into railway tanks, as well as Phase 1 upgrade of a delayed
coking unit; Moscow Refinery completed main construction and
installation activities on the Euro+ combined refining unit and overhauled
legacy refining units; construction of a new delayed coking unit continued
at the refinery in Pančevo, Serbia; and upgrade programmes were
continued with Gazprom Neft’s involvement at PAO Slavneft-YANOS
Refinery and Mozyr Refinery (Belarus)
Product mix was expanded, and marketing infrastructure was further
built up
New platform solutions have been rolled out to improve the marketing
business efficiency
By 2027, Gazprom energoholding is to become:
— Russia’s largest power generation holding company in
related and global markets
— a customer-oriented company ensuring reliable power
supply to consumers
— a financially stable company demonstrating steady profit
growth and debt reduction
— a company supporting the priority of the import substitu-
tion policy and the use of Russian equipment.
Strategic priorities
Activities to support the strategic priorities in 2018
Optimisation of the generation capacity mix
Unit 1 at the Grozny TPP commissioned
Operational excellence and cost optimisation
Constructing new and upgrading existing generating capacity,
and decommissioning low-performing facilities
Measures to improve operational efficiency and optimise costs
implemented
Low-performing generating capacity decommissioned
Driving technological advances
Operation modes for generating equipment optimised
Diversifying the power business by entering promising markets in Russia
and abroad
The Company commenced construction of CHP plant in Pančevo, Serbia
to meet the power and heat needs of an oil refinery operated by NIS,
a Gazprom Neft subsidiary
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PJSC Gazprom Annual Report 2018 Strategic Priorities
2019 and mid-term objectives in the context of strategic priorities
Upgrades and capacity expansions across refineries
Implementing an LNG bunkering project
2019
2020
2021
New Euro+ combined
refining unit
at Moscow Refinery
(commissioning)
New delayed coking
unit at the refinery
in Pančevo, Serbia
(commissioning)
New primary refining unit,
advanced oil refining
facility, and delayed
coking unit at Omsk
Refinery
(commissioning)
Catalyst production
business in Omsk
(commissioning)
LNG bunkering vessel
(commissioning)
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2023
Advanced oil refining
facility at Moscow Refinery
(commissioning)
2019 and mid-term objectives in the context of strategic priorities
Completion of an ambitious programme to build new generating capacity under capacity supply agreements (CSAs)
Generating fleet upgrades
Decommissioning of over 2 GW of low-performing capacity by 2022
Implementation of measures to improve operational efficiency and optimise costs
2019
2020
Grozny TPP
(commissioning of Unit 2)
Svobodnenskaya TPP
for power supply
of the Amur GPP
(commissioning)
CHP plant in Pančevo,
Serbia
(commissioning)
Note. Timelines for commissioning and ramp-up may be adjusted subject to the energy market environment.
81
PJSC Gazprom Annual Report 2018 Capex Programmes
Gazprom Group channels significant funds to investment pro-
grammes to develop and maintain its production assets. In
2018–2019, Gazprom’s investment cycle reaches its peak as
a number of major strategic projects are implemented con-
currently which, among other things, will allow PJSC Gazprom
to strengthen its leadership in the European market and
diversify exports into the rapidly growing Asian market.
Gazprom Group’s capital expenditures, RUB bn
2016
2017
2018
2019*
1,357.3
1,504.6
1,795.9
2,094.2
* Total actual expenditure under Gazprom’s capex programme for 2019 (covering gas, oil,
electricity, heat generating, and other assets) and similar plans of the Group.
Gazprom Group’s capex breakdown, RUB bn
2016
2017
2018
Gas transportation
Processing/refining
Gas production
Oil and gas condensate production
Electricity and heat generation and sales
Gas distribution
Gas storage
Other business segments
Total
2016
406.8
193.2
235.2
326.4
63.5
41.8
35.5
54.9
2017
498.6
225.2
216.5
330.4
58.1
51.7
37.7
86.4
1,357.3
1,504.6
2018
Change 2018/2017
640.1
309.4
308.0
257.9
72.9
39.1
19.4
149.1
1,795.9
28.4 %
37.4 %
42.3 %
−21.9 %
25.5 %
−24.4 %
−48.5 %
72.6 %
19.4 %
Capacity commissioned by Gazprom Group in 2018
Business segment
Gas production
Facilities commissioned
A 30 bcm per year comprehensive gas treatment unit (CGTU) at the Bovanenkovskoye OGCF
Two booster compressor stations at the Zapolyarnoye and Bovanenkovskoye fields with a combined capacity
of 237 MW
102 gas production wells in Russia
Oil and gas condensate production
Phase 2 facilities of a compressor station with a CGTU at the Novoportovskoye OGCF and Phase 1 facilities
of the TL-4 compressor station at the Orenburgskoye OGCF’s Eastern block
578 oil production wells in Russia
The second train of the CGTU at the Badra field in Iraq
Gas transportation
Four compressor plants with a combined capacity of 371 MW at the Bovanenkovo — Ukhta trunk gas pipeline
compressor station
890.8 km of trunk gas pipelines and connections in Russia, including 361.7 km following upgrades
Ten gas pumping units with a combined capacity of 73 MW and two upgraded gas distribution stations
in Russia
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PJSC Gazprom Annual Report 2018 Capex Programmes
Capacity commissioned by Gazprom Group in 2018 (continued)
Business segment
Facilities commissioned
Underground gas storage
Working gas capacity of 0.08 bcm at the Volgogradskoye UGSF
Ten wells at the Sovkhoznoye, Volgogradskoye, and Peschano-Umetskoye UGSFs
A 12 MW compressor plant at the Volgogradskoye UGSF
OOO Gazprom export’s working gas capacity of 0.08 bcm at the Dambořice UGSF in the Czech Republic
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Hydrocarbon processing
187.1 km of the Urengoy — Surgut gas condensate pipeline (Line 2). The 107 km–288 km section
A hydrogen production unit (intended to increase the output of premium Euro-5 fuels) and a diesel fuel
hydrotreating unit (upgraded) at the Astrakhan GPP
A refinery hydrogen pressure swing adsorption facility (allowing to increase hydrogen concentration in the plant’s
network and the hydrotreating severity of motor fuels across units, as well as reduce the amount of gases
discharged to flare) and a sulfur-alkaline wastewater neutralisation unit at Gazprom neftekhim Salavat’s refinery
and Monomer plant
Gas distribution
An LNG receiving terminal and a floating storage and regasification unit in the Kaliningrad Region
Electricity and heat generation
Unit 1 at the Grozny TPP with an installed capacity of 176 MW
Gazprom Group’s capital expenditures in 2018 were directed
mostly towards a number of projects across our business
segments.
—
In gas production — field construction to develop the
Chayandinskoye OGCF, the Cenomanian-Aptian
deposits at the Bovanenkovskoye OGCF, and the Achi-
mov deposits in the Urengoy OGCF. Production drilling
for gas in Russia totalled 304.4 thousand m.
— Oil and gas condensate production — field construction
to develop the oil rim at the Chayandinskoye OGCF, and
the implementation of Gazprom Neft’s projects, including
construction and production drilling at the Novoportovs-
koye OGCF and the Prirazlomnoye oil field, building of
high-tech ice breakers, participation in auctions for sub-
soil licences, as well as capex projects for conventional
assets. Production drilling for oil in Russia totalled
2,202.6 thousand m.
— Gas transportation — construction of the Power of Sibe-
ria and Ukhta — Torzhok 2 trunk gas pipelines, the UGSS
expansion project for the Gryazovets — Slavyanskaya CS
section in the North-West region, and the construction
of the TurkStream and Nord Stream 2 trunk gas pipelines.
Progress on the Nord Stream 2 gas pipeline project
During 2018, the Company obtained full sets of permits for the gas
pipeline construction in Russia, Germany, Finland, and Sweden. As at
31 December 2018, the permitting process was in progress for the
primary and alternative routes in Denmark (within Denmark’s exclusive
economic zone, to the north of the Bornholm Island).
In September 2018, the Solitaire offshore pipelay vessel started the
pipelay, and on 1 November 2018, the pipelaying of both gas pipeline
strings was completed in the German coastal waters. In December 2018,
dredging and backfilling were completed for the section. The Company
also completed the construction of a microtunnel.
Also in December 2018, the Pioneering Spirit vessel arrived for
pipelay in Finland’s waters. The Company expects to complete the main
construction on the pipeline in 2019 to ensure its commissioning.
The Company continued the capex project to build gas transporta-
tion capacity to support supplies via the Nord Stream 2 gas pipeline in
Germany (the EUGAL gas pipeline), the Czech Republic, and other
European countries.
Progress on the TurkStream gas pipeline project
In 2018, the Company completed the landfall section of the gas pipeline
in Russia and pipelaying of the deep-water offshore section. Landfall
facilities and a receiving terminal are under construction in Turkey.
In November 2018, TurkAkim Gaz Tasima A.S. joint project company
was established to implement the construction project for the onshore
transit section in Turkey. Expansion of the gas transportation infrastruc-
ture in Bulgaria and Serbia is in progress. Options are being considered
for the extension of the TurkStream pipeline’s onshore transit string
into the territory of European countries. In June 2017, PJSC Gazprom, the
Italian Edison, and the Greek DEPA signed a Cooperation Agreement,
which envisages establishing a southern route for Russian gas supplies
from Russia to Europe, which will run across Turkey to Greece and further
to Italy. The Company is also exploring options to deliver Russian gas to
consumers in Bulgaria, Serbia, and Hungary.
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PJSC Gazprom Annual Report 2018 Investment priorities for 2019
— Gas production — production drilling and field construction to
develop the Chayandinskoye OGCF, field construction to develop
the Cenomanian-Aptian deposits at the Bovanenkovskoye OGCF,
production drilling and field construction to develop the Achimov
deposits at the Urengoy OGCF, and production drilling and field
construction to develop the Kovyktinskoye gas and condensate field
— Oil and gas condensate production — field construction to develop
the oil rim in the Botuobinsky horizon of the Chayandinskoye OGCF;
development of the Novoportovskoye OGCF and the Prirazlomnoye
oil field
— Gas transportation — construction of the Power of Siberia trunk gas
pipeline, the UGSS expansion project for the Gryazovets — Slavyan-
skaya CS section in the North-West region, construction of the
Sakhalin — Khabarovsk — Vladivostok and the Ukhta — Torzhok 2
trunk gas pipelines, and the implementation of the Nord Stream 2
and TurkStream gas pipeline projects
— Underground gas storage — construction of facilities at the Kalinin-
gradskoye UGSF and Volgogradskoye UGSF, expansion and revamp
of the Kanchurinsko-Musinskoye UGSF complex, construction of the
Udmurtia Reserving UGSF Complex, and expansion of the Pungin-
skoye UGSF
— Hydrocarbon processing/refining — construction of the Amur GPP,
implementation of projects to enable liquid hydrocarbon transporta-
tion from the Nadym-Pur-Taz region (stabilisation unit for Achimov
deposit condensate from the Nadym-Pur-Taz region, Urengoy oil
pumping station, the Urengoy — Purpe oil and condensate pipeline,
a jumper between the gas condensate pipeline from Blocks 1A and
2A of the Urengoy OGCF and the stabilisation unit for Achimov
deposit condensate from the Nadym-Pur-Taz region), construction
of a catalytic cracking complex at Gazprom neftekhim Salavat, and
projects to boost refining depths at Omsk and Moscow Refineries.
— Gas supply — gas infrastructure expansion in Russia and construc-
tion of an LNG production, storage, and shipping complex near
the Portovaya compressor station
— Power and heat generation — construction of Unit 2 at the Grozny
TTP, Svobodnenskaya TPP, and Pančevo CHPP (Serbia), upgrade
of the existing generating equipment, and implementation of
a series of projects to ensure the reliability and safety of generating
facilities and maintain the heat network infrastructure
For more details on Gazprom Group’s key projects see Gazprom in Figures 2014–2018
Factbook
Capex Programmes
— Underground gas storage — construction of the new
Volgogradskoye UGSF, revamp of the Sovkhoznoye
UGSF, revamps of existing and construction of new facili-
ties at the Kaliningradskoye UGSF in Russia, as well as
capacity expansions at the Katharina and Jemgum UGS-
Fs in Germany, and the Dambořice UGSF in the Czech
Republic.
— Hydrocarbon processing/refining — construction of the
Amur GPP, implementation of projects to enable liquid
hydrocarbon transportation from the Nadym-Pur-Taz
region, construction and upgrade of oil refining and pet-
rochemical facilities at Gazprom neftekhim Salavat (con-
struction of a catalytic cracking complex and a hydrogen
unit), construction and upgrade of production facilities
at Moscow Refinery (construction of Euro+ combined
refining unit), and at Omsk Refinery (construction of
a primary refining unit, an advanced oil refining facility,
and a delayed coking unit), and the construction of
a delayed coking unit at Pančevo Refinery in Serbia.
Progress on the Amur GPP project
Construction of the Amur GPP — Russia’s No. 1 and the world’s No. 2 gas
processing facility by production capacity (42 bcm per year), and also the
global leader in helium production (up to 60 mmcm per year) — is in
active phase.
The first coil-wound heat exchanger was delivered to the plant
construction site. The unit, produced in Russia for the first time, is a key
link in the helium production chain.
In 2018, the Company signed a contract to supply ethane fraction
from the Amur GPP to Amur GCC (part of SIBUR Group) — about 2 mm
tonnes per year will be supplied over 20 years.
— Gas supply — construction of an LNG production, stor-
age, and shipping complex with an annual production
capacity of 1.5 mm tonnes near the Portovaya compres-
sor station in the Leningrad Region, gas infrastructure
expansion in Russia, and the implementation of a series
of projects to ensure gas supplies in the Kaliningrad
Region (a floating storage and regasification unit (FSRU)
terminal).
— Power and heat generation — construction of two new
GTU-180 units at the Grozny TTP, Svobodnenskaya TPP,
Pančevo CHPP (Serbia), as well as the upgrade of the
existing generating equipment (particularly, the upgrade
of the Verkhne-Tulomskaya HPP of PAO TGC-1, and the
equipment upgrade of Power Unit 9 at CHPP-22 operated
by PAO Mosenergo) and implementation of a series of
projects to ensure the reliability and safety of generating
facilities and maintain the heat network infrastructure.
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Interfaces between SPT-based long-, mid-, and short-term planning frameworks
Material changes in PJSC Gazprom’s
internal and external operating environment
Strategic (long-term)
planning
Tier-1 SPTs
Tier-2 SPTs
Mid-term
planning
Short-term
planning
PJSC Gazprom’s Long-Term Development Programme for 10 years
Feedback
List
of priority projects
Programme
indicators
Monitoring and control
(data, SPTs, PBs)
3-Year
Investment Programme
3-Year
Budget
Actual data / PBs
Performance benchmarks (PBs)
1-Year
Investment Programme
1-Year
Budget
Corporate KPIs
Strategic Performance Targets
PJSC Gazprom’s long-term strategic planning is based on
a framework of strategic performance targets (SPTs) well-
balanced across all lines of business and quantifying targets
in achieving PJSC Gazprom’s strategic goals. Strategic
planning identifies growth areas and management decisions,
which are detailed at the mid-term and short-term planning
levels. Results of the planning process are used as inputs for
PJSC Gazprom’s budgeting and Investment Programme for
the coming year and a three-year period.
Tier-1 SPTs (SPTs1) are set by the Company’s Board of Direc-
tors for the end of a ten-year planning period and provide
a basis for developing PJSC Gazprom’s Long-Term Develop-
ment Programme.
Tier-2 SPTs (SPTs2) flesh out SPTs1 for specific lines of
business, providing more details on the targets in production,
marketing, economic performance, internal corporate pro-
cesses, innovation, and HR management.
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PJSC Gazprom Annual Report 2018 Long-Term Development Programme
and Key Performance Indicators
SPTs1 values for the end of a ten-year period
(approved by Resolution of the Board of Directors No. 1528
dated 29 December 2009)
Metrics
Economic profit growth
Return on capital (ROC)
(return on capital employed)
Debt/equity ratio
(ratio between debt and equity)
Gas production and sales volumes
Gross production of natural gas
Sales of natural gas
Total gas reserves
Reserve replacement ratio
Target value
Positive
At least 6%
Not more
than 40%
Not less
than 550 bcm
Not less
than 490 bcm
Not less
than 29 tcm
of natural gas
Not less
than 100%
The SPT-based long-term planning framework covers the op-
erations of the Company and its key subsidiaries in the gas
business. The Company is actively taking efforts to develop
a mechanism to roll out the long-term planning framework
to PJSC Gazprom’s international operations and its oil and
power generation businesses, which will improve Gazprom
Group’s overall performance.
Long-Term Development Programme
PJSC Gazprom’s Long-Term Development Programme is
a key tool for the Company’s longer-term planning.
Its purpose is to provide a comprehensive integrated
plan ensuring the Company’s balanced and successful
growth, achievement of SPTs, and maximisation of systemic
economic benefits based on risk and opportunity analysis.
86
The key objectives of the Long-Term Development Programme
of PJSC Gazprom include:
—
identifying priority growth areas for the Company based
on insights into trends in the global and Russian energy
markets and competition analysis
— defining development options and prioritising projects
for PJSC Gazprom
— financial and economic evaluation of the Company’s
development options
— qualitative and quantitative assessment of PJSC Gazprom’s
strategic risks
— preparing recommendations and developing action
plans to achieve the Company’s SPTs and support its
sustainable growth.
The Long-Term Development Programme is developed
annually in accordance with the Company’s Planning Proce-
dures Based on the Strategic Performance Targets (SPTs)
approved by resolution of the Company’s Management
Committee in June 2006, and incorporating the Guidelines
on Long-Term Development Programmes for Strategic Open
Joint Stock Companies and Federal State Unitary Enterpris-
es, and Open Joint Stock Companies in which the Aggregate
Share of the Russian Federation Exceeds 50% (Instruction of
the Government of the Russian Federation No. ISh-P13-2583
dated 15 April 2014). Once pre-approved by PJSC Gazprom’s
Management Committee, the Programme is submitted for
approval to the Company’s Board of Directors.
PJSC Gazprom’s Long-Term Development Programme
(for 2019–2028, covering the gas business) was approved by
Resolution of the Board of Directors No. 3164 dated 2 Octo-
ber 2018 (Minutes of the Board of Directors’ meeting No. 1215
dated 2 October 2018). It covers PJSC Gazprom’s gas busi-
ness — the core business line. As a global vertically integrat-
ed energy company with different lines of business, Gazprom
is working to create a mechanism for rolling out the SPT-
based long-term planning framework across its oil and power
generation businesses, as well as international operations,
pursuant to the Russian Government Directives No. 4955p-
P13 dated 17 July 2014.
Extending the SPT-based long-term planning framework
to international operations and oil and power generation
businesses will facilitate the development of a framework of
quantitative indicators covering the key metrics of Gazprom
Group’s performance, enable monitoring of progress on the
strategy and the actual values achieved against targets,
ensure Gazprom Group’s adaptation to the changing external
and internal environment, boost planning efficiency, and im-
prove management decisions, thus achieving synergies
across different lines of business.
PJSC Gazprom Annual Report 2018 y
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Key Performance Indicators
The medium and short term investment, financial, and opera-
tional planning at PJSC Gazprom is consolidated within the
budget planning framework.
Targets for corporate key performance indicators (KPIs)
are calculated based on PJSC Gazprom’s annual budget
(financial plan) and Investment Programme. The KPIs incor-
porate the Company’s most important short-term efficiency
and effectiveness metrics and are subject to approval by the
Board of Directors.
The Company’s KPI framework was approved by Resolu-
tion of the Board of Directors of JSC Gazprom No. 2435
dated 21 October 2014 (Minutes of the Board of Directors’
meeting No. 972 dated 21 October 2014) as part of the
Regulations on JSC Gazprom’s Key Performance Indica-
tors. Subsequently, the KPI framework was amended by
PJSC Gazprom’s Board of Directors to incorporate the in-
structions issued by government authorities.
KPI targets for 2018 were set by resolutions of the Board
of Directors based on PJSC Gazprom’s 2018 budget (finan-
cial plan) and Investment Programme, with some of the KPIs
subsequently adjusted as per the new version of the 2018
budget (financial plan) and Investment Programme.
The adjustment was mainly driven by increased gas
supplies to consumers in Russia and abroad on the back of
growing demand.
Long-Term Development Programme
and Key Performance Indicators
Changes in PJSC Gazprom’s Long-Term Development Programme
in 2018
In 2018, PJSC Gazprom’s Long-Term Development Programme was
developed with the use of actual performance metrics for 2017, updated
forecast operating, economic, and financial performance targets for the
Company’s gas business, and projections made by the Russian Ministry
of Economic Development about the country’s long-term socio-economic
development.
Also, within the efforts to create a mechanism for rolling out the
SPT-based long-term planning framework across the oil and power
generation businesses in 2018, a special section was added to the
Company’s Long-Term Development Programme, covering the extension
of the long-term planning framework to international operations and oil
and power generation businesses.
Russian Government Directives No. 4955p-P13 dated 17 July
2014 provide for audits covering the progress on the Long-
Term Development Programme.
In 2018, a progress audit of PJSC Gazprom’s Long-Term
Development Programme (for 2017–2026, covering the gas
business) was conducted by OOO FBK. The audit was per-
formed in accordance with the Standard for Conducting
a Progress Audit of PJSC Gazprom’s Long-Term Development
Programme and the Terms of Reference for Conducting
a Progress Audit of PJSC Gazprom’s Long-Term Development
Programme (approved by Resolution of the Board of Direc-
tors of PJSC Gazprom No. 3074 dated 16 February 2018).
Based on the results of the audit procedures and the audit
evidence obtained, the auditor produced a report (No. 3675
dated 28 December 2018) confirming that the actual values
achieved against the targets set out in the Programme were
reliable and the targets set in PJSC Gazprom’s Long-Term
Development Programme (for 2017–2026, covering the gas
business) were on the whole achieved in 2017.
In line with the Standard for Conducting a Progress Audit
of PJSC Gazprom’s Long-Term Development Programme,
proposals for implementing the auditor’s recommendations
are submitted for approval to PJSC Gazprom’s Board of
Directors. Information on implementation of the auditor’s rec-
ommendations is included in the Programme as part of its
annual update.
Proposals for implementing the auditor’s recommenda-
tions produced following the progress audit of PJSC Gazprom’s
Long-Term Development Programme for 2017 were approved
by Resolution of PJSC Gazprom’s Board of Directors
No. 3242 dated 10 April 2019.
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PJSC Gazprom Annual Report 2018 Long-Term Development Programme
and Key Performance Indicators
Target and actual values of corporate KPIs for 2018
Target value
KPI metric
Initial*
Adjusted**
Actual value
Financial and economic KPIs
,
KPI achievement
% of the target
Explanation of variance
between target and actual KPI values
Per unit costs
in Production,
RUB/t c. e.
Per unit costs
in Transportation,
RUB per unit
of transportation
(mcm/100 km)
Reduction
of operating costs
(expenses),
%
Total shareholder return
(TSR)
Return on Equity
(ROE),
%
Labour productivity,
RUB thousand/
man-hour
Industry-specific KPIs
Gas sales by volume,
bcm
Commissioning
of priority production
facilities
Integrated innovation
key performance
indicator,
%
933.30
926.07
907.52
102%
Higher demand for gas resulting in increased
gas supplies to far abroad countries
and Russia
69.90
68.38
67.47
101%
2
0.10
No
adjustments
No
adjustments
No
adjustments
6
−2.61
0.242
–
242%
11.68
195%
68.89
74.36
85.88
115%
439.899
456.988
465.130
102%
10
(list of production
facilities
adjusted)
10
100%
No
adjustments
104.1
110%
10
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Significantly higher gas transit and storage
costs outside Russia due to record-high export
volumes
Higher market value of PJSC Gazprom shares
on the Moscow Exchange
Growth in operating profit due to increased
sales and higher prices for the key products
sold by Gazprom Group
Higher revenue for PJSC Gazprom, combined
with reduced man-hours vs the assumptions
used in calculating the target
Higher demand for gas resulting in increased
gas supplies to far abroad countries
and Russia
–
Implementation of PJSC Gazprom’s Innovative
Development Programme and well-organised
innovation
* Resolution of PJSC Gazprom’s Board of Directors No. 3096 dated 17 April 2018.
** Resolution of PJSC Gazprom’s Board of Directors No. 3205 dated 28 December 2018.
Description of the KPIs is provided in the Remuneration of Members of Management
and Supervisory Bodies section
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PJSC Gazprom Annual Report 2018
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Long-Term Development Programme
and Key Performance Indicators
Target corporate KPIs for 2019 were approved by Resolution
of PJSC Gazprom’s Board of Directors No. 3249 dated
16 April 2019.
Target corporate KPIs for 2019
KPI metric
Financial and economic KPIs
Target value
*
Per unit costs in Production, RUB/t c.e.
926.50
Per unit costs in Transportation, RUB per unit
of transportation (mcm/100 km)
Reduction of operating costs (expenses), %
Total shareholder return (TSR)
Return on Equity (ROE), %
Labour productivity, RUB thousand/man-hour
Industry-specific KPIs
Gas sales by volume, bcm
Commissioning of priority production facilities
Integrated innovation key performance indicator, %
69.32
2
0.10
6
81.42
453.288
10
95
* KPI values were calculated in accordance with PJSC Gazprom’s annual budget (financial
plan) and Investment Programme approved by the Board of Directors and may be
adjusted following the established procedures if the Board of Directors resolves
to approve new versions of these documents.
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PJSC Gazprom Annual Report 2018 Performance
Results
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
90PJSC Gazprom Annual Report 2018 Operations and Marketing 92
Exploration and Production 92
Transportation and Underground Storage 100
Gas Distribution, Gas Infrastructure Expansion,
and NGV Fuel Markets 104
Hydrocarbon Processing and Petrochemicals 108
Power Generation 113
Marketing 117
Innovations and Import Substitution 126
Financial Performance 133
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 201891PJSC Gazprom Annual Report 2018
Operations and Marketing
Exploration and Production
Gazprom — the global leader by gas reserves and
production. The Company effectively expands its resource
base, successfully develops new gas production hubs in
the Yamal Peninsula and in eastern Russia, implements
prospective projects abroad. Among the key results of
2018 is the commissioning of the Bovanenkovskoye field
production site No. 3 in the Yamal Peninsula, the largest
by explored reserves.
PJSC Gazprom maintains its leadership in gas reserves and
production among Russian and global public companies
of the fuel and energy sector. The Company’s priority is en-
suring increased reserve replacement rates which will allow
producing hydrocarbon volumes matching the consumer
needs. Since 2005, exploration-based reserve replacement
consistently remains at the levels exceeding gas production
volumes. To replace its mineral resource base, Gazprom
Group actively conducts exploration in Russia and abroad,
and constantly monitors new projects.
According to DeGolyer and MacNaughton, Gazprom
Group’s proved and probable PRMS reserves as at 31 De-
cember 2018 were 24,255.1 bcm of natural gas, 1,090.2 mm
tonnes of gas condensate, and 1,335.4 mm tonnes of oil,
including share in the reserves of entities in which Gazprom
has investments classified as joint operations (22.4 bcm of
natural gas and 152.7 mm tonnes of oil).
Most of Gazprom Group’s projects have been audited,
totalling 93.0% of gas reserves, 94.1% of condensate re-
serves and 93.9% of oil reserves in A+B1+C1 reserve cate-
gories.
Proved and probable PRMS hydrocarbon reserves
of Gazprom Group
(including share in the reserves of entities in which Gazprom
has investments classified as joint operations)
Natural gas, bcm
including proved reserves
Gas condensate, mm tonnes
including proved reserves
Oil, mm tonnes
including proved reserves
Total, bn boe*
including proved reserves
As at
31 December 2017
As at
31 December 2018
24,146.6
18,253.4
1,105.7
797.7
1,360.0
736.8
175.7
130.4
24,255.1
17,890.4
1,090.2
759.7
1,335.4
712.3
176.1
127.5
* For management accounting purposes, Gazprom Group measures hydrocarbon reserves
and production in metric units. In this Annual Report, gas reserves are converted from
metric units to barrels of oil equivalent at a ratio of 1,000 cu m to 6,49 boe.
The relevant conversion ratios are provided in the Glossary section
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Exploration and Production
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In addition to the annual production from the fields operated
by Gazprom, the key factors behind the changes in reserve
estimates under international standards included a review
of geological models following exploration activities and
re-estimation (at the Tambeyskoye, Yen-Yakhinskoye, Taldin-
skoye, and Gubkinskoye fields), new development solutions
(Yen-Yakhinskoye, Gubkinskoye, and Taldinskoye fields),
transfer of the Semakovskoye field licence to the books of
OOO RusGazAlyans, as well as PAO Gazprom Neft’s invest-
ment decisions on gas transportation and sale for the Novo-
portovskoye field.
Operations in Russia
Mineral Resource Base
Subsoil licence portfolio as at 31 December 2018
Gazprom Group
274
559.3 thousand
square km
licences for geological surveying, exploration,
and production of hydrocarbons
total area of licence blocks
Entities in which Gazprom has investments classified as joint operations
36
licences for geological surveying, exploration,
and production of hydrocarbons
23.1 thousand
square km
total area of licence blocks
For more details on Gazprom Group’s licences for major hydrocarbon fields
and licensing activities see Gazprom in Figures 2014–2018 Factbook
As at 31 December 2018, Gazprom Group’s A+B1+C1 hydro-
carbon reserves in Russia were 35,195.3 bcm of natural gas,
1,604.4 mm tonnes of gas condensate, and 2,015.7 mm
tonnes of oil, including share in the reserves of entities in
which Gazprom has investments classified as joint opera-
tions — 23.9 bcm of gas, 2.8 mm tonnes of gas condensate,
and 190.9 mm tonnes of oil. Gazprom Group’s A+B1+C1
hydrocarbon reserves total 256.3 bboe.
Factors behind the changes in A+B1+C1 natural gas reserves in 2018, bcm
Natural gas reserves as at 31 December 2017
Re-estimation
Exploration-based additions to reserves
Transfer of reserves to the Russian open acreage*,
to the books of other companies
Production (including losses)**
Natural gas reserves as at 31 December 2018
35,355.4
−49.6
+796.6
−409.3
−497.8
35,195.3
* Under the Russian laws, a subsoil user does not have any vested right to develop reserves it discovers within the areas covered by its exploration licences or beyond the licensed areas.
Such reserves are to be transferred to the open acreage of the Russian Federation, with the subsoil user granted the pre-emptive right to subsequently obtain a licence for developing the
relevant discovery.
** Excluding dissolved gas.
Gazprom Group’s mineral resource base has a high concen-
tration of reserves with about 60% concentrated in Western
Siberia. Unique, and large fields of the region such as Yam-
burgskoye, Urengoyskoye, Medvezhye, and Vyngayakhin-
skoye, which for a long time ensured planned natural gas
production levels, entered the declining production phase.
A significant part of reserves is located in deposits with low
reservoir energy, challenging geology, poor porosity and
permeability, flooding of pay zone. New approaches to reser-
voir engineering and reliable well productivity forecasting are
required to ensure cost-effective operation of such fields and
achieve high recovery ratio. Over the mid- and longer term,
resource base expansion will be ensured through exploration
and appraisal of conventional resources in promising oil and
gas regions, as well as through the development of hard-to-
recover, and unconventional resources.
Breakdown of Gazprom Group’s explored gas reserves, %
Reserves in offshore fields
Reserves in remote fields
with poor infrastructure
Reserves securing stable production
rates in areas covered by the existing
UGSS
Reserves in the fields with declining
production rates
Reserves in deep-lying complex
deposits
Reserves in the Astrakhanskoye field
(with environmental restrictions on gas
production depth)
24.8
23.8
19.5
13.2
10.6
8.1
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Exploration and Production
Gazprom Group’s fields in Russia with the largest reserves of natural gas and oil
2
7
9
7
10
3
2
5
10
5
6
1 6
1
9
8
4
4
3
11
8
The largest fields by natural gas reserves
The largest fields by oil reserves
1
2
3
4
5
6
7
8
9
10
11
Urengoyskoye
Shtokman
Bovanenkovskoye
Astrakhanskoye
Yamburgskoye
Zapolyarnoye
Tambeyskoye
Kovyktinskoye
Kharasaveyskoye
Kruzenshternskoye
Chayandinskoye
1
2
3
4
5
6
7
8
9
10
Priobskoye
Novoportovskoye
Eastern block of the Orenburgskoye OGCF
Vyngapurovskoye
Sutorminskoye
Vyngayakhinskoye
Prirazlomnoye
Ety-Purovskoye
Novogodneye
Tazovskoye
Note. The map shows Gazprom Group’s hydrocarbon fields (excluding entities in which Gazprom has investments classified as joint operations) with combined A+B1+C1 reserves accounting
for over 70% of natural gas and over 50% of oil reserves as at 31 December 2018.
Exploration
Exploration programme employing advanced prospecting
methods is underway to replace and expand the mineral re-
source base.
Exploration drilling for gas and oil across Gazprom Group,
thousand m
2016
2017
2018
Change 2018/2017
111.6
85.9
157.6
83.5%
The Group’s share in A+B1+C1 hydrocarbon reserves of as-
sociates and joint ventures (including share in the reserves of
OOO RusGazAlyans joint venture) as at 31 December 2018
was 1,146.7 bcm of gas, 110.1 mm tonnes of gas conden-
sate, and 592.0 mm tonnes of oil, which totals 12.7 bboe.
Re-estimation
Gazprom continued revising gas recovery factors (GRFs) un-
der the new Russian Classification of Reserves and Resources
of Oil and Flammable Gases. The revision did not have any
significant impact on the changes in natural gas reserves in
2018 since it covered the fields comprising a minor share of
Gazprom Group’s total gas reserves. As at 31 December
2018, Gazprom completed the GRF estimation for the fields
containing 19% of the Group’s total A+B1+C1 reserves. Revi-
sion of GRFs for Gazprom Group’s other fields in the coming
years may have a significant impact on the size of its recov-
erable gas reserves.
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Exploration and Production
1.60
The gas reserve replacement ratio
Transfer of Reserves
In the reporting year, the transfer of subsoil licences for the
Severo-Parusovoye and Semakovskoye fields located in the
Tazovsky and Nadymsky districts of the Yamal-Nenets Autono-
mous Area and in the Taz Bay of the Kara Sea to OOO Rus-
GazAlyans (a joint venture between OOO Gazprom dobycha
Yamburg and AO RusGazDobycha) was a major factor be-
hind the changes in natural gas reserves vs the estimate as at
31 December 2017. The transaction was made under the
Master Agreement on the implementation of a joint project for
the development of the Parusovoye, Severo-Parusovoye and
Semakovskoye fields located in the Yamal-Nenets Autono-
mous Area, signed between PJSC Gazprom and AO RusGaz-
Dobycha.
Field Developments
PJSC Gazprom’s consistent success in implementing unique
and strategically important hydrocarbon production projects
is largely driven by its recognised technology leadership.
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Gazprom Group’s hydrocarbon production assets in Russia
as at 31 December 2018
Gazprom Group
138
7,418
1,166 bcm
fields in commercial development
gas producing wells
total design capacity of comprehensive
and preliminary gas treatment units
8,489
oil producing wells
Entities in which Gazprom has investments classified as joint operations
38
fields in commercial development
Within its licence areas Gazprom conducts exploration in al-
most every oil and gas province located onshore, on the
Arctic continental shelf, and in the Okhotsk oil and gas prov-
ince.
In 2018, the Company completed seismic surveys in
Russia: 2D — 5.7 thousand square km, 3D — 9.5 thousand
square km. In the same period, exploration drilling totalled
157.6 thousand m of solid rock, and 25 oil and gas wells were
completed, with 20 wells producing flow when tested. In-
crease in exploration drilling meterage was, in particular, due
to the Bazhenov project implementation by Gazprom Neft.
For more details on the project see the Innovations and Import Substitution section
During the year, the Company also used sidetrack drilling for
further exploration. Drilling meterage totalled 637 m, with four
production wells completed.
The Company allocated RUB 86.4 bn for its exploration
programmes (inclusive of VAT).
In addition, for entities in which Gazprom has invest-
ments classified as joint operations, exploration drilling stood
at 28.7 thousand m, with eight exploration wells (including
five production wells) completed, and 3D seismic survey was
acquired on 474 square km. Further exploration using side-
track drilling totalled 5.0 thousand m.
In 2018, exploration-driven additions to A+B1+C1 hydro-
carbon reserves in Russia totalled 796.6 bcm of natural gas,
21.8 mm tonnes of gas condensate, and 19.4 mm tonnes of
oil. Including additions to the reserves of companies in which
Gazprom has investments classified as joint operations —
6.8 mm tonnes of oil.
Significant growth in gas reserves was achieved at the
Leningradskoye field in the Kara Sea (+667.4 bcm) and the
Yuzhno-Kirinskoye field in the Sea of Okhotsk (+100.9 bcm).
The Group made three new field discoveries during 2018:
the Neptune and Triton fields in the Sea of Okhotsk and the
Blizhnenovoportovskoye field in the Yamal-Nenets Autono-
mous Area, as well as identified 12 new deposits at the previ-
ously discovered fields in the Yamal-Nenets Autonomous
Area, Khanty-Mansi Autonomous Area — Yugra, the Tomsk
and Orenburg regions, and the Kara Sea. In addition, entities
in which Gazprom has investments classified as joint opera-
tions discovered the Vostochno-Talovoye field in the Tomsk
Region and three deposits in the Khanty-Mansi Autonomous
Area — Yugra.
The results of exploration activities at the Nyarmeysky
and Rusanovsky licence blocks in the Kara Sea allow
Gazprom to expect more discoveries in the areas.
The exploration success rate in 2018 was 34.5 thousand
boe per metre drilled (excluding entities in which Gazprom
has investments classified as joint operations).
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Operations and Marketing
Exploration and Production
Gazprom Group’s fields in Russia with the largest production of natural gas and oil
4
2
2
4
1
5
3
9
6
6
3
1 8
8
7
7
5
The largest fields by natural gas production
The largest fields by oil production
1
2
3
4
5
6
7
8
Zapolyarnoye
Bovanenkovskoye
Urengoyskoye
Yamburgskoye
Yuzhno-Russkoye
Yamsoveiskoye
Orenburgskoye
Astrakhanskoye
1
2
3
4
5
6
7
8
9
Priobskoye
Novoportovskoye
Vyngapurovskoye
Prirazlomnoye
Eastern block of the Orenburgskoye OGCF
Vyngayakhinskoye
Tsarichanskoye
Kraineye
Ety-Purovskoye
Note. The map shows Gazprom Group’s hydrocarbon fields (excluding entities in which Gazprom has investments classified as joint operations) with combined production accounting for 70%
or more of total natural gas and oil production in 2018.
The Group produced 498.7 bcm of natural and associated
gas in the reporting year, demonstrating growth due to an in-
crease in demand. In autumn and winter of 2017/2018, actual
maximum daily production in the UGSS area amounted to
1,494.2 mmcm.
The Zapolyarnoye OGCF (Cenomanian) and the Bovanen-
kovskoye OGCF significantly contributed to the growth in nat-
ural gas production. In 2018, the third gas production site with
a 30 bcm per year gas treatment unit was launched at the
Bovanenkovskoye field. This will help ramp up gas production
from the field’s Cenomanian-Aptian deposits to a design ca-
pacity of 115 bcm per year.
Actual gas production at the field is increased incremen-
tally based on market demands.
The Bovanenkovskoye OGCF was tested at maximum
daily gas production of 317 mmcm.
Gazprom Group’s natural and associated gas production
in the Russian Federation, bcm
Gazprom Group, including share in the production volumes
of entities in which Gazprom has investments classified
as joint operations
2016
2017
2018
420.1
1.0
472.1
1.1
498.7
1.1
Total
Gazprom Group’s share in the production volumes of entities
in which Gazprom has investments classified as joint operations
Change 2018/2017
Gazprom Group’s equity share of production
from associates and joint ventures
2016
2017
2018
Change 2018/2017
96
5.6%
27.2
27.0
26.9
−0.4%
PJSC Gazprom Annual Report 2018 Operations and Marketing
Exploration and Production
Information on the commissioning of exploration and production capacities
in the reporting year is presented in the Capex Programmes section
In only ten years, in the most challenging Arctic
conditions, Gazprom has built a strong production
complex and transportation and life-supporting
infrastructure at the Bovanenkovskoye field
in the Yamal Peninsula from the ground up.
Gas production from the Bovanenkovskoye OGCF, bcm
2016
2017
2018
Change 2018/2017
67.5
82.8
87.4
5.6%
In 2018, Gazprom Group also increased the production of
APG. The primary contributor to this growth was the Novo-
portovskoye OGCF of Gazprom Neft, where facilities allowing
APG re injection into a reservoir to maintain formation pres-
sure at the required level were commissioned in 2017. APG
utilisation level across Gazprom Neft Group (excluding enti-
ties in which the Group has investments classified as joint
operations) increased to 78.4% (in 2017 — 76.2%).
Revamps and retrofits of gas production facilities carried out
under comprehensive programmes ensure reliable, safe, and
cost-efficient operation of Gazprom Group’s gas production
assets to maintain target gas production levels, including
fields in the declining production phase. Activities under such
programmes in 2018 covered the Yamburgskoye, Uren-
goyskoye, Medvezhye, Yubileynoye, and Yamsoveiskoye,
and Orenburgskoye OGCFs, as well as the Astrakhanskoye
GCF. The Group allocated RUB 6.0 bn (inclusive of VAT) to
fund these programmes.
Gazprom Group’s oil and gas condensate production
volumes in 2018 remained almost flat year-on-year. Produc-
tion volumes were reduced for a number of Gazprom Neft’s
fields to meet quotas defined by the Ministry of Energy of
the Russian Federation for Gazprom Group under the OPEC+
production cut deal.
Oil production by Gazprom Group in Russia, mm tonnes
Gazprom Group, including share in the production volumes
of entities in which Gazprom has investments classified
as joint operations
2016
2017
2018
47.2
7.9
48.6
7.6
48.3
7.4
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in the production volumes of entities in which
the Group has investments classified as joint operations, bcm
Total
Gazprom Group’s share in the production volumes of entities
in which Gazprom has investments classified as joint operations
2016
2017
2018
Change 2018/2017
10.4
11.4
13.9
21.9%
Gazprom Neft is working to improve APG utilisation level in
line with the APG Efficient Utilisation Programme involving
capex projects for construction of gas infrastructure. APG uti-
lisation of at least 95% is planned to be achieved by 2020 for
assets with well-developed gas infrastructure and by 2022
taking into account the new assets. In 2018, new facilities
were commissioned at Eastern block of the Orenburgskoye
OGCF under the programme.
In 2018, APG utilisation across Gazprom Group’s assets
in Russia reached 81.8%, including share in the production
volumes of entities in which the Group has investments clas-
sified as joint operations.
PJSC Gazprom’s gas production subsidiaries
achieved APG utilisation rates of almost 100%.
Change 2018/2017
Gazprom Group’s equity share of production
from associates and joint ventures
2016
2017
2018
Change 2018/2017
−0.6%
9.9
10.9
11.2
2.8%
The Group continued to ramp up oil production at the Novo-
portovskoye OGCF and the Prirazlomnoye oil field under the
field development projects.
As at 31 December 2018, 16 of 32 planned wells were
commissioned at the Prirazlomnoye field located on the
south-eastern Pechora Sea shelf. Year-round oil shipments
are ensured, including the ice season in winter.
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Exploration and Production
Gas condensate production by Gazprom Group in Russia,
mm tonnes
Gazprom Group
2016
2017
2018
Change 2018/2017
Gazprom Group’s equity share of production
from associates and joint ventures
2016
2017
2018
Change 2018/2017
15.9
15.9
15.9
–
5.2
5.0
4.9
−2.0%
Operations outside Russia
Outside Russia, Gazprom Group carries out hydrocarbon
field prospecting and exploration, holds stakes in a number
of oil and gas projects which have entered the production
phase, and provides oilfield services related to well con-
struction.
During 2018, Gazprom Group carried out a number of
geological and geophysical (G&G) surveys under the relevant
contracts in FSU countries, Europe, Southeast Asia, Africa,
the Middle East, and South America.
Exploration campaigns conducted by Gazprom Group on
the Group-operated projects included exploratory drilling of
21.9 thousand m of rocks with 10 exploration wells completed
(including 9 producing wells), as well as 3D seismic surveys
of 1.1 thousand square km. Drilling operations were conduct-
ed in Serbia and Iraq, 3D seismic surveys — in Serbia.
Under the Agreement of Strategic Cooperation between
PJSC Gazprom and AO Uzbekneftegaz, hydrocarbon poten-
tial of six investment blocks, as well as the Paleozoic deposits
in the Bukhara-Khiva region in Uzbekistan was assessed.
Oil production from the Prirazlomnoye oil field, mm tonnes
2016
2017
2018
Change 2018/2017
2.2
2.6
3.2
23.1%
The ARCO oil type produced at the Prirazlomnoye
field is in high demand since its unique properties
and composition are perfectly suited for deep
processing at European refineries.
Two next-generation icebreakers commissioned by Gazprom
Neft and built in 2018 will help enhance the logistics of year-
round Arctic oil shipment from the Novoportovskoye field.
Oil production from the Novoportovskoye OGCF, mm tonnes
2016
2017
2018
Change 2018/2017
2.9
6.0
7.1
18.3%
Attracting investments in the development
of hard-to-recover reserves
In September 2018, Gazprom Neft Group, Mubadala Petroleum invest-
ment fund (UAE), and the Russian Direct Investment Fund announced the
completion of a transaction establishing a joint venture to develop oil
fields in Western Siberia. Further to the transaction, a 49% minority inter-
est in OOO Gazpromneft-Vostok operating 13 fields in the Tomsk and
Omsk regions was sold to the investor consortium. The subsidiary’s
potential lies in designing technology for the cost-effective development
of pre-Jurassic hydrocarbon resources.
The increase in the oil production volumes of associates and
joint ventures was driven by higher production from AO Mes-
soyakhaneftegaz-operated Vostochno-Messoyakhskoye
field, put into commercial development in 2016 (a joint ven-
ture between PJSC Gazprom Neft and PAO Rosneft).
For more details on Gazprom Group’s priority field developments in the Russian
Federation see the Strategy section and Gazprom in Figures 2014–2018 Factbook
For more details on the application of new development technologies see
the Innovations and Import Substitution section
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Exploration and Production
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In Algeria, Gazprom Group optimised the technical and eco-
nomic parameters of the ZERN and ZER field development
(including negotiations with the Algerian party on amending
the contract terms), which led to the decision to transfer the
blocks to the state. In 2018, Gazprom Group also returned
licences for the Shohambary and Sarikamysh prospects in
Tajikistan, and the Kugart and Eastern Mailu-Suu IV licence
blocks in Kyrgyzstan since PJSC Gazprom resolved that further
exploration would be unviable.
Gazprom Group spent RUB 4.7 bn in 2018 on exploration
projects outside Russia (inclusive of VAT).
Gazprom Group also has stakes in a number of oil and
gas projects at the production stage. In terms of natural gas
and gas condensate production, the largest of them include
the projects on development of the Moc Tinh and Hai Thach
fields in the Vietnamese section of the South China Sea bed
(49% held by Gazprom Group), and the Incahuasi field in Ipati
and Aquio licence blocks in Bolivia (20% held by Gazprom
Group). The Badra field development project in Iraq (30%
held by Gazprom Group) is the largest by production of oil
and APG.
Natural gas production from the Incahuasi field in Bolivia, bcm
2016
2017
2018
Change 2018/2017
0.7
2.5
2.6
4.0%
Note. Total production figures are given for the project, without separating the share
attributable to Gazprom Group.
Natural gas production from the Moc Tinh and Hai Thach fields
in Vietnam, bcm
2016
2017
2018
Change 2018/2017
2.1
2.1
2.2
4.8%
Note. Total production figures are given for the project, without separating the share
attributable to Gazprom Group.
More than20%
The share of Vietnamese natural gas produced
by the joint venture at the Moc Tinh and Hai Thach fields
developed with the Group’s participation
In 2018, the Group completed the production well drilling pro-
gramme at the Badra field and commissioned the second
train for gas treatment.
Oil production from the Badra field in Iraq, mm tonnes
2016
2017
2018
Change 2018/2017
2.6
3.8
4.0
5.3%
Note. Total production figures are given for the project, without separating the share
attributable to Gazprom Group.
The Group signed the supplementary agreement to the pro-
duction sharing agreement for the development of the
Shakhpakhty field extending its validity till 2024, and the pro-
duction sharing agreement for the Djel field development
(Uzbekistan) in 2018.
Naftna Industrija Srbije (NIS), a Serbian subsidiary of
Gazprom Neft, produced 0.9 mm tonnes of oil and 0.5 bcm
of natural and associated gas.
In 2018, Wintershall Noordzee joint venture (50% were
obtained by the Group following an asset swap deal between
PJSC Gazprom and Wintershall Holding GmbH) produced
0.7 bcm of gas in the North Sea. The Group’s associate Win-
tershall AG (49% held by the Group) still faces challenges
due to the ongoing political crisis in Libya, which resulted
in limited oil production and export: in the reporting year,
2.1 mm tonnes of oil and 0.3 bcm of associated gas were
produced.
For more details on Gazprom Group’s prospecting and exploration projects
and on performance of associates and joint ventures outside Russia see
Gazprom in Figures 2014–2018 Factbook
Gazprom Group executes oilfield services contracts in the
Republic of Bangladesh. In 2018, the Group completed the
construction of the Bhola North 1 well in Bangladesh for
BAPEX.
Exploring business opportunities in Iran
Gazprom Group is exploring opportunities to conduct business in Iran
in compliance with the laws of the Russian Federation, international laws,
and considering economic, operational, and legal risks.
Between 2009 and 2017, PJSC Gazprom signed a number of
non-binding memoranda of understanding with Iranian companies to
cooperate in exploration, production, transportation, processing, and
marketing of hydrocarbons. The Company does not conduct any
investments and operations under these memorandums.
In 2018, the Group continued to focus on exploring opportu-
nities for participation in new oil and gas projects in South
America and Tajikistan. Under the Agreement of Strategic
Cooperation with YPFB, PJSC Gazprom is focusing on possi-
ble participation in the development of the Vitiacua block in
Bolivia. In addition, in line with the Memorandum of Coopera-
tion with YPF, PJSC Gazprom is exploring a number of pro-
spective projects in hydrocarbon exploration and production
in Argentina.
99
PJSC Gazprom Annual Report 2018
Operations and Marketing
Transportation and Underground Storage
The effective operation of the world’s largest gas
transportation system (GTS) of Gazprom ensures highly
reliable and flexible gas supplies. The Company
consistently develops the system with an emphasis on
constructing advanced high-tech gas pipelines. Major
efforts are focused on the expansion of the Northern Gas
Transmission Corridor becoming the key route for
domestic and export supplies, and on building gas
transportation system in eastern Russia.
Gas Transportation in Russia
The Unified Gas Supply System (UGSS) of Russia is a cen-
trally operated system of natural gas treatment, transporta-
tion, and storage. The UGSS incorporates the world’s longest
network of high-pressure trunk pipelines covering European
Russia and Western Siberia. In addition, the Group owns
trunk pipelines in the Russian Far East: Sakhalin — Khaba-
rovsk — Vladivostok and Sobolevo — Petropavlosk-Kamchat-
sky. As at 31 December 2018, the combined length of trunk
pipelines and connections operated by the Group’s gas trans-
portation subsidiaries in Russia totalled 172.6 thousand km.
Breakdown of Russian trunk gas pipelines operated
by the Group’s gas transportation subsidiaries by time in service
as at 31 December 2018, thousand km
Less than 10 years (inclusive)
11 to 20 years (inclusive)
21 to 30 years (inclusive)
31 to 40 years (inclusive)
41 to 50 years (inclusive)
Over 50 years
Total
16.7
15.7
34.8
59.1
26.3
20.0
172.6
Gazprom’s GTS, which is unique in its size and quality
parameters, ensures highly reliable and flexible gas
supplies for consumers in Russia and abroad.
During 2018, a total 693.1 bcm of gas were supplied into
Gazprom’s GTS in Russia exceeding the level of 2017. The
growth was driven by higher demand and a subsequent in-
crease in gas supplies by Gazprom.
100
PJSC Gazprom Annual Report 2018 Operations and Marketing
Transportation and Underground Storage
Gas supplies into the GTS in Russia, bcm
Gas consumption for own operational needs of the GTS, bcm
2016
2017
2018
Change 2018/2017
622.6
672.1
693.1
3.1%
2016
2017
2018
Change 2018/2017
Gas transportation services to non-Group companies via Gazprom’s GTS in Russia
32.0
37.5
40.1
6.9%
2018
Change 2018/2017
−1.1%
−1.6%
4.2%
23.9
22.1
25.1
13.6%
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2016
129.0
121.3
24
2017
137.9
130.4
24
136.4
128.3
25
Inline inspections to diagnose the GTS in Russia, thousand km
2016
2017
2018
Change 2018/2017
Reduced overhauls of trunk gas pipelines over the last years
were due to a higher share of pipe replacements in the total
overhauls and redistribution of funding on repairs for gas pro-
cessing facilities, GPUs, and gas-turbine engines. To com-
pensate for the change and ensure reliable GTS operation,
the number of inline inspections in trunk gas pipelines was
increased.
For more details on the diagnostics and overhauls of trunk gas pipelines in Russia
and on the number of GTS technical fault see Gazprom in Figures 2014–2018
Factbook
Gas transported, bcm
including Russian gas
Companies serviced
As the owner of the Russian section of the GTS, PJSC Gazprom
leases out free gas pipeline capacity (subject to its availabili-
ty) to independent companies outside Gazprom Group pro-
vided they have a gas production licence and a supply con-
tract with the buyer of the supplied gas. Such third-party gas
also needs to meet relevant technical standards.
Over the last ten years, there were no significant
problems in gas supplies to consumers due
to break-downs or faults in GTS operation.
Every year, under the relevant targeted comprehensive repair
programmes, the Company performs overhauls and sched-
uled maintenance of gas transportation facilities based on
inline and corrosion inspections data. It improves the reliabili-
ty of gas supplies, technical and environmental safety of
transportation, and distribution of gas flows.
GTS overhauls in Russia, km
2016
2017
2018
Change 2018/2017
822.8
810.1
771.3
−4.8%
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Transportation and Underground Storage
Gas Transportation outside Russia
In the former Soviet Union (FSU) countries, Gazprom Group
companies own the gas transportation systems in Belarus,
Armenia, and Kyrgyzstan. The gas transportation system in
Belarus, which is owned by PJSC Gazprom’s subsidiary
OAO Gazprom transgaz Belarus, supplies natural gas to con-
sumers in Belarus, and carries transit supplies of gas to
Europe and Russia’s Kaliningrad Region.
For more details on profiles of Gazprom Group’s gas transportation infrastructure
outside Russia see Gazprom in Figures 2014–2018 Factbook
Gas injected into Belarus’ GTS, bcm
2016
2017
2018
Total
Including gas in transit
Change 2018/2017
60.3
41.7
61.2
42.2
62.6
42.3
2.3%
Nord Stream (operated by joint venture Nord Stream) and
Blue Stream (operated by Blue Stream, which is included
in the list of entities in which Gazprom has investments classi-
fied as joint operations) offshore cross-border pipeline sys-
tems constructed with Gazprom’s involvement, secure gas
supplies to consumers in Northwest and Central Europe, as
well as in Turkey.
The key drivers of gas pipeline capacity utilisation in-
clude demand from European consumers and regulatory re-
strictions by supervisory authorities on access to pipeline
capacity for transit supplies.
For details on key gas export routes of PJSC Gazprom see the Company Information
section
Gas transported through the Nord Stream gas pipeline, bcm
2016
2017
2018
Change 2018/2017
Note. Gas injection into the pipeline at the Portovaya compressor station.
43.8
51.0
58.7
15.1%
Gas transported through the Blue Stream gas pipeline, bcm
2016
2017
2018
Change 2018/2017
13.1
15.9
13.3
−16.3%
Note. Gas injection into the pipeline at the Beregovaya compressor station.
In 2018, the share of these GTS in transit supplies of gas to
Europe totalled ca. 36%.
Underground Gas Storage in Russia
Underground gas storage facilities (UGSFs) are located in
key gas consumption areas. Peak and base load gas storage
facilities improve the reliability of the UGSS infrastructure and
optimise technical parameters and capital intensity of gas
transportation systems. UGSFs have been constructed and
are used by Gazprom Group for process purposes, as well as
to ensure the reliability of gas supplies during seasonal con-
sumption peaks and level off seasonal and daily fluctuations
in demand.
Volgogradskoye UGSF (phase 1) was commissioned
in 2018.
In Russia, Gazprom Group operates 23 UGSFs in 27 geologi-
cal structures. As at 31 December 2018, Gazprom Group’s
UGSFs in Russia had an aggregate total gas storage capacity
of 75.0 bcm.
During 2018, withdrawal and injection amounts for Rus-
sian UGSFs totalled 52.0 bcm and 49.5 bcm of gas. The
maximum aggregate daily deliverability was registered on
1 March 2018 at 555 mmcm. By the start of the withdrawal
season, the potential maximum daily deliverability was in-
creased by 7.2 mmcm from 2017 and totalled 812.5 mmcm of
gas. By the 2018/2019 withdrawal season, operating gas
reserves in Russian UGSFs increased by 0.088 bcm from the
previous season to 72.2 bcm. The improved performance
was driven by a recovery in target well productivity and
revamps of the existing Kasimovskoye, Sovkhoznoye, Kalinin-
gradskoye, Elshano-Kurdyumskoye, and Peschano-Umet-
skoye UGSFs, as well as the construction of the new Volgo-
gradskoye UGSF.
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Transportation and Underground Storage
Gazprom Group injected 1.2 bcm of gas into FSU-based
UGSFs, and withdrew the same volume of gas.
To secure reliable and flexible gas supplies, Gazprom
makes extensive use of gas storage facilities located in Euro-
pean far abroad countries: in Austria (Haidach), Germany
(Jemgum, Rehden, Katharina, and Etzel), Serbia (Banatski
Dvor), the Netherlands (Bergermeer), and the Czech Repub-
lic (Dambořice).
By the start of the 2018/2019 withdrawal season,
PJSC Gazprom owned gas storage capacity in far abroad
European countries totalled approximately 5 bcm of working
gas while the additional gas storage contracts signed in
autumn and winter of 2018/2019 added 5.8 bcm in gas inven-
tories by 1 December 2018. In 2018, a total of 6.6 bcm of
PJSC Gazprom’s gas were injected into UGSFs in far abroad
European countries under OOO Gazprom export contracts,
with a total gas withdrawal of 7.2 bcm.
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Gas withdrawn from UGSFs in Russia, bcm
2016
2017
2018
Change 2018/2017
Gas injected into UGSFs in Russia, bcm
2016
2017
2018
Change 2018/2017
Gas consumption for own operational needs of UGSFs bcm
2016
2017
2018
Change 2018/2017
44.8
45.5
52.0
14.3%
24.7
44.2
49.5
12.0%
0.31
0.50
0.56
12.0%
Underground Gas Storage outside Russia
The UGSFs outside Russia enable Gazprom Group to build
strategic natural gas reserves mitigating transit risks.
In the FSU countries, Gazprom operates UGSFs in Bela-
rus (Pribugskoye, Osipovichskoye, and Mozyrskoye), in
Armenia (the Abovyanskaya underground gas storage sta-
tion), and employs capacities of the Inčukalns UGSF in Latvia
during repairs and emergencies. As at 31 December 2018,
the operating gas reserves in FSU-based UGSFs totalled
1.6 bcm, down from 31 December 2017 due to reduced oper-
ating gas reserves in the Inčukalns UGSF.
Gazprom Group’s operating gas reserves in FSU-based UGSFs
as at 31 December, bcm
2016
2017
2018
Change 2018/2017
2.9
3.0
1.6
−46.7%
103
PJSC Gazprom Annual Report 2018
Operations and Marketing
Gas Distribution, Gas Infrastructure Expansion,
and NGV Fuel Markets
Gazprom implements an important national objective of
expanding gas infrastructure across Russia: every year
tens of thousands of consumers are connected to the gas
network. Gas infrastructure expansion means higher living
standards for local residents and a major boost in social
and economic growth for Russian regions. Promoting the
use of natural gas vehicle fuel (NGV fuel) through
expanding the network of advanced gas filling stations is
an integral part of this effort.
Gazprom Group operates its network in a safe and reliable
way while providing corporate control over compliance with
industrial safety requirements for the operation of gas distribu-
tion systems in Russia. Work is in progress to consolidate
gas distribution assets in Russia through acquiring economi-
cally viable gas-distributing facilities in strict compliance with
the applicable laws.
The Group’s gas distribution networks are operated by
AO Gazprom gazoraspredelenie, its subsidiaries and associ-
ates, and OOO Gazprom transgaz Kazan.
As at 31 December 2018, the Group’s gas distribution
subsidiaries and associates owned and operated a total of
786.7 thousand km of gas distribution networks in Russia,
which makes up ca. 82% of all gas distribution networks in
Russian regions.
Ca.74%
The share of end consumers supplied Gazprom Group’s
gas distribution entities
In 2018, Gazprom Group’s gas distribution subsidiaries and
associates transported 239.7 bcm of natural gas via their gas
distribution networks. Gas was supplied to:
— 27.7 million apartments and private households
— 32.4 thousand industrial facilities
— 8.1 thousand agricultural facilities
— 332.6 thousand utility facilities
Additionally, the Group’s subsidiaries and entities provide
gas distribution services in Armenia (ZAO Gazprom Armenia),
Kyrgyzstan (OsOO Gazprom Kyrgyzstan), and in Romania
(WIROM GAS S.A.).
For more details on Gazprom Group’s gas distribution business see Gazprom
in Figures 2014–2018 Factbook
104
PJSC Gazprom Annual Report 2018 Operations and Marketing
Gas Distribution, Gas Infrastructure Expansion,
and NGV Fuel Markets
Expansion of Gas Infrastructure in Russian Regions
The implementation of the Programme for Expansion of Gas
Infrastructure, which has a direct impact on social and eco-
nomic growth in Russian regions and people’s living standards,
is one of the Gazprom’s strategic priorities Russia. In 2018,
the Programme for Expansion of Gas Infrastructure covered
66 Russian regions.
RUB 36.7bn
were allocated by PJSC Gazprom in 2018 to expand
gas infrastructure across Russian regions
Funds channelled by PJSC Gazprom into expanding
gas infrastructure across Russian regions, RUB bn
2016
2017
2018
Change 2018/2017
25.0
29.5
36.7
24.4%
146 facilities spanning 2,019 km were built under the Pro-
gramme in 2018. The Company extended gas infrastructure
to connect 49.1 thousand households and apartments and
210 boiler houses across 272 locations. As part of utility con-
nection services, 101.8 thousand capital facilities were con-
nected to gas distribution networks.
24.4%
A year-on-year increase in funds channelled
by PJSC Gazprom into expanding gas infrastructure
across Russian regions in 2018
Increased PJSC Gazprom’s investment in infrastructure ex-
pansion across Russia in 2018 was mainly due to activities
with significant impact on Russia’s social and economic
growth in general and aimed at developing the gas market
in Russia’s Far East (supplying gas in priority development
areas (PDAs) in the Primorye, Khabarovsk, and Kamchatka
Territories, in the Sakhalin Region, the Vostochny Cosmo-
drome, and the Svobodny PDA in the Amur Region) and ex-
panding gas infrastructure in rural areas.
In 2018, the gas infrastructure coverage grew by 0.5 p.p.
year-on-year and, as at 31 December 2018, reached 68.6%
in Russia, including 71.9% in urban and 59.4% in rural areas.
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As part of supplying gas and expanding gas infrastructure in
PDAs of the Primorye, Khabarovsk, and Kamchatka Territo-
ries and the Sakhalin Region in 2018, 16 gas supply facilities
for the PDAs Mikhailovsky, Nadezhdinskaya, Parus, Komso-
molsk, and Gorny Vozdukh spanning a total of 170 km were
in design and construction phase with three facilities span-
ning 31 km completed. In 2018, the Company also designed
gas supply facilities for the Vostochny Cosmodrome (two
facilities), and continued designing gas supply facilities for
the Svobodny PDA in the Amur Region (two facilities).
The main challenge in implementing the gasification
programme in the Kamchatka PDA is the shortage of gas re-
sources due to a lack of proved gas reserves for a number of
fields. To maintain current production volumes, Gazprom
makes efforts in expanding mineral resource base in the re-
gion and considers alternative gas supply options.
Capex projects in off-mains solutions employing natural
gas liquefaction technology are underway in the Tomsk Re-
gion. In 2018, as part of these efforts, the Company designed
five facilities: Kargala, a small-scale LNG production facility
(7 tonnes of LNG per hour), and four receiving, storage, and
regasification stations.
The Programme for Expansion of Gas Infrastructure in
Russian Regions for 2019 covers 66 regions (just like in 2018).
Allocated investments totalled RUB 34.3 bn.
NGV Fuel Markets
Development of the NGV Fuel Market in Russia
Promoting the use of natural gas as motor fuel in Russia is
one of Gazprom Group’s priorities.
The Group is promoting the NGV fuel market (including
sales of gas as motor fuel) through OOO Gazprom gazomo-
tornoe toplivo, owned on a parity basis by a subsidiary of
PJSC Gazprom and a company of Gazprombank Group.
As at 31 December 2018, Gazprom Group operated a net-
work of 293 compressed natural gas (CNG) filling stations in
Russia with total sales of over 2.2 bcm per year. 235 of these
CNG filling stations were operated by OOO Gazprom gazo-
motornoe toplivo, and 58 — by PJSC Gazprom’s subsidiaries.
Operating CNG filling stations on the books of Gazprom Group
and OOO Gazprom gazomotornoe toplivo in Russia
as at 31 December, units
2016
2017
2018
Change 2018/2017
254
271
293
8.1%
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Gas Distribution, Gas Infrastructure Expansion,
and NGV Fuel Markets
Cooperation with Russian Automotive Manufacturers
and Carriers
OOO Gazprom gazomotornoe toplivo and Russian automo-
tive manufacturers jointly worked on developing an electronic
catalogue of CNG-powered vehicles, discussed possible
options for cooperation to expand the model range of CNG-
powered vehicles (in particular, with PAO KAMAZ, and
PAO AVTOVAZ), and ran activities to promote gas-powered
transport and CNG use.
Government Relations
In the reporting year, major efforts were focused on relations
with the Ministry of Energy of the Russian Federation (Min-
energo of Russia), Ministry of Industry and Trade of the Rus-
sian Federation (Minpromtorg of Russia), Ministry of Trans-
port of the Russian Federation (Mintrans of Russia), Ministry
of Agriculture of the Russian Federation (Minselkhoz of
Russia), Executive Office of the Government of the Russian
Federation, and executive offices of the Presidential Plenipo-
tentiary Envoys to the Federal Districts to address state
support for the development of the NGV fuel market. In par-
ticular, proposals were drafted on improving the laws to
encourage the use of NGV fuels.
In 2018, OOO Gazprom gazomotornoe toplivo signed
agreements with eight Russian regions to promote the use
of NGV fuel, and submitted proposals on measures to
encourage the use of natural gas as motor fuel to 17 regions.
60
Regions of the Russian Federation developing their
gas refuelling networks under relevant agreements
with OOO Gazprom gazomotornoe toplivo
CNG sales through CNG filling stations of the Group
and OOO Gazprom gazomotornoe toplivo in Russia, mmcm
2016
2017
2018
Change 2018/2017
480.0
525.9
598.2
13.7%
CNG sales in 2018 grew due to implementing marketing
programmes to promote the use of natural gas as motor fuel,
incentive programmes to convert vehicles to natural gas, and
a rapidly growing federal network of gas filling stations.
Total sales of small-scale LNG (produced in Russia)
by Gazprom Group and OOO Gazprom gazomotornoe toplivo
increased year-on-year due to growth in export supplies.
Sales of small-scale LNG (produced in Russia) by Gazprom Group
and OOO Gazprom gazomotornoe toplivo in Russia,
thousand tonnes
2016
2017
2018
Change 2018/2017
15.8
24.2
30.5
26.0%
In 2018, the Group promoted the use of NGV fuel with a focus
on following key areas: development of gas-filling infrastruc-
ture, interaction with Russian automakers and carriers, inter-
action with state authorities of the Russian Federation.
NGV Infrastructure Expansion
In cooperation with the Federal Road Agency (Rosavtodor),
the Group developed the Master Plan for Developing NGV
Infrastructure along the Federal Roads providing for construct-
ing a core network of 181 facilities and setting up so-called
transit NGV corridors at the existing and projected key high-
ways of Russia.
Furthermore in 2018, 21 CNG filling stations and three
mobile NGV-refuelling stations were completed and bought
from private investors and four CNG filling stations and
two mobile NGV-refuelling stations were revamped. LNG
infrastructure for gas-powered locomotives was expanded.
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Gas Distribution, Gas Infrastructure Expansion,
and NGV Fuel Markets
Presence in the International NGV Fuel Market
Gazprom Group is also active in the international NGV fuel
segment of the European market via Gazprom NGV Europe,
a 100% subsidiary (active in the markets of Germany, the
Czech Republic, and Poland), and via NIS (part of Gazprom
Neft Group) that markets CNG in Serbia. In 2018, the number
of CNG filling stations and cryogenic filling stations in Europe
grew to 70 (over a half of them — in Germany) driven by
the expansion of CNG filling station network in the Czech
Republic. CNG and LNG sales also increased and amounted
12.9 mmcm (12.3 mmcm in 2017).
The Group offers CNG via CNG filling stations in FSU
countries — Armenia, Belarus, and Kyrgyzstan. CNG sales
totalled 42.3 mmcm in 2018.
Status of the project on promoting the NGV fuel market in Vietnam
(as at 31 December 2018)
— The Group completed and approved a feasibility study on the
project providing for the construction of a small-scale natural gas
liquefaction plant with an annual capacity of 20 mmcm, and
a network of LNG/CNG filling stations in the southern provinces of
Vietnam
— An official confirmation of natural gas supply for a pilot project until
2033 was obtained from PV Gas
— The Group rented a land plot to site an LNG facility
— The project was approved for implementation under an EPC-
contract
— A document package was prepared to initiate tender procedures
In cooperation with our foreign partners, we took efforts on
developing the NGV fuel markets, including implementation
of the NGV infrastructure projects in Bolivia and Vietnam.
An NGV rally across the international transport route
between Europe and China
(in partnership with CNPC and JSC National Company
KazMunayGas)
The motor rally commenced on 4 September 2018 in Rudong, China,
and officially concluded on 4 October 2018 at the 8th St Petersburg
International Gas Forum. The motor rally involved several events (round-
table discussions, presentations) to promote the use of natural gas as
motor fuel. The motor rally featured a total of 15 gas-powered trucks,
cars, and buses.
The international conference Silk Road Clean Energy — the Future
of International Transcontinental Gas-Motor Corridors, held on 4 October
2018, summarised the motor rally. The conference participants also
discussed the prospects of development of LNG filling infrastructure on
the transport route between Europe and China.
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Hydrocarbon Processing and Petrochemicals
The Company consistently develops its gas processing
business with the half of Russia’s gas volumes processed
at Gazprom Group’s facilities. The Amur GPP, Russia’s
No. 1 and the world’s No. 2 gas processing facility, is
under construction and a number of other promising
projects are explored.
In 2018, Gazprom Group processed 31.1 bcm of natural and
associated gas (almost flat year-on-year), excluding tolling ar-
rangements. Processing of liquid hydrocarbon feedstocks
(crude oil, gas condensate, and fuel oil) grew by 5.1% year-
on-year to 67.4 mm tonnes mainly due to higher processing
volumes across Gazprom Neft Group and Gazprom neftekh-
im Salavat Group.
The Group produced 3.6 mm tonnes of liquefied petroleum
gas (LPG) and 5.1 mmcm of helium in 2018. Due to higher
processing volumes of liquid hydrocarbon feedstocks, the
output of petroleum products reached 51.4 mm tonnes. As
a result of the production facilities upgrade, Gazprom neft-
ekhim Salavat ramped up its output of monomers and poly-
mers. At the same time, the output of mineral fertilisers was
down following the sale of a non-performing asset.
108
PJSC Gazprom Annual Report 2018 Operations and Marketing
Hydrocarbon Processing and Petrochemicals
Gazprom Group’s natural and associated gas processing, bcm
2016
2017
2018
Change 2018/2017
Note. Excluding tolling arrangements.
Gazprom Group’s liquid hydrocarbon processing, mm tonnes
2016
2017
2018
Total
Including Russia
Change 2018/2017
Note. Excluding tolling arrangements.
Gazprom Group’s output of oil products, mm tonnes
Gazprom Group’s monomer and polymer production,
thousand tonnes
2016
2017
2018
Change 2018/2017
Gazprom Group’s production of mineral fertilisers
and relevant feedstocks, thousand tonnes
2016
2017
2018
Change 2018/2017
31.0
30.8
31.1
1.0%
65.9
62.7
64.1
60.6
67.4
63.8
5.1%
473.1
419.2
521.4
24.4%
953.0
913.2
836.4
−8.4%
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2016
15.0
12.3
7.8
3.2
2.1
3.2
0.4
6.2
2017
14.3
11.7
6.6
3.1
2.7
3.4
0.5
6.6
50.2
48.9
2018
Change 2018/2017
15.7
12.0
6.9
3.6
3.1
2.9
0.5
6.7
51.4
9.8%
2.6%
4.5%
16.1%
14.8%
−14.7%
–
1.5%
5.1%
Diesel fuel
Motor gasolines
Fuel oil
Aviation fuel
Bitumens
Marine fuel
Lubricants
Other oil products
Total
2016
2017
2018
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Hydrocarbon Processing and Petrochemicals
Gazprom Group’s hydrocarbon processing, and gas chemical and petrochemical capacity as at 31 December 2018
6
4
5
6
2
5
3
4
3
2
1
1
Gas processing plants (GPPs) with installed throughput capacity
Refineries with installed throughput capacity
1
2
3
4
5
6
Astrakhan
Astrakhan GPP
Sosnogorsk
Sosnogorsk GPP
Orenburg
Orenburg GPP
Orenburg Helium Plant
Khanty-Mansiysk
Yuzhno-Priobskiy GPP*
12.0
7.3
3.0
2.5
37.5
6.3
15.0
0.5
Surgut
Condensate stabilisation plant
12.1
Novy Urengoy
Condensate pre-transportation
preparation plant**
13.7
Natural and associated gas, bcm
Oil, mm tonnes
Unstable gas condensate, mm tonnes
Oil, stable gas condensate, deethanised gas condensate, mm tonnes
1
Serbia
Novi Sad Refinery***
2
3
4
5
6
Belarus
Moscow
Yaroslavl
Salavat
Omsk
Pančevo Refinery
Mozyr Refinery****
Moscow Refinery
Slavneft-YANOS*
Salavat Refinery
Omsk Refinery
10.0
4.6
14.0
12.8
7.5
10.0
22.2
*
**
***
****
Gazprom Group has access to 50% of capacity.
Capacity by non-degassed condensate; degassed condensate capacity is 12.2 mm tonnes.
Suspended as at 31 December 2018.
Up to 50% of oil supplied by the Group to the refinery. The actual processing volume at the refinery depends on cost-efficiency. In 2018, the Group did not run refining operations under
tolling arrangements at the Mozyr Refinery.
For more details on Gazprom Group’s hydrocarbon processing/refining capacities see
Gazprom in Figures 2014–2018 Factbook
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Hydrocarbon Processing and Petrochemicals
Gas and Condensate Processing by Gazprom’s
Gas Processing and Gas Production Subsidiaries
In 2018, PJSC Gazprom’s gas processing and gas production
subsidiaries processed 30.1 bcm of natural and associated
gas and refined 17.8 mm tonnes of crude oil and unstable gas
condensate, excluding tolling arrangements. Gas processing
and unstable gas condensate refining volumes remained flat
year-on-year.
Plans for the construction of gas processing facilities near
the seaport of Ust-Luga
In May 2018, PJSC Gazprom and AO RusGazDobycha signed the Heads
of Agreement on cooperation in implementing a joint project to construct
new gas processing facilities relying on PJSC Gazprom’s current hydro-
carbon resource base in the Nadym-Pur-Taz region. The Agreement
specifies the key terms of a GPP construction near the seaport of Ust-
Luga intended to process ethane-containing natural gas produced from
the Achimov and Valanginian deposits.
In 2018, a joint venture, OOO RusKhimAlyans, was established
to implement this project, and a pre-investment study was carried out to
support the main investment decision making.
In 2018, the Orenburg GPP processed 9.5 bcm of gas from
the Karachaganakskoye gas and condensate field (Kazakh-
stan) under tolling arrangements (8.8 bcm in 2017).
Unstable gas condensate and crude oil processing by Gazprom’s
gas processing and gas production subsidiaries, mm tonnes
2016
2017
2018
Change 2018/2017
Note. Excluding tolling arrangements.
17.6
17.5
17.8
1.7%
Stable gas condensate (crude oil) processing by Gazprom’s gas
processing and gas production subsidiaries, mm tonnes
The decrease in stable gas condensate (crude oil) primary
refining volumes was due to an upgrade of the diesel fuel hy-
drotreating unit at the Astrakhan GPP.
In 2018, PJSC Gazprom completed the consolidation
of its processing assets into OOO Gazprom pererabotka:
the subsidiary acquired the Orenburg GPP and the Orenburg
Helium Plant, both formerly owned by OOO Gazprom doby-
cha Orenburg, and the Astrakhan GPP formerly owned by
OOO Gazprom dobycha Astrakhan. OOO Gazprom
pererabotka has obtained all applicable licences.
Oil Refining, Petrochemicals, and Mineral Fertiliser
Production at Gazprom Neftekhim Salavat’s Facilities
In 2018, Gazprom neftekhim Salavat’s production facilities
refined 6.7 mm tonnes of liquid hydrocarbon feedstocks (in-
cluding 1.6 mm tonnes of crude oil, 4.8 mm tonnes of stable
gas condensate and 0.3 mm tonnes of fuel oil) and pro-
cessed 0.5 bcm of natural gas.
Stable gas condensate and crude oil processing
by Gazprom neftekhim Salavat’s facilities, mm tonnes
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2017
2018
Change 2018/2017
6.5
6.5
6.7
3.1%
Motor gasoline production ramped up in 2018 due to the
commissioning of a pentane-hexane fraction isomerisation
plant in 2017 and favourable market conditions. The subsidiary
also increased its diesel fuel output, while cutting production
of the relatively low-margin marine fuel. The production
process upgrade to the updated GOST 33133-2014 and the
launch of grade BND 70/100 and BND 100/300 road bitu-
mens production enabled the subsidiary to achieve a record-
high bitumen output.
2016
2017
2018
Change 2018/2017
Note. Excluding tolling arrangements.
6.6
6.5
6.2
−4.6%
New products launched by Gazprom neftekhim Salavat’s facilities
in 2018
Facility
Salavat
Refinery
Product
Grade BND 70/100 and BND 100/300 road bitumens
Isopentane fraction
Feedstock for grade SDB 80/120 bitumen production
Monomer
plant
SNOLEN ER 0.26/51N PE100 slurry high-density
polyethylene
111
PJSC Gazprom Annual Report 2018
Operations and Marketing
Hydrocarbon Processing and Petrochemicals
New products launched by Gazprom Neft’s refineries in 2018
Facility
Product
Moscow
Refinery
Omsk
Refinery
G-DRIVE-100 motor gasoline
Needle coke (pilot batch)
RT jet fuel (for subsonic aircraft)
Aromatics
Catalytically cracked gasoline
Avangard-NEO microspheric cracking catalyst
Diesel fuel isodewaxing catalyst (pilot batch)
PAO Slavneft-
YANOS
Grade 50/70, 70/100, and 100/150 road bitumens
made to EN 12591:2009 standard for export
to the EU countries
Asphalt
The Group continued the efforts to expand its product range,
improve the product quality, and launch new innovative prod-
ucts.
For more details on the use of new hydrocarbon processing/refining technologies,
see the Innovations and Import Substitution section
The Monomer plant underwent a phased upgrade and in-
creased its monomer and polymer output in 2018 year-on-
year. Thus, by upgrading the ethylene and propylene produc-
tion facilities and switching them to a two-year maintenance
cycle, the plant was able to ramp up its ethylene, styrene,
and high-density polyethylene output.
In early 2018, the plant completed the sale of its
100%-stake in a non-performing OAO Meleuz Mineral Ferti-
lisers, therefore its mineral fertiliser range no longer includes
ammonium nitrate; however, the plant’s ammonia supply
volumes to OAO Meleuz Mineral Fertilisers have remained
flat.
OOO Akril Salavat is Russia’s largest acrylic acid
and butyl acrylate producer.
Due to higher market demand, the acrylic acid plant’s output
increased year-on-year.
Oil Refining and Petrochemicals Production
at Gazprom Neft Group’s Facilities
In 2018, Gazprom Neft Group refined 42.9 mm tonnes of oil
and stable gas condensate and 0.5 bcm of APG supplied
to the Yuzhno-Priobskiy GPP as Gazprom Neft Group’s equity
share of production. The increased volumes of processed
liquid hydrocarbon feedstocks were due to the completion of
scheduled overhaul programme at Russian refineries oper-
ated by Gazprom Neft Group in 2017.
Stable gas condensate and crude oil processing
by Gazprom Neft Group’s refineries, mm tonnes
2016
2017
2018
Change 2018/2017
41.9
40.1
42.9
7.0%
Higher processing volumes enabled Gazprom Neft Group to
increase the motor gasoline and diesel fuel output. Moreover,
due to an increase in processing volumes and a production
process optimisation at PAO Slavneft-YANOS the aviation fuel
output also grew. The increase in bitumen output resulted
from higher domestic market demand and addition of new
export destinations.
112
PJSC Gazprom Annual Report 2018 Operations and Marketing
Power Generation
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Gazprom is the leader in heat and power generation
among domestic heat producing companies. In 2019,
the Group will complete an ambitious programme to build
new generating capacity under capacity supply
agreements (CSAs).
Russia’s largest vertically integrated power generation hold-
ing company has been established within PJSC Gazprom and
has consolidated electricity and heat generating assets, heat
transmission and distribution assets, as well as assets in
related segments.
Gazprom Group’s generating assets are consolidated
within its 100% subsidiary, OOO Gazprom energoholding,
managing PAO TGC-1, PAO Mosenergo, PAO OGK-2, and
PAO MIPC.
AO Gazprom energosbyt, a Gazprom Group company,
is a leader in the Russian electricity market, active in both
wholesale and retail segments and providing over 95% of
electricity needs of Gazprom Group’s subsidiaries.
16 %
Gazprom energoholding’s share in the installed
electrical capacity of Russia’s Unified Energy System
(UES)
Outside Russia, the Group owns Unit 5 at the Hrazdan TPP
through its subsidiary ZAO Gazprom Armenia.
Gazprom Group’s generating capacity as at 31 December 2018
Installed
,
electrical capacity
GW
Installed
,
heat capacity
thousand Gcal/h
Gazprom energoholding
38.58
67.91
Other generating assets in Russia
and abroad
Total
1.38
39.96
2.88
70.79
The year-on-year change in the installed electrical and heat
capacity in 2018 was due to the retirement of obsolete and
underperforming generating assets and installed capacity
upgrades across OOO Gazprom energoholding companies
as well as the launch of Unit 1 at the Grozny TPP. Replacing
heat generation capacity of retired facilities remains a major
challenge in decommissioning low-performing assets.
For more details on capacity commissioned in the power generation segment in 2018
see the Capex Programmes section
Factors affecting Gazprom energoholding’s installed electrical capacity in 2018, GW
Installed electrical capacity as at 31 December 2017
New capacity commissioned
Low-performing capacity decommissioned
Other factors
Installed electrical capacity as at 31 December 2018
38.82
+0.18
−0.55
+0.13
38.58
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Power Generation
Gazprom energoholding’s generating capacity as at 31 December 2018
6
7
5
8
9
10
4
1
2
3
12
13
11
1
2
3
4
5
6
Adler
Stavropol
Grozny
Novocherkassk
Pskov
Saint Petersburg,
Republic of Karelia,
the Leningrad
and Murmansk Regions
7
Kirishi
Adler TPP
PAO OGK-2
Stavropolskaya GRES
PAO OGK-2
Grozny TPP
PAO OGK-2
Novocherkasskaya GRES
PAO OGK-2
Pskovskaya GRES
PAO OGK-2
52 power stations
of PAO TGC-1
and its subsidiaries
Kirishskaya GRES
PAO OGK-2
367
63
2,423
145
176
2,258
60
440
91
6,950
13,745
2,595
1,234
Installed electric capacity, MW
Installed heat capacity, Gcal/h
Electricity and Heat Generation
14
8
9
Cherepovets
Cherepovetskaya GRES
PAO OGK-2
Moscow
and the Moscow Region
15 power stations
of PAO Mosenergo
10 Ryazan
11
Troitsk
12 Serov
13 Surgut
14 Krasnoyarsk
PAO MIPC
and its subsidiaries
Ryazanskaya GRES
PAO OGK-2
Troitskaya GRES
PAO OGK-2
Serovskaya GRES
PAO OGK-2
Surgutskaya GRES -1
PAO OGK-2
Krasnoyarskaya GRES-2
PAO OGK-2
1,080
39
12,798
43,136
7,091
3,130
213
1,315
210
451
3,333
903
1,260
976
Electricity generation by Gazprom Group in Russia, billion kWh
According to the UES System Operator, power consumption
within the Unified Energy System (UES) of Russia totalled
1,056 billion kWh in 2018 while electricity generation was
1,071 kWh.
2016
2017
2018
During 2018, the Group generated 151.5 billion kWh of
Change 2018/2017
electricity and 131.25 mm Gcal of heat at its generating
assets in Russia. The decline in electricity generation by the
Group was due to the streamlining of the load factors for
Gazprom energoholding’s inefficient generating equipment.
Heat generation increased due to cooler average tempera-
tures during the heating season.
114
156.73
155.46
151.50
−2.5%
PJSC Gazprom Annual Report 2018 Operations and Marketing
Power Generation
Heat generation by Gazprom Group in Russia, mm Gcal
Pursuing a customer-focused policy
2016
2017
2018
Change 2018/2017
14%
Gazprom’s share in electricity generation in Russia
Electricity generation by Gazprom Group, billion kWh
Gazprom energoholding
PAO Mosenergo
PAO OGK-2
PAO TGC-1 and its subsidiaries
Other generating assets in Russia and abroad
Total
Note. The table shows power generation, i.e. the amount of electricity generated by power stations.
Heat generation by Gazprom Group, mm Gcal
Gazprom energoholding
PAO Mosenergo
PAO MIPC and its subsidiaries*
PAO OGK-2
PAO TGC-1 and its subsidiaries
Other generating assets in Russia and abroad
129.48
127.34
131.25
3.1%
Gazprom energoholding companies pursue a customer-focused policy,
which has proven to be successful both globally and in Russia. A cus-
tomer focus implying consistent engagement with consumers and analy-
sis of their feedback on customer service is expected to drive our rev-
enues from other services to existing and new consumers in the medium
and longer term.
As part of this policy, Gazprom energoholding companies are taking
steps to ensure better, faster, and more convenient customer service
through establishing a contact centre, upgrading customer service cen-
tres, launching an e invoicing platform for consumers, and offering
a customer account service. Client websites were upgraded with an ex-
tremely user-friendly interface to provide users with all the information
they might need.
2016
153.83
59.07
67.09
27.67
3.68
157.51
2016
123.36
81.83
10.19
6.90
24.44
6.12
2017
150.81
57.87
63.43
29.51
5.74
156.55
2017
120.77
79.45
9.85
6.76
24.71
6.57
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Change 2018/2017
146.56
58.31
58.92
29.33
6.63
153.19
−2.8%
0.8%
−7.1%
−0.6%
15.5%
−2.1%
2018
Change 2018/2017
124.36
82.29
10.17
7.01
24.89
6.89
131.25
3.0%
3.6%
3.2%
3.7%
0.7%
4.9%
3.1%
Total
129.48
127.34
* Heat generation figures include PAO MIPC’s subsidiaries — OOO TSK Novaya Moskva and OOO TSK Mosenergo.
Note. The table shows heat supply from TPPs, i.e. the amount of heat supplied by a power station to consumers at the asset ownership / interface boundary points.
Outside Russia, Gazprom Group generated 1.69 billion kWh of
electricity. The year-on-year increase was due to increased
power output from Unit 5 at Hrazdan TPP, reflecting the actual
operation modes of Armenia’s national grid in the context of
extended repair operations at the Armenian NPP and Yerevan
CHPP, as well as the need to meet both domestic and export
demand.
For more details on Gazprom Group’s generating capacity and output of power
and heat see Gazprom in Figures 2014–2018 Factbook
Electricity generation by Gazprom Group abroad, billion kWh
0.78
1.09
1.69
55.1%
2016
2017
2018
Change 2018/2017
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Power Generation
Diversification of Gazprom energoholding’s
power generation business
— PAO Mosenergo is implementing a project for constructing electric
vehicle (EV) charging stations
— Gazprom energoholding companies provide power plant resources
(electricity, heat and water supply to consumers) and infrastructure
(unoccupied floor space and land, warehouse facilities, and equip-
ment, including for laboratory water tests) to drive SME growth while
also looking for opportunities in renewable energy
International expansion opportunities for the power generation
business are explored to boost sales of Gazprom Group’s natural
gas, including pipeline gas, as well as sales of LNG from Russian
projects and from Gazprom Group’s trading portfolio, and gas from
international hydrocarbon production projects of the Group
—
Natural gas dominates the fuel mix of Gazprom energohold-
ing. Coal-fired power generation is less viable in the first
pricing zone due to significantly higher costs of coal-fired
power generation compared to gas-fired power generation
(1.5 times as high) and fuel prices outstripping prices in the
capacity and electricity markets, which leads to accelerated
decommissioning of coal-fired power stations and declining
coal consumption.
Volume-based fuel mix of Gazprom energoholding
Gas, bcm
Gazprom Group’s coal assets
Given a significant share of coal in Gazprom energoholding’s fuel mix,
Gazprom acquired Angrensor Group in 2016 to diversify the risk of fuel
supply shortfalls and optimise its pricing policy in the coal market. The
coal company is engaged in mining, processing, and marketing of coal
from the Ekibastuzsky open pit in the Pavlodar Region of Kazakhstan.
Coal production in 2018 was 2.6 mm tonnes. Gazprom energoholding’s
share in the total coal supplies by the group is approximately 30%.
Improvements in Operational Efficiency
Improving operational efficiency is a strategic priority of
Gazprom’s power generation business.
Generating companies across Gazprom energoholding
annually develop and implement action plans to optimise
costs and improve financial performance in the following fo-
cus areas:
—
— Operational efficiency improvements
— Cost reduction
— Decommissioning/optimisation of low-performing and
Improvement of the production system
idle facilities
— Non-core asset disposal and efficient use of assets
The economic effect from operational efficiency and cost
reduction initiatives in 2018 totalled RUB 4.0 bn.
41.9
28.6
40.8
27.6
41.0
28.3
0.5%
12.6
11.5
9.4
−18.3%
0.3
0.3
0.3
–
2016
2017
2018
Total
Including Gazprom Group’s gas
Change 2018/2017
Coal, mm tonnes
2016
2017
2018
Change 2018/2017
Fuel oil and other fuels, mm tonnes
2016
2017
2018
Change 2018/2017
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PJSC Gazprom Annual Report 2018 Operations and Marketing
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Gazprom is the largest supplier of gas in Russia and
a global leader in gas exports. The Company has a strong
track record of delivering on its commitments to ensure
reliable gas supply to consumers amid the growing
demand. In 2018, Gazprom’s gas exports to European far
abroad countries were at a record high for the third year
running.
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Far Abroad Gas Markets
Far abroad countries, including Europe, are the Company’s
traditional export market offering high profit margins for the
Group.
In 2018, Gazprom Group sold 243.3 bcm of natural gas
to far abroad countries. Gas sales showed significant growth
in the UK and the Netherlands. At the same time, sales to
Turkey decreased due to the impact of weather conditions,
increased LNG supplies to the market in Q4 2018, and
a weaker national economy.
Net sales revenue (net of excise tax and customs duties)
was RUB 2,951.2 bn. The increase in sales revenue was
mainly driven by higher average selling price and increased
sales volumes.
Gazprom Group’s sales of natural gas to far abroad countries
Sales volumes, bcm
2016
2017
2018
Change 2018/2017
Average selling price
(including excise tax and customs duties), USD per mcm*
2016
2017
2018
Change 2018/2017
Average selling price
(including excise tax and customs duties), RUB per mcm
2016
2017
2018
Change 2018/2017
Net sales revenue
(net of excise tax and customs duties), RUB bn
2016
2017
2018
Change 2018/2017
* Calculated based on the year-average RUB/USD exchange rate.
228.3
242.0
243.3
0.5%
176.0
200.2
246.4
23.1%
11,763.3
11,670.5
15,499.5
32.8%
2,140.0
2,221.2
2,951.2
32.9%
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Operations and Marketing
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Gazprom Group’s gas sales to far abroad countries, 2017–2018, bcm
0.1 0.3
Ireland
34.2
29.1
67.1
65.7
Norway
21.4
17.4
1.8 1.7
Denmark
Sweden
2.4
2.6
Finland
Estonia
Latvia
United Kingdom
The Netherlands
2.7 2.8
Belgium
Russia
Lithuania
Russia
10.5
9.9
Germany
3.8 2.6
Poland
Belarus
0.4 0.6
Switzerland
9.8 9.0
Czech
Republic
4.5
5.0
23.7
22.6
Austria
0.6
0.5
Slovenia
2.8
2.8
Croatia
0.2 0.2
Slovakia
7.3
7.0
Hungary
Italy
Bosnia and
Herzegovina
Montenegro
2.2 2.2
Serbia
Ukraine
Moldova
1.4 1.5
Romania
Albania
0.3
0.2
3.3 3.2
Macedonia
Bulgaria
2.9
3.3
Greece
29.0
24.0
Turkey
13.3 13.3
France
0.2 0.1
Spain
5.5 6.3
Other countries
Algeria
Tunisia
Natural gas sales in 2017
Natural gas sales in 2018
Note. Gazprom Group’s sales to other countries include LNG sales and sales of gas from international hydrocarbon exploration and production projects in which the Group has equity stakes.
PJSC Gazprom’s compliance with the EU competition laws
On 24 May 2018, the European Commission adopted a decision in
accordance with Article 9 of Council Regulation (EC) No. 1/2003 on the
alleged infringement by PJSC Gazprom of the EU competition laws,
imposing binding commitments on Gazprom to enable free flow of gas at
competitive prices in Central and Eastern European gas markets as
offered by PJSC Gazprom and OOO Gazprom export on 15 March 2018.
The Company has taken steps to meet the above Commitments as
soon as the notice on the decision has been given to PJSC Gazprom and
OOO Gazprom export. The first phase of these efforts, completed on
6 August 2018, included sending letters specified in the Commitments to
PJSC Gazprom’s and OOO Gazprom export’s counterparties covered
by the Commitments.
PJSC Gazprom is a major supplier of natural gas to the Euro-
pean market.
In 2018, PJSC Gazprom’s gas supplies to European far
abroad countries under OOO Gazprom export’s contracts and
Gazprom Schweiz AG’s direct contracts totalled 201.9 bcm,
up 7.5 bcm, or 3.8% year-on-year.
201.9 bcm
An all-time record for gas supplies
to European far abroad countries
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Marketing
The Company’s exports are diversified by market, the largest
consumers being Germany, Turkey, and Italy.
Large-scale LNG Sales
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Large-scale LNG sales from Gazprom Group’s trading portfo-
lio totalled 3.88 mm tonnes, or 5.18 bcm, in 2018, up by 16%
year-on-year.
Corporates in Asia Pacific were the key buyers of large-
scale LNG (76% of the total supply volume) from Gazprom
Group’s trading portfolio in the reporting year, just like in pre-
vious years. In 2018, India became the key destination for
LNG supplies for the first time: this market accounted for 20%
of total supplies (1.01 bcm). The growth in India’s share in
large-scale LNG supplies by Gazprom Group was mainly driven
by the start of supplies under a long-term LNG sales and pur-
chase agreement signed between Gazprom Marketing &
Trading Singapore and Indian GAIL. The agreement provides
for the annual supply of up to 2.9 mm tonnes of LNG over
20 years (at a plateau).
For more details on LNG market trends see the Trends and Developments on Gas
Markets section
Large-scale LNG sales by Gazprom Group in foreign countries
mm BTU
176,474,067
159,151,850
184,990,184
2016
2017
2018
including
LNG from
Sakhalin-2
mm tonnes
bcm
59,443,050
72,894,365
70,068,095
3.71
4.94
3.34
4.46
3.88
5.18
Notes:
1. Calculated in accordance with the principles underlying management reporting.
Parameters calculated using these methods might be not comparable between each
other due to differences in the methodologies used for preparing consolidated financial
statements and for management reporting.
2. Data excludes LNG supplies from Gazprom Group’s trading portfolio to Russia (0.08 mm
tonnes, or 0.11 bcm) as part of pre-commissioning operations at an LNG receiving
terminal in the Kaliningrad Region.
76%
Share of Asia Pacific markets in total LNG supplied
from Gazprom Group’s trading portfolio in 2018
Growth drivers for PJSC Gazprom’s gas supplies to European far
abroad countries in 2018
— A year-on-year increase in demand for natural gas in European
countries in February and March 2018 due to cold weather
— Gas injections into UGSFs in European countries exceeding with-
drawals
— Declining domestic gas production in European far abroad coun-
tries as compared to 2017, and higher net gas imports in Europe
— Limited capabilities of other gas exporters and lower net LNG
imports in Q1–Q3 2018
Our goal for 2019 in the European far abroad markets
is to sustain our achievements and maintain our
position in the market, including our share in overall
supplies.
Share of PJSC Gazprom’s gas sales under OOO Gazprom export’s
contracts and Gazprom Schweiz AG’s direct contracts
in the total gas consumption in European far abroad countries,
2014–2018, %
2014
2015
2016
2017
2018
30.4
31.5
33.1
34.2
36.8
Note. Figures for 2017 and previous years may differ from the data in Annual Reports
of PJSC Gazprom for previous periods since international statistics may be subsequently
updated.
Proprietary electronic sales platform
In August 2018, OOO Gazprom export launched its Electronic Sales
Platform (ESP) to sell natural gas both on standard market terms and on
its own terms. Contracts for gas supply at any delivery point (both at
trading platforms or facilities with slow-moving inventories located close
to the borders) with delivery periods starting from one day can be offered
via the ESP. OOO Gazprom export holds daily trading sessions and offers
contracts for the supply of natural gas to various delivery points to pre-
qualified companies registered on the ESP.
As a result of trading sessions held in 2018, OOO Gazprom export
sold about 1.1 bcm of gas with delivery in the reporting year.
In 2018, Gazprom Group’s subsidiaries sold 28.2 bcm of gas
directly to end consumers in Europe.
For more details on gas sales volumes to end consumers in far abroad countries see
Gazprom in Figures 2014–2018 Factbook
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Marketing
LNG sales to foreign markets in 2018, mm BTU
Gas sales by Gazprom Group in Russia
Sales volumes, bcm
2016
2017
2018
Change 2018/2017
Average selling price (net of VAT), RUB per mcm
2016
2017
2018
Change 2018/2017
Net sales revenue (net of VAT), RUB bn
2016
2017
2018
Change 2018/2017
214.9
229.9
239.7
4.3%
3,815.5
3,808.3
3,981.3
4.5%
819.9
875.7
954.5
9.0%
For more details on Russian gas market trends see the Trends and Developments
on Gas Markets section
In accordance with applicable Russian laws, end consumers
buy gas at regulated prices which are differentiated between
consumer groups (households vs industrial consumers), as
well as by price zone, based on the relative distance from the
gas production region to the consumer. In 2018, wholesale
gas prices for subsequent resale to household consumers
were 16% lower than wholesale gas prices for industrial con-
sumers.
India
Japan
China
South Korea
Kuwait
Taiwan (China)
Spain
FOB LNG supplies
Total
36,100,075
29,667,398
29,159,927
26,402,240
20,072,378
19,257,270
2,945,511
21,385,385
184,990,184
LNG supplies under a long-term sales and purchase agree-
ment signed between Gazprom Marketing & Trading Singa-
pore and Yamal Trade in 2015 started in May 2018. The
agreement provides for the annual supply of 2.9 mm tonnes
of LNG to Gazprom Group’s trading portfolio from Russia’s
Yamal LNG project over 20 years (at a plateau), FOB Zee-
brugge, Belgium.
LNG supplies from the Cameroon FLNG project were
added to Gazprom Group’s trading portfolio in June 2018
under a long-term agreement with Perenco Cameroon and
Societe Nationale des Hydrocarbures for the annual supply
of 1.2 mm tonnes of LNG over eight years.
For more details on Gazprom Group’s LNG sales to different countries see
Gazprom in Figures 2014–2018 Factbook
Russian Gas Market
Gazprom is the largest natural gas supplier on the Russian
market. Major buyers of Gazprom Group’s natural gas are
electricity generators, household consumers, and utilities.
Moreover, the Group’s natural gas is heavily used in the steel-
making, fertiliser, and cement industries, and other sectors
of the national economy.
In 2018, Gazprom Group sold 239.7 bcm of gas to con-
sumers in the Russian Federation, up by 9.8 bcm, or 4.3%
year-on-year, primarily due to colder weather conditions
in Q1 and Q4 2018. Gas supplies increased mainly to con-
sumers in the energy and fertiliser industries, and the utilities
sector. Net sales revenue was also driven by higher selling
prices.
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Marketing
Weighted average wholesale regulated prices (net of VAT)
of PJSC Gazprom’s gas for industrial and household consumers,
RUB per mcm
Gazprom Group’s gas sales to FSU countries
Sales volumes, bcm
Weighted average annual price for industrial and household
consumers*
2016
2017
2018
Change 2018/2017
Weighted average annual price for industrial consumers**
2016
2017
2018
Change 2018/2017
Weighted average annual price for subsequent resale
to households**
2016
2017
2018
Change 2018/2017
2016
2017
2018
Change 2018/2017
Average selling price (including customs duties),
USD per mcm*
2016
2017
2018
Change 2018/2017
Average selling price (including customs duties),
RUB per mcm
2016
2017
2018
Change 2018/2017
Net sales revenue (net of customs duties), RUB bn
3,938.2
3,988.5
4,117.2
3.2%
4,158.1
4,202.3
4,316.4
2.7%
3,422.8
3,512.9
3,640.0
3.6%
33.2
35.0
38.1
8.9%
153.6
158.4
162.6
2.7%
10 263.1
9 237.0
10 225.9
10.7%
309.7
292.8
348.6
19.1%
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2016
2017
2018
Change 2018/2017
* Calculated based on the year-average RUB/USD exchange rate.
To improve dynamic interaction with our partners
from Azerbaijan, PJSC Gazprom registered
a representative office in Baku in December 2018.
Gazprom Group continued to purchase natural gas from
Central Asian countries in 2018, with the weighted average
purchase price for the gas supplied from Central Asia in-
creasing from 2017 (9.5% year-on-year) due to higher oil
prices and the resulting growth in prices of oil products.
* Calculated as the combined weighted average prices for industrial and household
consumers for the year indicated. Weighting is based on actual volumes delivered to
each price zone for household and industrial consumers, respectively (exclusive of gas
volumes supplied pursuant to Resolution of the Government of the Russian Federation
No. 333 dated 28 May 2007 On Improvement of State Gas Price Regulation).
** Weighting is based on actual volumes delivered to each price zone for each group of
consumers separately, household and industrial consumers, respectively (exclusive of
gas volumes supplied pursuant to Resolution of the Government of the Russian
Federation No. 333 dated 28 May 2007 On Improvement of State Gas Price Regulation).
FSU Gas Markets
Gazprom Group covers a significant portion of natural gas
demand in FSU countries.
In 2018, the Group sold 38.1 bcm of natural gas to FSU
countries, with net sales revenue (net of customs duties)
amounting to RUB 348.6 bn. The increase in sales revenue
was due to higher average selling prices and higher volumes
of sales.
The increase in gas supplies to FSU countries in 2018 re-
sulted from higher demand and gas withdrawals in Belarus,
and higher gas supplies to Azerbaijan under an agreement
with SOCAR (Azerbaijan), as well as higher volumes of gas
from Uzbekistan supplied to Kazakhstan.
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Operations and Marketing
Marketing
Gazprom Group’s gas sales in FSU countries in 2017–2018, bcm
18.8 20.0
Lithuania
Belarus
Russia
2.4 2.7
Ukraine
2.7
3.0
Moldova
4.8 6.2
Kazakhstan
1.4 1.4
Lithuania
Russia
0.5 0.4
Estonia
1.8 1.3
Latvia
Russia
Belarus
0.3
0.3
Kyrgyzstan
0.0*
0.0*
0.0*
0.1
Georgia
South
Ossetia
1.8
1.8
Armenia
0.4
1.0
Azerbaijan
Uzbekistan
Turkmenistan
Tajikistan
Turkey
Natural gas sales in 2017
Natural gas sales in 2018
* Less than 0.05.
Gazprom Group’s purchases of gas in Central Asia, bcm
For subsequent supplies to far abroad countries
Uzbekistan
Kazakhstan
2016
2017
2018
Change 2018/2017
4.3
12.7
5.5
13.8
3.8
12.3
−30.9%
−10.9%
Weighted average purchase price on the border of supplying countries,
USD per mcm
116.3
121.6
133.1
9.5%
For subsequent supplies to Southern Kazakhstan
Uzbekistan
For subsequent supplies to Kyrgyzstan
Uzbekistan
Kazakhstan
* Less than 0.05.
1.9
0.0*
0.2
1.7
0.0*
0.3
2.9
70.6%
0.0*
0.3
–
–
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Marketing
Crude oil and gas condensate sales volumes by Gazprom Group,
mm tonnes
Total
2016
2017
2018
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
Russia
2016
2017
2018
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
Far abroad countries
2016
2017
2018
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
FSU
2016
2017
2018
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
Note. Excluding intra-group sales.
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24.7
19.7
27.6
23.8
25.6
21.2
−7.2%
5.9
4.4
4.3
2.8
2.7
1.2
−37.2%
17.1
13.6
21.6
19.3
21.2
18.3
−1.9%
1.7
1.7
1.7
1.7
1.7
1.7
–
Oil and Gas Condensate Sales
In 2018, Gazprom Group sold 25.6 mm tonnes of crude oil
and stable gas condensate with total net sales revenue (net
of VAT and customs duties) reaching RUB 734.9 bn, an in-
crease over 2017 driven by higher selling prices.
The decline in oil sales was due to increased volumes
of processed liquid hydrocarbon feedstocks following the
completion of scheduled overhaul programme at Russian re-
fineries operated by Gazprom Neft Group in 2017.
Net revenue from sales of crude oil and gas condensate
(net of VAT and customs duties), RUB bn
411.9
539.9
734.9
36.1%
81.3
71.4
64.6
−9.5%
307.1
438.7
631.6
44.0%
23.5
29.8
38.7
29.9%
Total
2016
2017
2018
Change 2018/2017
Russia
2016
2017
2018
Change 2018/2017
Far abroad countries
2016
2017
2018
Change 2018/2017
FSU
2016
2017
2018
Change 2018/2017
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PJSC Gazprom Annual Report 2018
Operations and Marketing
Marketing
Sales volumes of refined oil and gas products by Gazprom Group,
mm tonnes
Refined Product Sales
In 2018, Gazprom Group sold 68.9 mm tonnes of refined oil
and gas products. Net sales revenue amounted to RUB
2,179.8 bn (net of excise tax, VAT, and customs duties) driven
by higher average prices across all geographical segments
and higher volumes of sales by Gazprom Neft Group to con-
sumers within Russia and in far abroad countries.
In 2018, total sales of refined oil and gas products by
Gazprom Group increased due to a higher output of refined
products at Gazprom Neft’s refineries and a respective in-
crease in sales volumes. Sales of liquid helium declined due
to lower exports associated with the growing demand in the
domestic market and volume redistribution in favour of gase-
ous helium.
Gazprom Group’s net revenue from sales of refined products
(net of VAT, excise tax, and customs duties), RUB bn
Total
2016
2017
2018
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
Russia
2016
2017
2018
68.0
44.6
66.0
43.3
68.9
45.8
4.4%
41.1
27.7
40.8
27.8
43.2
29.6
5.9%
22.6
13.8
20.9
12.4
21.3
13.2
1.9%
4.2
3.1
4.3
3.1
4.4
3.0
2.3%
1,497.6
1,687.1
2,179.8
29.2%
980.4
1,115.1
1,394.1
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
Far abroad countries
2016
2017
25.0%
2018
428.3
454.3
641.0
41.1%
88.9
117.7
144.7
22.9%
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
FSU
2016
2017
2018
Gazprom Group
Including Gazprom Neft Group
Change 2018/2017
Note. Excluding intra-group sales and sales of helium.
Total
2016
2017
2018
Change 2018/2017
Russia
2016
2017
2018
Change 2018/2017
Far abroad countries
2016
2017
2018
Change 2018/2017
FSU
2016
2017
2018
Change 2018/2017
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PJSC Gazprom Annual Report 2018 Operations and Marketing
Marketing
Sales of refined products by Gazprom Group, mm tonnes
Diesel fuel
Motor gasoline
Fuel oil
Sulphur
LPG
Aviation fuel
Mineral fertilisers
Lubricants
Polymers
2016
15.9
14.9
7.6
5.5
4.5
3.5
1.0
0.4
0.1
2017
15.9
13.4
5.8
5.3
3.7
3.6
0.9
0.4
0.1
2018
Change 2018/2017
17.3
15.5
6.5
5.2
4.1
3.9
0.9
0.5
0.1
8.8%
15.7%
12.1%
−1.9%
10.8%
8.3%
–
25.0%
–
Other refined, petrochemical, and gas chemical products
14.6
16.9
14.9
−11.8%
Note. Excluding intra-group sales and sales of helium.
Sales of helium by Gazprom Group
Gaseous helium, mmcm
Liquid helium, tonnes
Note. Excluding intra-group sales.
2016
3.2
299.3
2017
3.3
289.6
2018
Change 2018/2017
3.4
260.1
3.0%
−10.2%
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Electricity and Heat Distribution
Sales of Gas Transportation Services
In 2018, Gazprom Group’s net revenue from electricity and
heat sales (net of VAT) was RUB 522.1 bn, with the increase
mostly due to higher competitive (unregulated) electricity
prices and tariffs for capacity under capacity supply agree-
ments (CSAs) in the Russian market. In particular, the weight-
ed average selling price of electricity produced by Gazprom
energoholding’s generating companies increased at the
day-ahead market by 3.7% year-on-year.
Electricity produced by the Group’s Russian generat-
ing companies is sold mainly in Russia, with a small portion
exported to Norway and Finland. Gazprom Group also
supplies electricity to end consumers in the UK and the
Netherlands. In 2018, these supplies amounted to 1.5 billion
kWh.
In 2018, Gazprom Group’s net revenue from sales of gas
transportation services (net of VAT) was RUB 225.7 bn. The
decrease from 2017 was mainly due to lower gas transporta-
tion volumes supplied by independent producers via
Gazprom’s GTS within Russia.
In 2018, the average regulated tariffs charged to inde-
pendent companies for services related to gas transportation
via PJSC Gazprom’s trunk pipelines comprising the UGSS
amounted to RUB 65.20 per mcm/100 km. The tariff rate was
set by the FTS of Russia back in 2015 and, despite the re-
peated annual requests by PJSC Gazprom to the FAS of Rus-
sia to change the gas transportation rates, setting economi-
cally sound tariffs, the FAS of Russia has been reluctant to
adjust them.
Gazprom Group’s net revenue from electricity and heat sales
(net of VAT), RUB bn
Gazprom Group’s net revenue from sales of gas transportation
services (net of VAT), RUB bn
481.7
503.8
522.1
3.6%
2016
2017
2018
Change 2018/2017
199.0
235.1
225.7
−4.0%
2016
2017
2018
Change 2018/2017
125
PJSC Gazprom Annual Report 2018
Innovations and Import Substitution
Gazprom successfully pursues most ambitious and
challenging projects through active deployment of
advanced equipment and technology. The Company
is consistently working on technological innovations and
import substitution with a focus on engaging Russian
R&D and production capabilities.
Innovations
PJSC Gazprom’s Innovation Engine
In its evolution as a global energy company and a reliable
energy supplier, Gazprom focuses on research and application
of new knowledge and technology, as well as on continuous
improvement of its innovation capabilities and acceleration
of innovation to address a number of strategic, technological,
and economic challenges that such leadership involves.
PJSC Gazprom’s Innovative Development Programme until
2025 approved by Resolution of PJSC Gazprom’s Board of
Directors No. 3099 dated 17 April 2018 (Minutes No. 1196
dated 17 April 2018) is a fundamental instrument for long-
term planning and management of innovations embedded
into Gazprom’s strategic development planning. The Pro-
gramme covers gas, oil, and power generation businesses
of the Company. PJSC Gazprom, PAO Gazprom Neft,
OOO Gazprom energoholding, and other subsidiaries and
associates implement R&D programmes (plans) to achieve
the technology and organisational priorities set out in the
Programme.
Gazprom has in place an extensive innovation manage-
ment framework. The R&D Committee of PJSC Gazprom
serves as a platform to discuss all matters related to R&D
performance through comprehensive review and collective
decision-making driven by the principles of openness,
fairness, and independence while balancing the interests of
Operations, Economics, and Prospective Development.
126
PJSC Gazprom Annual Report 2018
Innovations and Import Substitution
Within its Corporate Framework for Management of Innova-
tions at Subsidiaries of PJSC Gazprom, PJSC Gazprom
focuses on further use (roll-out) and commercialisation of
R&D results and protected intellectual property that deliver
a positive and meaningful impact for PJSC Gazprom as well
as on reviewing and following up compliance of its subsidiar-
ies’ innovation efforts with Russian laws and internal docu-
ments of PJSC Gazprom.
Cooperation with Russian and global companies, exter-
nal institutions, research centres, and anchor universities is
vital for stronger and better innovation at PJSC Gazprom.
Russian research partners of PJSC Gazprom include leading
research organisations of the Russian Academy of Sciences,
Rosatom, Rostec, State Space Corporation ROSCOSMOS,
RUSNANO, the Skolkovo Foundation, Russia’s largest pipe
manufacturers, and innovative SMEs.
Gazprom runs R&D programmes in collaboration with
14 foreign energy companies, as well as engages 13 anchor
universities across seven Russian regions to implement tar-
geted R&D and personnel training programmes for Gazprom
Group.
Over RUB25 bn
The economic effect from using patented items
in operations in 2016–2018
The Company has designed and successfully maintains an
intellectual property management framework, which is
essentially intended to determine company-wide principles
governing the creation, legal protection, registration, com-
mercialisation, and monitoring of the use of intellectual prop-
erty across Gazprom Group, as well as to provide incentive
schemes encouraging employees of Gazprom Group com-
panies to create intellectual property.
127
Number of patents held by PJSC Gazprom and its subsidiaries
and their use in operations
Total number of patents held by PJSC Gazprom
and its subsidiaries, as at 31 December
2016
2017
2018
2016
2017
2018
Total
Including those used in operations
Economic effect from the use of patented items in operations,
RUB bn
2,269
406
2,365
427
2,555
441
7.1
8.0
10.3
Innovation Performance
The Group allocates significant amounts for its annual R&D
budgets, and R&D results are applied in its priority projects
across different lines of business.
Total spending on R&D projects commissioned by Gazprom Group
(net of VAT), RUB bn
2016
2017
2018
Actual economic effect from the use of R&D results
in Gazprom Group subsidiaries, RUB bn
2016
2017
2018
6.3
8.2
9.0
9.2
12.3
12.3
Our R&D efforts aim to develop and implement high-tech
equipment and sophisticated engineering complexes unri-
valled in the world, as well as to create advanced R&D solu-
tions.
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PJSC Gazprom Annual Report 2018
Innovations and Import Substitution
Gas Business
Hydrocarbon exploration and production yielded the best
R&D results in 2018.
Knowledge-intensive technologies were widely used
when building the TurkStream and the Power of Siberia trunk
gas pipelines — the Company’s strategic projects. The inno-
vations used in the Power of Siberia pipeline project were
designed either under the R&D Programme of PJSC Gazprom
and its subsidiaries or by Russian contractors based on
PJSC Gazprom’s specifications.
Technological priorities in gas business
— Hydrocarbon field exploration and appraisal, including development
of unconventional resources
— Brownfield enhancement technologies
— Offshore hydrocarbon development technologies
— Greenfield development technologies
— Efficiency enhancement of trunk gas pipelines and diversification
of gas distribution methods
— Enhancement of gas storage
— Enhancement of gas and condensate processing
— LNG production technologies
— Gas marketing and utilisation technologies
Selected brownfield enhancement solutions developed in 2018
Field
Innovative R&D project outcomes
Patent protection
Yuzhno-Russkoye OGCF
Innovative techniques and solutions developed for tapping hard-to-recover
Cenomanian and Turonian gas reserves using existing infrastructure and
equipment at the Cenomanian gas production sites:
— Double hole well in a dual completion design
— Multi-stage hydraulic fracturing for dual completion wells
— Slant-hole well
The first slant-hole well was developed, drilled, and piloted to produce
Turonian gas. The technology ensures optimal operating mode, high well
productivity and gas recovery, and uses only Russian equipment and
components.
The developed technical solutions
are protected by 5 patents.
Astrakhan GCF
Developed and utilized new water-based cationic polymer drilling fluid
systems (Katburr). These are fundamentally new drilling fluid systems offering
almost the same performance as hydrocarbon-based drilling muds while
having significantly improved cost efficiency when drilling in geotechnically
challenged areas.
The developed water-based
cationic polymer drilling fluid
systems are protected
by 24 patents.
128
PJSC Gazprom Annual Report 2018 Innovations and Import Substitution
State-of-the-art knowledge-intensive technologies and equipment
used in the construction of the TurkStream and the Power of Siberia trunk gas pipelines
Pipeline
TurkStream
Project specifics requiring advanced knowledge-intensive
technologies and equipment
Technologies and equipment
— Ultra-deepwater installation (depths below
1,500 m)
— Aggressive hydrogen sulphide environment
— Landfall section located at steep slopes and near
densely populated areas
Power of Siberia
—
The pipeline route passes through swampy,
mountainous, seismically active, permafrost, and
rocky areas with extreme environmental conditions.
The absolute lowest air temperatures along the
Power of Siberia route range from −62°C in the
Republic of Sakha (Yakutia) to −41°C in the Amur
Region.
— The technical solution in the form of thick-walled
integral buckle arrestors welded into pre-coated
(external anti-corrosion coating) Russian-made
pipe
— A tie-in will connect the landfall facilities with the
offshore section using an innovative technique for
microtunnelling through hard rock and reinforcing
two shafts with concrete
— Unique domestically-produced 812.8 mm high-
strength thick-wall pipe made of K65 steel for
operation at a pressure of 300 atm will be used to
construct the tie-in connecting the landfall facilities
with the offshore section
— Domestically-produced steel pipe with internal flow
coating, including pipe with enhanced deformation
properties and special engineering solutions for
pipe installation.
External insulation coating is made of
innovative domestic nanocomposite materials,
which ensures high corrosion resistance of the gas
pipeline.
Reduced pipe roughness and, therefore,
friction makes gas transmission less energy-
consuming. Pipes crossing active tectonic faults
can withstand high seismic activity and ground
displacements
— Quick-opening highly reliable axial-flow anti-surge
and control valves that are not inferior to foreign
alternatives due to unique design solutions
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At the Chayandinskoye OGCF, the construction of a mem-
brane unit (with projected capacity of a 32 bcm per year) to
recover helium from natural gas based on the membrane
technology for in-field helium extraction commissioned by
PJSC Gazprom (US patent No. 9987596 Membrane gas sep-
aration module held by PJSC Gazprom) was in progress.
Cooperation with BASF/Wintershall and OMV to enhance
the co-development of Cenomanian and Turonian deposits
at the Yuzhno-Russkoye OGCF by launching a project to build
a digital twin of OAO Severneftegazprom’s operational facili-
ties.
In 2018, Gazprom also continued its innovative breakthrough
projects to develop a methane-hydrogen mixture production
and application technology, including as a fuel for gas
pumping units (GPU), as well as innovative materials for
midstream applications: research and feasibility studies for
new, high-performance methane adsorbents.
The value of using methane-hydrogen fuel for GPUs
at Gazprom’s operations lies in improved energy
efficiency, 4–5 times lower CO and NOX emissions,
and 30% lower GHG emissions.
129
PJSC Gazprom Annual Report 2018
Innovations and Import Substitution
Oil Business
The deployment of advanced technologies in oil business
will ensure cost-effective implementation of major upstream
projects and strategic leadership. Projects for developing,
testing, and implementing new technologies have already
been launched or planned for each prioritised area.
Recovery enhancement solutions developed in 2018
Field
Innovative R&D project outcomes
Technological priorities in oil business
— Development of multiphase fields
— Production from low-permeability reservoirs
— Effective and safe shelf operations in ice conditions
— Development and production of catalysts for refining processes
Tazovskoye OGCF
A production well with a record-long horizontal section of 2,070 m was drilled to completion
Yuzhno-Priobskoye oil field
Workover of a 3,600-m well with a record long horizontal sidetrack of 700 m was completed
Eastern block
of the Orenburgskoye OGCF
First multi-stage combined acid and proppant fracturing. Well productivity under seven-stage fracking proved
to be 57% higher than at similar wells with standard multi-stage acid fracturing
Zapadno-Salymskoye oil field
A pilot project to inject a mixture of sodium carbonate, surfactants, and a polymer into a reservoir was wrapped up.
The oil recovery ratio was increased by 17 p.p.
Gazprom Neft Group continued the Bazhenov project which
was granted a national status in 2017. A hydraulic fracturing
software suite was used in 2018 for modelling an optimal fis-
sure system for each well drilled during the year.
Bazhenov project
The Bazhenov suite is a formation spanning the entire Western Siberia,
which is comparable in scale to the discovery of a new oil province
onshore or a complex of large fields offshore. A benefit of the Bazhenov
suite is that it will be developed using existing infrastructure. The
extremely challenging geology of the oil-bearing formation will require
new engineering solutions to ensure cost-effective production.
The goal of the project is to bring together research, industry, and
business communities, as well as the Government, to develop cost-
effective technology for bringing unconventional and hard-to-recover
reserves of the Bazhenov suite on stream. The production programme of
the Bazhenov Technology Centre for Engineering and Technology for
Hard-to-Recover Reserves is run across nine licence blocks in the
Yamal-Nenets Autonomous Area with the strategic goal of developing
a cost-effective technology for the Bazhenov suite by 2025.
Gazprom Neft and IBM created a unique cognitive tool to
search for missed intervals. The prototype testing showed an
80% overlap between predictions made by the system and
an expert with the tool operating 600 times faster. Cognitive
tools are also being designed to predict complications and
change in lithological bottomhole parameters during the drill-
ing process.
In terms of hydrocarbon processing, hydrocracking cata-
lyst technology has fully matured. The catalyst range is con-
stantly updated to match feedstock profile. Hydrocracking
catalyst range has products for a single-stage process, the
first step of a two-stage process, and pre-treatment of hydro-
cracking feed. In 2018, Aroforming, a promising process
unique in the industry, was developed along with effective
catalysts for oligomerisation, isodewaxing, and reforming.
The Aroforming technology allows using refining
by-products to produce high-margin high-octane
gasolines.
130
PJSC Gazprom Annual Report 2018 Innovations and Import Substitution
Refining enhancement solutions developed in 2018
Refinery
Omsk Refinery
Moscow Refinery
Innovative R&D project outcomes
The existing catalyst production site launched production of Avangard-Neo, an advanced hydrocracking catalyst
An isodewaxing catalyst used to produce winter and Arctic grades of diesel fuel was introduced and a pilot batch
was manufactured. The product contains no platinum-group metals, which allowed to significantly reduce
the catalyst cost as compared to imported alternatives
The commercial production of an oligomerisation catalyst developed in-house was launched. As compared
to the previously used catalyst, the new product has increased the high-octane component yield by 30%
and the catalyst cycle length 2.5 times
Power Generation Business
Import Substitution
Gazprom energoholding designs and implements innovative
technologies for electricity and heat generation at power sta-
tions. In 2018, the construction of Unit 1 at the Grozny TPP
was completed. The new 176 MW unit comprises a Siemens
gas turbine and a generator. Unit 1 project involved a wide
use of domestically-produced engineering systems and
equipment, including protective relaying and controls, switch
gears, fuel gas conditioning system components, mechanical
draft cooling towers, and smokestacks with emission moni-
tors.
Technological priorities in power generation business
Increasing energy efficiency in power generation
—
— Reducing the environmental footprint of operations
Implementing advanced engineering solutions
—
For more details on PJSC Gazprom’s innovation engine and innovations see
Gazprom Group’s Sustainability Reports published on an annual basis
Growing the share of Russian products used in Gazprom
Group’s operations and encouraging the development of
Russian alternatives to critical imported products are some of
the key initiatives being taken to address the risk associated
with using foreign equipment and technologies in the context
of economic sanctions.
An action plan has been implemented since 2015 to ad-
dress the challenges of import substitution and identify the
Company’s needs for import substituting equipment and
technologies. The economic effect from the deployment of
import substituting equipment and technologies is estimated
annually.
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Over RUB20 bn
The economic effect from import substitution initiatives
in 2016–2018
Economic effect from deploying import substituting equipment and technologies at PJSC Gazprom’s facilities in 2016–2018
Segment
Economic effect, RUB bn
Initiatives with the largest economic effect
Gas transportation
10.0
Hydrocarbon production
Other
9.2
1.5
Development of drive repair technology for foreign-made GPUs
by a Russian company using domestically made components
(progress in the reporting year)
Using Russian-made hydrogen sulphide-resistant downhole equipment
for operation at a pressure of 70.0 MPa
(production launched in 2017)
Purchasing Russian materials and components to replace foreign
alternatives
131
PJSC Gazprom Annual Report 2018
Innovations and Import Substitution
Development of new high-tech
(including import substituting) products
by Russian businesses
Development of high-tech import substituting products
for subsea production systems
used in hydrocarbon development
The State Programme of the Russian Federation for the De-
velopment of Shipbuilding and Equipment for Offshore Up-
stream Operations for 2013–2020 provides for R&D projects
to produce offshore upstream technologies and equipment
for hydrocarbon developments using subsea production sys-
tems (SPS). The Scientific and Technical Council for the
Development of Oil and Gas Equipment of the Russian Minis-
try of Industry and Trade has set up the Subsea Production
Facilities team of experts (led by Pavel Krylov, a Department
Head at PJSC Gazprom) to coordinate projects for the devel-
opment of Russian SPS equipment. The Russian Ministry
of Industry and Trade signs government R&D contracts with
general contractors.
Prototype SPS for offshore upstream operations
is expected to be manufactured in 2019.
In 2018, the first and second phases of the project providing
for preparing the schematic and detailed design documenta-
tion for equipment were completed. Prototypes will be manu-
factured in 2019 with acceptance testing planned for 2020.
The development of capabilities of Russian engineering
and shipbuilding companies in manufacturing SPS equip-
ment is also supported by an agreement for joint establish-
ment of an industrial cluster focused on high-tech solutions
to develop the World Ocean’s and Arctic resources signed
between PJSC Gazprom and the Governor of St Petersburg
in 2017.
For more details on PJSC Gazprom’s import substitution initiatives see
Gazprom Group’s Sustainability Reports published on an annual basis
The Company engages Russian businesses and research
institutions in manufacturing high-tech and import substitut-
ing products and materials under focused agreements,
memoranda, roadmaps with businesses and organisations,
roadmaps on types of equipment, and roadmaps signed
with Russian regions.
17 roadmaps across 22 Russian regions were being
implemented in 2018.
In 2017, PJSC Gazprom, the Russian Ministry of Industry and
Trade, and regional governments started signing tripartite
roadmaps.
The benefits achieved by PJSC Gazprom through signing tripartite
roadmaps with regional manufacturers as a new cooperation
mechanism
— A series of consistent initiatives aimed at developing high-tech
(including import substituting) products, as well as state support for
participating businesses from the Russian Ministry of Industry and
Trade
— No binding agreements and no investments in the initiatives from
PJSC Gazprom
— The participants may receive subsidies from the Russian Ministry of
Industry and Trade and PJSC Gazprom may consider entering into
long-term contracts for the supply of developed products
As at 31 December 2018, PJSC Gazprom
was cooperating with more than 50 businesses
from adjacent industries.
High-tech (including import substituting) products developed
by Russian businesses in 2018 will be primarily used in gas
transportation, including the Power of Siberia gas pipeline.
Long-term contracts as a framework
for import substitution projects
In 2018, the Company continued to sign long-term contracts
with domestic manufacturers for mass production, supply,
maintenance, service, and repair of import-substituting
products against guaranteed future supplies.
In 2018, the Company signed a long-term agreement
for manufacturing and purchasing LNG-powered
shunting locomotives.
As at 31 December 2018, the Company had nine long-term
agreements for production and supply of import substituting
products.
132
PJSC Gazprom Annual Report 2018 Financial Performance
PJSC Gazprom follows a conservative approach to budget
planning, closely monitors its operating costs and capital
expenditures, and uses a wide range of financial
instruments for efficient debt management, which helps
the Company maintain high financial stability and ensures
its strong financial performance.
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The reporting year was successful for PJSC Gazprom. The
Company’s figures came in strong on the back of various
external and internal drivers, including higher oil and gas
prices in international markets, record-high supplies of gas to
Europe in the Company’s entire history, strong performance
of oil and power generation businesses, and a high level of
operating cost control combined with the prioritisation of the
capex schedule.
Meeting Gazprom Group companies’ contractual obliga-
tions in full and ensuring the necessary liquidity buffer while
providing sufficient financing for the Company’s development
and dividend payouts to shareholders are key priorities of
PJSC Gazprom’s financial policy.
Revenue
Gazprom Group’s sales revenue (net of VAT, excise tax,
and customs duties) in 2018 amounted to RUB 8,224.2 bn,
primarily driven by higher net sales of gas, refined products
as well as by higher sales of crude oil and gas condensate.
A significant part of the Group’s sales revenue is denom-
inated in foreign currencies (mostly in US dollars and Euros).
RUB8,224.2 bn
PJSC Gazprom’s revenue in 2018
133
PJSC Gazprom Annual Report 2018
Financial Performance
Variation analysis of net sales revenue in 2018, RUB bn
Net sales revenue in 2017
Change in net revenue from sales of natural gas to far abroad countries
Change in net revenue from sales of natural gas to FSU countries
Change in net revenue from sales of natural gas in the Russian Federation
Retroactive gas price adjustments
Change in net revenue from sales of crude oil and gas condensate
to far abroad countries
Change in net revenue from sales of crude oil and gas condensate
to FSU countries
Change in net revenue from sales of crude oil and gas condensate
in the Russian Federation
Change in net revenue from sales of refined products to far abroad countries
Change in net revenue from sales of refined products to FSU countries
Change in net revenue from sales of refined products in the Russian Federation
Change in net revenue from sales of electricity and heat
Change in net revenue from sales of gas transportation services
Change in other revenues
Net sales revenue in 2018
Net sales revenue, RUB bn
2016
2017
2018
Net revenue from gas sales
Net revenue from sales of refined products
Net revenue from sales of crude oil and gas condensate
Net revenue from sales of electricity and heat
Net revenue from sales of gas transportation services
Other revenues
Total
2016
3,302.8
1,497.6
411.9
481.7
199.0
218.1
6,111.1
134
6,546.1
+730.0
+55.8
+78.8
+98.5
+192.9
+8.9
−6.8
+186.7
+27.0
+279.0
+18.3
−9.4
+18.4
8,224.2
2018
Change 2018/2017
2017
3,340.6
1,687.1
539.9
503.8
235.1
239.6
4,303.7
2,179.8
734.9
522.1
225.7
258.0
6,546.1
8,224.2
28.8%
29.2%
36.1%
3.6%
−4.0%
7.7%
25.6%
PJSC Gazprom Annual Report 2018 Variation analysis of net sales revenue in 2018, RUB bn
Net sales revenue in 2017
Change in net revenue from sales of natural gas to far abroad countries
Change in net revenue from sales of natural gas to FSU countries
Change in net revenue from sales of natural gas in the Russian Federation
Retroactive gas price adjustments
Change in net revenue from sales of crude oil and gas condensate
to far abroad countries
to FSU countries
Change in net revenue from sales of crude oil and gas condensate
Change in net revenue from sales of crude oil and gas condensate
in the Russian Federation
Change in net revenue from sales of refined products to far abroad countries
Change in net revenue from sales of refined products to FSU countries
Change in net revenue from sales of refined products in the Russian Federation
Change in net revenue from sales of electricity and heat
Change in net revenue from sales of gas transportation services
Change in other revenues
Net sales revenue in 2018
Net sales revenue, RUB bn
2016
2017
2018
Net revenue from gas sales
Net revenue from sales of refined products
Net revenue from sales of crude oil and gas condensate
Net revenue from sales of electricity and heat
Net revenue from sales of gas transportation services
Other revenues
Total
2018
Change 2018/2017
2016
3,302.8
1,497.6
411.9
481.7
199.0
218.1
6,111.1
2017
3,340.6
1,687.1
539.9
503.8
235.1
239.6
4,303.7
2,179.8
734.9
522.1
225.7
258.0
6,546.1
8,224.2
6,546.1
+730.0
+55.8
+78.8
+98.5
+192.9
+8.9
−6.8
+186.7
+27.0
+279.0
+18.3
−9.4
+18.4
8,224.2
28.8%
29.2%
36.1%
3.6%
−4.0%
7.7%
25.6%
Financial Performance
Operating Expenses
In 2018, Gazprom Group’s operating expenses amounted to
RUB 6,181.2 bn, an increase driven by more expensive pur-
chased oil and gas (by 19%) and higher taxes other than
income tax (by 20%). The MET growth by 27% was the main
driver behind higher taxes other than income tax. The Group’s
operating expenses as a percentage of sales decreased
from 87% in 2017 to 75% in 2018.
RUB6,181.2 bn
PJSC Gazprom’s operating expenses in 2018
Operating expenses breakdown, RUB bn
2016
2017
2018
Taxes other than income tax
Purchased gas and oil
Transit of gas, oil, and refined products
Depreciation
Staff costs
Other
Total
Gazprom is Russia’s major taxpayer. In 2018, the taxes paya-
ble by the Group (net of income tax), totalled RUB 1,498.3 bn,
up RUB 252.2 bn year-on-year. A heavier tax burden on
Gazprom Group in 2018 was predominantly driven by an in-
crease in mineral extraction tax (MET), mainly as a result of
higher oil prices, an increase in the adjusting coefficient in
the MET formula for crude oil, and an increase in coefficient
values in the MET formula for gas.
For more details on oil price changes in 2018 see the Trends and Developments on
Gas Markets section
Breakdown of taxes other than on income, RUB bn
2016
900.4
1,157.6
610.3
571.6
641.0
1,400.0
5,280.9
2017
1,246.1
1,236.2
593.3
613.2
682.1
1,326.2
5,697.1
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Change 2018/2017
1,498.3
1,468.9
650.8
648.0
600.8
1,314.4
6,181.2
20.2%
18.8 %
9.7%
5.7%
−11.9%
−0.9%
8.5%
Outlook for Gazprom Group’s tax burden in 2019
A higher MET on oil and gas condensate is expected in 2019 due to
changes in the MET rate calculation as part of the completion of the tax
manoeuvre in the oil industry. The growing MET on oil and gas
condensate is expected to be partially offset by the negative oil excise
from the budget, and the lower export duty on oil and oil products.
MET
Property tax
Other taxes
Total
2016
2017
2018
135
2016
613.7
127.1
159.6
900.4
2018
Change 2018/2017
2017
915.2
154.6
176.3
1,163.9
162.9
171.5
1,246.1
1,498.3
27.2%
5.4%
−2.7%
20.2%
PJSC Gazprom Annual Report 2018
Financial Performance
Profit
In 2018, Gazprom Group’s operating profit amounted to
RUB 1,930.0 bn. The increase in the Group’s adjusted EBITDA
was due to the operating profit growth. In 2018, Gazprom
Group’s adjusted EBITDA margin grew to 32%.
RUB2,599.3 bn
PJSC Gazprom’s adjusted EBITDA for 2018
Income tax in the reporting year was RUB 323.6 bn. Effective
tax rate decreased to 17.5% (24.7% in 2017).
In 2018, the Group’s profit attributable to the owners of
PJSC Gazprom totalled RUB 1,456.3 bn. This growth was
mostly due to higher revenue and a higher share of profit
of associates and joint ventures. At the same time, the
Company’s profit was affected by higher operating costs, the
recognition of the impairment loss on financial assets, and
of the foreign exchange losses resulting from changes in
RUB/USD and RUB/EUR exchange rates in 2018. In 2018,
profit margin attributable to the owners of PJSC Gazprom
reached 18%.
Profit, RUB bn
Operating profit
2016
2017
2018
Change 2018/2017
Adjusted EBITDA
2016
2017
2018
Change 2018/2017
726.6
871.4
1,930.0
121.5%
1,323.3
1,467.7
2,599.3
77.1%
Profit for the year attributable to the owners of PJSC Gazprom
2016
2017
2018
Change 2018/2017
951.6
714.3
1,456.3
103.9%
Gazprom Group’s profit margin, %
Adjusted EBITDA margin
Profit margin for the year attributable
to the owners of PJSC Gazprom
2016
2017
2018
22
16
22
11
32
18
Variation analysis of profit attributable to the owners of PJSC Gazprom, 2018, RUB bn
Profit for 2017 attributable to the owners of PJSC Gazprom
Change in sales revenue
Change in operating expenses
Change in impairment loss on financial assets
Change in net financial income (expense)
Change in income tax
Change in share of profit of associates and joint ventures
Other factors
Profit for 2018 attributable to the owners of PJSC Gazprom
714.3
+1,678.1
−484.1
−169.7
−329.6
−72.5
+105.6
+14.2
1,456.3
136
PJSC Gazprom Annual Report 2018 Financial Performance
Capital Expenditures
In 2018, Gazprom Group’s capital expenditures amounted to
RUB 1,795.9 bn.
Transportation, Gas Production, and Refining segments
account for the bulk of the Group’s capital expenditures. The
high share of the Transportation segment in the total capital
expenditures is due to the concurrent implementation of a num-
ber of major gas transportation projects. With Gazprom’s
capex mostly denominated in Russian roubles, its investment
activities are less exposed to external factors.
Total actual expenditure under Gazprom Group’s 2019
capex programme (covering gas, oil, electricity, heat gener-
ating, and other assets) and similar plans of the Group was
RUB 2,094.2 bn.
RUB1,795.9 bn
Gazprom Group’s capital expenditures in 2018
For more details on Gazprom Group’s key capital expenditures in 2018 and 2019
priorities see the Capex Programmes section
Capital expenditures, RUB bn
2016
2017
2018
Transportation
Refining
Gas production
Oil and gas condensate production
Electricity and heat generation and sales
Gas distribution
Gas storage
Other segments
Total
2016
406.8
193.2
235.2
326.4
63.5
41.8
35.5
54.9
2017
498.6
225.2
216.5
330.4
58.1
51.7
37.7
86.4
1,357.3
1,504.6
Note. Capital expenditures are shown as reported in the segment information of PJSC Gazprom's IFRS consolidated financial statements.
Cash and Free Cash Flow
According to Gazprom Group’s financial policy, capital ex-
penditures are covered by the operating cash flow.
In 2018, net cash from operating activities totalled
RUB 1,617.4 bn. This growth was mainly due to higher cash
from operating activities before the changes in the working
capital year-on-year, mainly due to growth in sales profits.
In 2018, net cash from operating activities remained low-
er than cash capital expenditures as the Company was pass-
ing the peak of its investment cycle.
PJSC Gazprom is enhancing the Group’s centralised
cash flow and liquidity management system.
Cash from operating activities, RUB bn
Net cash from operating activities
2016
2017
2018
Change 2018/2017
Cash capital expenditures
2016
2017
2018
Change 2018/2017
Free cash flow
2016
2017
2018
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Change 2018/2017
640.1
309.4
308.0
257.9
72.9
39.1
19.4
149.1
1,795.9
28.4%
37.4%
42.3%
−21.9%
25.5%
−24.4%
−48.5%
72.6%
19.4%
1,571.3
1,187.0
1,617.4
36.3%
1,369.0
1,405.8
1,639.5
16.6%
202.3
−218.8
−22.1
PJSC Gazprom Annual Report 2018
Financial Performance
Gazprom intends to expand the cash pooling system, includ-
ing by means of cross-border cash pooling, optimising
Gazprom Group’s settlement system, improvement of corpo-
rate dealing, and the use of cutting-edge banking technolo-
gies in cash management.
322 participants
in Gazprom Group’s real cash pooling system
as at 31 December 2018
Debt Management
As at 31 December 2018, the total debt of Gazprom Group
was RUB 3,863.8 bn while its net debt amounted to
RUB 3,014.4 bn.
Despite the growth, the weighted average interest rate
decreased to 5.1% as at 31 December 2018 (5.6% as at
31 December 2017) while the debt repayment profile was ex-
tended. As at 31 December 2018, 43% of debt matured from
two through five years.
In 2018, the Group’s Net debt/adjusted EBITDA ratio
stood at comfortable 1.2.
Debt, RUB bn
2016
2017
2018
Net debt
Cash and cash equivalents
Total
Net debt/adjusted EBITDA*
2016
2017
2018
Change 2018/2017
2016
1,932.9
896.7
2,829.6
2017
2,397.5
869.0
3,266.5
2018
Change 2018/2017
3,014.4
849.4
3,863.8
25.7%
−2.3%
18.3%
PJSC Gazprom’s credit ratings assigned by the rating agen-
cies Standard & Poor’s, Fitch Ratings, and Moody’s have
an investment grade, which is a credible external recognition
of the Group’s high creditworthiness and financial stability.
Gazprom Group companies are reliable borrowers in the do-
mestic and international capital markets, able to raise funds
on favourable terms.
1.5
1.6
1.2
−25%
* Calculated as the ratio of net debt to adjusted EBITDA denominated in Russian roubles.
1.2
Net debt/adjusted EBITDA in 2018
Cost of debt, %
Weighted average fixed interest rate
Weighted average floating interest rate
Weighted average interest rate
2016
2017
2018
6.3
4.1
5.8
6.3
3.6
5.6
6.0
2.9
5.1
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PJSC Gazprom Annual Report 2018 2016
2017
2018
16
25
34
25
27
15
33
25
15
16
43
26
The Group’s debt portfolio is well-balanced in terms of matu-
rity — loans maturing in more than five years account for
about a fourth of the portfolio.
PJSC Gazprom pursues a policy of improving control
over Gazprom Group companies’ external borrowings and
debt and managing their excessive liquidity. Group compa-
nies have debt caps and need to go through preliminary
approvals of their external borrowing programmes and indi-
vidual borrowings within set limits and financial metrics.
To reduce the debt load and streamline the debt struc-
ture, an increasing number of subsidiaries is involved in the
cash pooling system, while the existing regulations on
Gazprom Group’s debt and borrowings are improved, and
new regulations are developed. Moreover, Group companies
consistently strive to reduce the rates through refinancing
their current loans and borrowings, and use financial instru-
ments not affecting their external debt.
In 2019, PJSC Gazprom will continue to control external
borrowings and maintain comfortable external debt and debt
ratios for the Group.
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Debt maturities, %
2016
2017
2018
0 through 1 year
1 through 2 years
2 through 5 years
Over 5 years
Gazprom successfully raises capital funds on international
debt markets, making informed decisions when selecting its
sources of finance, and ensuring strong management of bor-
rowed funds. The Group’s borrowed funds mainly come from
foreign currency borrowings: ca. 29% of its debt is denomi-
nated in US dollars and 43% in Euros. This is due to a num-
ber of factors including low interest rates on foreign markets
and a sizeable currency borrowings market as compared
to rouble-denominated instruments. Considering the gradual
increase of interest rates in US dollars and still negative
interest rates in Euros, the share of Euro-denominated loans
in the debt portfolio has been rising. On top of that, Gazprom
Group’s debt currency profile reflects prevailing foreign cur-
rency revenues, thus creating a natural hedge for debt ser-
vicing: if the Russian rouble depreciates against the US dol-
lar/Euro, higher payments on external debt in the rouble
equivalent will be offset by growing foreign currency reve-
nues in their rouble equivalent.
Rouble-denominated loans prevailing in debt portfolios
of Gazprom Group’s subsidiaries account for nearly 20%
of the Group’s total debt.
For details on bond issues outstanding as at 31 December 2018 see the Share Capital
and Securities Market section
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PJSC Gazprom Annual Report 2018
Environmental
and Social
Responsibility
140
140140
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
140PJSC Gazprom Annual Report 2018 Personnel 142
Occupational Safety 147
Environmental Protection 151
Energy Saving and Energy Efficiency 155
Social Projects 158
141
141
141141
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
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PJSC Gazprom Annual Report 2018141PJSC Gazprom Annual Report 2018 Personnel
A tight-knit professional team is one of Gazprom’s
key competitive advantages. The Group strictly complies
with the requirements of labour laws, fosters continuous
improvement of its employees’ skills, and ensures
a high level of their social security.
Social and labour relations within Gazprom Group are gov-
erned by labour laws, the General Agreement between
the National Associations of Trade Unions and Employers,
and the Russian Government, the Industry Agreement for
Oil, Gas and Construction Companies, collective bargaining
agreements, and Gazprom Group’s local regulations.
Governed by the standards of the International Labour
Organisation, Gazprom respects the fundamental rights and
principles set forth in ILO conventions and recommendations,
covering in particular:
—
freedom of association and the effective recognition
of the right to collective bargaining
— elimination of all forms of forced or compulsory labour
— effective abolition of child labour
— elimination of discrimination in respect of employment
and occupation.
Gazprom also adheres to international standards on
hours and conditions of work, occupational safety, remune-
ration for work, social security, and holidays with pay.
Personnel Structure
As at 31 December 2018, the total headcount of the Group
was 466.1 thousand employees, including 26.6 thousand
employees in entities registered abroad.
0.6 %
the share of Gazprom Group’s personnel in the total
number of employed Russian citizens
Total headcount of Gazprom Group as at the end of the year,
thousand people
2016
2017
2018
Change 2018/2017
467.4
469.6
466.1
−0.7%
Note. Excluding entities in which Gazprom has investments classified as joint operations.
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PJSC Gazprom Annual Report 2018
Personnel
Breakdown of Gazprom Group’s personnel
as at 31 December 2018, thousand people
PJSC Gazprom
(including branches and
representative offices)
Major subsidiaries of Gazprom Group
engaged in gas production,
transportation, storage, and processing
Gazprom neftekhim Salavat
Gazprom Neft
Gazprom energoholding
Other subsidiaries
Total
Note. Excluding entities in which Gazprom has investments
classified as joint operations.
26.7
232.9
15.2
68.5
43.3
79.5
466.1
Employee turnover rate across Gazprom Group entities, %
2016
2017
2018
4.0
1.3
4.7
1.3
5.6
2.1
Gazprom Group
including subsidiaries of Gazprom Group engaged in gas
production, transportation, storage, and processing
Notes.
1. The following grounds for resignation are taken into account in calculating the employee
turnover rate: clauses 3, 6, 7, 9, Article 77 of the Labour Code of the Russian Federation
(termination of a labour agreement on employee’s initiative). Only clause 3, Article 77
of the Labour Code of the Russian Federation was taken into account in calculating the
employee turnover rate before 2018.
2. Excluding share in the production volumes of entities in which Gazprom has investments
classified as joint operations.
Breakdown of Gazprom Group’s personnel by category
as at 31 December 2018, thousand people
Profile of Gazprom Group’s workforce
as at the end of the year
Blue collar
White collar
Managers
Total
248.8
151.3
66.0
466.1
Note. Excluding entities in which Gazprom has investments
classified as joint operations.
Gender balance of Gazprom Group’s workforce
as at 31 December 2018, thousand people
Men
Women
Total
Note. Excluding entities in which Gazprom has investments
classified as joint operations.
Age balance of Gazprom Group’s workforce
as at 31 December 2018, thousand people
Under 30 years
30 to 40 years
40 to 50 years
Over 50 years
Total
330.1
136.0
466.1
67.0
149.3
137.1
112.7
466.1
Note. Excluding entities in which Gazprom has investments
classified as joint operations.
For more details on Gazprom Group’s personnel see Gazprom in Figures 2014–2018
Factbook
Employees with a higher education degree, %
2016
2017
2018
2016
2017
2018
2016
2017
2018
2016
2017
2018
Candidates of Sciences
Doctors of Sciences
Mean age, years
48.5
49.4
51.1
2,550
2,654
2,531
163
141
172
41.3
41.6
41.3
Note. Excluding entities in which Gazprom has investments classified as joint operations.
Overall, the share of employees with higher education
tends to grow. The average age of employees remained flat
in 2016–2018.
Gazprom Interregional Trade Union, which is part
of the Russian Oil, Gas and Construction Workers’ Union,
represents the interests of over 466 thousand Gazprom
Group’s employees.
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Young Talent Management
Projects aimed at creating professional development opportunities
for young specialists at PJSC Gazprom
— PJSC Gazprom’s Young Specialist Training School
— Youth Coordination Council of PJSC Gazprom’s subsidiaries
and entities
— Councils of Young Researchers and Specialists
— R&D conferences for young employees
Gazprom runs a number of dedicated programmes for
young employees and those new to the gas industry. The
programmes, such as the Young Specialist Training School,
a corporate post-graduate training programme, facilitate on-
boarding for young employees, identify their professional
skills, and cultivate corporate traditions.
Conferences, round-table discussions, and contests
for young specialists
— Youth Day: Dialogue of Generations — 2018 at the 8th St Petersburg
International Gas Forum (October 2018)
— Young Professionals Forum. Promising Research Projects of Young
Scientists and Staff Training for Offshore Oil and Gas Development
round-table discussion at Offshore Marintec Russia (October 2018)
— Two oceans: present and future of the Russian offshore oil and gas
production youth session at the VII International Conference
Russian Offshore Oil and Gas Development: Arctic and Far East
(ROOGD 2018)
— PJSC Gazprom’s Best Young Innovator contest
The Group has established the Youth Coordination Council
of PJSC Gazprom’s subsidiaries and entities. The Company’s
subsidiaries have their own councils of young researchers
and specialists and hold R&D conferences for young employ-
ees aged under 35. A workshop for chairs of young re-
searchers and specialist councils of PJSC Gazprom sub-
sidiaries was held in October 2018 dedicated to discussing
key matters related to young specialists’ performance and
identifying further focus areas of young talent management.
Young talent management in Gazprom Group
University and vocational school graduates hired
by Gazprom Group entities, people
2016
2017
2018
2016
2017
2018
2016
2017
2018
Share in the total number of employees hired
by Gazprom Group entities in 2018
Number of the Young Specialist Training School
corporate post-graduate training programme participants,
people
2,743
3,238
2,931
5.5
6.0
5.0
209
271
244
Employee Training and Development
The Group has in place a corporate Continuous Vocational
Education and Training System designed to upgrade employee
skills to meet the ever-growing operational and performance
requirements and support deployment of new technologies,
adoption of professional standards, delivery of digital trans-
formation across its business, and expansion of the Group’s
regional footprint.
Number of Gazprom Group employees trained under career
enhancement and retraining programmes, thousand people
2016
2017
2018
Change 2018/2017
337.5
342.9
381.1
11.1%
Gazprom runs targeted employee training programmes tai-
lored for specific activities, such as development of offshore
hydrocarbon fields, GTS dispatch control, LNG production,
use of NGV fuels, use of innovative process equipment.
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PJSC Gazprom Annual Report 2018 Personnel
Targeted training programmes for Gazprom Group employees developed in 2018
Programme
Educational institution
Programme audience
Oil and Gas Trading
(full-year, eight-module programme)
Gazprom MBA: Efficient Mineral Resource
Base Management
(full-year, eight-module programme)
Remuneration and Social Security
Gubkin Russian State Oil and Gas
University and Gazprom Corporate Institute
(joint project)
Gazprom Corporate Institute
Employees engaged in trading activities
Gazprom Group companies’ heads
of operations and exploration
The Company has in place the Remuneration Management
Policy for Employees of PJSC Gazprom’s Entities, which sets
out unified corporate remuneration standards for Gazprom
Group’s employees. Its purpose is to provide a framework
for attracting and retaining people with the required skills
and motivate employees to perform as expected.
Current remuneration schemes link fixed salaries and
pay rates to qualifications and business skills, and also
provide for monthly performance bonuses, premiums and
additional allowances for work scope and conditions,
as well as ad hoc and annual bonuses.
Key objectives of the Remuneration Management Policy
for Employees of PJSC Gazprom’s Entities
— Adopting unified corporate employee remuneration standards
— Maintaining real pay levels reflecting consumer price index growth
— Ensuring competitive pay levels for employees of PJSC Gazprom
entities based on market wage rate assessment
— Establishing an average monthly pay level for employees of
Gazprom Group entities based on unified corporate remuneration
standards
Staff costs of Gazprom Group, RUB bn
2016
2017
2018
Change 2018/2017
641.0
682.1
600.8
−11.9%
To maintain real pay levels in accordance with the General
Collective Bargaining Agreement of PJSC Gazprom and the
collective bargaining agreements of its subsidiaries, the
Company in its annual budgeting process takes into account
the opinion of Gazprom Interregional Trade Union to decide
on the increases of employee fixed salaries and pay rates,
setting the time and rate of indexation versus the preceding
year to reflect the projected CPI growth for the year based
on forecasts by the Ministry of Economic Development of the
Russian Federation.
Increase of employee fixed salaries and pay rates
in PJSC Gazprom and its budgeted subsidiaries and entities
in Russia, %
— Monitoring application of remuneration systems based on the
From 1 January 2017
From 1 January 2018
From 1 January 2019
unified corporate reporting on HR costs
5.0
3.7
4.6
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PJSC Gazprom Annual Report 2018 Personnel
PJSC Gazprom’s social policy provides it with a competitive
advantage in the employment market as it seeks to retain
and motivate employees for strong and sustainable perfor-
mance.
The social partnership between employees and employers
is central to implementing our social policy, with its key as-
pects set out in the General Collective Bargaining Agree-
ment of PJSC Gazprom and in the collective bargaining
agreements of its subsidiaries.
Key aspects of employees’ social security
Social benefits
Personal insurance
Healthcare benefits
Housing programme
Private pension plans
Social benefits provide for necessary social security of both all
the Company employees and certain employee groups (young talent,
employees of subsidiaries located in the regions of Far North and
equated localities, employees with family liability).
PJSC Gazprom and its subsidiaries provide healthcare benefits to
employees and retired employees and their families to ensure their
occupational health, extend careers, as well as boost motivation and
satisfaction. Healthcare benefits are an element of the operating process,
a crucial part of managing personnel and its performance.
The Company has in place a corporate housing programme that is
funded by both employees and financial institutions through bank
mortgage lending facilities as well as by employer through subsidising
mortgage loans.
The Company runs a private pension arrangement to attract and retain
key and highly skilled employees that have the necessary experience
and qualifications and exhibit the greatest performance.
Gazprom Group’s social expenses, RUB bn
2016
2017
2018
Change 2018/2017
6 occupation types
across Gazprom Group’s core businesses covered
by the 2018 Labour Festival
35.5
34.5
42.8
24.1%
To better incentivise and drive improvements in employee
development, promote transfer of professional skills and
knowledge, and cultural exchanges, Gazprom holds regular
vocational skills competitions.
Starting from 2018, vocational skills competitions are
held as part of Labour (vocational skills) Festivals.
For more details on employee training, motivation system, and social benefits
see Gazprom Group’s Sustainability Reports published on an annual basis
146
PJSC Gazprom Annual Report 2018 Occupational Safety
The health and safety of employees are important
priorities in Gazprom’s business. The Group companies
strictly comply with occupational health, industrial
and fire safety laws, monitor the relevant risks, and
implement preventive measures.
PJSC Gazprom puts the health and safety of its employ-
ees at the top of its operational agenda. In its activities,
PJSC Gazprom is guided by its Occupational Health,
Industrial and Fire Safety Policy.
Objectives of PJSC Gazprom’s Occupational Health,
Industrial and Fire Safety Policy are to:
— create safe working conditions and protect the health and safety
—
of employees
reduce the risks of accidents and incidents at hazardous production
facilities
— ensure fire safety
For more details on commitments relating to occupational health, industrial
and fire safety set out in PJSC Gazprom’s Occupational Health, Industrial
www.gazprom.com
and Fire Safety Policy see PJSC Gazprom’s website
Unified Occupational Health and Safety
Management System
The Company has in place a Unified Occupational Health
and Safety Management System (UOHSMS). It is a part of
PJSC Gazprom’s integrated management system developed
and introduced to manage OHS risks and meet the Company’s
objectives and commitments under its occupational Health,
Industrial and Fire Safety Policy.
Health, industrial and fire safety performance
results are subject to reviews at the highest level —
meetings of PJSC Gazprom’s Board of Directors.
The scope of the Unified Occupational Health and Safety
Management System covers PJSC Gazprom, its major
gas exploration, production, processing, transportation,
underground storage, and energy subsidiaries, as well as
subsidiaries supporting the operation of the Russian UGSS,
with a total headcount of around 319 thousand employees.
Industrial safety leadership programme was
developed by PJSC Gazprom in 2018.
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UOHSMS improvements in 2018
— Corporate requirements to the UOHSMS were reviewed to comply
—
—
with ISO 45001:2018 international standard.
Industrial safety leadership programme was developed by
PJSC Gazprom.
Industrial safety leadership workshops were organised for the
executive management.
— Recommendations were developed to engage PJSC Gazprom
employees in creating safe and healthy working conditions.
— Corporate requirements were established for visual alarm devices
(Gazprom’s Corporate Standard 18000.1-007-2018 “Unified
Occupational Health and Safety Management System of
PJSC Gazprom. Procedure for Using Safety Signs and Other
Visual Alarm Devices at PJSC Gazprom’s facilities”).
— Measures were taken to improve corporate monitoring of
compliance with industrial safety requirements at PJSC Gazprom
facilities.
UOHSMS certification
In 2014, the UOHSMS was certified to OHSAS 18001:2007.
PJSC Gazprom annually expands the certification scope
by including new subsidiaries and entities.
The Russian Register Certification Association
(a member of the International Certification Bodies
Association — IQNet) confirmed compliance
of the UOHSMS to OHSAS 18001:2007 in 2018.
The UOHSMS is planned for certification
to ISO 45001:2018 in 2020.
Number of PJSC Gazprom’s UOHSMS certified subsidiaries
as at the end of the year
2016
2017
2018
Change 2018/2017
Average headcount of PJSC Gazprom’s UOHSMS
certified subsidiaries, thousand people
2016
2017
2018
Change 2018/2017
43
51
56
9.8%
260.6
266.4
275.3
3.3%
Outcomes of OHS activities
Gazprom makes consistent efforts to prevent injuries,
occupational diseases, accidents, incidents, and fires.
Based on the identified critical and material risks,
PJSC Gazprom develops and approves its occupational
health, industrial and fire safety targets for the year,
and develops programmes to achieve the annual targets
while all its subsidiaries and entities develop programmes
to improve labour conditions and action plans to ensure
occupational safety at hazardous production facilities.
Pre-FEED and design documents are reviewed by
our internal experts for compliance with PJSC Gazprom’s
requirements to occupational safety.
Compliance with PJSC Gazprom’s OHS standards and
regulations by suppliers and contractors operating at the
facilities of PJSC Gazprom and its subsidiaries is an essen-
tial requirement of occupational safety. In its activities,
the Com pany engages suppliers and contractors who share
the principles set out in Gazprom’s Occupational Health,
Industrial and Fire Safety Policy.
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PJSC Gazprom Annual Report 2018 Actions taken as a follow up to injury investigations
— Additional requirements were imposed on passenger and freight
transport service providers; and procedures established for
controlling the entire process, from trip planning, releasing vehicles,
speed monitoring, and driver work and rest hours, to return of the
vehicles to the parking area.
— Requirements were set down for the purchased vehicles;
specifically, a number of restrictions were introduced on the active
and passive vehicle safety systems: a ban on using a vehicle without
safety belts and restrictions related to routes, driver qualifications,
and replacement of motor vehicles.
— A set of initiatives was developed for ensuring compliance of
territories and premises with set requirements. Accountability for
their maintenance was strengthened.
Industrial safety incidents at hazardous production facilities
of entities covered by the UOHSMS
65
49
63
28.6%
77
61
89
45.9%
4
6
3
2016
2017
2018
31
26
16
−38.5%
4
4
3
−25.0%
Fires at facilities of entities covered by the UOHSMS
2016
2017
2018
Change 2018/2017
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A plan that included organisational and technical measures
to ensure fire safety was implemented in the reporting period.
The plan consisted of 50 measures and resulted from a root
cause analysis of, and contributing factors to, fires that
happened in the previous periods. The Company continuously
improves the performance of professional emergency
response services and fire safety units that maintain and
protect PJSC Gazprom’s facilities.
For more details on the Unified Occupational Health and Safety Management System
www.gazprom.com
see PJSC Gazprom’s website
Change 2018/2017
−50.0%
Change 2018/2017
Lost time injury frequency rate (LTIFR)*
Occupational Safety
Number of injuries and fatalities resulting from accidents
and injury rates in entities covered by the UOHSMS
Accidents
2016
2017
2018
Change 2018/2017
Injuries
2016
2017
2018
Change 2018/2017
Fatalities
2016
2017
2018
2016
2017
2018
Change 2018/2017
Fatal accident rate (FAR)**
2016
2017
2018
Change 2018/2017
0.16
0.11
0.17
54.5%
0.79
1.17
0.57
−51.3%
* Lost time injuries / total hours worked by all employees × 1,000,000.
** Fatalities / total hours worked by all employees × 100,000,000.
Note. Data published in Annual Report 2017 was amended after the internal investigation
found one 2016 accident not to be related to the operational activities.
During 2018, causes for injury mainly included traffic acci-
dents (47% of the total number of injured) and same-level
falls (34%).
Fatal accident rate in 2018 reduced by 50% year-on-
year. All employee fatal injuries in 2018 resulted from traffic
accidents.
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Occupational Health and Safety at Gazprom Group
Entities Outside the UOHSMS
Gazprom Neft Group
Gazprom Neft Group benefits from a vertically integrated
industrial and environmental safety, occupational safety,
and civil protection management system compliant with
ISO 14001, ISO 9001, and OHSAS 18001 international
standards. PAO Gazprom Neft’s operations are aligned with
the in-house policy on industrial, fire and transport safety,
environmental protection, health and workplace safety, and
civil protection, and is coordinated by the Occupational
Safety Department at the Corporate Centre. Gazprom Neft
Group has in place a Health, Safety and Environmental
Protection Board.
Gazprom energoholding
At Gazprom energoholding Group and its subsidiaries,
occupational health and safety issues are addressed in line
with the requirements of Russian laws and applicable statutory
regulations. CEOs are responsible for compliance with these
requirements while relevant activities are coordinated by
Chief Engineers of subsidiaries and their branches (power
stations).
Gazprom neftekhim Salavat
PJSC Gazprom’s common goals, operating principles and
commitments are also reflected in Gazprom neftekhim
Salavat’s existing OHS Policy. The company implements
them in line with the requirements of federal, regional, and
industry-related laws and international standards. Gazprom
neftekhim Salavat has in place an OHS management system
certified to OHSAS 18001:2007.
For more details on industrial safety across Gazprom Group see Gazprom Group’s
Sustainability Reports published on an annual basis
Gazprom Group has in place the Occupational Health and
Safety Management System across its oil, power generation,
and petrochemical businesses.
Number of people injured in accidents across Gazprom Group
entities outside the UOHSMS
Gazprom Neft
2016
2017
2018
Change 2018/2017
Gazprom energoholding
2016
2017
2018
Change 2018/2017
Gazprom neftekhim Salavat
2016
2017
2018
Change 2018/2017
38
36
35
−2.8%
19
16
18
12.5%
1
2
–
−100%
Lost time injury frequency rate (LTIFR )across Gazprom Group
entities outside the UOHSMS
Gazprom Neft
2016
2017
2018
Change 2018/2017
Gazprom energoholding
2016
2017
2018
Change 2018/2017
Gazprom neftekhim Salavat
2016
2017
2018
0.40
0.33
0.33
–
0.30
0.25
0.28
12%
0.07
0.14
–
Change 2018/2017
−100%
Note. Lost time injuries / total hours worked by all employees × 1,000,000.
Gazprom neftekhim Salavat Group reported
no occupational injuries in 2018.
150
PJSC Gazprom Annual Report 2018 Environmental Protection
Sustainably using natural resources and caring for
the environment are among Gazprom’s top priorities.
Gazprom Group runs a large number of environmental
initiatives, many of which are voluntary.
When implementing projects both in Russia and abroad, sus-
tainable use of natural resources and environmental protec-
tion are among the key principles guiding PJSC Gazprom’s
operations as a socially and environmentally responsible
energy company.
PJSC Gazprom’s Environmental Policy is the primary
document outlining the Company’s corporate policy and
environmental commitments across operating regions.
PJSC Gazprom’s Environmental Policy was recommended by
the Board of Directors for adoption across Gazprom Group
companies.
The Environmental Policy is available on PJSC Gazprom’s website
www.gazprom.com
To assure the international community of its environmental
responsibility in 2018, Gazprom committed to further
reducing methane emissions from its facilities by signing
the Guiding Principles on Reducing Methane Emissions
across the Natural Gas Value Chain.
For more details on the Corporate Climate Policy see Gazprom Group’s Sustainability
Reports published on an annual basis
Guiding principles on reducing methane emissions across
the natural gas value chain
— The Guiding Principles signed by Gazprom in 2018 are part of wider
efforts by the global energy industry to ensure that natural gas
continues to play an important role in helping to meet energy
demand in the future
— The Guiding Principles were developed in cooperation with the
United Nations Environment Programme, the International Energy
Agency, the International Gas Union, the Oil and Gas Climate
Initiative, the Environmental Defense Fund, and the Sustainable Gas
Institute
— The Guiding Principles are also supported by leading international
energy companies such as Shell, Total, Eni, Equinor, BP, Exxon,
Repsol, and Wintershall
Environmental Management System
The Environmental Management System (EMS) is essen-
tial to the Company’s Environmental Policy. It covers
PJSC Gazprom’s business units and 34 wholly-owned sub-
sidiaries engaged in core activities: gas and gas conden-
sate exploration, production, transportation, storage, and
processing, or capital project management.
In 2018, PJSC Gazprom’s EMS underwent
a recertification audit, receiving a certificate
of compliance with ISO 14001:2015, valid
until December 2020.
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PJSC Gazprom Annual Report 2018 Environmental Protection
In 2018, Gazprom Group continued to roll out the EMS
to ISO 14001:2015 requirements at its entities operating
in Armenia and Kyrgyzstan. ZAO Gazprom Armenia has fully
adopted the EMS and received a certificate of compliance.
Corporate Environmental Targets are set and environ-
mental activities are grouped into focused programmes
within PJSC Gazprom’s EMS and based on an annually up-
dated list of significant environmental aspects.
Recognition of Gazprom Group’s environmental performance
by stakeholders
— PJSC Gazprom was ranked Russia’s best energy sector company
for the seventh time in the CDP’s international rating for corporate
climate reporting and GHG reduction strategy
— PJSC Gazprom is a leader in the Russian Union of Industrialists and
Entrepreneurs’ Transparency and Responsibility, and Sustainable
Development Vector indices, which are used as benchmarking tools
by Russian companies and included in The Reporting Exchange,
a global database of sustainability ratings, rankings, and indices.
2018 indexes were audited by FBK Grant Thornton, an independent
auditor
PJSC Gazprom was ranked Russia’s best energy
sector company for the seventh time in the CDP’s
international rating.
Four out of the six targets set for 2017 to 2019 were met
in 2018. The growth in above-limit impact charges against
the 2014 baseline was due to a failure to obtain necessary
environmental permits on time, which did not result in higher
environmental impact. The rise in specific fuel and energy
consumption for own operational needs was driven by
a disproportionate increase in fuel and energy consumption
along with higher natural gas transportation volumes (up
15.5% in 2018). Analysis of energy consumption by trunk gas
pipelines under comparable operating conditions confirmed
that specific fuel and energy consumption is going down.
The Gazprom Group companies not covered by
PJSC Gazprom’s EMS also have their own effective,
business-specific environmental management systems.
For more details on the environmental management systems in the Group companies
see PJSC Gazprom’s Environmental Report or information on the companies’
official websites
Achievement of PJSC Gazprom’s corporate environmental targets in 2018
Progress against
the target
(vs the 2014
baseline)
Down 3.8%
Down 2.2%
Down 23.5%
Down 5.3%
Up 2.7%
Up 1.8%
No
Corporate environmental target
Reduction of methane emissions
Reduction of specific emissions of nitrogen oxides
Reduction of waste and effluent water discharge
into surface water bodies
Reduction of landfill share
Reduction of above-limit impact charges
Entities within the EMS scope
All subsidiaries engaged
in natural gas transportation
All subsidiaries engaged
in natural gas transportation
All subsidiaries
All subsidiaries
All subsidiaries
Reduction of specific fuel and energy consumption
for own operational needs
All subsidiaries engaged
in natural gas transportation
1
2
3
4
5
6
152
PJSC Gazprom Annual Report 2018 Environmental Protection
Environmental Performance
and Environmental Protection Costs
The rise in Gazprom’s GHG emissions in Russia is due
to increased production across all production operations
segments.
A minor increase in the Group’s air pollutant emissions
was due to higher natural gas production and transportation
volumes, and gas injection/withdrawal volumes at under-
ground gas storage facilities.
Gazprom Group’s environmental performance in Russia
Air pollutant emissions, thousand tonnes
carbon oxide
nitrogen oxides
sulphur dioxide
hydrocarbons (including methane)
GHG emissions, mm tonnes of CO2 equivalent
Wastewater discharge into surface water bodies, mmcm
including clean and treated as per standards
Waste generation, thousand tonnes
Area of land disturbed during the year, thousand ha
Area of land rehabilitated during the year, thousand ha
Note. Excluding entities, in which Gazprom has investments classified as joint operations.
In 2018, PJSC Gazprom was the first Russian energy
company to pass an independent audit (certification)
of corporate GHG reporting to the International
Standard on Assurance Engagements (ISAE) 3410,
Assurance Engagements on Greenhouse Gas
Statements.
During 2018, Gazprom Group undertook a large number
of environmental initiatives to achieve more efficient water
use for operational and household needs and improve
wastewater treatment quality. The initiatives helped to reduce
wastewater discharge into surface water bodies including
untreated and effluent water discharge.
100 %
of Gazprom Group subsidiaries and entities covered by
environmental reporting have adopted the greenhouse
gas stocktaking system
2016
2,868.5
550.5
288.5
346.1
1,462.3
228.2
3,855.5
3,691.2
4,289.8
27.0
42.5
2017
2,795.9
529.9
313.6
262.7
1,495.7
233.8
3,905.3
3,781.7
4,130.3
42.2
19.6
2018
2,894.0
594.1
328.6
276.2
1,497.8
240.0
3,658.4
3,579.5
3,555.1
25.8
15.8
Change
2018/2017
3.5%
12.1%
4.8%
5.1%
0.1%
2.7%
−6.3%
−5.3%
−13.9%
−38.9%
−19.4%
A smaller area of land was disturbed in the reporting year,
as most of the area affected by the Power of Siberia trunk
gas pipeline construction was reported during the previous
period. The decrease in land remediation in 2018 was due
to ongoing repairs and construction work in progress on the
land leased during previous periods.
The decrease in waste generation resulted from lower
Class 5 bottom ash waste levels at Gazprom energoholding’s
facilities due to substituting coal with natural gas in the fuel
mix and less drilling waste produced by Gazprom Neft.
According to the CDP’s international rating,
Gazprom’s products have the lowest carbon footprint
across the world’s largest oil and gas companies.
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PJSC Gazprom Annual Report 2018 Environmental Protection
Gazprom Group’s environmental protection costs in Russia, RUB bn
2016
2017
2018
Current environmental protection costs
Capital expenditures for environmental protection and sustainable use
of natural resources
Negative environmental impact charges
Total
Note. Excluding entities in which Gazprom has investments classified as joint operations.
Gazprom Group’s current environmental protection costs
in Russia grew in 2018 as a result of higher operating
costs and overhaul costs for fixed capital assets used in
environmental protection. The increase was primarily due
to Gazprom neftekhim Salavat, which commissioned
a sulfur-alkaline wastewater neutralisation unit at its refinery
and Monomer plant and retrofitted the elemental sulphur
pro duction unit.
The decline in capital investments in environmental
protection and sustainable use of natural resources was
primarily due to lower investments made by Gazprom Neft
Group during the year for reasons including the capital-
intensive construction of water treatment facilities completed
at refineries in 2017.
2016
34.10
22.55
0.82
57.47
2017
34.47
35.58
0.77
70.82
2018
39.15
29.19
0.62
68.96
Change
2018/2017
13.6%
−18.0%
−19.5%
−2.6%
The decrease in negative environmental impact charges paid
by Gazprom Group in 2018 was largely due to lower charges
for discharge of pollutants into water bodies during APG flar-
ing at Gazprom Neft Group’s fields, reduced landfill, and
a decline in the above-limit impact charges for discharge of
pollutants into water bodies.
For more details on the capacities commissioned during the reporting year
to increase APG use see the Exploration and Production section
Penalties and compensation for environmental damage in Russia by Gazprom Group, RUB mn
Penalties
Compensation for environmental damage
including for previous years
Note. Excluding entities in which Gazprom has investments classified as joint operations.
Compensation payments for damage primarily resulted from
Gazprom Neft pipeline incidents in 2017 and minor land
contamination in the Yamal-Nenets Autonomous Area.
Gazprom Group’s subsidiaries operating abroad are also
committed to minimising their environmental footprint in strict
compliance with both local regulations and PJSC Gazprom’s
Environmental Policy.
In 2018, the operations of PJSC Gazprom’s
subsidiaries outside Russia did not have
a significant environmental impact.
2016
24
46
30
2017
11
91
90
2018
17
189
177
Change
2018/2017
54.5%
107.7%
96.7%
Since the date Gazprom Group gained control of its
gas transportation subsidiaries in FSU countries
(OAO Gazprom transgaz Belarus, OsOO Gazprom Kyrgyzstan,
and ZAO Gazprom Armenia), it has been engaged in major
efforts to upgrade production facilities and improve envi-
ronmental management systems to bring them in line with
PJSC Gazprom’s corporate standards and ISO 14001. When
prospecting, exploring, and developing hydrocarbon fields
outside Russia, Gazprom Group applies technological
and scientific innovations, including innovations aimed at
reducing its environmental footprint.
For more details on Gazprom Group’s environmental performance and environmental
protection costs see PJSC Gazprom’s Environmental Report
154
PJSC Gazprom Annual Report 2018 Energy Saving and Energy Efficiency
Saving energy and improving energy efficiency are
among Gazprom’s top priorities. Gazprom approved
its corporate Energy Efficiency and Energy Saving Policy
in 2018. The Policy builds on PJSC Gazprom’s existing
Energy Saving and Energy Efficiency Improvement
Concept for 2011–2020.
Gazprom works consistently to save energy and improve
its energy efficiency, particularly through its Energy Saving
and Energy Efficiency Improvement Concept for 2011–2020.
For more details about the objectives set out in the Energy Saving and Energy
Efficiency Improvement Concept for 2011–2020 see PJSC Gazprom’s website
www.gazprom.com
To further encourage energy saving and energy efficiency
improvements, as well as prepare for the corporate energy
management system’s certification, PJSC Gazprom’s Man-
agement Committee approved the Energy Efficiency and
Energy Saving Policy in 2018. The Policy sets out commit-
ments and mechanisms supporting rational use of energy re-
sources, energy performance improvements, and further
promoting systemic energy efficiency solutions.
For a third consecutive year, the Russian Ministry
of Energy ranked PJSC Gazprom the best energy
company in terms of energy saving and energy
efficiency management in operational processes.
Key commitments in PJSC Gazprom’s Energy Efficiency
and Energy Saving Policy
— Consistently improve energy efficiency
— Save natural energy resources
— Further reduce GHG emissions from production facilities
The Energy Efficiency and Energy Saving Policy of PJSC Gazprom is available
on PJSC Gazprom’s website
www.gazprom.com
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PJSC Gazprom Annual Report 2018 Energy Saving and Energy Efficiency
In 2019, PJSC Gazprom expects to certify
its corporate Energy Management System
for compliance with ISO 50001:2012.
PJSC Gazprom achieves its energy saving and energy
efficiency improvement objectives through energy saving
initiatives run across all subsidiaries engaged in natural gas
transportation, production, processing, underground
storage, and distribution, as well as in OOO Gazprom energo.
Fuel and energy savings, mm t c.e
2016
2017
2018
Change 2018/2017
2.76
3.63
3.56
−1.9%
Note. Fuel and energy consumption rates have been converted to t c.e. using the following ratios:
1 mcm of gas = 1.155 t c.e.; 1 thousand kWh = 0.325 t c.e.; 1 thousand Gcal = 0.143 t c.e.
5.5 %
fuel and energy savings in 2018
Fuel and Energy Consumption and Saving
by Subsidiaries Covered by PJSC Gazprom’s
Energy Saving Programmes
Fuel and energy consumption, mn t c.e.
2016
2017
2018
Change 2018/2017
Fuel and energy savings by type
Natural gas, mmcm
2016
2017
2018
Change 2018/2017
Electricity, million kWh
2016
2017
2018
52.73
60.86
65.03
6.9%
Change 2018/2017
Heat, thousand Gcal
2016
2017
2018
Note. Fuel and energy consumption rates have been converted to t c.e. using the following ratios:
1 mcm of gas = 1.155 t c.e.; 1 thousand kWh = 0.325 t c.e.; 1 thousand Gcal = 0.143 t c.e.
Change 2018/2017
Fuel and energy consumption by type
Value of fuel and energy savings, RUB bn
2,285
3,014
2,952
−2.1%
256
331
364
10.0%
254
268
236
−11.9%
8,5
11,6
12,0
3.4%
2016
2017
2018
Change 2018/2017
Note. Calculations are based on the actual energy prices in respective period.
For more details on fuel and energy consumption and savings across all segments
by the subsidiaries covered by PJSC Gazprom’s energy saving programmes see
the Environmental Report and Gazprom Group’s Sustainability Reports published
on an annual basis
Results of energy saving initiatives under PJSC Gazprom’s
energy saving programmes in 2011–2018
Savings:
19.1 bcm of natural gas
2.2 billion kWh of electricity
1.8 mm Gcal of heat
22.5 mm t c.e.
of fuel and energy
worth a total of RUB 64.5 bn
39,939
46,416
49,870
7.4%
10,659
12,497
12,958
3.7%
21,976
22,312
22,565
1.1%
Natural gas, mmcm
2016
2017
2018
Change 2018/2017
Electricity, million kWh
2016
2017
2018
Change 2018/2017
Heat, thousand Gcal
2016
2017
2018
Change 2018/2017
156
PJSC Gazprom Annual Report 2018 Energy Saving and Energy Efficiency
With an increase in goods transported relative
to the level of 2011 by 9%, specific consumption
of fuel and energy resources for own technological
needs decreased by 18.5%.
RUB 12.0 bn
value of PJSC Gazprom’s fuel and energy savings
in 2018
19.1 bcm
natural gas savings in 2011–2018
As natural gas consumed by trunk gas pipelines accounts
for over 70% of the fuel and energy consumption mix of the
subsidiaries covered by PJSC Gazprom’s energy saving
programmes, key energy saving and energy efficiency
improvement initiatives, such as deploying energy efficient
equipment, are focused on natural gas.
Key energy saving and energy efficiency improvement initiatives
under PJSC Gazprom’s energy saving programmes
— Optimising operation modes for power generating equipment at
operating facilities
— Reducing gas losses
—
— Reducing gas consumption for own operational needs by optimising
Installing smart lighting, heating, and ventilation systems
operation modes of trunk gas pipelines
— Upgrading and replacing gas pumping units with highly efficient,
next-generation units
— Reducing fuel gas consumption by replacing the flow channels at
centrifugal gas compressors
— Telemetry-based well logging without gas venting
Increasing vent gas recovery during repairs
—
Innovative and energy efficient technologies are implemented
using contemporary practices such as energy service
contracts.
For more details on the Corporate Climate Policy see Gazprom Group’s Sustainability
Reports published on an annual basis
Energy saving and energy efficiency objectives to 2021 under PJSC Gazprom’s Energy Saving
and Energy Efficiency Improvement Programme for 2019–2021
6.2 bcm of natural gas
635.8 million kWh of electricity
529.8 thousand Gcal of heat
over 7.4 mm t c.e.
of fuel and energy
worth a total of RUB 24 bn
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The economic effect from fuel and energy savings worth
RUB 2.3 bn achieved by Gazprom Neft’s energy saving
programme was primarily due to electricity savings in oil
exploration and production segments.
For more details on energy saving programmes run by the companies of Gazprom
Neft, Gazprom energoholding, and Gazprom neftekhim Salavat see their respective
websites, PJSC Gazprom’s Environmental Report, or Gazprom Group’s Sustainability
Reports published on an annual basis
To implement
over 2,800
energy saving
initiatives
To save:
6.2 bcm
gas savings planned for 2019–2021
Subsidiaries of Gazprom Neft, Gazprom energoholding,
and Gazprom neftekhim Salavat are not covered by
PJSC Gazprom’s energy saving programmes, as they have
their own energy saving and energy efficiency programmes
compliant with federal laws and corporate requirements
of Gazprom Group.
In 2018, Gazprom energoholding’s energy programme
helped to save 1.4 mn t c.e. of fuel and energy worth
RUB 6.1 bn primarily due to optimising operation modes
of combined-cycle equipment and the initiatives to increase
the share of heat generation by power plants.
157
PJSC Gazprom Annual Report 2018 Social Projects
Gazprom is a socially responsible company. The Group
actively runs and supports projects promoting sports,
science, and arts and preserving heritage. A strong focus
is placed on enhancing international cultural cooperation.
Gazprom Group undertakes a large number of charity and
sponsorship initiatives. While most of the Group’s social
investments are in Russia, the scale and geography of its
operations enables expanded support for certain inter-
national social and economic projects.
For more details on the social initiatives of PJSC Gazprom and its subsidiaries
and entities see Gazprom Group’s Sustainability Reports published on an annual
basis or the Social Responsibility section of PJSC Gazprom’s website
www.gazprom.com
Charitable Activities
In its charitable activities, the Company seeks to contribute to
the social and economic development in the regions in which
it operates and strengthen its partnerships with each.
PJSC Gazprom and its subsidiaries consistently support
science, education, culture, healthcare, physical education,
and sports. Both in its regions of operation and country-wide,
the Company helps to build new or rehabilitate existing
sports, social, education, and healthcare facilities, as well
as cultural heritage sites in need of renovation or restoration.
The Company also focuses on environmental protection and
projects reviving national spiritual and cultural values while
supporting indigenous minorities of the Russian North.
Over 2,600
charitable projects and initiatives financed
by Gazprom Group companies in 2018
158
PJSC Gazprom Annual Report 2018 Social Projects
Key charity efforts of PJSC Gazprom and its subsidiaries and entities in 2018
The Gazprom for Children Programme
Support for beautification and restoration of War Memorials
in Russia and FSU countries
Donations for maintaining Eternal Flame memorials in Russia’s Hero
Cities and Cities of Military Glory
Supporting healthcare
Supporting construction and renovations of medical facilities
Maintaining a gas infrastructure for Eternal Flame memorials, including
connecting both existing and new Eternal Flame memorials to the gas
grid instead of using gas cylinders
Restoring and renovating memorials and war grave sites
Supporting vulnerable groups
Supporting medical projects run by Dmitry Rogachev National Research
Centre of Paediatric Haematology, Oncology, and Immunology
Financial support for scientific medical events
Financing charity events for children from foster, low-income, and large
families, and children from care institutions
Assistance in holding charity events for elderly people
Financing treatment courses for people with disabilities and severely
ill children
Charitable support in acquisition of pharmaceuticals and medical devices
Support for reviving cultural and spiritual values
Participation in financing the Russia — My History initiative
Supporting culture and the arts
Supporting church construction and renovation and restoration
of religious sites and church complexes
Supporting the cultural education programmes run by the Russian
Orthodox Church
Assisting restoration projects in the Tsarskoye Selo State Museum-
Preserve (jointly with ENGIE) and the Chinese Palace in Oranienbaum,
part of the Peterhof State Museum-Reserve
Rehabilitating and renovating cultural monuments and converting them to
museums
Financial support for theatres, museums, and musical groups
Supporting musical education projects, including international projects
Supporting indigenous minorities of the Russian North
Supporting education
Running the Gazprom Classes project
Supporting organisations whose projects focus on environmental protection and population growth of rare animal species
Supporting veteran organisations
Financial support for educational institutions with a particular focus on
schools (renovation projects, provision of equipment, and specialised
classrooms)
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PJSC Gazprom Annual Report 2018 Social Projects
The Gazprom for Children Programme is the Group’s
key social responsibility project.
Gazprom for Children Programme
The Programme aims to contribute a positive effect in the intellectual,
cultural, and physical development of children and teenagers and involve
as many of them as possible in sports and the arts. PJSC Gazprom is the
only Russian company with such an ambitious social project.
Since the launch of the Programme in 2007, over 1,659 various
facilities have been built in Russia.
In 2018, the Group completed the construction of 51 sports facilities
under the Programme:
— 18 fitness and health facilities (the largest community facilities
include a fitness and health facility with a swimming pool and
a multi-purpose sports hall in Komsomolsk-on-Amur and a fitness
and health facility with an ice rink in Stavropol)
— Two indoor athletics arenas
— A riding school in Kursk
— 30 outdoor sports fields, including 7 school stadiums and
23 multi-courts
In 2018, 46 infrastructure projects were under construction.
Financing under the Programme covered 25 Russian regions.
211 countries and regions
delegated children to participate in the Football
for Friendship International Children’s Social
Programme in 2018
Football for Friendship International Children’s Social Programme
Football for Friendship International Children’s Social Programme
is PJSC Gazprom’s ambitious social project in partnership with FIFA
and UEFA.
The Program aims to develop children’s football and promote
universal human values such as equality, tolerance, and healthy lifestyles.
The sixth season of the Programme was PJSC Gazprom’s key social
project in 2018 and carried as a part of the 2018 FIFA World Cup events
in Russia: Moscow hosted 12-year old participants, including children
with disabilities, from the six continents: Asia, Africa, Australia and
Oceania, Europe, North and South America. All in all, over 180 sports
events and city festivals for children were held during the season in
different parts of the globe with over 240 thousand children participating.
The Gazprom for Children Programme will continue, with plans
During the sixth season, over 70 environmental, educational, and
set to 2024.
Gazprom Group increasingly involves its employees in
charitable activities. Their participation as volunteers and
philanthropists in various charitable projects has become
part of the corporate culture.
volunteer events were held, aiming to raise global awareness of the need
to save endangered species and protect the environment.
In 2018, 35 thousand publications about the Programme in
60 languages appeared in the world’s leading media such as Euronews,
Associated Press, Al Jazeera, Reuters, RT, DPA, TASS, and Africa News.
Football for Friendship was supported in 2018 by the UN, FIFA,
and UEFA, national football federations, top global football clubs, inter-
national children’s charitable foundations, NGOs, and governments
from various countries who noted the Programme’s significant social
and humanitarian mission.
The Programme’s partners in 42 countries financed their own social
initiatives as part of the Football for Friendship: sports and humanitarian
events, international football championships, workshops and presentations
for children from orphanages, and inclusive football projects for children
with disabilities.
During its existence, Football for Friendship has won 21 awards for
communications, social, and sports initiatives such as the Gold Quill
Awards, Sabre Awards, Silver Archer, and Eventiada IPRA GWA.
The Programme has won global recognition and plays an important
role in Russia’s international social policy.
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PJSC Gazprom Annual Report 2018 Social Projects
Sponsorships
PJSC Gazprom and its subsidiaries and entities sponsor
sports organisations and initiatives, cultural organisations,
and events, along with major business forums held
in Russia.
The 2018 FIFA World Cup was a key sports project
supported by PJSC Gazprom during the year.
Over 200
Projects and events sponsored by Gazprom Group
companies in 2018
Key sponsorship efforts of PJSC Gazprom and its subsidiaries and entities in 2018
Supporting sports
Partnerships with FIFA and UEFA
Sponsoring the Russian Olympic Committee and Russian national teams
in competition preparation and participation
Sponsoring sports federations and sports clubs
Sponsoring competitions and sports events
Sponsoring Children’s Radio
Major business forums supported by PJSC Gazprom
and its subsidiaries and entities in 2018
— 8th St Petersburg International Gas Forum
— Sochi International Investment Forum
— 22nd St Petersburg International Economic Forum
— 4th Eastern Economic Forum in Vladivostok
— 9th Gaidar Forum, Russia and the World: Values and Virtues
— Russian Energy Week International Forum 2018
Sponsorship efforts help Gazprom pursue its communi-
cations strategy, run ambitious social projects, improve
brand recognition, and boost its profile in key international
markets.
Supporting cultural and art projects
Sponsoring business events
Sports federation and club sponsorships in 2018
Sport
Football
Ice hockey
Volleyball
Sponsorship recipient
Clubs: Zenit, Orenburg, Tom
Clubs: SKA, Avangard, Vityaz
Volleyball Federation of Russia
the Zenit-Kazan, Zenit-Saint
Petersburg, and Gazprom-Yugra
clubs
Basketball
Zenit club
Rhythmic Gymnastics
Swimming
Biathlon
Rhythmic Gymnastics Federation
of Russia
Russian Swimming Federation
Russian Biathlon Union
Kayaking and canoeing
Russian Canoe Federation
Billiards
Table tennis
Sailing sports
Federation of Billiard Sports
of Russia
Fakel-Gazprom club
Bronenosets yacht crew
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PJSC Gazprom Annual Report 2018 Corporate
Governance
162
162162
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
162PJSC Gazprom Annual Report 2018 Letter to Shareholders
by the Chairman of PJSC Gazprom’s
Board of Directors 164
PJSC Gazprom’s Corporate Governance Compliance
Report, including Statement of Compliance
with the Corporate Governance Principles Set Out
in the Russian Corporate Governance Code 165
PJSC Gazprom’s Corporate Governance Model 169
Remuneration of Members of Management
and Supervisory Bodies 177
Liability Insurance of Directors, Officers,
and the Company 182
Shareholdings of Members of the Board of Directors
and Management Committee and Transactions
with PJSC Gazprom Shares 183
Internal Audit 185
External Audit 187
Risk Management and Internal Control 188
Risk Management and Internal Control System 188
Key Risk Factors 191
Procurement Performance 194
Ensuring Compliance of Operations
with Legal Requirements 198
Share Capital and Securities Market 202
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Letter to Shareholders
by the Chairman of PJSC Gazprom’s
Board of Directors
Dear Shareholders,
Gazprom, one of the global energy giants, is steadily strengthening its international position.
Having an effective corporate governance system is a key prerequisite for Gazprom’s
stable and sustainable development. The Company meets all legal requirements concerning
corporate governance, proactively applying best Russian and international practices while
reaching for ultimate excellence in everything we do. We are continuously focused on achiev-
ing the Company’s strategic development objectives, safeguarding the rights and interests
of all shareholders, ensuring informational transparency, and maintaining an open dialogue
with the investment community.
In 2018, the Board of Directors dealt with dozens of matters of strategic importance to
Gazprom. In particular, the Board monitored progress on our major investment projects and
the Innovative Development Programme, as well as the Company’s efforts in cost optimisation,
import substitution, and adoption of advanced digital technologies. The Board approved
a number of important corporate documents, including an updated PJSC Gazprom’s Long-
Term Development Programme and power generation strategy for the next decade.
We continued our efforts to improve disclosure quality. In 2018, Gazprom Group’s Sus-
tainability Report was reviewed for the first time by an independent auditor. The experts found
the document to meet the applicable international standards.
In 2019, the Board of Directors prepared a number of recommendations for shareholders
regarding amendments to the Company’s governing documents: PJSC Gazprom’s Articles of
Association and Regulations on the General Shareholders Meeting, on the Board of Directors,
and on the Management Committee. One of the proposals is to include a provision into the
Articles of Association allowing shareholders to vote remotely online by using e-ballots. This
will expand the shareholders’ ability to take part in decision making on matters on the agenda
discussed at the shareholders meetings.
In 2018, to further improve our investor relations, the Company arranged ten one-on-one
meetings with its independent directors, Viktor Martynov and Timur Kulibaev. The meetings
were attended by representatives of major international investment funds. Moreover, a series
of meetings was held for investors to discuss our performance on environmental protection,
social policy, and corporate governance. The investors who attended the meetings were pro-
vided with a comprehensive and detailed picture of Gazprom’s current standing and future
development areas, both in Russia and internationally. The investors who spoke to our inde-
pendent directors and Company representatives considered such direct communication very
fruitful and, among other things, commended Gazprom for its commitment to responsible
business conduct.
Dear Shareholders, the Board of Directors will continue making every effort to ensure fur-
ther improvement of Gazprom’s business performance.
Viktor Zubkov
Chairman of PJSC Gazprom’s Board of Directors
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PJSC Gazprom’s Corporate Governance Compliance
Report, including Statement of Compliance
with the Corporate Governance Principles Set Out
in the Russian Corporate Governance Code
Gazprom places particular emphasis on the quality
of corporate governance and makes consistent efforts
aimed at its development and enhancement in line
with international standards and best practices.
Key documents of PJSC Gazprom
ensuring protection of shareholder rights
— Articles of Association of Public Joint Stock Company Gazprom
— Corporate Governance Code of PJSC Gazprom
— Corporate Code of Ethics of PJSC Gazprom (amended in 2018)
— Regulations on the General Shareholders Meeting of PJSC
Gazprom (amended in 2018)
— Regulations on the Board of Directors of PJSC Gazprom
— Regulations on the Board of Directors’ Audit Committee
of JSC Gazprom
— Regulations on the Board of Directors’ Nomination and
Remuneration Committee of PJSC Gazprom
— Regulations on the Management Committee of PJSC Gazprom
— Regulations on the Chairman of the Management Committee
of PJSC Gazprom
— Regulations on the Audit Commission of JSC Gazprom, new version
— Regulations on the Internal Control System of PJSC Gazprom
— External Audit Policy for PJSC Gazprom, its subsidiaries and entities
— Procedures for Documenting of Proposals and Requests of
Shareholders Related to the Convocation of the General
Shareholders Meeting of PJSC Gazprom
— Dividend Policy of Joint Stock Company Gazprom
— Regulations on the Information Disclosure of PJSC Gazprom
(amended in 2018)
— Procedure for Providing Information about PJSC Gazprom
to Shareholders (amended in 2018)
— Regulations of JSC Gazprom on Control of Compliance with
the Laws on Countering the Unlawful Use of Insider Information
and Market Manipulation
— Anti-Corruption Policy of PJSC Gazprom
— Regulations on the Hotline for Fighting Fraud, Corruption,
and Embezzlement at Gazprom Group
Description of amendments
made in 2018 to PJSC Gazprom’s documents
ensuring protection of shareholder rights
Document
Amendments
Corporate
Code of
Ethics of
PJSC Gazprom
Regulations
on the General
Shareholders
Meeting of
PJSC Gazprom
Regulations
on the
Information
Disclosure of
PJSC Gazprom
A provision on regular tests for employees’ knowledge
of corporate ethics standards was introduced
(Resolution of PJSC Gazprom’s Board of Directors
No. 3172 dated 26 October 2018)
Amendments allowing the use of additional premises
equipped for TV broadcasts of the General
Shareholders Meeting and allowing shareholders
to pose questions to spokespersons and make
announcements concerning their participation
in debates were introduced (Resolution of the
Company’s Annual General Shareholders Meeting
dated 29 June 2018, Minutes No. 1)
Amendments were introduced to include information
on proposed changes to the Articles of Association
and PJSC Gazprom’s internal documents on the list
of additional information subject to disclosure to the
participants of the General Shareholders Meeting
in the form of a comparison between the current and
proposed versions of the documents (Resolution of
PJSC Gazprom’s Board of Directors No. 3152 dated
22 August 2018)
Procedure
for Providing
Information
about
PJSC Gazprom
to Shareholders
Aligned with the current version of Article 91 of Federal
Law No. 208-FZ On Joint Stock Companies dated
26 December 1995 including in terms of shareholders’
access to PJSC Gazprom’s information and documents
(Resolution of the Management Committee of
PJSC Gazprom No. 36 dated 27 September 2018)
These documents are available on PJSC Gazprom’s website
www.gazprom.com
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PJSC Gazprom’s Corporate Governance Compliance
Report, including Statement of Compliance
with the Corporate Governance Principles Set Out
in the Russian Corporate Governance Code
The Board of Directors believes that compliance with the
principles and recommendations set out in the Corporate
Governance Code (the “Russian Corporate Governance
Code” or “Code”), which is recommended as a guidance
by the Bank of Russia, is key to the Company’s long-term
growth and stronger investment case.
For the Company, the principles set forth in the Russian
Corporate Governance Code are an important source
used to develop its internal regulations and a benchmark
for building the best corporate governance practice.
The corporate governance practice pursued by
PJSC Gazprom relies on compliance with the requirements
of Russian laws, the requirements applicable to issuers,
and on balancing the interests of the state, shareholders,
and all stakeholders.
PJSC Gazprom pays close attention to the development
of corporate governance and respective practices both
in Russia and abroad.
The Company performs regular independent assessment
of the current development level of corporate governance
in order to analyse its compliance with the recommendations
of the Russian Corporate Governance Code. The independent
assessment is carried out with the involvement of experts
from specialised external organisations.
Experts of AO KPMG conducted a scheduled independent
audit of PJSC Gazprom’s corporate governance practice
in 2017, commended the Company for the positive develop-
ments in numerous areas of its corporate governance over
the past few years and highlighted potential areas of further
development.
The independent audit of PJSC Gazprom’s corporate
governance practice in 2017 also involved an independent
assessment of the performance of PJSC Gazprom’s Board
of Directors, the Audit Committee, and the Nomination and
Remuneration Committee. In 2018, PJSC Gazprom initiated
self-assessment of the performance of the Board of Directors
and its committees since regular self-assessment of the
management bodies’ performance is recommended by
the Code. Members of the Board of Directors commended
PJSC Gazprom for the current development level of the
Board of Directors and its committees.
The results of the independent audit and performance
assessment of the Company’s management body are
reviewed by PJSC Gazprom’s Board of Directors, thoroughly
discussed, and considered in future efforts to enhance
corporate standards.
In accordance with the requirements of paragraph 70.4.
of the Regulations on Disclosing Information by the Issuers
of Issue-Grade Securities No. 454-P approved by the Bank
of Russia on 30 December 2014, key principles and recom-
mendations of the Russian Corporate Governance Code
not fully complied or not complied with at PJSC Gazprom
are listed below, along with the description of corporate
governance mechanisms and tools used by PJSC Gazprom
instead of those recommended by the Russian Corporate
Governance Code. The Company includes in the key pro-
visions of the Code principles and recommendations that
correspond to the mandatory requirements of Russian stock
exchanges (PAO Moscow Exchange and PAO Saint Petersburg
Exchange) applicable to issuers’ corporate governance
for the purposes of inclusion of their shares in the first (top)
level quotation list, which are mandatory for PJSC Gazprom
to maintain its top listing on these exchanges.
1 The Code recommends that independent directors
constitute at least one third of the elected members
of the board of directors
(paragraph 2.4.3 of the Code).
In 2018, the Company did not comply with this principle
of the Code.
The Board of Directors of PJSC Gazprom (11 mem-
bers) was elected by the Annual General Shareholders
Meeting on 29 June 2018 from among the nominees
proposed by share holders. The Board of Directors
included three independent directors, who were deter-
mined to be independent by Resolution of the Board
of Directors of PJSC Gazprom No. 3132 dated 20 June
2018, as part of the procedures set forth in the rules
of Russian stock exchanges.
Determining nominees to PJSC Gazprom’s Board of Directors
to be independent nominees
PJSC Gazprom’s Board of Directors passed a resolution (Resolution
No. 3132 dated 20 June 2018) determining Timur Kulibaev, Viktor
Martynov and Vladimir Mau to be independent nominees to
PJSC Gazprom’s Board of Directors although they met the formal
criteria of being related to PJSC Gazprom, and although Vladimir
Mau and Viktor Martynov met the formal criteria of being related
to the state and PJSC Gazprom’s significant counterparties as
it does not affect their ability to make impartial and independent
judgements in good faith considering their professional experience,
knowledge, and business reputation.
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Report, including Statement of Compliance
with the Corporate Governance Principles Set Out
in the Russian Corporate Governance Code
2 To preview matters of supervision over the
company’s financial and business performance,
the Code recommends to set up an audit committee
comprised of independent directors
(paragraph 2.8.1, Recommendation 173 of the Code).
3 To preview matters of adopting an effective
and transparent remuneration scheme,
the Code recommends to set up a remuneration
committee comprised of independent directors
and headed by an independent director who
is not the chairman of the board of directors
(paragraph 2.8.2, Recommendation 179 of the Code).
To preview matters of talent management
(succession planning), professional composition
and efficiency of the board of directors,
the Code recommends to set up a nomination
(appointments and HR) committee, predominantly
comprised of independent directors
(paragraph 2.8.3 of the Code).
Where setting up a separate nomination committee
is not practicable, its functions may be assigned
to any other committee of the board of directors,
i.e. a corporate governance committee or
a remuneration committee
(Recommendation 185 of the Code).
Enhancement of PJSC Gazprom’s corporate governance standards
In 2018, the Company partially complied with the principles
of setting up committees of the Board of Directors due in part
to objective reasons (insufficient number of independent
directors on the Board of Directors).
In accordance with the requirements of the Listing Rules
of PAO Moscow Exchange, the above mentioned committees
must comprise independent directors. If it is impossible due
to objective reasons, independent directors must represent
the majority of committee members, while the remaining
committee members may be members of the Board of
Directors who are neither the issuer’s sole executive body
nor members of the issuer’s collegial executive body.
The majority of the Audit Committee and the Nomination
and Remuneration Committee of the Board of Directors
set up by PJSC Gazprom in 2018 was represented by
independent directors — Viktor Martynov and Vladimir Mau.
A member of both committees, Mikhail Sereda, is not
a member of PJSC Gazprom’s Management Committee.
An independent director, Viktor Martynov, serves as Chairman
of the Audit Committee of the Board of Directors.
PAO Moscow Exchange and PAO Saint Petersburg
Exchange confirm the compliance of PJSC Gazprom’s
corporate governance with the rules of stock exchanges,
required to maintain the Company’s shares on the first (top)
level quotation list.
Focus area
Strategic planning
Shareholder rights
Plans for 2019
Roll-out of the Long-Term
Development Programme to
international operations and the
oil and power generation business
Formalisation in PJSC Gazprom’s
Articles of Association of provisions
ensuring the right to vote by
electronic voting during the General
Shareholders Meeting for
individuals recorded in the Register
of Shareholders
Progress in 2018
Strategic (long-term) planning: SPT lists for Gazprom Group’s oil
and power generation business were approved
Changes to the Regulations on the General Shareholders Meeting
of PJSC Gazprom were introduced allowing to use additional premises
equipped for TV broadcasts of the General Shareholders Meeting
and allowing shareholders to pose questions to spokespersons and
make announcements concerning their participation in debates
Changes to the Regulations on the Information Disclosure
of PJSC Gazprom were introduced to include information on amendments
to the Articles of Association and PJSC Gazprom’s internal documents
on the list of additional information subject to disclosure to the participants
of the General Shareholders Meeting in the form of a comparison between
the current and proposed versions of the documents
Changes to the Procedure for Providing Information about PJSC Gazprom
to Shareholders (Resolution of the Management Committee of PJSC Gazprom
No. 36 dated 27 September 2018) were introduced — the document was
aligned with the current version of the Federal Law on Joint Stock Companies
including in terms of shareholders’ access to PJSC Gazprom’s information
and documents
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PJSC Gazprom’s Corporate Governance Compliance
Report, including Statement of Compliance
with the Corporate Governance Principles Set Out
in the Russian Corporate Governance Code
Enhancement of PJSC Gazprom’s corporate governance standards (continued)
Focus area
Progress in 2018
Plans for 2019
Assessment of management
bodies’ performance
An internal assessment of the performance of PJSC Gazprom’s Board
of Directors, Audit Committee, and Nomination and Remuneration
Committee (recommended by the Russian Corporate Governance Code)
was initiated. Members of the Board of Directors commended PJSC
Gazprom for the current development level of the Board of Directors
and its committees. The assessment results were reviewed at the Board
of Directors’ meeting held in November 2018
Information disclosure
Gazprom Group’s Sustainability Report passed its first professional external
audit and was subjected to a public verification procedure
Procurement
Corporate ethics
Insider information
protection
Shareholder and
investor relations
Further improvement of operations
transparency, including through
the enhancement of information
disclosure in Gazprom Group’s
Sustainability Reports
Further improvement of
procurement to ensure targeted
and cost-efficient spending
on purchasing goods, works,
and services, and reduce
PJSC Gazprom’s costs
A provision on the predominantly competitive procurement of independent
valuator services to evaluate facilities was set out in PJSC Gazprom’s
internal document on the independent evaluation procedure.
In line with fundamental changes in the Russian legislation on procure-
ment, which came into force in 2018, a new version of the Regulations
on the Procurement of Goods, Works, and Services by PJSC Gazprom and
Gazprom Group Companies was approved
An online training course with regular tests for knowledge of ethics
standards was developed for PJSC Gazprom’s employees. A provision
on regular tests was included in the Code of Corporate Ethics
of PJSC Gazprom
Distance education for
PJSC Gazprom’s employees
involving a final test starting
from 2019
The List of Insider Information of PJSC Gazprom was extended
Targeted investor meetings were arranged for the independent directors
Timur Kulibaev and Viktor Martynov
A road show on environmental protection, social policy and corporate
governance was run
Development of corporate ethics
in PJSC Gazprom and its controlled
entities
Further improvement of safeguards
to protect insider information
Further meetings of independent
director with investors and road
shows on environmental protection,
social policy and corporate
governance
The Company continues to enhance its corporate governance
standards in line with recommendations of independent ex-
perts who conduct scheduled independent audits of
PJSC Gazprom’s corporate governance practice.
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PJSC Gazprom’s Corporate Governance Model
The corporate governance model in place at PJSC Gazprom
relies on Russian laws and the requirements of Russian stock
exchanges applicable to issuers whose shares have been in-
cluded in the first (top) level quotation list.
Key principles underlying the Company’s corporate
governance are set forth in the Corporate Governance
Code of PJSC Gazprom.
PJSC Gazprom’s corporate governance model ensures
efficient corporate governance while protecting the interests
of shareholders and maintaining the highest standards
of disclosure. The model also implies the establishment
and continuous operation of an efficient risk management
and internal control system and provides for a clear
division of roles and responsibilities and a performance
assessment framework for each management body of
PJSC Gazprom.
Significant aspects of the Company’s corporate governance model and practices
Priority of shareholder rights and interests
Informational transparency
Strategic decisions at PJSC Gazprom are made with due consideration
of their impact on all shareholders
Strategic governance
of the Company
by the Board of Directors
Effective supervision
over the executive bodies
by the Board of Directors;
accountability
of management bodies
to shareholders
The Company consistently keeps its investors and shareholders
informed of all key events and intentions.
PJSC Gazprom fosters an ongoing dialogue with shareholders,
diverse investor groups, and analysts
Balanced and efficient
internal audit
and risk management
Division of roles
and responsibilities
in Company management
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PJSC Gazprom’s Corporate Governance Model
PJSC Gazprom’s Corporate Governance Structure
External Auditor
approves
General Shareholders Meeting
Audit Commission
reports to
elects
Audit Committee
Department responsible
for internal audit
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develops
recommendations
elects
Board
of Directors
reports to
resolves
on appointments
(dismissals)
of executives
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Business units with
Corporate Secretary roles
Nomination and Remuneration
Committee
Commission on Strengthening
Financial Discipline for Domestic
Gas Supplies
approves
appointments
(dismissals)
of executives
report to
elects
develops
recommendations
establishes
develops
recommendations
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Coordinating Committee
for Shareholder and Investor
Relations
reports to
sets up
Chairman of the
Management Committee
determines
leads
Business unit responsible
for insider information
Management
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Management Committee
PJSC Gazprom’s corporate governance pillars are its
management and supervisory bodies: General Shareholders
Meeting, Board of Directors, Management Committee,
Chairman of the Management Committee, and Audit
Commission.
PJSC Gazprom’s Board of Directors has set up the
Audit Committee and the Nomination and Remuneration
Committee of the Board of Directors of PJSC Gazprom
to preview the most important matters of PJSC Gazprom’s
business reserved to the Board of Directors.
The Company’s financial and business performance
is independently reviewed by an external auditor.
The key priority of the Department responsible for
internal audit is to provide the Board of Directors (through
the Audit Committee of the Board of Directors) and
management of PJSC Gazprom with independent and
unbiased assurances and advice as to the improvement
of the Company’s operations.
In order to maintain a transparent and constructive dialogue
with the investment community, PJSC Gazprom has in place
the Coordinating Committee for Shareholder and Investor
Relations (set up by JSC Gazprom’s Order No. 292 dated
17 November 2008). Relations with the investment community
are governed by the annual plan of the Coordinating
Committee.
PJSC Gazprom has in place the role of Corporate
Secretary (Resolution of the Board of Directors No. 2817
dated 30 September 2016). The responsibilities of Corporate
Secretary are distributed, to the extent recommended by
the Russian Corporate Governance Code, among several
business units of PJSC Gazprom, in line with the regulations
governing their functions as approved by the Board of
Directors.
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PJSC Gazprom’s Corporate Governance Model
General Shareholders Meeting
Board of Directors
General Shareholders Meeting is the supreme management
body of PJSC Gazprom and is held on an annual basis.
Any General Shareholders Meeting other than the AGM shall
be deemed extraordinary.
The voting power at General Shareholders Meetings
is attributed to holders of the Company’s ordinary shares.
Any shareholder may participate in a General Shareholders
Meeting in person or by proxy. A General Shareholders
Meeting is duly constituted if attended by the shareholders
holding in aggregate more than a half of voting shares.
The Company intends to launch electronic voting
at the General Shareholders Meeting in 2019.
The responsibilities of the General Shareholders Meeting
include, inter alia, amending the Articles of Association
of PJSC Gazprom, approving Annual Reports and the
Company’s auditor, distributing profit, electing members
to the Board of Directors and the Audit Commission, making
decisions on reorganisation or liquidation of PJSC Gazprom
and on increase or decrease of the Company’s charter
capital.
In the reporting year, PJSC Gazprom held its annual
General Shareholders Meeting on 29 June 2018.
Annual General Shareholders Meeting held on 29 June 2018
— Held in person (in the form of joint attendance of shareholders to
—
—
discuss agenda items and pass resolutions on matters put to vote).
Location — Saint Petersburg.
The quorum required to pass resolutions on all the agenda items
was present.
— Resolutions were passed on the following agenda items.
The Meeting approved PJSC Gazprom Annual Report 2017,
the Company’s annual accounting (financial) statements for 2017,
dividend amount (RUB 8.04 per share), the dividend record date —
19 July 2018, deadline to receive dividends for the nominee share-
holders and trustees who are professional security traders recorded
in the Register of Shareholders — 2 August 2018, and for the rest
of the registered shareholders — 23 August 2018. Limited Liability
Company Financial and Accounting Consultants was approved
as PJSC Gazprom’s auditor. Amendments to the Regulations on the
General Shareholders Meeting of PJSC Gazprom were also
approved.
The Meeting resolved to distribute PJSC Gazprom’s profit
for 2017, distribute the retained earnings of past years, and pay
remuneration to members of PJSC Gazprom’s Board of Directors
and Audit Commission holding no public office in the amount
stipulated by the Company’s internal documents.
The Meeting elected a new Board of Directors and Audit
Commission of PJSC Gazprom.
PJSC Gazprom held no extraordinary General Shareholders
Meetings in 2018.
The Board of Directors is responsible for the general man-
agement of PJSC Gazprom’s operations, excluding matters
reserved to the General Shareholders Meeting.
The Company’s Board of Directors is elected by the General
Shareholders Meeting until the next Annual General Share-
holders Meeting.
The Board of Directors determines the Company’s busi-
ness priorities, approves the annual budget and investment
programmes, makes decisions on convening General Share-
holders Meetings and setting up executive bodies of PJSC
Gazprom, develops recommendations on
per share dividend amounts, and resolves other matters re-
served to the Board of Directors by the Articles of Associa-
tion of PJSC Gazprom.
The Board of Directors of PJSC Gazprom has a well-bal-
anced composition to ensure the performance of their tasks
for the benefit of all shareholders and the Company
as a whole.
Composition of the Board of Directors by status, %
Non-executive director
Executive director
Independent director
46
27
27
The activities of PJSC Gazprom’s Board of Directors are gov-
erned by the duly approved six-month activity plans.
In 2018, the Board of Directors held a total of 53 meetings,
including 13 meetings held in person and 40 meetings held
in absentia. At these meetings, the Board of Directors
passed 142 resolutions, including 51 resolutions in person
and 91 resolutions in absentia.
For the full list of matters reviewed by PJSC Gazprom’s Board of Directors in 2018
see PJSC Gazprom’s website
www.gazprom.com
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Matters reviewed by PJSC Gazprom’s Board of Directors in 2018,
by line of business, %
Strategic development
Financial and business activity,
investment activity
Improving corporate governance
HR policy
Audit
32
27
21
18
2
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PJSC Gazprom’s Corporate Governance Model
Board of Directors’ report on PJSC Gazprom’s development
in priority business areas
In 2018, the activities of PJSC Gazprom’s Board of Directors were aimed
at creating the environment to maintain consistent performance and
development of PJSC Gazprom as a global energy company, increasing
PJSC Gazprom’s capitalisation and improving the investment appeal,
ensuring efficient control over asset management, investment and financial
and business operations, improving the performance and transparency
of internal governance mechanisms, enhancing internal controls and
accountability of the Company’s management bodies, and protecting
shareholder rights.
PJSC Gazprom’s Board of Directors passed key resolutions in the
key business areas listed below.
Strategic development
The Board of Directors approved PJSC Gazprom’s Power Generation
Strategy for 2018–2027. Ensuring steady profit growth while maintaining
highly reliable power supply to consumers is the Company’s key
strategic goal. In particular, the Strategy provides for constructing new
and upgrading existing generating capacity, and decommissioning low-
performing facilities, as well as further improving operational efficiency,
boosting technological development, using import substituting equipment,
and diversifying the Group’s power generating business by entering
promising markets in Russia and abroad.
Following the review of PJSC Gazprom’s strategic planning frame-
work within Gazprom Group, the Board of Directors resolved to continue
enhancing the strategic planning framework in line with international best
practices. PJSC Gazprom’s updated Long-Term Development Programme
was approved at the same meeting.
In the reporting year, the Board of Directors approved new versions
of the Investment Programme and the annual budget (financial plan) for
2018. The Investment Programme for 2018 was adjusted through increasing
the actual expenditure to RUB 1,496.328 bn (or by RUB 217.498 bn
compared to the Investment Programme approved in December 2017),
in particular, due to increasing investments in PJSC Gazprom’s priority
projects in transportation and liquefaction of natural gas.
The Board of Directors reviewed and took into account the infor-
mation on the progress of PJSC Gazprom’s Innovative Development
Programme until 2025, including the efficient use of funds allocated for
research and development (R&D). The Board of Directors also noted
the Company’s focused and consistent efforts to increase innovation
performance. The Innovative Development Programme until 2025 has
proved to be an effective tool to determine the relevant key objectives
and priorities, with its implementation making a significant contribution
to PJSC Gazprom’s sustainable development. The Board of Directors
also reviewed the matters of enhancing the corporate intellectual property
management framework, in particular, the information on the development
of PJSC Gazprom’s Patent Strategy until 2025 which will help streamline
the Company’s activities in legal protection of its engineering and techno-
logical solutions.
In 2018, the implementation of PJSC Gazprom’s major investment
projects was prominent on the agenda of the Board of Directors. Directors
reviewed the implementation of the extensive Eastern Gas Programme
and the construction of production facilities for gas supplies to domestic
consumers and to China, the implementation of strategically significant
projects to develop Russia’s UGSS in the west (launch of a gas production
hub on the Yamal Peninsula, expansion of the Northern Gas Transmission
Corridor), construction of the Nord Stream 2 and TurkStream trunk gas
pipelines, and development of own natural gas liquefaction capacities
(in particular, construction of an LNG production, storage, and shipping
complex near the Portovaya compressor station). The Management
Committee was instructed to continue implementing the Company’s
major investment projects.
The Board of Directors reviewed and took into account the
infor mation on the progress of the Programme for Expansion of Gas
Infrastructure in Russian Regions which is carried out through annual
programmes developed in line with general plans of gas supply and gas
infrastructure development in each region. The plans consider current
and potential gas demand, resource base, and alternative gas supply
schemes, as well as energy saving initiatives.
The Board of Directors regularly reviewed the information on the
Company’s activities to promote the domestic NGV fuel market,
as well as the NGV infrastructure readiness to provide fuel during the
2018 FIFA World Cup Russia™. The Company builds new compressed
natural gas (CNG) filling stations and platforms with mobile gas filling
stations, and installs CNG modules at its filling stations. The existing
NGV fuel infrastructure is being renovated. Overhauls of 20 CNG filling
stations were carried out as an additional measure to provide the venues
of the World Cup with sufficient NGV infrastructure, with PJSC Gazprom
allocating RUB 436.73 mm to this end in 2017–2018.
PJSC Gazprom’s Board of Directors duly reviewed the prospects
of the shale gas and LNG industry development across the globe, as well
as respective opportunities and threats for the Company. It was noted
that almost all shale gas was produced in the United States as before.
At the same time, long-term production forecasts are still highly uncertain.
China has witnessed an upward trend in shale gas production, although
growth rates are considerably lower than expected. According to current
estimates, Europe does not expect own commercial production of shale
gas even in the long term. Taking into account PJSC Gazprom’s significant
conventional gas reserve life, shale gas production is not viable in the
medium and long term. In the long term, the geography of LNG consuming
countries will expand mainly due to new importers in Asia Pacific. Experts
also estimate that China and the countries of Southern and Southeast
Asia will replace traditional importers (Japan, Taiwan (China) and South
Korea) as leaders among LNG importing countries. Russia has strong
potential for becoming a global leader in the LNG industry. In particular,
Gazprom continues dynamical development of LNG production in addition
to pipeline gas supplies to the existing and prospective markets.
Following the review by PJSC Gazprom’s Board of Directors of
prospects for developing the LNG bunkering market and relevant initiatives
(construction of an LNG production, storage, and shipping complex near
the Portovaya compressor station, matters concerning the construction
of an LNG plant near the Black Sea coast and in Russia’s Far East, making
a decision on the implementation of pilot project to launch an LNG
bunker vessel), the Management Committee was instructed to continue
developing infrastructure for LNG production and sale as a bunkering fuel.
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PJSC Gazprom’s Corporate Governance Model
Board of Directors’ report on PJSC Gazprom’s development
in priority business areas (continued)
Financial and business activity, investment activity, audit
Corporate governance improvement and HR policy
Throughout 2018, PJSC Gazprom’s Board of Directors paid close attention
to ensuring control over investment and financial and business activities
of Gazprom Group. This approach ensures PJSC Gazprom’s quick
response to the unfavourable changes in economic environment and
sufficient flexibility in implementing all major projects. The Group’s
centralised procurement and its planning are associated with a significant
economic effect. The Board of Directors reviews reports on the results
of procurement activities on a quarterly basis. In 2018, there were no
comments. PJSC Gazprom is committed to further improvement of
approaches to cost optimisation based on relevant best practices.
Following the meetings, PJSC Gazprom’s Management Committee
was instructed to continue implementing initiatives to optimise (reduce)
the Group’s costs.
PJSC Gazprom’s current shareholder and investor relations were
commended by the Board of Directors. During the meeting, it was
noted that, in order to maintain a transparent and constructive dialogue,
PJSC Gazprom promotes regular direct communication between the
Company’s management and analysts and investors in multiple formats,
which has a positive effect on the evaluation of investments in
PJSC Gazprom securities. The Company makes consistent efforts
to diversify its investor base and sources of finance, in particular through
expanding its presence in Asia Pacific financial markets. Following the
meeting, the Chairman of PJSC Gazprom’s Management Committee
was instructed to continue enhancing PJSC Gazprom’s shareholder and
investor relations in 2018 and submit the relevant report to PJSC Gazprom’s
Board of Directors in Q2 2019.
Committees of the Board of Directors
The Committees’ priorities are to conduct holistic previews
of selected matters reserved to the Board of Directors
of PJSC Gazprom and develop recommendations on reso-
lutions for the Company’s Board of Directors.
Audit Committee of the Board of Directors
In 2018, the Audit Committee of PJSC Gazprom’s Board
of Directors continued its work. The Committee reports
to the Board of Directors and operates as set forth in the
Regulations on the Board of Directors’ Audit Committee
of JSC Gazprom approved by Resolution of the Board
of Directors of JSC Gazprom No. 2314 dated 25 February
2014 (Board of Directors’ Minutes No. 934 dated
25 February 2014).
Composition of the Board of Directors’ Audit Committee in 2018
— Committee Chairman:
Viktor Martynov (Independent Director)
— Committee members:
Mikhail Sereda, Vladimir Mau (Independent Director)
Throughout 2018, the Board of Directors paid close attention to the
HR policy and initiatives aimed at enhancing the effectiveness of corporate
governance.
In particular, directors reviewed the information on the analysis
of the Company’s HR policy and incentive scheme efficiency, as well as
the progress in KPI achievement by top managers of PJSC Gazprom
and its subsidiaries. It was noted that the Company has in place a set
of business processes designed to attract and retain best talent and
develop their competencies. The Board of Directors received information
on the functioning of the Continuous Vocational Education and Training
System and the progress in building a talent pool from PJSC Gazprom’s
employees with high-level professional and managerial skills, who have
completed respective training under corporate targeted programmes.
The Board of Directors also took into account the information on the
introduction of professional standards in the operations of PJSC Gazprom,
its subsidiaries and entities.
During the discussion of corporate governance enhancement,
it was noted that the functions of the Corporate Secretary were distributed
among a number of PJSC Gazprom’s dedicated business units, which
proved to be an efficient approach.
The Board of Directors made multiple decisions on transaction
approval and the management of the property and other assets of
PJSC Gazprom and its subsidiaries.
In 2018, the Board of Directors reviewed and took into account
the information on the assessment of the Board of Directors’ and its
committees’ performance. The Company’s Board of Directors and its
committees were highly praised while no comments were made.
The Audit Committee of PJSC Gazprom’s Board of Directors
addressed the specific planned activities, meeting at least on
a quarterly basis. In 2018, the Committee held nine meetings
(all held in absentia). The most important matters discussed
by the Committee in 2018 included OOO FBK’s information
on critical audit issues at PJSC Gazprom and its subsidiaries,
along with the external auditor’s reports on ensuring indepen-
dence and on the effectiveness of external audit.
The key relevant recommendations made by the
Committee to the Board of Directors concerned compliance
and alignment with provisions of the Russian Corporate
Governance Code.
For the full list of matters reviewed by the Audit Committee of PJSC Gazprom’s Board
of Directors in 2018 see PJSC Gazprom’s website
www.gazprom.com
The Audit Committee maintained close contact with the ex-
ternal auditor OOO FBK, the Audit Commission, and
PJSC Gazprom’s Department responsible for internal audit.
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PJSC Gazprom’s Corporate Governance Model
Nomination and Remuneration Committee
of the Board of Directors
In 2018, the Nomination and Remuneration Committee
of PJSC Gazprom’s Board of Directors continued its work.
The Committee reports to the Board of Directors and operates
as set forth in the Regulations on the Board of Directors’
Nomination and Remuneration Committee of JSC Gazprom
approved by Resolution of the Board of Directors of
JSC Gazprom No. 2819 dated 30 September 2016 (Board
of Directors’ Minutes No. 1100 dated 30 September 2016).
Composition of the Board of Directors’ Nomination
and Remuneration Committee in 2018
— Committee Chairman:
Mikhail Sereda,
— Committee members:
Vladimir Mau (Independent Director),
Viktor Martynov (Independent Director).
In 2018, the Committee held nine meetings (all held in
absentia). The Committee reviewed the following matters:
election of members of PJSC Gazprom’s Management
Committee; approval of the Company’s actual 2017 KPI values
for the purposes of the annual bonus scheme for the
management of PJSC Gazprom as well as target (planned),
threshold, and maximum KPI values for 2018; remuneration
of members of PJSC Gazprom’s Board of Directors and Audit
Commission; assessment of Directors’ performance, etc.
For the full list of matters reviewed by the Nomination and Remuneration Committee
of PJSC Gazprom’s Board of Directors in 2018 see PJSC Gazprom’s website
www.gazprom.com
Commission on Strengthening Financial Discipline
for Domestic Gas Supplies
PJSC Gazprom’s Board of Directors pays particular attention
to strengthening financial discipline for gas supplies in the
domestic market and measures taken to ensure repayment
of overdue debt owed by consumers.
For additional coordination of efforts undertaken
by PJSC Gazprom to improve the situation with regard
to payments for gas deliveries, the Commission on
Strengthening Financial Discipline for Domestic Gas Supplies
operates on a permanent basis at PJSC Gazprom’s Board
of Directors. The Commission develops recommendations
to the Board of Directors on PJSC Gazprom’s policy on
strengthening financial discipline for domestic gas supplies,
improving coordination between the Company and the federal
and regional executive authorities to increase financial disci-
pline for domestic gas supplies, monitoring the debt owed by
consumers in Russian regions and developing measures to
reduce this debt, and improving the laws on consumer pay-
ments for supplied natural gas.
Composition of the Board of Directors’ Commission
on Strengthening Financial Discipline for Domestic Gas Supplies
of PJSC Gazprom in 2018
— Commission Chairman:
Viktor Zubkov, Chairman of the Board of Directors
of PJSC Gazprom
— Deputy Commission Chairman:
Alexander Babakov, member of the Federation Council
of the Federal Assembly of the Russian Federation
— Commission Members:
Valery Golubev, Deputy Chairman of PJSC Gazprom’s
Management Committee,
Nikolai Dubik, First Deputy Director General of Gazprom export,
Nikolai Kruglikov, Head of the Secretariat of the Management
Committee Administration (Commission Secretary)
In 2018, the Commission held four offsite meetings in Russian
regions and one meeting in Moscow to discuss essential
matters of strengthening financial discipline for gas supplies
in the domestic market and certain Russian regions,
as well as the outstanding debt for natural gas delivered by
PJSC Gazprom.
Corporate Secretary
In line with Resolution of PJSC Gazprom’s Board of Directors
No. 2817 dated 30 September 2016, the responsibilities
of the Corporate Secretary are distributed, to the extent
recommended by the Russian Corporate Governance Code,
among the following business units of PJSC Gazprom:
— Department of the Management Committee
Administration (Yury Nosov)
— Secretariat of the Management Committee
Administration (Nikolai Kruglikov)
— Department Directorate (Alexey Finikov)
— Department Directorate Division (Maksim Babich)
Heads of business units with Corporate Secretary
functions report to the Board of Directors on the perfor-
mance of these functions. They are appointed and removed
from office by the Chairman of the Management Committee
upon approval of PJSC Gazprom’s Board of Directors.
Key functions of the Corporate Secretary
— Ensuring PJSC Gazprom’s communication with regulators, stock
exchanges, the registrar, and other professional security traders
on matters related, inter alia, to the security market development,
share capital monitoring, depositary receipt programme support
and development, and security issuance in new stock markets
Involvement in the organisation of the General Shareholders
Meeting
—
— Ensuring operation of the Board of Directors and its committees
Involvement in the implementation of the information disclosure
—
policy
Involvement in corporate governance enhancement
— Communication with shareholders and investors
—
— Ensuring safekeeping of corporate documents
— Ensuring and monitoring the execution of procedures aimed
at protecting shareholder rights
— Notifying the Board of Directors about detected violations of the
law and internal documents when the Corporate Secretary
is responsible for ensuring relevant compliance
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PJSC Gazprom’s Corporate Governance Model
For more details on the Corporate Secretary’s responsibilities distribution across
the Company’s business units see PJSC Gazprom’s website (information is available
in Russian only)
www.gazprom.ru
Matters reviewed by PJSC Gazprom’s Management Committee
in 2018, by line of business, %
The activities of PJSC Gazprom’s business units performing
Corporate Secretary functions are aimed at ensuring
compliance with the applicable Russian laws and the
Company’s Articles of Association and internal documents,
which guarantee the exercise of shareholder rights and
legitimate interests. In 2018, the Corporate Secretary’s
functions were performed in full.
Corporate governance
Preview of business priorities, strategy,
and budget of PJSC Gazprom
Reliable operation of the UGSS
and consumer gas supplies
Forward-looking plans and
key business activity programmes
of PJSC Gazprom
PJSC Gazprom’s internal regulations
on matters reserved to the
Management Committee
Other matters reserved to the
Management Committee
39
28
14
11
4
4
For more details on the functions of the Corporate Secretary at PJSC Gazprom
see PJSC Gazprom’s website
www.gazprom.com
Audit Commission
Executive Bodies
Day-to-day operations of PJSC Gazprom are managed by
the Chairman of the Management Committee (sole executive
body) and the Management Committee (collegial executive
body). They are responsible for implementing resolutions
passed by the General Shareholders Meeting and the Board
of Directors and are accountable to them.
The Chairman and members of the Management
Committee are elected by the Board of Directors for a five-
year term. The matters reserved by PJSC Gazprom’s Articles
of Association to the Management Committee include
drafting of the annual budget, investment programmes,
future and current action plans, preparing reports, gas flow
management, and monitoring Russia’s Unified Gas Supply
System.
In 2018, the Management Committee held a total of
18 meetings (11 meetings held in person and 7 meetings
held in absentia). At these meetings, the Management
Committee passed 46 resolutions, including 39 resolutions
passed in person and 7 resolutions passed in absentia.
The Audit Commission’s authority is set forth in the Federal
Law On Joint Stock Companies and PJSC Gazprom’s Articles
of Association. The Audit Commission operates under the
Regulations on the Audit Commission of JSC Gazprom
approved by the Resolution of JSC Gazprom’s Annual
General Shareholders Meeting (Minutes No. 1 dated
28 June 2013).
Key roles of the Audit Commission:
— Monitor the fair presentation of PJSC Gazprom’s financial
and accounting statements and other information
on the Company’s financial and business operations
and condition of its assets
— Supervise statutory compliance of PJSC Gazprom’s
accounting practices and of submission of its financial
statements and information to relevant authorities and
shareholders
— Prepare proposals on enhancing the Company’s asset
management and other financial and business operations
of PJSC Gazprom, mitigate financial and operating risks,
and improve internal controls
The Audit Commission is accountable to the General
Shareholders Meeting and coordinates its activities with the
Audit Committee of the Board of Directors.
Following an audit of PJSC Gazprom’s financial and
business operations, the Audit Commission presented
its opinion confirming the fairness of data in the Company’s
statements and other financial documents.
The Audit Commission of nine members is elected by
the General Shareholders Meeting.
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PJSC Gazprom’s Corporate Governance Model
Members of the Audit Commission elected by the General Shareholders Meeting on 29 June 2018
Name
Vadim Bikulov
Year of birth
1957
Alexander Gladkov
Margarita Mironova
Yury Nosov
Karen Oganyan
Alexandra Petrova
Sergey Platonov
Oksana Tarasenko
Tatiana Fisenko
1969
1964
1963
1974
1990
1966
1983
1961
Position as at 31 December 2018
Deputy Department Head — Head of Directorate at Department
of the Management Commission Administration, Secretary of the
Audit Commission of PJSC Gazprom
Department Director, the Russian Ministry of Energy
First Deputy Head of the Management Committee Administration —
Head of Department of the Management Commission Administration,
Chairwoman of the Audit Commission, PJSC Gazprom
Deputy Head of the Management Committee Administration —
Department Head, Executive Secretary of the Management Committee,
PJSC Gazprom
Department Head, PJSC Gazprom
Deputy Head of Division at the Directorate, Federal Agency for
State Property Management
Deputy Department Director, the Russian Ministry of Finance
Deputy Minister of Economic Development of the Russian Federation
Department Director, the Russian Ministry of Energy
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PJSC Gazprom Annual Report 2018
Remuneration of Members of Management
and Supervisory Bodies
Documents defining remuneration of members of PJSC Gazprom’s
management and supervisory bodies
— Regulations on the Guidelines on Remuneration of the Board
of Directors of JSC Gazprom (approved by Resolution of the Board
of Directors No. 2523 dated 15 April 2015)
— Regulations on Remuneration of the Audit Commission of
PJSC Gazprom (approved by Resolution of the Board of Directors
No. 2641 dated 9 December 2015, as amended)
— Regulations on the Annual Bonus Scheme for the Management
of PJSC Gazprom (approved by Resolution of JSC Gazprom’s Board
of Directors No. 927 dated 19 December 2006, as amended)
— Regulations on PJSC Gazprom’s Key Performance Indicators
(approved by Resolution of JSC Gazprom’s Board of Directors
No. 2435 dated 21 October 2014, as amended)
Remuneration Scheme for Members of the Management
Committee and Other Key Employees of PJSC Gazprom
Remuneration of members of PJSC Gazprom’s Management
Committee (including the Chairman of the Management
Committee) and other executives of PJSC Gazprom (including
the remuneration of executives who are also members of the
Company’s Board of Directors, which is not related to their
serving on the Board of Directors) is determined by their
employment agreements and is short-term. Remuneration
for service on PJSC Gazprom’s Management Committee is
not provided.
Remuneration paid by PJSC Gazprom to its executives
creates sufficient incentives for them to work efficiently while
enabling the Company to engage and retain competent and
qualified specialists. The Annual Bonus Scheme for the
Management of PJSC Gazprom is an important component
of the remuneration system for PJSC Gazprom’s executives,
including members of the Management Committee.
The Annual Bonus Scheme covers the executives of
PJSC Gazprom and its key gas production, transportation,
underground storage, processing, and sales subsidiaries.
Executives’ annual bonus is linked to PJSC Gazprom’s
performance (achievement of corporate key performance
indicators (KPIs)) and personal contribution of executives
(achievement of individual targets).
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PJSC Gazprom Annual Report 2018
Remuneration of Members of Management
and Supervisory Bodies
Corporate KPIs for 2018
KPI
Description
Financial and economic KPIs
Per unit costs in Production
Total costs of gas producing subsidiaries divided by total volume of gas, unstable gas
condensate, and oil production
Per unit costs in Transportation
Total costs of gas transportation subsidiaries divided by total transportation volume
Reduction of operating costs
(expenses)
Total shareholder return, TSR
Reduction of operating costs (expenses) in the reporting year
Estimated shareholder’s income for the reporting year from share price growth and dividend
received
ROE
Ratio of net income to average annual shareholders’ equity
Labour productivity
Industry-specific KPIs
Gas sales by volume
Commissioning of priority
production facilities
Integrated innovation key
performance indicator
Total revenue from sales of products, proceeds from work done and services provided,
revenue from sales of goods purchased for resale less expenses on purchase of such goods,
divided by total man-hours worked by full-time employees and external part-time employees
PJSC Gazprom’s gas sales by volume, including both its own gas and purchased gas,
excluding sales to PJSC Gazprom’s subsidiaries for own operational needs, as well as the
volumes purchased and sold in far abroad countries
Completion of activities related to commissioning of priority production facilities
(as per the approved list)
Sum of scores reflecting the achievement of KPI targets, with application of weights allocated
to each of the KPIs:
— Patents and licences obtained in the reporting year and during two preceding years
— Technologies introduced based on R&D results under the Innovative Development
Programme in the reporting year
— Reduction of relative rates of GHG emissions expressed as CO2-equivalent
— Assessment of the quality of design/annual implementation of the Innovative
Development Programme
Weight in the
reporting period
bonus
70%
15%
15%
5%
10%
20%
5%
30%
10%
10%
10%
The annual bonus payable to members of PJSC Gazprom’s
Management Committee (excluding the Chairman of the
Management Committee) comprises two components —
corporate (80%) and individual (20%). The corporate com-
ponent is linked to PJSC Gazprom’s performance, while the
individual component is determined based on the achieve-
ment of individual targets. The annual bonus payable to the
Chairman of the Management Committee only comprises
the corporate component.
As per the Annual Bonus Scheme, remuneration is linked
to the achievement of corporate KPIs. Planned and actual
values of corporate KPIs are approved by PJSC Gazprom’s
Board of Directors on an annual basis.
To determine the amount of actual payments, a corpo-
rate correction factor reflecting the actual KPI achievement
level is applied to the corporate and individual components
of the annual bonus. If the KPIs are not achieved, the amount
of the annual bonus is reduced, which establishes a link
between the KPIs and the amount of remunerations, as well
as executives’ personal motivation to achieve the KPIs.
In 2018, PJSC Gazprom paid the annual bonus for 2017
taking into account the corporate correction factor of 111.04%.
For more details on calculating the progress against corporate KPIs in 2017,
as well as the explanation of variance between target and actual KPI values
see PJSC Gazprom Annual Report for 2017
www.gazprom.com
Members of PJSC Gazprom’s executive bodies and other
executives of the Company are also eligible for long-term
post-employment payments. These payments comply with
the applicable laws, PJSC Gazprom’s local regulations, and
the procedure which is applicable to all employees of the
Company, and comprise private pension plans provided by
Non-State Pension Fund GAZFOND, and one-off payments
upon retirement made by PJSC Gazprom.
The Company also provides voluntary medical insurance.
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PJSC Gazprom Annual Report 2018
Remuneration of Members of Management
and Supervisory Bodies
Remuneration for Service on a Management Body
Remuneration of Members of the Board of Directors
and Members of the Management Committee
Pursuant to the Regulations on the Board of Directors of
PJSC Gazprom approved by the annual General Share-
holders Meeting (Minutes No. 1 dated 30 June 2016) and
PJSC Gazprom’s Articles of Association, members of the
Board of Directors, during the period of their service, may be
remunerated and/or reimbursed for expenses incurred by
them as members of the Board of Directors. The amount of
remuneration and/or reimbursement is determined by the
General Shareholders Meeting.
Members of the Board of Directors holding public or
civil office receive no remuneration from PJSC Gazprom.
Approaches to determining the amount of remunera-
tion to members of the Board of Directors are set forth
by the Regulations on the Guidelines on Remuneration of
the Board of Directors of JSC Gazprom (approved by Res-
olution of JSC Gazprom’s Board of Directors No. 2523 dat-
ed 15 April 2015).
Remuneration of members of PJSC Gazprom’s Board of Directors
— Fixed base remuneration for service on the Board of Directors
— Additional remuneration for additional responsibilities such as acting
as Chairman of the Board of Directors, Deputy Chairman of the
Board of Directors, or serving on committees of the Board of
Directors
— Bonus component for achieving corporate key performance
indicators (KPIs)
The Regulations also stipulate that the Board of Directors
may recommend the General Shareholders Meeting not to
pay remuneration to members of the Board of Directors or
pay a lower remuneration calculated under the Regulations.
Remuneration of members of PJSC Gazprom’s Board of Directors,
RUB thousand
2016
2017
2018
Remuneration of members
of PJSC Gazprom’s Board
of Directors* paid by
PJSC Gazprom
including by type
of remuneration:
Remuneration for service
on a management body
Salary
Bonuses
321,547
370,339
346,971
209,476
245,486
210,708
57,885
64,775
71,986
43,666
49,594
53,897
Commission fees
–
–
–
Other remuneration
10,520
10,484
10,380
Insurance premiums paid
by PJSC Gazprom**
Total
44,796
56,581
50,178
366,343
426,920
397,149
* The amounts are inclusive of personal income tax.
** In line with Russian laws, PJSC Gazprom pays insurance premiums under mandatory
pension insurance, mandatory social insurance in case of temporary disability or
a maternity leave, mandatory medical insurance, and industrial accident and
occupational disease insurance, which the Company calculates based on the amount
of remuneration and other payments.
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PJSC Gazprom Annual Report 2018
Remuneration of Members of Management
and Supervisory Bodies
Remuneration of members of the Board of Directors for service on a management body paid in 2018
(Resolution No. 1 of the annual General Shareholders Meeting dated 29 June 2018, Minutes No. 1)
Position
Holding public or civil office
Holds no such office
Remuneration paid, RUB
Including additional
remuneration for additional
responsibilities serving
on the Board of Directors,
or serving on committees
of the Board of Directors
5,782,500
Total
30,073,060
Name
Viktor Zubkov
Alexey Miller
Andrey Akimov
Timur Kulibaev
Denis Manturov
Vitaly Markelov
Viktor Martynov
Vladimir Mau
Alexander Novak
Dmitry Patrushev
Mikhail Sereda
Chairman of the Board
of Directors
Deputy Chairman of the
Board of Directors
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
|of Directors
Member of the Board
of Directors
Member of the Board
of Directors, Chairman
of the Board of Directors’
Audit Committee, member
of the Board of Directors’
Nomination and
Remuneration Committee
Member of the Board
of Directors, member
of the Board of Directors’
Nomination and
Remuneration Committee,
member of the Board of
Directors’ Audit Committee
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors, Chairman
of the Board of Directors’
Nomination and
Remuneration Committee,
member of the Board of
Directors’ Audit Committee
Holds no such office
29,109,310
4,818,750
Holds no such office
Holds no such office
Holds an office
24,290,560
24,290,560
–
Holds no such office
24,290,560
–
–
–
–
Holds no such office
26,539,310
2,248,750
Holds no such office
25,575,560
1,285,000
Holds an office
Holds an office
–
–
–
–
Holds no such office
26,539,310
2,248,750
Total
Note. The amounts are inclusive of personal income tax.
210,708,230
16,383,750
Minutes No. 1 of the annual General Shareholders Meeting dated 29 June 2018
are available on PJSC Gazprom’s website (information is available in Russian only)
www.gazprom.ru
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PJSC Gazprom Annual Report 2018
Remuneration of Members of Management
and Supervisory Bodies
Remuneration of members of PJSC Gazprom’s Management
Committee, RUB thousand
2016
2017
2018
PJSC Gazprom’s voluntary medical insurance premiums paid for
members of the Management Committee and executives who are
also members of the Company’s Board of Directors, RUB thousand
Remuneration of members
of PJSC Gazprom’s
Management Committee paid
by PJSC Gazprom*,**
including by type
of remuneration:
Remuneration for service
on a management body
2,448,926
2,445,656
2,551,450
–
–
–
Salary
1,213,506
861,443
1,035,748
Bonuses
(including the annual bonus)
1,176,159
1,532,323
1,475,344
Commission fees
–
–
–
Other remuneration
(including short-term benefits
related to healthcare)
Insurance premiums paid
by PJSC Gazprom***
Total
59,261
51,890
40,358
381,329
396,416
413,804
2,830,255
2,842,072
2,965,254
* The amounts are inclusive of personal income tax.
** Income received by members of PJSC Gazprom’s Board of Directors who are also
members of PJSC Gazprom’s Management Committee and full-time employees
of the Company for service on the Board of Directors was accounted for in the income
received by members of the Board of Directors. Other types of remuneration paid
to such members of the Board of Directors and/or reimbursement for their expenses
are included in the total remuneration and/or reimbursement for expenses of
PJSC Gazprom’s Management Committee.
*** In line with Russian laws, PJSC Gazprom pays insurance premiums under mandatory
pension insurance, mandatory social insurance in case of temporary disability or a
maternity leave, mandatory medical insurance, and industrial accident and occupational
disease insurance, which the Company calculates based on the amount of remuneration
and other payments.
2016
6,914
2017
12,781
2018
12,420
In 2018, PJSC Gazprom transferred RUB 30,300 thousand
to individual pension accounts of key management personnel
under private pension agreements with Non-State Pension
Fund GAZFOND.
From 2016 to 2018, PJSC Gazprom paid no reimburse-
ment for expenses incurred by a member of a management
body in connection with his/her duties to members of the
Board of Directors and members of the Management Com-
mittee.
From 2016 to 2018, PJSC Gazprom did not provided
any loans to members of the Board of Directors and mem-
bers of the Management Committee.
Remuneration of Members of the Audit Commission
To calculate the remuneration of a member of the Audit
Commission, the Company uses, inter alia, a personal
contribution factor which reflects the member’s attendance
at the meetings of the Audit Commission and additional
responsibilities as Chairman of the Audit Commission.
Members of the Audit Commission holding public or civil
office receive no remuneration.
Remuneration of members of PJSC Gazprom’s Audit Commission for service
on a financial and operating performance control body paid in 2018
Name
Position
Holding public or civil office
Remuneration paid, RUB
Margarita Mironova
Alexander Gladkov
Yury Nosov
Karen Oganyan
Alexandra Petrova
Sergey Platonov
Oksana Tarasenko
Tatiana Fisenko
Vadim Bikulov
Total
Chairwoman of the Commission
Holds no such office
Member of the Commission
Holds an office
Member of the Commission
Holds no such office
Member of the Commission
Holds no such office
Member of the Commission
Member of the Commission
Member of the Commission
Member of the Commission
Holds an office
Holds an office
Holds an office
Holds an office
Member of the Commission (Secretary) Holds no such office
Note. The amounts are inclusive of personal income tax.
5,072,433
–
3,901,872
3,901,872
–
–
–
–
3,901,872
16,778,049
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PJSC Gazprom Annual Report 2018
Liability Insurance of Directors, Officers,
and the Company
PJSC Gazprom insures the liability of its directors (excluding
directors holding public office), officers, and the Company.
A liability insurance policy is a standard practice used by in-
ternational companies, a mandatory condition for listing
shares on western stock exchanges, and an important tool
to boost the Company’s image among investors. The policy
terms remained the same as in 2017.
The insurance coverage under the current liability insurance
policy is in line with PJSC Gazprom’s needs and Russian and
international insurance standards in terms of risk coverage
and indemnity limits.
Liability insurance programme for directors, officers, and the Company in 2018
Insurance coverage
USD 100 mm
Insurance premium
USD 900 thousand
Persons insured
Members of the Company’s Board of Directors (excluding directors who hold public office) and Management
Committee, as well as heads of PJSC Gazprom’s Departments who are not members of the Company’s
Management Committee
Risks insured
— Risk of third-party claims against the insured for losses arising from unintentional errors made by the insured
in their management roles
— Risk of third-party claims against PJSC Gazprom for losses arising from unintentional errors made by the
insured in their management roles: claims related to PJSC Gazprom’s securities; claims initially made against
the insured
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PJSC Gazprom Annual Report 2018
Shareholdings of Members of the Board of Directors
and Management Committee and Transactions
with PJSC Gazprom Shares
As at 31 December 2018, members of the Board of Directors,
members of the Management Committee, and the Chairman
of the Management Committee had a 0.012036% stake
in PJSC Gazprom (direct ownership).
The Employee Equity Sharing Plan for the Management
aims to provide an extra financial incentive for PJSC Gazprom’s
management to support PJSC Gazprom share performance.
The Programme is aimed to better align the interests of
the Company’s shareholders and management by linking the
Programme participants’ extra income to PJSC Gazprom
share price growth.
PJSC Gazprom’s executives holding positions of depart-
ment heads or higher, and the management of subsidiaries
engaged in core operations are eligible to participate
in the Programme. In 2018, 70 executives were eligible
to participate in the Programme.
Terms of the Employee Equity Sharing Plan for the Management
of PJSC Gazprom (set out in the Regulations on the Employee
Equity Sharing Plan for the Management of PJSC Gazprom
approved by Resolution of JSC Gazprom’s Board of Directors
No. 2105 dated 26 December 2012, as amended)
— Executives hold Company shares
— Executives can acquire shares at their own cost or with loans
granted by AO Gazprombank as part of the Programme
— AO Gazprombank also provides depositary and broker services
under the Programme
Direct ownership of PJSC Gazprom shares by members of the Board of Directors, members of the Management Committee,
and the Chairman of the Management Committee as at 31 December 2018
Name
Position
Members of the Board of Directors
Viktor Zubkov
Alexey Miller
Andrey Akimov
Timur Kulibaev
Denis Manturov
Vitaly Markelov
Viktor Martynov
Vladimir Mau
Alexander Novak
Dmitry Patrushev
Mikhail Sereda
Shareholding
in PJSC Gazprom,
%
–
0.000958
–
–
–
Chairman of the Board of Directors
Deputy Chairman of the Board of Directors, Chairman of the Management Committee
Member of the Board of Directors
Member of the Board of Directors
Member of the Board of Directors
Member of the Board of Directors, member of the Management Committee
0.006203
Member of the Board of Directors, Chairman of the Board of Directors’ Audit Committee,
member of the Board of Directors’ Nomination and Remuneration Committee
Member of the Board of Directors, member of the Board of Directors’ Audit Committee,
member of the Board of Directors’ Nomination and Remuneration Committee
Member of the Board of Directors
Member of the Board of Directors
Member of the Board of Directors, Chairman of the Board of Directors’ Nomination
and Remuneration Committee, member of the Board of Directors’ Audit Committee
–
–
–
0.001013
0.000232
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PJSC Gazprom Annual Report 2018
Shareholdings of Members of the Board of Directors
and Management Committee and Transactions
with PJSC Gazprom Shares
Direct ownership of PJSC Gazprom shares by members of the Board of Directors, members of the Management Committee,
and the Chairman of the Management Committee as at 31 December 2018 (continued)
Name
Position
Members of the Management Committee**
Elena Vasilieva
Valery Golubev
Andrey Kruglov
Deputy Chairwoman of the Management Committee — Chief Accountant
Deputy Chairman of the Management Committee
Deputy Chairman of the Management Committee
Alexander Medvedev
Deputy Chairman of the Management Committee
Mikhail Putin
Deputy Chairman of the Management Committee
Sergey Khomyakov
Deputy Chairman of the Management Committee
Oleg Aksyutin
Vladimir Markov
Elena Mikhailova
Member of the Management Committee, Head of Department
Member of the Management Committee, Head of Department
Member of the Management Committee, Head of Department
Vyacheslav Mikhalenko
Member of the Management Committee, Head of Department
Sergey Prozorov
Member of the Management Committee, Head of Department
Kirill Seleznev
Igor Fyodorov
Member of the Management Committee, Head of Department
Member of the Management Committee, Head of Department
Vsevolod Cherepanov
Member of the Management Committee, Head of Department
* For shareholdings of executive directors see the Members of the Board of Directors section of this table.
Shareholding
in PJSC Gazprom,
%
0.000281
0.000232
0.000735
0.000232
0.000313
0.000232
0.000218
0.000148
0.000217
0.000424
0.000148
0.000148
0.000154
0.000148
Transactions with PJSC Gazprom shares by members of PJSC Gazprom’s Board of Directors and Management Committee in 2018
Name
Viktor Zubkov
Elena Mikhailova
Transaction date
25 January 2018
27 June 2018
Transaction type
Disposal
Purchase
Number of ordinary
registered shares
of PJSC Gazprom involved
in the transaction
180,180
7,210
184184
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Internal Audit
Internal audit assists in achieving PJSC Gazprom’s goals
through applying a holistic consistent approach to assess-
ment and improvement of risk management, control, and
corporate governance processes.
To improve the internal audit function and in accordance
with Directive of the Russian Government for persons rep-
resenting interests of the Russian Federation No. 3984p-P13
dated 24 June 2015, the Company developed and approved
the Regulations on Internal Audit of PJSC Gazprom in 2015
(Resolution of the Board of Directors No. 2621 dated
6 November 2015).
These Regulations determine the goals, objectives, status,
powers, and liability of the Department responsible for
internal audits at PJSC Gazprom, as well as the scope of
internal audit.
Pursuant to the Regulations, the internal audit in
the Company is organised by the relevant Department,
a business unit of PJSC Gazprom, and by internal audit
units — in PJSC Gazprom’s subsidiaries and entities.
The key priority of the Department is to provide
the Board of Directors (through the Audit Committee of
the Board of Directors) and management of PJSC Gazprom
with independent and unbiased assurances and advice as
to the improvement of the Company’s operations.
Internal audit system
Board of Directors
Audit Committee of the Board of Directors
Chairman of the Management Committee
Functional accountability
Administrative accountability
Department charged with internal audit
Subsidiaries
Functional accountability
Administrative accountability
Internal audit functions of subsidiaries
Subordination
Accountability
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Internal Audit
The Department is administratively accountable to the
Chairman of PJSC Gazprom’s Management Committee within
the Management Committee Administration and functionally
accountable to the Board of Directors (through the Board
of Directors’ Audit Committee). Head of the Department is
appointed and removed from office by the Chairman of the
Company’s Management Committee upon recommendation
of the Deputy Chairman of the Management Committee —
Head of the Administration of PJSC Gazprom’s Management
Committee, as approved by the Board of Directors (through
the Board of Directors’ Audit Committee).
The Department’s organisation is coordinated with
the Audit Committee and approved by the Chairman of the
Management Committee. The Department consists of three
Directorates.
Activities of the Department are governed by
PJSC Gazprom’s Regulations on Internal Audit, the Internal
Auditors’ Code of Ethics (approved by Resolution of the
Board of Directors No. 1956 dated 14 March 2012),
JSC Gazprom’s Internal Audit Development Concept
(approved by the Board of Directors’ Audit Committee on
25 June 2015), Regulations on the Department (approved
by the Board of Directors’ Audit Committee and
PJSC Gazprom’s Order No. 419 dated 23 June 2016,
as amended by Order of PJSC Gazprom No. 163 dated
22 March 2017), International Standards for the Professional
Practice of Internal Auditing, and internal auditing guidelines
of the Federal Agency for State Property Management.
PJSC Gazprom’s internal audit meets the corporate
governance principles set out in the Russian Corporate Gov-
ernance Code (recommendations 263–273).
The Department arranges and conducts internal audits
of PJSC Gazprom’s business units, subsidiaries and entities
in accordance with the established procedure and Russian
and international best practices for internal audit. The Depart-
ment conducted its 2018 audits to identify risks and assess
the performance for the Company’s significant business
segments and processes based on:
— achievement by the auditees of their objectives
— efficiency and effectiveness of operations
— protection of assets
— compliance of operations with the terms and conditions
of contracts, legal requirements, and in-house regula-
tions.
Results of internal audits conducted by the Department are
used to develop and submit proposals to PJSC Gazprom’s
management on elimination of violations, irregularities,
and root causes. Based on the proposals made by the
Department, the Chairman of the Management Committee
gives instructions to PJSC Gazprom’s business units, sub-
sidiaries and entities, aimed at improving PJSC Gazprom’s
performance. The Department monitors
the execution of such instructions.
In December 2015, an external assessment was carried
out and the opinion was issued on the compliance of
PJSC Gazprom’s internal audit function with the Definition
of Internal Auditing, Code of Ethics, and International
Standards for the Professional Practice of Internal Auditing.
The Department also has in place and implements
an Internal Audit Quality Programme covering all aspects
of internal audit. The Programme was updated in 2018.
The internal audit function conducts annual performance
assessments (self-assessments) with results reported to the
Audit Committee of the Board of Directors.
In 2018, the following internal audit matters were reviewed
at the meetings of the Board of Directors’ Audit Committee:
— Report on the performance of PJSC Gazprom’s Depart-
ment of the Management Committee Administration in
2017
— Reviewing amendments to the Regulations on Internal
Audit of PJSC Gazprom
— Amending the 2018 Activity Plan of PJSC Gazprom’s De-
partment of the Management Committee Administration
— Draft 2019 Activity Plan of PJSC Gazprom’s Department
of the Management Committee Administration
The 2019 Internal Audit Plan was approved by the order
of PJSC Gazprom.
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External Audit
PJSC Gazprom selects its auditor by a public tender in
accordance with the applicable Russian laws. Assessment
of potential auditors is one of the main duties of the Audit
Committee of PJSC Gazprom’s Board of Directors.
OOO FBK won the public tender for the service contract
to audit PJSC Gazprom’s accounting (financial) statements,
Gazprom Group’s consolidated accounting statements,
and Gazprom Group’s consolidated IFRS financial statements
for 2018, and was approved as auditor by the annual General
Shareholders Meeting of PJSC Gazprom on 29 June 2018.
The contract price offered by the winner was RUB 195,000,000
(exclusive of VAT) and was approved by Resolution of the
Board of Directors No. 3113 dated 16 May 2018.
OOO FBK provided other audit-related services to
PJSC Gazprom outside the audit contract. In 2018, a fee
of RUB 44,284,438.44 (inclusive of VAT) was paid for other
audit-related services.
Bid assessment criteria for entering into an audit service contract
Price criterion — Contract price
Non-price
criteria
— Quality profile of the service to be procured
— Bidder qualification, including the track record
in auditing accounting (financial) statements,
consolidated accounting statements, and
consolidated IFRS financial statements, as well
as availability of the bidder’s personnel with
a certain qualification level
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Risk Management and Internal Control
Risk Management and Internal Control System
PJSC Gazprom has developed a cutting-edge risk
management and internal control system based
on relevant global best practice, which contributes
to efficient business process management across
the Group entities and helps achieve corporate goals.
PJSC Gazprom acknowledges that its operations are
exposed to uncertainties such as risks, and implements
measures to provide adequate assurance that the goals
set for PJSC Gazprom by its management bodies are
achieved.
The Company has developed an effective RMICS which
helps promptly identify, assess, and respond to, potential
events, circumstances, and internal and external factors
that may influence the achievement of goals.
Key documents of PJSC Gazprom
regulating risk management and internal control
— PJSC Gazprom’s Risk Management and Internal Control Policy
(approved by Resolution of PJSC Gazprom’s Board of Directors
No. 3195 dated 25 December 2018 to comply with Russian statutory
requirements) specifying the key principles and approaches to the
organisation of the risk management and internal control system
(RMICS), the powers of its participants, as well as its components,
goals, and objectives
— Documents establishing approaches to managing certain risk
groups (approved by PJSC Gazprom’s orders):
— Regulations on Credit Risk Management at PJSC Gazprom
and its Subsidiaries and Entities
— Regulations on Foreign Exchange Risk Management
at Gazprom Group
— Regulations on Interest Risk Management at Gazprom Group
— Regulations on Liquidity Risk Management at Gazprom Group
— Regulations on Operational Risk Management at Gazprom
Group
PJSC Gazprom’s risk management and internal
control system complies with the corporate
governance principles set forth in the Russian
Corporate Governance Code.
RMICS is an integral part of PJSC Gazprom’s corporate
governance and is embedded into the planning and project
management systems, and occupational health and safety
management programmes. RMICS covers all operations
of PJSC Gazprom and Gazprom Group entities, as well as all
management levels, business segments, and risks across
PJSC Gazprom and Gazprom Group entities.
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PJSC Gazprom Annual Report 2018
Risk Management and Internal Control
Risk Management and Internal Control System
Key RMICS participants
Principles of RMICS organisation and operation
RMICS participants include PJSC Gazprom’s Board of Directors, the
Audit Committee of PJSC Gazprom’s Board of Directors, PJSC Gazprom’s
Management Committee, Chairman of PJSC Gazprom’s Management
Committee, the risk management and internal control unit within
PJSC Gazprom’s Management Committee Administration, PJSC Gazprom’s
business units, and Gazprom Group entities.
PJSC Gazprom’s business units and Gazprom Group entities
responsible for developing, implementing and monitoring risk manage-
ment activities and internal controls, act as risk owners. Risk coordi nators
help risk owners coordinate their activities in multiple areas of risk
management.
PJSC Gazprom’s risk management and internal control unit develops
and provides methodological support for pursuing its unified risk manage-
ment and internal control policy.
PJSC Gazprom’s business units and Gazprom Group entities are
engaged in risk identification and assessment, and implementation of risk
management activities on an ongoing basis.
The organization and operation of the RMICS are carried out
with the following principles:
— Consistency (integration)
— Comprehensiveness
— Alignment (with goals)
— Reasonable assurance
— Agility and development
— Relevance and availability of resources
— Continuity (of operation)
—
— Accountability
— Separation of duties
— Assessment of results
— Streamlined structure and promptness
— Single regulatory framework
— Economic feasibility
— Three lines of defence
Interaction and collective decision-making
Risk management and internal control provides for con-
tinuous functioning of the system’s components.
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Risk Management and Internal Control
Risk Management and Internal Control System
Interfaces between RMICS’ components
9
Reporting
and information
sharing as part
of the RMICS,
relevant IT support
1
Creating the internal control environment
2
Goal-setting
3
Risk identification
4
Risk assessment
5
Risk response
10 RMICS
performance
assessment
and monitoring
6
Development and implementation of risk management initiatives
7
Internal control procedures
8
Monitoring risks and risk management initiatives
1
2
3
4
5
Creating the internal control environment implies building a single
RMICS infrastructure, ensuring continuity of risk management
processes and internal control procedures, and developing a risk
management and internal control culture.
Goal-setting at PJSC Gazprom and Gazprom Group entities, which
is indispensable for risk identification and assessment, and further
determination of internal control procedures.
Risk identification. Identification of risks as internal/external events
which may happen in the future and produce a negative (threats)
or positive (opportunities) effect on the achievement of the goals
of PJSC Gazprom and Gazprom Group entities.
Risk assessment comprising the analysis of identified risks,
opportunities and implications to ensure further risk management
and the implementation of internal control procedures.
6
7
8
9
Risk response aimed at maintaining risks within the risk tolerance
levels through the implementation of risk management initiatives
considering the selected response option (combination of options).
10
6. Selection of risk response options based on the determination
of the risk level materiality and risk manageability.
Implementation of internal control procedures in accordance
with the local regulations of PJSC Gazprom and Gazprom Group
entities.
Monitoring of risks and the status of risk management initiatives,
and control over timely and efficient implementation of such initiatives,
as well as monitoring of internal control procedures.
Information sharing as part of the RMICS ensures the completeness,
timeliness, fairness and accuracy of such information, its proper
addressing, optimal form and scope, and compliance with
confidentiality requirements.
The local regulations of both PJSC Gazprom and Gazprom Group
entities (based on the former) determine RMICS performance
monitoring and assessment, which are carried out through self-
assessments and internal and external assessments.
In 2018, PJSC Gazprom and its subsidiaries and entities im-
plemented risk management and internal control initiatives in
the following key focus areas:
—
Improvement of the legal framework and guidelines,
and development of RMICS local regulations
at PJSC Gazprom, its subsidiaries and entities
— Organisation and coordination of activities aimed
at introducing and improving risk management systems
at subsidiaries and entities of PJSC Gazprom
—
Improvement and formalisation of the process to gather
and consolidate information on risks, prepare and submit
regular risk reports
— Activities aimed at automating risk management
— Professional training in risk management and internal
control for employees of PJSC Gazprom and its subsidi-
aries and entities
Further activities in these areas have been scheduled
for 2019.
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Risk Management and Internal Control
Key Risk Factors
Strategic and country risks
Risk
Description
Risk management/mitigation
Risks related to the global economy
An unfavourable economic environment can
cause a slowdown in energy demand and drive
the cost of borrowed capital
European gas market risks
Political risk
Natural gas transit risks
Russian regulatory risks for the gas industry
Unconventional gas development risks
The EU pursues a policy of diversifying its gas
supply sources and increasing the share of
natural gas exchange trade, which affects PJSC
Gazprom as one of the main suppliers of natural
gas to the EU countries
Starting from 2014, Russia is under sanctions
imposed by the EU, the United States, and
other countries
Gas transmission via transit countries is
associated with the risks of the counterparties
defaulting on their transit obligations as well as
the uncertainty regarding future transit contract
terms, which may affect Gazprom Group’s
performance of its obligations under gas supply
contracts
PJSC Gazprom’s operations are regulated by
Federal Law No. 147-FZ On Natural Monopolies,
dated 17 August 1995
Shale gas appeals mostly to countries with
limited conventional gas reserves and
resources; however, the risk that these countries
will reduce gas imports in the mid-term is
assessed as insignificant
Renewable energy risks
Renewable energy output can be expected to
grow in some countries, which may squeeze
gas consumption in these markets
To ensure growth of revenue from energy sales,
PJSC Gazprom considers various markets
and sales channels, and expands the uses
of natural gas. To maintain its financial stability,
PJSC Gazprom optimises leverage
To minimise the risk of lower supply levels,
a set of initiatives continues to be implemented
to both build new infrastructure and bolster
demand for natural gas, as well as strengthen
PJSC Gazprom’s position in the sectors with
a potential for extra supplies
PJSC Gazprom pursues a policy of ensuring
technological independence
A number of measures are taken to diversify
export routes, expand underground gas storage
capacity abroad, and develop LNG trade
PJSC Gazprom is consistently engaged in
a dialogue with government authorities to improve
the pricing policy; objective supporting cases
are prepared to inform decision-making by
PJSC Gazprom’s Board of Directors
PJSC Gazprom continuously monitors the
evolution of the shale gas industry and
developments in other unconventional
hydrocarbons industries around the world.
The monitoring results, including the economics
of unconventional gas production and its potential
as a competition to PJSC Gazprom in its existing
or prospective markets, are reviewed by the
Company’s management bodies on a regular
basis, which enables PJSC Gazprom to efficiently
implement its marketing policy in respective
regions taking into account various mechanisms
of gas sales
The use of natural gas, inter alia, for power
generation offers consumers economic,
technological, and environmental benefits,
which, PJSC Gazprom believes, will support
natural gas as a common energy source.
In most cases, renewable power generation
supplements power generation from other
sources and may entail certain risks for the natural
gas market if renewable energy is subsidised
at national and/or supranational levels
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Risk Management and Internal Control
Key Risk Factors
Customs, currency, and tax regulation risks
Risk
Description
Risk management/mitigation
Risk of changes in the Russian currency
regulation and tax legislation
Currency regulation and tax legislation risks
persist, along with the risk of a heavier tax
burden on companies operating in the fuel and
energy sector. Changes in the Russian currency
regulation and tax legislation, as well as tax
legislation changes in the countries in which
Gazprom Group has a presence may affect the
operations of PJSC Gazprom and Gazprom
Group’s entities
Changes in currency and tax laws are regularly
monitored. PJSC Gazprom liaises with
government authorities to ensure timely
adjustment of its operations in line with changes
in Russian and international laws
Risks related to changes in Russian rules
on customs control and duties
Customs authorities may introduce additional
customs requirements if the rules of customs
control and export duty payment are amended
PJSC Gazprom complies with the requirements
of customs laws while communicating with
government authorities
Financial risks
Risk
Foreign exchange and inflation rate risks
Description
Risk management/mitigation
Potential cash flow reduction due to adverse
change in foreign exchange rates. High
exchange rate volatility coupled with income
and expenses denominated in different
currencies affect PJSC Gazprom’s
performance.
The current inflation rate has no significant
influence on PJSC Gazprom’s financial position
PJSC Gazprom ensures the optimal ratio of assets
and liabilities denominated in foreign currency,
calculates earnings considering the foreign
exchange risk, and forecasts exchange rates to
develop a forecast balance. To minimise losses
from exchange rate volatility, PJSC Gazprom
hedges its foreign exchange and interest rate
risks
Credit and liquidity risks
Delayed or incomplete discharge of contractual
obligations by some counterparties entails risks
for PJSC Gazprom’s operations
Relations with credit institutions are subject
to the limits per credit institution which are
revised on a regular basis and reflect, inter alia,
the calculated credit rating. Counterparty
credit quality is assessed, measures to reduce
risks in case of low credit ratings are taken,
and discharge of contractual obligations
by counterparties is monitored
Market risks
Risk
Market risks
Description
Risk management/mitigation
If energy prices drop and/or remain flat for
a long time, resulting risks may lead to a decline
in revenues. There are also volume risks
associated with a certain flexibility that buyers
have in terms of gas offtake
Contract terms and conditions are adjusted,
or new contracts are concluded, and approved
types of transactions, financial instruments and
counterparties are determined
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Risk Management and Internal Control
Key Risk Factors
PJSC Gazprom’s operating risks
Risk
Description
Risk management/mitigation
Risks of early termination and suspension
of subsoil licences
Risks of failure to reach peak gas
withdrawal capacity at UGSFs
Risk of power outages at UGSS facilities
Non-compliance with the licence agreements
exposes PJSC Gazprom to risks of early
termination or suspension of subsoil licences
for the survey, exploration, and production of
hydrocarbons
Failure to reach necessary gas supply volumes
in the context of steep increase in gas
consumption
Internal and external factors may lead to power
outages at UGSS facilities
Risks related to occupational health and
industrial safety
PJSC Gazprom’s sustainability and performance
depend on the efficiency of its occupational
health and industrial safety practices
Regular monitoring, control of compliance with
licence requirements, and timely amendment of
licence agreements minimise the likelihood of
licence revocation and suspension
UGSFs are tested to confirm their maximum daily
deliverability
PJSC Gazprom implements comprehensive
programmes to enhance reliability of power
supply facilities, insure equipment, and create
reserves to cover potential losses
PJSC Gazprom has in place a Unified
Occupational Health and Safety Management
System which forms part of PJSC Gazprom’s
integrated management system and was
developed and adopted to manage occupational
health and industrial safety risks and meet the
objectives and commitments under the
Occupational Health, Industrial and Fire Safety
Policy
Cost risks
Facilities risks
Hydrocarbon reserve
estimation risks
Environmental risks
Increased prices for equipment, technical
devices, spare parts, as well as works and
services, which form the actual cost of capital
construction projects, constitute one of the
most significant investment risks
Entering into contracts for the performance of
works (provision of services, supply of inventory)
with a fixed price, and relevant monitoring during
the execution of contracts help reduce the cost
risks of investment activities
The key operations, including hydrocarbon
production, transportation, processing/refining,
and storage, carry process and engineering,
natural and climatic risks, as well as risks of
adverse actions by personnel or third parties
PJSC Gazprom’s strategic and financial goals
depend on hydrocarbon reserves. Thus,
inaccurate reserve estimation bears potential
risks for PJSC Gazprom’s operations
The key operations, including hydrocarbon
production, transportation, refining/processing,
and storage, carry environmental risks (risks of
environmental pollution, non-compliance with
environmental regulations) that may lead to
legal, financial, and reputational implications
The Unified Gas Supply System (UGSS) ensures
reliable gas supplies. Stable operation of the
system is achieved by implementing advanced
and innovative diagnostic methods, carrying out
timely overhaul and maintenance, revamping and
upgrading existing facilities. Insurance coverage
is provided to protect the property interests of
Gazprom Group’s subsidiaries, which includes
property insurance (including offshore facilities),
business interruption insurance and liability
insurance for construction, repair, and operation
of production facilities
Reserve estimation procedures have been
developed and are implemented, including
in accordance with international standards.
The Company’s reserves estimated under
Russian reserves classification standards are
recorded in its books after the annual review
and approval by the State Reserves Commission
of the Russian Ministry of Natural Resources
PJSC Gazprom implements a unified
environmental policy, programmes, and initiatives
to reduce its environmental footprint, takes out
voluntary environmental liability insurance,
introduces best available innovative technology
for mitigating the environmental impact.
The Company has developed and operates
an efficient environmental management system
combining environmental controls of both
PJSC Gazprom and Gazprom Group’s entities.
Efforts taken by PJSC Gazprom help maintain
high levels of environmental risk manageability
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Procurement Performance
Documents regulating procurement procedures
at PJSC Gazprom and its subsidiaries
— Federal Law No. 223-FZ On Procurement of Goods, Works,
and Services by Certain Types of Legal Entities, dated 18 July 2011
(the “Federal Law On Procurement”)
■ — A new version of the Regulations on the Procurement of Goods,
Works, and Services by PJSC Gazprom and Gazprom Group
Companies (approved by Resolution of PJSC Gazprom’s Board
of Directors No. 3168 dated 19 October 2018) developed in line
with the changes in the Federal Law On Procurement and effective
from 2 November 2018 (the “new version of the Regulations
on Procurement”). Prior to 1 November 2018, the version approved
by Resolution of JSC Gazprom’s Board of Directors No. 1969 dated
19 April 2012, as amended, was effective (the “Regulations on
Procurement No. 1969 dated 19 April 2012”)
Gazprom Group runs an effective vertically integrated
procurement system.
The procurement system is a part of PJSC Gazprom’s
in-house tool providing for end-to-end (from drafting capex
programmes and budgets to monitoring contract execution)
cost management within a single separate centre (business
unit), PJSC Gazprom’s Corporate Cost Management Depart-
ment.
Procurement principles followed by Gazprom Group
Creating conditions for timely and full supply
to Gazprom Group of goods, works and
services, and identification of a supplier
(contractor, service provider)
Ensuring safe operation of hazardous
UGSS facilities
Procurement transparency
Equality, fairness, non-discrimination,
no unreasonable and restrictive business
practices towards bidders
Targeted and cost-efficient spending,
and implementation of measures to reduce the
Customer’s costs
No restriction of access to bidding
Fostering competition between bidders
Ensuring the balance of costs related to organising and conducting
competitive procurement and expected economic benefits
Procurement by PJSC Gazprom and its subsidiaries is public,
transparent, standardised, and straightforward to the maximum
possible extent.
In 2018, significant changes in the Russian legislation
on procurement became effective.
PJSC Gazprom’s cost-cutting tools
— Detailed breakdown, cost benchmarking (breakdown and
benchmarking by type of cost, comparing by year and region,
determining unit costs)
— Process optimisation (expenditure proposal and prioritisation
—
within budget limits)
Improving the process efficiency (standard costing based on
historical benchmarks, assessing the fairness of prices offered
during the procurement process vs unit costs)
In line with the Federal Law On Procurement, information
on procurement, including procurement plans, notices and
competitive procurement documentation, minutes, infor-
mation on signed contracts and their execution, information
on the number and total price of contracts signed as a result
of procurement procedures are published in the Unified
Information System of public procurement of goods, works,
and services for state and municipal needs (www.zakupki.
gov.ru). Except for the information access to which is legally
restricted, the above mentioned information is available
to the general public.
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Procurement Performance
Changes in the Russian legislation on procurement which came into force in 2018 and are material for Gazprom Group
— Definitions were given to “competitive” and “non-competitive”
procurement. Requirements to competitive procurement, including
online, as well as procurement methods and procedures were
established.
when it is necessary to ensure the compatibility of procured items
with the goods used by the customer; procurement of spare parts
and expendables in line with the technical documentation for the
machines and equipment used by the customer.
— New rules concerning description of procurement items were
— Procurement from related parties (in line with the Tax Code
introduced.
It is prohibited to specify trademarks, service marks, business
names, patents, utility models, registered designs, country of origin,
and requirements to the item leading to unreasonable restriction of
the number of bidders, except for the cases when it is indispensable
for the most clear and precise description of the item to be
procured.
When including a trademark in procurement documents, the
option of equivalent product supply should be indicated. Main
exceptions are: incompatibility with other goods of other trademarks
of the Russian Federation) was removed from the Federal Law
On Procurement. The list of parties related to PJSC Gazprom
was approved as part of the new version of the Regulations on
Procurement.
— Competitive procurement from small and medium-sized enterprises
(SMEs) may be carried out online via a limited number of methods
(tender, auction, request for proposal, and request for quotation),
with strict procedures established for all stages of such procurement.
Following procurement procedures, contracts with SMEs are only
signed online through the electronic platform.
Procurement methods used by Gazprom Group
Until 1 November 2018
(in line with the Regulations on Procurement No. 1969 dated 19 April 2012)
Until 1 November 2018
(in line with the Regulations on Procurement No. 1969 dated 19 April 2012)
I
Competitive procurement
I
Competitive procurement
— Through public bidding — tender, auction
— Without public bidding — request for proposal
Bidding — tender, auction, request for proposal, request for quotation
—
— Competitive selection which is not considered bidding
II
Procurement from a sole supplier
II
Non-competitive procurement
— Marketing research
— Procurement through the Trading Portal
— Non-alternative procurement
— Procurement through participation in bidding
—
Procurement from a sole supplier
(contractor, service provider)
New methods of competitive and non-competitive procurement
The share of online procurement in the total value of competitive
procurement by PJSC Gazprom and its subsidiaries
Savings by PJSC Gazprom and its subsidiaries following
a competitive procurement process, RUB bn
2016
2017
2018
97.0
98.7
99.3
2016
2017
2018
30.4
20.3
22.1
The share of online procurement in the total value
of competitive procurement by PJSC Gazprom
and its subsidiaries exceeded 99% in 2018.
Total price of contracts awarded by PJSC Gazprom
and its subsidiaries through a competitive procurement process,
RUB bn
2016
2017
2018
792,0
(more than
18 thousand
contracts)
427,9
(more than
15 thousand
contracts)
584,1
(more than
18 thousand
contracts)
Note. Savings are defined as the difference between the initial (maximum) and final
contract prices including the cost of the procurement process.
To maintain procurement business processes, PJSC Gazprom
uses the proprietary Automated Electronic Procurement
System (AEPS, www.zakupki.gazprom.ru) covering the entire
procurement cycle from planning to signing and executing
a contract.
Gazprom Group’s online procurement is arranged
through the Electronic Trading Platform of Gazprombank
(ETP-GPB) (Gazprom Group Procurement section at
https://etpgpb.ru/pao_gazprom/) integrated with the UIS
and the AEPS. ETP-GPB is included in the list of electronic
platform operators complying with the requirements set out
in the Federal Law On Procurement, including requirements
to procurements accessible to SMEs.
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Procurement Performance
The Regulations on Procurement provides for PJSC Gazprom’s
pre-qualification process to compile a Register of Gazprom
Group’s potential bidders. As part of the pre-qualification
process, Gazprom Group’s Central Procurement Office
monitors participating entities on a quarterly basis, in parti-
cular, to assess instances of deadline violation, change
of price, lower quality of work, negative references.
As at 1 February 2019, 2,052 entities took part in the pre-
qualification process, including 553 SMEs (22.1%).
Number of entities — participants of the
pre-qualification system
As at 1 February 2017
As at 1 February 2018
As at 1 February 2019
1,478
2,056
2,502
Analysis of the contract price rationale by PJSC Gazprom’s
Budget Committee
Initial prices, RUB bn
Identified potential to reduce the price,
RUB bn
2016
271
2017
541
2018
430
58
81
83
Reduction percentage, % of initial prices
21%
15%
19%
To optimise costs at the stage of contract execution,
the Company uses the banking support mechanism which
was first applied by PJSC Gazprom and AO Gazprombank
in 2017 for inventory supply contracts. In line with this
mechanism, the inventory supply chain is reduced to the
maximum of two links, supplier and manufacturer (manu-
facturer’s sole official dealer).
Number of SMEs included in the Register of Gazprom Group’s
potential bidders
As at 1 February
2017
As at 1 February
2018
As at 1 February
2019
Effect from the use of banking support of the execution
of inventory supply contracts
Total
including
SMEs
316
128
451
179
530
292
— Removing unreasonable intermediaries ensures that payments
to direct manufacturers for the supplied goods are made timely
and in full.
— Tax risks due to a counterparty engaging economically inefficient
55 %
the share of SMEs among entities included
in the Register of Gazprom Group’s potential bidders
as at 1 February 2019
In the process of procurement, PJSC Gazprom and its
subsidiaries apply all available tools to optimise the initial
price of procured goods (works, services) before the bidding
procedures (standard costing, actual contract prices,
consolidated unit costs, market situation review) and use all
methods to reduce the price during the bidding procedure,
which are not in conflict with the laws of the Russian Federation
(extending the proposal submission period to involve more
bidders, bargaining on price bids).
co-contractors (sub-suppliers or sub-sub-suppliers), including
unscrupulous ones, were reduced.
— The analysis of AO Gazprombank’s reports on changes in prices
submitted to PJSC Gazprom, which are prepared based on
contracts and primary documents provided to the Bank by inventory
suppliers, allows the Central Procurement Office to set justified
initial (maximum) inventory prices when preparing for procurement,
as well as increase the efficiency of Gazprom Group’s overall cost
reduction initiatives.
From the beginning of 2018, 940 inventory supply contracts
have been transferred to AO Gazprombank for banking sup-
port.
RUB 2.4 bn
the effect from the use of banking support
of the execution of inventory supply contracts since
the adoption of this mechanism
By Q4 2018, PJSC Gazprom’s efforts to optimise
the price of large-diameter pipes resulted in a 40%
reduction in the purchase price of steel pipes without
coating vs Q1 2017.
In 2018, the successful application of banking support
of the execution of inventory supply contracts was expanded
to the procurement of works and services.
In case of procurement from a sole supplier, prior to signing
a contract, Gazprom Group’s Central Procurement Office and
PJSC Gazprom’s Budget Committee review the price ration-
ale of contracts and additional agreements and typically
identify an opportunity to reduce the price by 10%–20%.
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Procurement Performance
Enhancing access for small and medium-sized enterprises (SMEs)
to PJSC Gazprom’s procurement opportunities
PJSC Gazprom Annual Report 2018 on procurement of goods, works, and services
by certain types of legal entities from SMEs has been duly published in the Unified
Information System (information is available in Russian only)
www.zakupki.gov.ru
Pursuant to resolutions issued by the Russian Government, PJSC Gazprom
implements a number of activities to enhance SMEs’ access to the
procurement process of PJSC Gazprom.
1
A List of Goods, Works, and Services to be procured by
PJSC Gazprom from SMEs was developed, approved,
and published in the UIS.
PJSC Gazprom’s Procurement Plan designates procurement
opportunities accessible exclusively to SMEs.
Draft plans for procurement by PJSC Gazprom and individual
Gazprom Group’s companies of goods, works, and services
(including innovative and high-tech products) set forth by Russian
Government Decree No. 2258-r dated 6 November 2015 are duly
agreed with Russian Small and Medium Business Corporation
to ensure compliance with the applicable Russian laws providing
for involvement of SMEs in procurement, including allocation
of the SME quota in the procurement plan.
PJSC Gazprom involves innovative SMEs under its Innovative
Development Programme until 2025
— PJSC Gazprom runs its Pilot SME Partnership Programme
2
3
4
under which an SME Partner Register has been created
and is maintained on PJSC Gazprom’s official website
— To roll out innovative SME products and review innovative
proposals coming from individuals and legal entities,
the Company operates a One-Stop System
(www.oknogazprom.ru), managing the whole process
of submitting innovative proposals to be used
in PJSC Gazprom’s operations, from submission to the
final decision
— Workshops are held on PJSC Gazprom’s relations with
innovative SME providers
In 2018, PJSC Gazprom’s procurements from SMEs determined pursuant
to Resolution of the Russian Government No. 1352 On Specifics of
Participation of Small and Medium-Sized Enterprises in the Procurement
of Goods, Works, and Services by Certain Types of Legal Entities, dated
11 December 2014 (including the amounts paid) accounted for 32.5%
of the aggregate annual contract values, including 23.5 % from procure-
ments accessible exclusively to SMEs. PJSC Gazprom complies with
the targets for the share of procurement from SMEs set by the Russian
Government.
In 2018, the aggregate value of contracts signed by Gazprom Group
with SMEs included in the Unified Register of Small and Medium-Sized
Enterprises (https://ofd.nalog.ru) amounted to RUB 231.6 bn, including
6.5 thousand contracts worth over RUB 105 bn through competitive
procurements accessible exclusively to SMEs.SMEs (13,108 enterprises)
accounted for 60% of the total number of Gazprom Group’s suppliers
of goods, works, and services contracted in 2018.
PJSC Gazprom’s official website (information is available in Russian only)
www.gazprom.ru
The list of goods, works, and services procured by PJSC Gazprom from SMEs
has been published in the Unified Information System (information is available in
Russian only)
www.zakupki.gov.ru
PJSC Gazprom’s Pilot SME Partnership Programme is available on PJSC Gazprom’s
official website (information is available in Russian only)
www.gazprom.ru
For more details on the One-Stop System see PJSC Gazprom’s website (information
www.oknogazprom.ru
is available in Russian only)
For more details on the procurement system at PJSC Gazprom and its subsidiaries
see Gazprom Group’s Sustainability Reports published on an annual basis
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Ensuring Compliance of Operations
with Legal Requirements
Legal support of PJSC Gazprom’s operations is inextricably
linked to relevant legal regulation and is focused on the
Company’s objectives:
— Achieving efficient financial and business performance
— Ensuring the completeness, timeliness, and fairness of
all types of accounting and reporting at PJSC Gazprom,
as well as other information to be disclosed under appli-
cable laws
— Complying with applicable laws
— Preventing and countering corruption
— Protecting PJSC Gazprom’s assets (including data as-
sets)
Legal regulation is exercised in accordance with
the Constitution of the Russian Federation, Federal Law
No. 69-FZ On Gas Supply in the Russian Federation,
dated 31 March 1999; Federal Law No. 116-FZ On Industrial
Safety of Hazardous Production Facilities, dated 21 July 1997;
Federal Law No. 7-FZ On Environmental Protection, dated
10 January 2002; Federal Law No. 174-FZ On Ecological Ex-
pertise, dated 23 November 1995; Federal Law
No. 256-FZ On Safety of the Fuel and Energy Complex, dat-
ed 21 July 2011, and other federal laws and regulations
of the Russian Federation, as well as international laws, trea-
ties and agreements.
Legal support of PJSC Gazprom’s operations is exer-
cised by the Board of Directors, the Board of Directors’ Audit
Committee, the Audit Commission, executive bodies (the
Management Committee and Chairman of the Management
Committee), the Company’s business units
in line with their tasks and functions.
The Company has a special focus on compliance with
anti-corruption regulations and countering the unlawful use
of insider information and market manipulation.
Anti-Corruption Efforts
PJSC Gazprom has developed and adheres to the anti-cor-
ruption framework while effective local regulations adopted
as part of anti-corruption measures help foster negative sen-
timent towards corrupt conduct, prevent
or resolve conflicts of interest, and prevent unlawful behav-
iour.
Russian anti-corruption statutory regulations guiding
PJSC Gazprom
— Federal Law No. 273-FZ On Combatting Corruption, dated
25 December 2008
— Federal Law No. 79-FZ On Prohibiting Certain Categories of
Persons from Opening and Keeping Bank Accounts (Deposits),
Keeping Cash and Securities with Foreign Banks Outside the
Russian Federation, and Possessing and/or Using Foreign
Financial Instruments, dated 7 May 2013
— Federal Law No. 230 On Control over Expenditures of Public
Officials and Other Persons to Match Their Income, dated
3 December 2012
— Presidential Decree No. 557 On Approving the List of Positions
within the Federal Public Service Requiring Disclosure by Federal
Public Servants of Information on Their Income, Property, and
Property Liabilities, as well as on Income, Property, and Property
Liabilities of Their Spouses and Underage Children, dated
18 May 2009
— Presidential Decree No. 378 On the National Plan to Combat
Corruption for 2018–2020, dated 29 June 2018
International anti-corruption regulations PJSC Gazprom
has committed to
— United Nations Convention against Corruption (ratified by Federal
Law No. 40-FZ dated 8 March 2006)
— United Nations Convention against Transnational Organized Crime
(ratified by Federal Law No. 26-FZ dated 26 April 2004)
— Criminal Law Convention on Corruption of the Council of Europe
and non-member states (ratified by Federal Law No. 125-FZ
dated 25 July 2006)
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Ensuring Compliance of Operations
with Legal Requirements
PJSC Gazprom’s anti-corruption practices comply with the
main international and Russian regulations.
Set of PJSC Gazprom’s anti-corruption documents
Documents approved by the Board of Directors of PJSC Gazprom:
— PJSC Gazprom’s primary anti-corruption document is its
Anti-Corruption Policy
— Regulations on the Internal Control System of PJSC Gazprom
Documents approved by instructions and orders of PJSC Gazprom:
— Regulations on the Corporate Ethics Commission of JSC Gazprom
— Regulations on the Hotline for Fighting Fraud, Corruption, and
Embezzlement at Gazprom Group
— Procedure for a Conflict of Interest Disclosure and Conflict
of Interest Resolution
— Procedure for reporting offences with signs of corruption
committed by employees, counterparties or third parties,
which have become known to an employee, and for dealing
with allegations of corruption
— Procedure for reporting cases when an employee is incited
to commit offences, and for reviewing such reports
— Procedure for protecting whistle blowers who have reported
offences relevant to the Company’s operations
Compliance with corporate ethics
PJSC Gazprom has adopted its Corporate Code of Ethics
developed with due account for Russian and international
corporate governance best practices. The document details
PJSC Gazprom’s corporate values and determines the
fundamental rules of business conduct stemming from such
values, which rule out any conflicts of interest or corrupt
practices and impose restrictions, in particular, on nepotism,
employee engagement with PJSC Gazprom’s competitors,
their serving on elected government bodies, and acceptance
of gifts. Most of PJSC Gazprom’s subsidiaries have developed
and adopted similar documents based on the Code.
The Code specifies the procedure to be followed by the
Company’s employees in the event of a conflict of interest,
declares zero tolerance for corrupt conduct, affirms environ-
mental responsibility and non-discriminatory principles, es-
tablishes implementation and supervision practices on com-
pliance with corporate ethics standards.
Employee penalties for non-compliance with the
Code of Corporate Ethics of PJSC Gazprom
— Social condemnation
— Public censure
— Forfeiture of bonuses (in line with internal documents)
— disciplinary sanctions (if there are signs of a disciplinary offence)
The Code’s provisions are mandatory for PJSC Gazprom’s
employees, including all members of the Management Com-
mittee and the Board of Directors who are PJSC Gazprom’s
employees or employees of the Company-controlled corpo-
rate entities. The Code’s provisions are not mandatory for
employees of PJSC Gazprom’s affiliates which are
not under the Company’s control, and employees of
PJSC Gazprom’s counterparties.
In 2018, a provision on regular tests for employees’
knowledge of corporate ethics standards was added
to the Code of Corporate Ethics of PJSC Gazprom.
In 2018, a provision on regular tests for employees’ knowledge
of corporate ethics standards was added to the Code of
Corporate Ethics of PJSC Gazprom; an online training course
Corporate Ethics at PJSC Gazprom based on the Code
provisions was developed as part of distance education for
employees.
The permanent Corporate Ethics Commission of
PJSC Gazprom is responsible for supervising compliance
with the Code’s requirements and provisions. Most of
PJSC Gazprom’s subsidiaries and associates have similar
commissions in place.
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Ensuring Compliance of Operations
with Legal Requirements
Corporate Ethics Commission’s performance in 2018
Focus areas
Performance highlights
Reviewing reports on an ongoing basis as required by the applicable
Russian laws with the involvement of dedicated business units and
subsidiaries, if required
The Commission received several reports from individuals, including
two reports from employees of subsidiaries. All the reports received
by the Commission have been reviewed
Revealing the signs of a conflict of interest in sole executive bodies
of entities controlled by PJSC Gazprom, and making recommendations
on preventing and/or mitigating possible negative effects of identified
conflicts of interest
Arranging annual activities to ensure that the Company’s management,
including employees who are members of PJSC Gazprom’s Board
of Directors and Management Committee, sign written commitments
to comply with the Code provisions in the prescribed form
The Commission’s performance is reported to the Chairman
of PJSC Gazprom’s Management Committee on an annual
basis. The Chairman of PJSC Gazprom’s Management
Committee may impose sanctions stipulated by the Code
at his own initiative or at the Commission’s suggestion,
or at the initiative of the violator’s immediate superior.
PJSC Gazprom and its subsidiaries organise awareness
days to communicate to their employees the effective rules
of business, including anti-corruption corporate ethics.
Subsidiaries gather and consolidate information on measures
taken to comply with the requirements and restrictions
established by codes of corporate ethics.
Preventing and revealing corrupt practices
PJSC Gazprom’s management is consistently focused on
improving its procedures for preventing and revealing corrupt
practices in Gazprom Group.
During the year, the Company also worked on regula-
tions determining the lists of position of PJSC Gazprom’s
administration employees participating in anti-corruption
efforts. The management of PJSC Gazprom’s branches,
subsidiaries and entities will have to prepare similar lists and
organise training for employees included in the list.
PJSC Gazprom’s Corporate Security Service and corpo-
rate security departments of the Company’s subsidiaries
prevent and reveal corrupt practices as prescribed by Russian
laws and regulations of PJSC Gazprom. This work relies
on an ongoing cooperation with departments responsible
for internal audit, corporate cost management, asset manage-
ment and corporate relations, and with law enforcement
agencies of the Russian Federation.
In 2018, the Commission took relevant measures covering 270 companies
and entities controlled by PJSC Gazprom
All relevant managers of PJSC Gazprom have signed and submitted
to the Commission for safekeeping written commitments to comply
with the Code
Since November 2014, PJSC Gazprom has operated
a Hotline to report incidents of perceived fraud, corruption,
and embezzlement in Gazprom Group. Similar arrangements
are in place at several PJSC Gazprom’s key subsidiaries.
Employees of PJSC Gazprom’s Corporate Security Service
and corporate security departments of the Company’s
subsidiaries review the received information (via digital
communication channels, telephone or post, as well as
reports made in person), including anonymous, to reveal
preconditions for, and instances of, corruption at Gazprom
Group.
During 2018, the Company’s Corporate Security
Service received over 200 reports to the Hotline. Following
the investigation of these reports the Service has not
identified any instances of corruption as defined by Article 1
of Federal Law No. 273-FZ On Combating Corruption,
dated 25 December 2008.
Hotline contact information is available on PJSC Gazprom’s website
www.gazprom.com
The Company has a framework for preventing and avoiding
bad procurement practices.
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Ensuring Compliance of Operations
with Legal Requirements
Anti-corruption framework for preventing and avoiding bad procurement practices
— Anti-corruption clauses of procurement contracts provide for
disclosing counterparties’ ultimate beneficiaries.
— The annual procurement plan is publicly available.
— A dedicated collegial body, the Tender Committee, is established
to summarise the competitive bidding and marketing research
results. Gazprom Group closely monitors the membership of the
Tender Committee to avoid any conflict of interest. Members of the
Tender Committee who have vested interests in the procurement
process results or are bidders’ employees or management shall
withdraw (with a corresponding entry made in the minutes) and
abstain from voting on the matter. Votes of the interested Tender
Committee members are not taken into account when counting
the votes following the procurement procedure. The Tender
Committee’s decisions on the procurement results are guided by
the principles of fair, equal, and objective treatment of the bidders
based on the bid assessment and comparison criteria set out in
the tender documentation (quotation request notice).
—
— Corporate entities and officers engaged in arranging and conducting
procurements bear administrative liability for violating the procedure
for procuring goods, works, and services, as prescribed by Article
7.32.3 of the Russian Federation Code of Administrative Offences.
In order to protect the rights of bidders to challenge the actions
of the customer (organiser) pursuant to the Federal Law on
procurement, the Provisions on Procurement provide for a 10-day
period during which no contract may be awarded following a tender.
— Bidders have the right and opportunity to propose to PJSC Gazprom
(including anonymously) improvements to bidding procedures,
comments and complaints regarding actions/omission of customers,
organisers, and/or their officers, inform about unreasonable
requirements to procurement items, suppliers (service providers),
deadlines, and terms of delivery of goods (performing work,
rendering services) in the tender documentation, as well as about
other unreasonable restrictions of competition during the
procurement process. The feedback form for potential bidders is
available in the Tenders section of PJSC Gazprom’s official website.
Corporate security departments of the Company’s subsi-
diaries and entities send quarterly reports on corruption
prevention progress and revealed cases of possible corrupt
practices to PJSC Gazprom’s Corporate Security Service
and inform the Service of decisions made following the
investigation of such cases.
The Anti-Corruption Policy of PJSC Gazprom is available
on PJSC Gazprom’s website
www.gazprom.com
Countering the Unlawful Use of Insider Information
and Market Manipulation
Under Russian statutory requirements, PJSC Gazprom
counters the unlawful use of insider information, has the rules
regulating access to its insider information and protection
of confidentiality of such information, and determines the
framework of monitoring compliance with the relevant laws.
PJSC Gazprom has a business unit responsible for com-
pliance with insider laws and regulations.
Duties of the business unit responsible
for insider information
— Monitors changes in the laws on countering the unlawful use
of insider information and market manipulation
— Updates the Company’s local regulations
— Updates relevant sections of PJSC Gazprom’s website
— Updates insider lists
— Communicates with regulators such as the Bank of Russia and
—
exchanges; updated insider lists are sent to the market operators
at their request
Informs insiders, including PJSC Gazprom’s employees, of the
applicable legal requirements on a regular basis; Information for
Insiders, which is updated in line with changes in legislation and/or
PJSC Gazprom’s local regulations, is sent to the persons included
in PJSC Gazprom’s insider list
— Monitors compliance with the laws on countering the unlawful use
of insider information
In line with changes in the Russian legislation in 2018,
the List of Insider Information of PJSC Gazprom was
extended.
In 2018, PJSC Gazprom and its employees fully complied with
the laws on countering the unlawful use of insider information.
The List of Insider Information of PJSC Gazprom is available
on PJSC Gazprom’s website
www.gazprom.com
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
PJSC Gazprom’s key principle in shareholder relations
is to provide equal rights and efficiently protect the
interests of all security holders. The Company takes
further steps to enhance its corporate governance
practice, increase transparency, and maintain
a constructive dialogue with the investment community.
Shareholding Structure
PJSC Gazprom’s charter capital is RUB 118,367,564,500 di-
vided into 23,673,512,900 ordinary shares with a par value of
RUB 5 each. State registration number of the issue is 1-02-
00028-A. The state registration date is 30 December 1998.
The Company has no preferred shares.
PJSC Gazprom’s shareholding structure, %
Name
The Russian Federation
represented by the Federal Agency
for State Property Management
AO ROSNEFTEGAZ*
AO Rosgazifikatsiya*
ADR holders**
Other registered holders
As at 31 December
2017
As at 31 December
2018
38.37
10.97
0.89
25.20
24.57
38.37
10.97
0.89
24.13
25.64
* As at 31 December 2017 and 31 December 2018, the cumulative share in PJSC Gazprom
directly or indirectly controlled by the Russian Federation totals 50.23% and is owned
through the full ownership of AO ROSNEFTEGAZ which also holds a 74.55% stake
in AO Rosgazifikatsiya.
** The Bank of New York Mellon issued ADRs on PJSC Gazprom shares.
As the major shareholder of PJSC Gazprom, the Russian
Federation holds a more than 50% controlling stake (includ-
ing direct and indirect ownership) in PJSC Gazprom. The
Russian Federation does not have a special right
to manage PJSC Gazprom’s affairs (a “golden share”).
The Memorandum of Intent of the Russian Federation as the Major Shareholder
of PJSC Gazprom regarding PJSC Gazprom shares is available
on PJSC Gazprom’s website
www.gazprom.com
According to the Memorandum of Intent of the Russian
Federation as the Major Shareholder of PJSC Gazprom
regarding, the Planned Forecast (Programme) for the
Privatisation of Federal Property and the 2017–2019 Federal
Property Privatisation Guidelines (approved by Decree of
the Russian Government No. 227-r dated 8 February 2017),
there are no plans to dispose of any PJSC Gazprom shares
owned by the federal government. In 2018, PJSC Gazprom
received no information on any special agreements between
PJSC Gazprom’s shareholders.
464,969 shareholders
the number of shareholders included in the list
of persons entitles to participate in PJSC Gazprom’s
annual General Shareholders Meeting in 2018
202202
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
Information on PJSC Gazprom shares owned by PJSC Gazprom
and its subsidiaries
PJSC Gazprom’s market capitalisation in 2018,
USD bn
As at 31 December 2018, there were no PJSC Gazprom shares the title
to which was transferred to the Company. At the same time, as at the
said date, PJSC Gazprom’s subsidiaries held 934 million ordinary shares
of PJSC Gazprom, including American depositary receipts (ADRs)
representing 639 million ordinary shares of PJSC Gazprom, which in
total represents 6.6% of the total number of ordinary shares of
PJSC Gazprom.
4.0
3.8
3.6
3.4
3.2
Stock Market and Capitalisation
PJSC Gazprom shares are included in the first (top) level
quotation list of the Moscow Exchange and PAO Saint
Petersburg Exchange.
In October 1996, the Company listed depositary receipts
on the London Stock Exchange (LSE). The ADRs certifying
the rights to PJSC Gazprom ordinary shares under foreign
law were issued by The Bank of New York Mellon as
depositary bank. An ADR stands for two PJSC Gazprom
shares. ADRs on PJSC Gazprom shares are traded on
the London, Berlin, and Frankfurt exchanges, the Moscow
Exchange, the US OTC market, and on the Singapore
OTC market among qualified institutional buyers (QIBs).
The LSE accounts for the bulk of trade in PJSC Gazprom
ADRs. PJSC Gazprom explores opportunities to expand
on Asia Pacific exchanges.
46 %
PJSC Gazprom shares in free float
as at 31 December 2018
(according to the Moscow Exchange)
In 2018, PJSC Gazprom’s market capitalisation increased by
17.6% year-on-year in rouble equivalent; as at 31 December
2018, its capitalisation stood at RUB 3.6 tn, the equivalent
of USD 52.3 bn. MOEX Russia Index increased by 12.3% over
the same period. The rise in PJSC Gazprom’s capitalisation
was mostly driven by a record-high increase in production
volumes and export volumes to Europe in 2018. Also, gas
prices in Europe went up considerably in the reporting period
following oil prices, which enabled analysts and investors
to raise their free cash flow expectations, and consequently,
the expected dividend rate for the reporting period.
PJSC Gazprom share price growth in 2018,
and increase in MOEX Russia Index over the
same period.
01
02
03
04
05
06
07
08
09
10
11
12
Note. Market capitalisation is calculated as the daily rouble-denominated closing price
on the Moscow Exchange multiplied by the total number of PJSC Gazprom shares issued.
The total shareholder return was 0.242 in 2018, due to an in-
crease in the market value of the Company shares.
PJSC Gazprom shares are on the list of underlying secu-
rities for stock indices, including MSCI Russia, MSCI Emerg-
ing Markets, FTSE Russia IOB, STOXX All Europe 100, as well
as indices of leading Russian stock exchanges.
Main indices of Russian exchanges
which include the stock of PJSC Gazprom
PJSC Gazprom’s share index weight
as at 31 December 2018
Index
MOEX Russia Index
RTS Index
MICEX Oil and Gas Index
PJSC Gazprom ordinary share price performance
and daily trading volumes on the Moscow Exchange in 2018
170
160
150
140
130
12.62
12.62
14.22
100
80
60
40
20
01
02
03
04
05
06
07
08
09
10
11
12
Share price, RUB
Trading volume, mm shares
PJSC Gazprom ADR price performance and daily trading volumes on
the LSE in 2018
5.5
5.0
4.5
4.0
3.5
50
40
30
20
10
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02
03
04
05
06
07
08
09
10
11
12
ADR price, USD
Trading volume, mm shares
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
Dividend Policy
In developing its recommendations for PJSC Gazprom’s
General Shareholders Meeting on profit distribution, including
dividend payouts, the Board of Directors seeks to ensure
high financial stability of PJSC Gazprom and the implemen-
tation of its long-term development strategy, as well as protect
the rights of, and increase returns for, shareholders of
PJSC Gazprom both through dividend payouts and increased
market capitalisation of the Company.
The Company’s full dividend history is available on PJSC Gazprom’s website
www.gazprom.com
PJSC Gazprom’s dividend history in 2009–2018
Dividend per share, RUB
2009
2.39
2010
3.85
2011
8.97
2012
5.99
2013
7.20
2014
7.20
2015
2016
7.89 8.0397
2017
8.04
2018*
16.61
Dividend payout ratio, share of PJSC Gazprom’s
net profit under RAS (parent company), %
Dividend payout ratio, share of Gazprom Group’s IFRS
profit attributable to the owners of PJSC Gazprom, %
9
7
PJSC Gazprom’s dividend yield**, %
1.3
2.0
25
24
25
27
90
46
46
190
9
16
5.2
12
4.2
15
5.2
107
5.5
24
5.8
20
5.2
27
6.2
42
27
10.8
* Recommended dividend shown for 2018.
** Dividend yield for the relevant period is calculated as a ratio of total dividend paid per share for the relevant year to the share price as at 31 December.
PJSC Gazprom’s dividends paid in 2018 for 2017 as at 31 December 2018
Total
including dividends on shares:
Accrued,
RUB thousand
Paid,
RUB thousand
Unpaid,
RUB thousand*
Unpaid
to accrued,
%
190,335,044
190,005,139
329,905
0.17
held by the Russian Federation represented by the Federal Agency
for State Property Management
held by individuals and corporate entities whose rights to shares
are accounted for in the register
held by individuals and corporate entities whose rights to shares
are accounted for by the depositary maintaining a nominee holder
account in the issuer’s register**
held by unidentified persons
73,037,986
73,037,986
–
27,100,385
26,916,208
184,177
90,196,521
90,050,945
145,576
152
–
152
–
0.68
0.16
100.00
* No dividend payouts were made to individuals or corporate entities who had failed to provide clear payout details as per clauses 8 and 9 of Article 42 of Federal Law No. 208-FZ
On Joint-Stock Companies, dated 26 December 1995. Dividends accrued on shares held by unidentified persons are paid out as soon as the title to securities is established.
** PJSC Gazprom paid RUB 90,196,521 thousand in dividends to nominee holders on 2 August 2018 in execution of the Annual General Shareholders Meeting resolutions on dividend
payouts based on PJSC Gazprom’s 2017 results, which was held on 29 June 2018. As at 31 December 2018, the amount of dividends nominee holders failed to transfer as prescribed
by the securities laws of the Russian Federation for reasons beyond their control (clause 8 and clause 9, Article 42 of Federal Law No. 208-FZ dated 26 December 1995) totalled
RUB 145,576 thousand.
204204
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
PJSC Gazprom’s dividends paid in 2018 for 2014–2016, RUB thousand
Shareholder category
Corporate entities*
Individuals*
Nominee holders**
Holders unidentified as at the time of accrual***
Unpaid as at
1 January 2018
Paid in 2018
4,110
541,222
383,214
365
–
34,449
102,094
–
Reinstated in 2018
as retained
earnings upon
expiry of the
limitation period
1,167
157,661
83,051
99
Unpaid as at
1 January 2018
2,943
349,112
198,069
266
Total
928,911
136,543
241,978
550,390
* No dividend payouts were made to individuals or corporate entities who had failed to provide clear and required payout details as per Federal Law No. 208-FZ On Joint-Stock Companies
dated 26 December 1995.
** The nominee holders who failed to transfer dividends as prescribed by the securities laws of the Russian Federation for reasons beyond their control (clause 8 and clause 9, Article 42
of Federal Law No. 208-FZ dated 26 December 1995).
*** Dividends accrued on shares held by unidentified persons are paid out as soon as the title to securities is established.
Therefore, dividends on PJSC Gazprom shares recommended
for distribution for 2018 will amount to 27% of Gazprom
Group’s IFRS profit for the year attributable to the owners of
PJSC Gazprom and will exceed the 2017 dividends by 2.1x.
In the coming years, decisions on the dividend rate will
be based on annual analysis of the international oil and gas
markets and the situation on the financial markets, and will
depend on whether net profit is backed by free cash flow.
PJSC Gazprom expects that with the macroeconomic environ-
ment remaining positive, after the commissioning of major
capex projects, higher free cash flow will enable the Company
to further increase dividends.
Since 2015, PJSC Gazprom has been paying per share divi-
dend in rouble equivalent not lower than the level achieved in
the previous year.
2.8 x
Increase in dividends on PJSC Gazprom shares
compared to those paid for 2012
For 2018, PJSC Gazprom’s Board of Directors recommended
to distribute record-high dividends of RUB 16.61 per share.
Dividend payouts will total RUB 393.2 bn.
After commissioning of major capex projects in 2019,
the higher free cash flow will support further dividend
increase if the macroeconomic environment remains
positive.
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
Credit Ratings
Credit ratings assigned to PJSC Gazprom by Standard &
Poor’s and Fitch, are comparable with sovereign foreign
currency ratings of the Russian Federation, while Moody’s
rating is one notch above the sovereign rating.
In 2018, Standard & Poor’s and Moody’s upgraded their
credit ratings for the Company, while the rating assigned
by Fitch remained unchanged. In early 2019, Moody’s
upgraded PJSC Gazprom’s credit rating again.
Credit ratings of PJSC Gazprom
Rating agency
Standard & Poor’s
Fitch Ratings
Moody’s
Dagong
ACRA
Long-term foreign currency rating
Rating date
BBB− (stable outlook)
BBB− (positive outlook)
Baa2 (stable outlook)
AAA (stable outlook)
AAA (stable outlook)
27 February 2018
25 September 2018
12 February 2019
30 October 2018
31 January 2019
For more details on PJSC Gazprom’s credit ratings see PJSC Gazprom’s website
www.gazprom.com
Bond Issues
PJSC Gazprom raises funds in the international capital
markets through the EMTN (Euro Medium Term Note)
Programme. Also, in 2018, PJSC Gazprom closed a deal
to issue yen-denominated bonds guaranteed by Japan
Bank for International Cooperation (JBIC). Additionally,
the Company places rouble bonds.
The EMTN Programme is a revolving multi-currency credit
line for up to USD 40 bn (the maximum outstanding principal
amount).
As at 31 December 2018, there were 22 Eurobond
issues outstanding for the total amount of USD 10.05 bn,
EUR 5.75 bn, CHF 2.25 bn, and GBP 1.35 bn. The issuer
is Gaz Capital S.A. (Luxembourg), a special-purpose
vehicle.
The JBIC-guaranteed JPY 65 bn bond issue has
a maturity of 10 years and a 1.01% coupon rate. The issuer
is Gaz Capital S.A. (Luxembourg), a special-purpose
vehicle.
PJSC Gazprom’s foreign currency-denominated bonds
are historically purchased by a wide range of investors with
different country and institutional backgrounds.
PJSC Gazprom’s outstanding Eurobond issues placed under the EMTN Programme as at 31 December 2018
Size
USD 1.2 bn
USD 1.3 bn
USD 1.25 bn
USD 2.25 bn
USD 0.6 bn
USD 1.0 bn
USD 0.8 bn
USD 0.9 bn
EUR 1.0 bn
EUR 0.5 bn
GBP 0.5 bn
CHF 0.5 bn
EUR 0.75 bn
EUR 1.0 bn
CHF 0.5 bn
USD 0.75 bn
Placement date
Maturity date
Coupon, %
ISIN
28.04.2004
28.04.2034
8.625
XS0191754729
07.03.2007
07.03.2022
6.51
XS0290580595
16.08.2007
16.08.2037
23.04.2009
23.04.2019
23.11.2011
23.01.2021
19.07.2012
19.07.2022
06.02.2013
06.02.2020
06.02.2013
06.02.2028
21.03.2013
20.03.2020
21.03.2013
21.03.2025
25.09.2013
25.09.2020
25.10.2013
25.10.2019
26.02.2014
26.02.2021
7.288
9.25
5.999
4.95
3.85
4.95
3.389
4.364
5.338
2.85
3.6
XS0316524130
XS0424860947
XS0708813810
XS0805570354
XS0885733153
XS0885736925
XS0906946008
XS0906949523
XS0974126186
CH0226274261
XS1038646078
17.11.2016
17.11.2023
3.125
XS1521039054
30.11.2016
30.11.2021
23.03.2017
23.03.2027
2.75
4.95
CH0346828400
XS1585190389
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
PJSC Gazprom’s rouble bonds outstanding as at 31 December 2018 (continued)
Size
GBP 0.85 bn
CHF 0.5 bn
EUR 0.75 bn
CHF 0.75 bn
EUR 0.75 bn
EUR 1.0 bn
Placement date
Maturity date
Coupon, %
ISIN
06.04.2017
06.04.2024
19.07.2017
19.07.2022
22.11.2017
22.11.2024
06.03.2018
06.03.2023
21.03.2018
21.03.2026
4.25
2.25
2.25
1.45
2.5
XS1592279522
CH0374882816
XS1721463500
CH0404311711
XS1795409082
16.11.2018
24.01.2024
2.949
XS1911645049
PJSC Gazprom’s rouble bonds outstanding as at 31 December 2018
Size, RUB bn
Placement date
Maturity date
Callability
Coupon, %
Registration number
Issuer
15.0
15.0
15.0
15.0
5.0
5.0
10.0
10.0
10.0
15.0
15.0
27.11.2013
21.10.2043
27.11.2013
21.10.2043
If the coupon rate
reaches
or exceeds 10%
If the coupon rate
reaches
or exceeds 10%
Calculated
by issuer
with formula*
Calculated
by issuer
with formula*
15.02.2017
03.02.2027
07.02.2024
15.02.2017
03.02.2027
07.02.2024
27.02.2018
15.02.2028
18.02.2025
27.02.2018
15.02.2028
18.02.2025
27.02.2018
15.02.2028
18.02.2025
27.02.2018
15.02.2028
18.02.2025
8.9
8.9
7.15
7.15
7.15
7.15
4B02-19-00028-A
PJSC Gazprom
4B02-20-00028-A
PJSC Gazprom
4B02-05-36400-R
4B02-06-36400-R
4B02-01-36400-R
4B02-02-36400-R
4B02-03-36400-R
4B02-04-36400-R
OOO Gazprom
capital**
OOO Gazprom
capital**
OOO Gazprom
capital**
OOO Gazprom
capital**
OOO Gazprom
capital**
OOO Gazprom
capital**
31.07.2018
31.07.2018
31.07.2018
12.07.2033
23.06.2048
23.06.2048
22.07.2025
22.07.2025
22.07.2025
8.1***
8.1***
8.1***
4B02-07-00028-A
PJSC Gazprom
4B02-22-00028-A
PJSC Gazprom
4B02-23-00028-A
PJSC Gazprom
* Ki = (CPI−100 %)+1 %, where:
Ki means the interest rate for the ith coupon period, but not less than 0.01% per annum
CPI means the consumer price index calculated for the Russian Federation and expressed as percentage year-on-year.
** Special-purpose subsidiary for raising funds in the Russian financial market.
*** The interest rate is for the 1st to 14th coupon period. Starting from the 15th coupon period, the interest rate is determined according to paragraph 9.3 of the Resolution on Securities Issue.
For more details on PJSC Gazprom’s bond issues see PJSC Gazprom’s website
www.gazprom.com
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PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
Shareholder and Investor Relations
PJSC Gazprom’s securities are among the most liquid
financial instruments in the Russian market. The Company’s
investor base comprises several thousand institutional
investors, including major foreign investors, such as invest-
ment funds, pension funds, banks, and insurance companies,
as well as private investors. Investors based in the United
States, the UK, and mainland Europe remain the largest
minority holders of PJSC Gazprom shares and ADRs.
Geography of institutional investors in PJSC Gazprom shares
and ADRs as at 31 December 2018, %
USA
Europe
UK
Switzerland
Other European countries
Singapore
Russia
Other countries
Source: NASDAQ
42
41
21
5
15
7
5
5
The Company fosters an ongoing dialogue with the invest-
ment community. Investment analysts and investors are
engaged regularly through a range of formats.
170
The number of managers and analysts from leading
global investment funds and credit institutions
who attended Gazprom’s Investor Day in 2018
PJSC Gazprom promotes regular direct communication
between the Company’s management and analysts and
investors, including through conference calls, road shows,
or site visits to the Group’s production facilities. Represen-
tatives of PJSC Gazprom and its subsidiaries and entities
have regular meetings with investors and are frequent
speakers at national and global conferences held by leading
investment banks.
Investors commended the possibility of a dialogue
with PJSC Gazprom’s independent directors,
noting the importance of holding such meetings
on a regular basis.
The Company also runs road shows in the regions with
the highest concentrations of existing and potential
investors.
Meetings of independent members of the Board of Directors with representatives of the investment community
Meeting date
Meeting location
Independent
Director attending
the meetings
Matters discussed at the meetings
28 August
2018
Moscow
Timur Kulibaev
PJSC Gazprom’s strategy, activities of the Board of Directors, key projects, budgeting,
debt management, ways to increase the Company’s capitalisation, dividend policy
4–7 December
2018
Frankfurt,
Stockholm
Viktor Martynov
PJSC Gazprom’s strategy, activities of the Board of Directors, environmental issues and
corporate governance, review of the key projects, the Company’s investment programme,
prospects for increasing dividend payouts
2018 highlights in shareholder and investor relations
Date
February
30 March
26 April
27 April
30 May
May–June
6 June
29 June
Event
Investor Day in London (6 February) and New York (8 February)
Publication of PJSC Gazprom’s 2017 RAS Financial Statements
Publication of the 2017 Annual Financial Report under FSA requirements,
including the 2017 IFRS Financial Statements
Conference call with investors on Gazprom Group’s 2017 IFRS Financial Statements
Publication of Gazprom Group’s Q1 2018 IFRS Financial Statements,
a conference call with investors on the Financial Statements
Press briefings of PJSC Gazprom’s top management on the 2017 results
and key areas of the Company’s development
Publication of PJSC Gazprom draft Annual Report 2017
PJSC Gazprom’s annual General Shareholders Meeting
208208
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Share Capital and Securities Market
Meetings of independent members of the Board of Directors with representatives of the investment community (continued)
Date
3–6 July
19 July
29 August
31 August
5 October
30 November
3 December
17 December
Event
Investor and analyst visits to Gazprom Group’s production facilities
Record date for PJSC Gazprom’s dividend based on PJSC Gazprom’s 2017 results
Publication of Gazprom Group’s Q2 2018 IFRS Financial Statements
Conference call with investors on Gazprom Group’s Q2 2018 IFRS Financial Statements
Speech by Alexey Miller, Chairman of PJSC Gazprom’s Management Committee,
at the St Petersburg International Gas Forum
Publication of Gazprom Group’s Q3 2018 IFRS Financial Statements
Conference call with investors on Gazprom Group’s Q3 2018 IFRS Financial Statements
Meeting of the Coordinating Committee for Shareholder and Investor Relations
Largest Russian and foreign investment banks publish
regular analyst reports on PJSC Gazprom shares.
As at the end of 2018, all analysts recommended to “buy”
(“over-weight”) or “hold” (“neutral”).
Guidance for PJSC Gazprom shares in 2018
Guidance, end of 2017
Guidance, end of 2018
AO Gazprombank
Over-weight
Over-weight
Company
OOO BCS
Hold
OOO IC Veles Capital
Under review
AO VTB Capital
ATON
Buy
Buy
SOVA Capital Limited
(Otkritie Capital)
PAO BANK URALSIB
Hold
Buy
Bank of America Merrill Lynch
Neutral
Citigroup
Credit Suisse
Deutsche Bank
Goldman Sachs
HSBC
J.P. Morgan
Morgan Stanley
Raiffeisen Bank
Renaissance Capital
Sberbank CIB
UBS
WOOD & Company
Buy
Under-weight
Buy
Hold
Hold
Over-weight
Sell
Hold
Hold
Buy
Hold
Buy
Buy
Hold
Hold
Buy
Buy
Buy
Hold
Buy
Change
Upgrade
–
Downgrade
No adjustments
No adjustments
Upgrade
No adjustments
No adjustments
No adjustments
Termination of coverage
–
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Hold
Buy
No adjustments
Upgrade
Upgrade
Downgrade
Upgrade
Upgrade
Upgrade
No adjustments
No adjustments
No adjustments
e
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a
n
r
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v
o
G
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a
r
o
p
r
o
C
Contact details of investment analysts regularly covering PJSC Gazprom are available
on PJSC Gazprom’s website
www.gazprom.com
PJSC Gazprom intends to further streamline its relations with
existing and potential investors and shareholders to develop
a meaningful dialogue with the investment community,
increase the Company’s capitalisation, and reduce the cost
of new borrowings.
209209
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PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
Appendices
210
210210
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
210PJSC Gazprom Annual Report 2018 Major and Interested Party Transactions 212
Disposal of Non-core Assets
by PJSC Gazprom and Subsidiaries 213
Implementation of Presidential and Governmental
Directives and Instructions 214
Energy Consumption by PJSC Gazprom
and its Actual Cost 220
Additional Information for the Annual Report available
on PJSC Gazprom’s Corporate Website 221
Gazprom Group’s Operating and Marketing
Geography 222
Glossary 226
Contacts 230
211
211
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PJSC Gazprom Annual Report 2018
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PJSC Gazprom Annual Report 2018211PJSC Gazprom Annual Report 2018 Major and Interested Party Transactions
In 2018, PJSC Gazprom closed no transactions treated as ma-
jor transactions under the applicable laws of the Russian Fed-
eration.
For details of transactions closed by Gazprom in the re-
porting year and treated as interested party transactions under
the applicable laws of the Russian Federation see the Report
on PJSC Gazprom’s Interested Party Transactions in 2018 ap-
proved by Resolution of PJSC Gazprom’s Board of Directors
No. 3277 dated 21 May 2019 and available on the web pages
used by PJSC Gazprom for information disclosure: www.
gazprom.com and www.e-disclosure.ru.
The Report on PJSC Gazprom’s Interested Party Transactions in 2018 is available on
PJSC Gazprom’s website
www.gazprom.com
The Report on PJSC Gazprom’s Interested Party Transactions in 2018 is available on
PJSC Gazprom’s page on the website of Interfax — Centre for Corporate Information
Disclosure (information is available in Russian only)
www.e-disclosure.ru
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PJSC Gazprom Annual Report 2018
Disposal of Non-core Assets
by PJSC Gazprom and Subsidiaries
Actual proceeds from non-core asset disposal by PJSC Gazprom
and its subsidiaries in 2018 totalled RUB 18.21 bn (excluding
intra-group transactions — RUB 6.36 bn), including:
—
those owned by PJSC Gazprom — RUB 12.28 bn
(excluding intra-group transactions — RUB 0.91 bn)
those owned by PJSC Gazprom’s subsidiaries —
RUB 5.93 bn (excluding intra-group transactions —
RUB 5.45 bn).
—
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PJSC Gazprom Annual Report 2018
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PJSC Gazprom Annual Report 2018 Implementation of Presidential and Governmental
Directives and Instructions
Disclosure of Information on Ownership Structures,
including Beneficiaries, by Counterparties under
Existing Contracts
(Instruction of Prime Minister of the Russian Federation
Vladimir Putin No. VP-P13-9308 dated 28 December 2011
and Instruction of Deputy Prime Minister of the Russian
Federation Igor Sechin No. IS-P13-80 dated 12 January
2012)
From 1 January 2018 through 31 December 2018,
PJSC Gazprom informed the Russian Ministry of Energy, Fed-
eral Tax Service and Federal Service for Financial Monitoring
(Rosinfomonitoring) of:
— 87,491 existing contracts (with 4,550 contracts signed
by PJSC Gazprom and 82,941 contracts signed by sub-
sidiaries or associates directly and/or indirectly con-
trolled by PJSC Gazprom by more than 50%)
— changes in the ownership structure and/or executive
bodies of PJSC Gazprom’s counterparties
— changes in the ownership structure and/or executive
bodies of the counterparties of subsidiaries and associ-
ates directly and/or indirectly controlled by
PJSC Gazprom by more than 50% in total.
On Establishing Engineering Units and R&D Centres on
Russky Island (Vladivostok)
(List of Instructions of President of the Russian Federation
Vladimir Putin No. Pr-1849 dated 10 October 2018 issued
following the 2017 Eastern Economic Forum, which was held
on from 11 to 13 September 2018)
A number of initiatives is being implemented to provide engi-
neering capabilities for offshore hydrocarbon production and
natural gas liquefaction projects carried out by Gazprom
Group in the Russian Far East.
— A decision is pending on details of establishing
a dedicated engineering unit, the Far Eastern branch
of OOO Gazprom 335, on Russky Island, as well as the
phased approach to its development, including objec-
tives, primary activity, technical and economic parame-
ters, etc.
— The Company is now collaborating with Far Eastern Fed-
eral University (FEFU), including on permanently setting
up the Far Eastern branch of OOO Gazprom 335 on
property leased from FEFU.
— Taking into account the need for FEFU to comply with
corporate procedures established by Russian laws for
federal state autonomous higher education institutions,
the considerable time taken by the procedures and the
lack of accommodation options on Russky Island, and
aiming to absolutely ensure the launch of the Far Eastern
branch of OOO Gazprom 335 in 2019, a decision has
been taken that at the initial stage, employees of the
newly created structural unit will be accommodated on
the inland part of Vladivostok (the site has been found
and the lease contract approved).
214
PJSC Gazprom Annual Report 2018
Implementation of Presidential and Governmental
Directives and Instructions
Charitable Funds and Sponsorship Support
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-250 dated 9 February 2018 on providing
RUB 150 mm financial support to build a block of flats for
rehousing families from ramshackle homes in the Elshanka
village, the Saratov Region)
In 2018, PJSC Gazprom channelled RUB 75 mm under
a donation agreement to build a block of flats with integrated
and attached premises located at 2 Moskovskoye Shosse,
Saratov, Saratov Region, for rehousing families from ram-
shackle homes in the Elshanka village in Saratov’s Leninsky
District. The remaining funds will be donated according to
schedule, in 2019.
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-529 on providing EUR 10 mm financial support
to Dinamo Riga in the 2017/2018 season and upcoming years
for the hockey club to participate in the Kontinental Hockey
League Championship, dated 20 March 2017)
In pursuance of the instruction, two Gazprom Group compa-
nies (OOO Gazprom export and JSC Latvijas Gaze) chan-
nelled EUR 10.7 mm in sponsorship support to the hockey
club in 2018.
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-1991on providing financial support to organise
and hold a round-the-world polar expedition in 2018 as part
of the World Oceanic International Flight, dated 27
September 2017)
In the reporting year, PJSC Gazprom channelled RUB 96.8 mm
under a donation agreement to organise and hold a round-
the-world polar expedition in summer 2018 as part of the
World Oceanic International Flight featuring Oleg Atkov, Pilot-
Cosmonaut of the USSR and Hero of the Soviet Union, and
Valery Tokarev, Pilot-Cosmonaut of the Russian Federation
and Hero of the Russian Federation.
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-1066 on providing support to the Russian
Olympic Committee in preparing for the 2022 Olympics; the
amount of financial support is expected to remain at the
same level, dated 21 June 2018)
In pursuance of the instruction, PJSC Gazprom signed
sponsorship agreements with the Russian Olympic Com-
mittee (ROC) to support events, projects, and programmes
implemented by ROC for the Russian Olympic team and
Olympic delegation to get proper training and support and
participate in the Olympic Games, the Youth Olympic Games,
the European Games, and the European Youth Olympic Fes-
tivals, as well as to support activities under the programmes
aiming to promote elite and amateur sports. Payments under
the agreements are made in 2018–2019 according to sched-
ule, the amount of financial support remained at the same
level.
(Instruction of Prime Minister of the Russian Federation
Dmitry Medvedev No. DM-P12-2800r on a project to build
a fitness facility in Ivanovo, dated 16 May 2018)
In 2018, the project to build a fitness facility with an ice rink
and a swimming pool in Ivanovo was included in the Gazprom
for Children Programme. The facility is expected to be com-
missioned in Q4 2021.
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PJSC Gazprom Annual Report 2018 Implementation of Presidential and Governmental
Directives and Instructions
Procurement Standards for Certain Types of Goods,
Works, and Services
(Russian Government Directives No. 2793p-P13 dated 19
April 2016 approved by First Deputy Prime Minister of the
Russian Federation Igor Shuvalov)
The Board of Directors of PJSC Gazprom passed Resolution
No. 2770 dated 29 June 2016 comprising the instructions
outlined in the directives.
For Order of PJSC Gazprom No. 7 dated 10 January
2019 outlining procurement standards for certain types
of goods (works, services) see PJSC Gazprom’s website:
(http://www.gazprom.ru/f/posts/21/053269/pri-
kaz_10.01.2019.pdf). Procurement standards are used in
planning PJSC Gazprom’s procurement procedures. The
progress of PJSC Gazprom’s procurement is monitored, in-
cluding in terms of compliance with the approved procure-
ment plan and the respective procurement standards for
goods, works, and services to cater for PJSC Gazprom’s
needs, as well as in terms of compliance of the purpose
of goods, works, and services procured by PJSC Gazprom
with the activities outlined in the Articles of Association. Fur-
thermore, the adjustment (update) of procurement stand-
ards for goods, works, and services to cater for
PJSC Gazprom’s needs, is carried out.
Adjustment of Strategic Planning Documents
in the Russian Federation
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-2699, dated 25 December 2017, sub-paragraph
d, paragraph 1)
As part of a Working Group of the Ministry of Energy of the
Russian Federation, PJSC Gazprom, jointly with relevant min-
istries, authorities, and organisations, took part in the efforts
to update the Energy Security Doctrine of the Russian Feder-
ation. The draft Energy Security Doctrine of the Russian Fed-
eration was approved at the meeting of the Security Council
of the Russian Federation chaired by President of the Russian
Federation Vladimir Putin on 29 November 2018.
Introduction of Professional Standards
into the Activities of PJSC Gazprom, Its Subsidiaries
and Entities
(Russian Government Directives No. 5119p-P13 dated 14 July
2016 approved by First Deputy Prime Minister of the Russian
Federation Igor Shuvalov)
Pursuant to Resolution of the Board of Directors of
PJSC Gazprom No. 2802 dated 7 September 2016 on the in-
troduction of professional standards into the activities
of PJSC Gazprom, its subsidiaries and entities, Alexey Miller,
Chairman of PJSC Gazprom’s Management Committee,
was instructed to introduce professional standards into the
activities of PJSC Gazprom, its subsidiaries and entities
through approving and executing respective plans and re-
viewing this matter at least once every six months at the
meetings of the Board of Directors of PJSC Gazprom.
In pursuance of this resolution, the 2017–2019 Action
Plan to introduce professional standards into the activities
of PJSC Gazprom, its subsidiaries and entities was approved.
Taking into account the requirements of the Action Plan,
the development and introduction of professional standards
into the activities of PJSC Gazprom are carried out in line
with annual plans. The results of these efforts are reviewed
once every six months at the meetings of the Board of Di-
rectors of PJSC Gazprom.
Procurement of High-tech Products for Civilian
use from Defence Industry Organisations
(Minutes of the Defence Conference on Diversifying
the Manufacturing of High-Tech Products for Civilian Use
by Defence Industry Organisations No. RD-P22-2500, dated
27 April 2018)
PJSC Gazprom prepared and submitted to the Russian Min-
istry of Industry and Trade its proposals to create a mecha-
nism for financing a consolidated order of Mi-171A2 helicop-
ters for offshore operations by companies operating in the
fuel and energy sector.
216
PJSC Gazprom Annual Report 2018
Implementation of Presidential and Governmental
Directives and Instructions
Gas Infrastructure Expansion and Gas Supply
to Regions
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-1900 to ensure gas supplies in the Lyubimov
microdistrict in the right-bank area of Berezniki with the
Usolye (Pyskor) gas distribution station, dated 2 October
2016)
In 2018, the Lyubimov gas distribution station was commis-
sioned.
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-1112 to include the construction of a branch to
Kirillov — Belozersk — Lipin Bor — Vytegra (the Vologda
Region) — Pudozh (the Republic of Karelia) in PJSC
Gazprom’s Investment Programme, dated 15 May 2014)
The branch to Kirillov — Belozersk — Lipin Bor — Vytegra
(the Vologda Region) was included in PJSC Gazprom’s 2019
Investment Programme.
Pricing in the Russian Gas Market
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-68 dated 16 January 2018; Instruction of Deputy
Prime Minister of the Russian Federation Dmitry Kozak No.
DK-P9-4434 dated 19 July 2018; Instruction of Prime Minister
of the Russian Federation Dmitry Medvedev No. DM-P9-5068r
dated 20 July 2018; Minutes of meeting at the office of
Deputy Prime Minister of the Russian Federation Dmitry Kozak
and Deputy Prime Minister of the Russian Federation —
Presidential Plenipotentiary Envoy to the Far Eastern Federal
District Yury Trutnev No. DK-P9-213pr dated 28 October
2018)
In pursuance of the instruction to cancel government price
regulation for the natural gas sold to produce methanol for
exports, the Government of the Russian Federation adopted
Resolution No. 1282 on certain matters of gas sales in the
Russian Federation dated 29 October 2018 which cancels
government price regulation for natural gas sold to produce
methanol for exports.
(Instruction of Deputy Prime Minister of the Russian
Federation — Presidential Plenipotentiary Envoy to the Far
Eastern Federal District Yury Trutnev No. YuT-P9-58 dated
12 January 2018; Minutes of meetings at the Ministry
of Energy of the Russian Federation No. 05-6pr dated
26 January 2018 and No. 05-34pr dated 9 May 2018)
In pursuance of the instruction to cancel government price
regulation for the natural gas sold to produce refined gas
products and gas chemical products for exports, jointly with
gas chemical companies and federal executive authorities,
an aligned stance on pricing principles was developed to fur-
ther elaborate the respective draft resolution of the Govern-
ment of the Russian Federation.
(Instruction of President of the Russian Federation Vladimir
Putin No. Pr-2699 dated 8 December 2017; Instruction
of Deputy Prime Minister of the Russian Federation Dmitry
Kozak No. DK-P9-3486 dated 19 June 2018)
In pursuance of the instruction to cancel government price
regulation for the natural gas produced with the use of lique-
faction and/or regasification technology from the gas pro-
duced by PJSC Gazprom and its affiliates, owners of regional
gas supply systems and supplied to other than household
consumers, the Government of the Russian Federation
adopted Resolution No. 1442 dated 30 November 2018 to
amend certain decrees of the Russian Government on gas
price regulation to cancel price regulation for
the natural gas supplied to industrial consumers using lique-
faction and/or regasification technology.
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PJSC Gazprom Annual Report 2018 Implementation of Presidential and Governmental
Directives and Instructions
Implementation of Programmes to dispose
of PJSC Gazprom’s Non-core Assets
(sub-paragraph c, paragraph 2 of Decree of the President
of the Russian Federation Vladimir Putin No. 596 dated
7 May 2012)
In pursuance of sub-paragraph c, paragraph 2 of Decree of
the President of the Russian Federation No. 596 dated 7 May
2012, PJSC Gazprom consistently promotes the optimisation
and disposal of non-core assets.
In pursuance of Russian Government Directives
No. 4863p-P13 dated 7 July 2016, to enhance efforts aimed
at further optimisation and disposal of non-core assets,
PJSC Gazprom’s Board of Directors passed Resolution
No. 2810 dated 27 September 2016 approving the Programme
for the Disposal of PJSC Gazprom’s Non-Core Assets.
In pursuance of the Russian Government Directives
No. 6604p-P13 dated 18 September 2017, PJSC Gazprom’s
Board of Directors passed Resolution No. 3066 dated
16 January 2018 approving the new version of the Pro-
gramme to align it with the Guidelines for Identifying and Dis-
posal of Non-Core Instruction Assets approved by Russian
Government Decree No. 894r dated 10 May 2017.
In 2018, PJSC Gazprom was disposing of non-core as-
sets as part of this Programme, Action Plan for the Disposal
of PJSC Gazprom’s Non-Core Assets for 2018 (versions ap-
proved by resolutions of the Board of Directors No. 3052
dated 19 December 2017 and No. 3184 dated
20 November 2018) as well as the Register of Gazprom’s
Non-Core Assets (versions approved by resolutions of the
Board of Directors No. 3052 dated 19 December 2017,
No. 3184 dated 20 November 2018, and No. 3204 dated
28 December 2018).
The Register comprises three sections: Long-Term Fi-
nancial Investments (stock, shares), Real Property, and Mov-
able Property.
The information on PJSC Gazprom’s non-core assets subject
to disposal and included in the Register of Gazprom’s Non-
Core Assets contains, among other things: the asset list,
quantity; information on each non-core asset — asset de-
scription, type of activity associated with the asset, its book
(depreciated) value, initial selling price (equal to its market
value as assessed by an independent valuator), method of
sale (primarily a public sale process), and encumbrances.
The approval of the Programme, Register, and Plan was
disclosed by PJSC Gazprom in the manner prescribed by the
law by publishing appropriate open access information on its
website. The Programme and Register are also available on
a dedicated website for Gazprom Group’s non-core asset
disposal www.gazpromnoncoreassets.ru, the link to which is
available on PJSC Gazprom’s website in the Asset Disposal
section.
In 2018, in pursuance of the Russian Government Di-
rectives and under the Programme for the Disposal of
PJSC Gazprom’s Non-Core Assets, the Board of Directors
reviewed and took into account quarterly reports on the
disposal of PJSC Gazprom’s non-core assets (resolutions of
the Board of Directors No. 3100 dated 8 May 2018, No. 3121
dated 1 June 2018, No. 3150 dated 22 August 2018, and
No. 3184 dated 20 November 2018).
The actual cost of sale of PJSC Gazprom’s non-core as-
sets disposed of in 2018 under the said Programme, Action
Plan for the Disposal of PJSC Gazprom’s Non-Core Assets
for 2018, and Register of PJSC Gazprom’s Non-Core Assets
was RUB 269,949.03 thousand (inclusive of VAT). Pre-sale
preparation and disposal of non-core assets resulted
in the actual cost of sale exceeding the book value by
RUB 108,401.38 thousand.
Implementation of the Programme, Action Plan, and Register of PJSC Gazprom’s Non-Core Assets in 2018
No. Asset
Land plot at Pushkinskoye household, Bolshoe Boldino,
Bolsheboldinsky District, Nizhny Novgorod Region
Sanatorium building under construction at Pugacheva St., Zelenogradsk,
Kaliningrad Region
Inventory number
(if applicable)
–
–
Asset balance sheet item
containing the asset
as at the reporting date prior
to the asset disposal
1210
1150
Stables at Morozovka Park Hotel, Lyalovo, Solnechnogorsk District,
Moscow Region
Real estate object “Canteen, shop, bar” at Morozovka Park Hotel, Lyalovo,
Solnechnogorsk District, Moscow Region
249606–249608
1150
249992, 250057, 249347
1150
OOO Engineering (1%)
–
1173
911906/914706
9,680.00
1.50
−9,678.50
The asset disposed by auction
Movable property (motor vehicles and special-purpose machinery, equipment,
and other)
362 inventory items
1150
911110/914101
16,831.92
137,899.24
121,067.32
Results of pre-sale preparation
Balance sheet item
(analytics included), containing
asset disposal income
and expense (91.1xxx/91.2xxx)
903910/414900
625300/901910
915100/083152
624900/912300
911110/914101
911110/914101
Book value of asset
,
RUB thousand
Actual cost of sale
,
RUB thousand
(inclusive of VAT)
Actual cost of sale
vs book value
,
Reason for difference between
RUB thousand
the actual cost of sale and book value
46,737.00
47,237.00
500.00
Results of pre-sale preparation
86,666.66
78,168.84
−8,497.82
The asset disposed following
3.92
1,180.00
1,176.08
Results of pre-sale preparation
1,628.15
5,462.45
3,834.30
Results of pre-sale preparation
and disposal of assets
a competitive procedure with
the initial selling price equal
to its market value
and disposal of assets
and disposal of assets
at a price no less than its market
value
and disposal of assets
161,547.65
269,949.03
108,401.38
1
2
3
4
5
6
Total for 2018
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Implementation of Presidential and Governmental
Directives and Instructions
Implementation of the Programme, Action Plan, and Register of PJSC Gazprom’s Non-Core Assets in 2018
No. Asset
Land plot at Pushkinskoye household, Bolshoe Boldino,
Bolsheboldinsky District, Nizhny Novgorod Region
Sanatorium building under construction at Pugacheva St., Zelenogradsk,
Kaliningrad Region
Stables at Morozovka Park Hotel, Lyalovo, Solnechnogorsk District,
249606–249608
1150
Real estate object “Canteen, shop, bar” at Morozovka Park Hotel, Lyalovo,
249992, 250057, 249347
1150
Moscow Region
Solnechnogorsk District, Moscow Region
OOO Engineering (1%)
Inventory number
(if applicable)
Asset balance sheet item
containing the asset
as at the reporting date prior
to the asset disposal
–
–
–
1210
1150
1173
1
2
3
4
5
and other)
Total for 2018
6
Movable property (motor vehicles and special-purpose machinery, equipment,
362 inventory items
1150
911110/914101
16,831.92
137,899.24
121,067.32
911906/914706
9,680.00
1.50
−9,678.50
161,547.65
269,949.03
108,401.38
219
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PJSC Gazprom Annual Report 2018
Balance sheet item
(analytics included), containing
asset disposal income
and expense (91.1xxx/91.2xxx)
903910/414900
625300/901910
915100/083152
624900/912300
911110/914101
911110/914101
,
Book value of asset
RUB thousand
,
Actual cost of sale
RUB thousand
(inclusive of VAT)
Actual cost of sale
,
vs book value
RUB thousand
Reason for difference between
the actual cost of sale and book value
46,737.00
47,237.00
500.00
Results of pre-sale preparation
and disposal of assets
86,666.66
78,168.84
−8,497.82
3.92
1,180.00
1,176.08
1,628.15
5,462.45
3,834.30
The asset disposed following
a competitive procedure with
the initial selling price equal
to its market value
Results of pre-sale preparation
and disposal of assets
Results of pre-sale preparation
and disposal of assets
The asset disposed by auction
at a price no less than its market
value
Results of pre-sale preparation
and disposal of assets
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PJSC Gazprom Annual Report 2018 Energy Consumption by PJSC Gazprom
and its Actual Cost
Energy resource
Natural gas
mmcm
RUB mm (inclusive of VAT)
Electricity
thousand MWh
RUB mm (inclusive of VAT)
Heat
thousand Gcal
RUB mm (inclusive of VAT)
Motor gasoline
mm litres
RUB mm (inclusive of VAT)
Diesel fuel
mm litres
RUB mm (inclusive of VAT)
2016
2017
2018
5.6
5.8
6.5
35.9
37.4
43.5
61.3
58.8
64.1
292.4
315.0
357.9
81.4
78.3
77.5
139.0
143.8
158.8
1.5
0.9
1.4
52.7
33.9
56.4
0.8
0.6
1.1
25.8
20.4
43.2
Note. The reported data are for facilities managed by PJSC Gazprom. Power consumption by facilities placed under third parties’ management is not taken into consideration. PJSC Gazprom
consumes no other energy resources in significant quantities.
220
PJSC Gazprom Annual Report 2018
Additional Information for the Annual Report available
on PJSC Gazprom’s Corporate Website
Meetings of PJSC Gazprom’s Board of Directors in 2018
Meetings of the Audit Committee of PJSC Gazprom’s
Board of Directors in 2018
Meetings of the Nomination and Remuneration Commit-
tee of PJSC Gazprom’s Board of Directors in 2018
Debt Recovery Litigations pending as at 31 December
2018
List of Entities in which PJSC Gazprom holds Shares (In-
terest) as at 31 December 2018
Information on PJSC Gazprom’s website
www.gazprom.com
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Asia-Pacific
North America
Philippines
Sri Lanka
Japan
Canada
Mexico
United States
Central and South America
Argentina
Bolivia
Brazil
Guyana
Guatemala
Honduras
Colombia
Costa Rica
Nicaragua
Panama
Paraguay
Peru
El Salvador
Uruguay
Chile
Ecuador
Other countries
Dominican Republic
Jamaica
Maldives
Mongolia
Saint Vincent
and the Grenadines
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225
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PJSC Gazprom Annual Report 2018
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PJSC Gazprom Annual Report 2018
Glossary
Name
Definition
A
ADR of PJSC Gazprom
American Depositary Receipt issued for PJSC Gazprom shares
APG
Asia Pacific
Brent
Central Asia
B
C
CGTU
CHPP
CIS
CNG
CS
E
EMS
EU
Associated petroleum gas
The Asia-Pacific region, which includes countries of mainland Asia, America and Pacific Ocean Area
Benchmark grade of crude oil produced in the North Sea
Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan
Comprehensive gas treatment unit
Combined heat and power plant
The Commonwealth of Independent States
Compressed natural gas
Compressor station
Environmental Management System
European Union
European far abroad countries
25 EU countries (excluding Latvia, Lithuania, and Estonia), such non-EU countries as Turkey, Norway,
and Switzerland, and the Balkan states of Albania, Bosnia and Herzegovina, Macedonia, and Serbia
F
Far abroad countries
Foreign countries other than FSU countries, comprising the geographic segment Europe and other
countries as defined in PJSC Gazprom’s IFRS consolidated financial statements
FSU countries
Former Soviet Union republics, except for the Russian Federation
G
GCF
GHG
GPP
GPU
GRES
GRF
GTS
I
IFRS
ISO 14001
ISO 9001
K
L
KPIs
LNG
LPG
M MET
N
O
NGV fuel
OGCF
Gas condensate field
Greenhouse gases
Gas and/or condensate processing plant
Gas pumping unit
State district power station
Gas recovery factor
Gas transportation system
International Financial Reporting Standards
International Organisation for Standardisation, the international environmental management standard
International Organisation for Standardisation, the international quality management standard
Key Performance Indicators
Liquefied natural gas
Liquefied petroleum gas
Mineral extraction tax
Natural gas vehicle fuel
Oil and gas condensate field
OHSAS 18001:2007
Occupational Health and Safety Management Systems, the international standard for occupational
health and safety management systems
P
PBs
PRMS
226
Performance benchmarks
Petroleum Resources Management System, an international standard for hydrocarbon reserve
classification and reporting
PJSC Gazprom Annual Report 2018
Glossary
Name
R
R&D
RAS
S
SME
SPS
SPTs
Definition
Research and Development
Russian Accounting Standards
Small and medium enterprises
Subsea production system
Strategic Performance Targets
T
The Eastern Gas Programme
The programme of building an integrated gas production, transportation, and supply system in
Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-
Pacific countries, approved by Order of the Ministry of Economic Development of the Russian
Federation No. 340 dated 3 September 2007
toe
TPP
U
UGSF
UGSS
UIS
UOHSMS
USD
V
VAT
Tonne of oil equivalent
Thermal power plant
Underground gas storage facility
Unified Gas Supply System of Russia
Unified Information System of public procurement of goods, works, and services for state
and municipal needs
Unified Occupational Health and Safety Management System
United States (US) dollars
Value added tax
Definition
Conversion ratios
A cubic metre of natural gas measured at 1 Pa
pressure and 20°C, with a calorific value
of 8,850 kcal per cu m
1,000 cu m of gas = 6.49 barrels of oil equivalent
= 0,80 tonnes of oil equivalent
Units of Measurement and Conversion Table
Name
cu m of gas
BTU
tonne of oil
British thermal unit
Tonne of oil
tonne of gas condensate
Tonne of gas condensate
Conventions
Sign
–
0,0
Meaning
Not observed
Value less than 0.05
List of Foreign Companies Mentioned in the Report
Full name
ZAO Gazprom Armenia
(OsOO Gazprom Kyrgyzstan)
OAO Gazprom transgaz Belarus
JSC National Company KazMunayGas
JSC Uzbekneftegaz
Bangladesh Gas Fields Company Ltd.
Bank of America Corporation
BASF SE
Bloomberg L.P.
227
227
Short name
–
–
–
–
–
BAPEX
–
BASF
Bloomberg
1 mm BTU = 0.028 mcm of LNG
= 0.021 tonnes of LNG
= 7,33 barrels of oil
= 7,33 barrels of oil equivalent
= 1 tonne of oil equivalent
= 8,18 barrels of gas condensate
= 8,18 barrels of oil equivalent
= 1 tonne of oil equivalent
Country
Armenia
Kyrgyzstan
Belarus
Kazakhstan
Uzbekistan
Bangladesh
USA
Germany
USA
PJSC Gazprom Annual Report 2018
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PJSC Gazprom Annual Report 2018 Glossary
List of Foreign Companies Mentioned in the Report (continued)
Full name
Blue Stream Pipeline Company B.V.
BP p.l.c.
China National Petroleum Corporation
Citigroup Inc.
Credit Suisse Group AG
Short name
Blue Stream
BP
CNPC
Citigroup
Credit Suisse
Dagong Global Credit Rating Company Limited
Dagong
DeGolyer and MacNaughton
DEPA SA
Deutsche Bank AG
Edison Spa
ENGIE S.A.
Eni SpA
Equinor ASA
–
DEPA
Deutsche Bank
Edison
ENGIE
Eni
Equinor
Exxon Mobil Corporation
Exxon Mobil
Fitch Ratings
GAIL (India) Limited
GazAsia Capital S.A.
Gaz Capital S.A.
–
GAIL
–
–
Country
The Netherlands
United Kingdom
PRC
USA
Switzerland
PRC
USA
Greece
Germany
Italy
France
Italy
Norway
USA
USA
India
Luxembourg
Luxembourg
Gazprom Marketing and Trading Singapore Pte. Ltd. Gazprom Marketing & Trading Singapore
Singapore
Gazprom NGV Europe GmbH
Gazprom NGV Europe
GAZPROM Schweiz AG
HSBC Holdings plc
GAZPROM Schweiz
HSBC
International Business Machines Corporation
IBM
IHS Markit Ltd.
IHS Markit
Japanese Bank for International Cooperation
JBIC
JP Morgan Chase & Co
Moody’s Investors Service
JP Morgan
Moody’s
Morgan Stanley International Limited
Morgan Stanley
Mubadala Petroleum
Naftna Industrija Srbije a.d.
Nord Stream AG
OMV Aktiengesellschaft
–
NIS
Nord Stream
OMV
Otkritie Capital International Limited
Otkritie Capital
Perenco Cameroon S.A.
Perenco Cameroon
PetroVietnam Gas Corporation
PetroChina Company Limited
Qatar Petroleum
PV Gas
PetroChina
–
Raiffeisen Bank International AG
Raiffeisen Bank
Repsol S.A.
Royal Dutch Shell plc.
Repsol
Shell
Sakhalin Energy Investment Company Ltd.
Sakhalin Energy
S&P Global Platts
–
State Oil Company of Azerbaijan Republic
SOCAR
Siemens AG
Sonatrach Group
228
Siemens
Sonatrach
Germany
Switzerland
United Kingdom
USA
United Kingdom
Japan
USA
USA
USA
UAE
Serbia
Switzerland
Austria
United Kingdom
Cameroon
Vietnam
PRC
Qatar
Austria
Spain
United Kingdom
Bermuda
United Kingdom
Azerbaijan
Germany
Algeria
PJSC Gazprom Annual Report 2018
Glossary
List of Foreign Companies Mentioned in the Report (continued)
Full name
Short name
Societe Nationale des Hydrocarbures
Standard & Poor’s
The Bank of New York Mellon
–
–
–
The Goldman Sachs Group, Inc.
Goldman Sachs
TOTAL S.A.
TurkAkim Gaz Tasima A.S.
UBS Group AG
Wintershall AG
Wintershall Holding GmbH
Wintershall Noordzee B.V.
Total
–
UBS
–
Wintershall Holding
Wintershall Noordzee
WIROM GAS S.A.
–
Wood & Company Financial Services, a.s.
Wood & Company
Yacimientos Petroliferos Fiscales Bolivianos
YPFB
Yamal Trade Pte. Ltd.
YPF S.A.
Yamal Trade
YPF
Country
Cameroon
USA
USA
USA
France
Turkey
Switzerland
Germany
Germany
The Netherlands
Romania
Czech Republic
Bolivia
Singapore
Argentina
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PJSC Gazprom Annual Report 2018 Contacts
Full Name
Contact for Shareholders
Public Joint Stock Company Gazprom
Abbreviated Name
PJSC Gazprom
Location
Moscow, Russian Federation
Address
16 Nametkina St., GSP-7, Moscow,
117997, Russian Federation
Postal address:
BOX 1255, Saint Petersburg,
190900, Russia
Delivery address:
156 Moskovsky Av., Bld. A, Saint Petersburg,
196105, Russian Federation
Phone:
+7 495 719 3001
Fax:
+7 495 719 8333
+7 812 413 7333
Website
www.gazprom.com
E-mail
gazprom@gazprom.ru
Certificate of Entry into the Unified State Register
of Legal Entities
by the Moscow Department of the Ministry of Taxation
dated 2 August 2002
OGRN 1027700070518
Taxpayer Personal Identification Number (INN)
7736050003
+7 812 609 7657
(for shareholders of PJSC Gazprom)
Contact for Investors
Phone:
+7 812 609 4129
Fax:
+7 812 609 4334
E-mail:
ir@gazprom.ru
Auditor
Limited Liability Company
Financial and Accounting Consultants (OOO FBK)
OOO FBK is a member of the self-regulated organisation
of auditors Auditor Association Sodruzhestvo
Location:
44/1 Myasnitskaya St., Bld. 2 AB, Moscow,
101990, Russian Federation
Phone:
+7 495 737 5353
Website:
www.fbk.ru
Registrar
Joint Stock Company Specialised Registrar —
Register Keeper for Gas Industry Shareholders (AO DRAGa)
Location:
71/32 Novocheryomushkinskaya St., Moscow,
117420, Russian Federation
Phone:
+7 495 719 4044
Fax:
+7 495 719 4585
Website:
www.draga.ru
230
PJSC Gazprom Annual Report 2018
231
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PJSC Gazprom Annual Report 2018 This Annual Report is approved
by PJSC Gazprom’s
annual General Shareholders Meeting
(Minutes No. 1 dated 2 July 2019),
pre-approved
by Resolution of PJSC Gazprom’s
Board of Directors
No. 3271 dated 21 May 2019
(Minutes No. 1254 dated 21 May 2019).
Chairman of PJSC Gazprom’s
Management Committee
A.B. Miller
Chief Accountant
of PJSC Gazprom
E.A. Vasilieva
232232
PJSC Gazprom Annual Report 2018
PJSC Gazprom Annual Report 2018
www.gazprom.ru
www.gazprom.com