Strategy

The strategic goal of OAO Gazprom is leadership among global energy companies

What is the strategic goal of Gazprom?

The strategic goal of Gazprom is becoming a leader among global energy companies by conquering new markets, diversifying business activities and ensuring reliable supplies.

At the same time, OAO Gazprom views its mission in maximally efficient and balanced supply of consumers with natural gas, other energy resources and their derivatives.

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What principles does Gazprom’s strategy hinge on?

Gazprom’s strategy hinges on the following operating principles:

  • enhancing the efficiency of its major business;
  • diversifying activities through high-efficiency projects for high value added products;
  • raising the Company’s market capitalization and credit ratings;
  • meeting the interests of all OAO Gazprom shareholders;
  • improving the corporate governance;
  • enhancing financial and economic transparency;
  • personal responsibility of the executives for managerial decision making;
  • minimizing adverse environmental impacts of production processes.
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Why is business diversification a strategic priority for Gazprom?

The Company’s business diversification implies expanding the areas of operations and the range of final products, conquering new markets and developing logistics schemes. All of the above are the prerequisites for global companies to enjoy their strategic and competitive advantages.

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What are the strategic projects of Gazprom?

The strategic challenges of OAO Gazprom are met through the execution of the following promising projects:

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Developing Yamal Peninsula resources

Yamal Peninsula fields layout
Yamal Peninsula fields layout

The Yamal Peninsula is a strategic gas production region for the Company. It is one of the most promising oil and gas bearing provinces in Western Siberia. The Yamal resources development is the largest energy project in the contemporary history of Russia, unparalleled in terms of sophistication. The project is similar to the development of Western Siberian fields in the 1970s in terms of its scale and significance. It lays the foundation required to boost gas production in Russia. Commercial development of the Yamal fields will make it possible to build up regional gas production to 310–360 billion m3 a year by 2030.

There are several dozens of gas, oil, gas and condensate fields discovered onshore and offshore Yamal. Explored reserves of the region’s largest fields, i.e. Bovanenkovskoye, Kharasaveyskoye, Severo-Tambeyskoye, Kruzenshternskoye and Malyginskoye exceed 8 trillion m3 of gas with Gazprom Group as their licensed operator. Bovanenkovskoye, Yamal’s largest gas field, where production started in 2012, was developed at the first phase of the Yamal megaproject.

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Eastern Gas Program

Gas resources available in Eastern Siberia and the Far East are sufficient for arranging gas export and meeting long-term needs of Eastern Russia where initial gas resources in place total 52.4 trillion m3 onshore and 14.9 trillion m3 offshore.

In September 2007 the Russian Industry and Energy Ministry approved the Development Program for an integrated gas production, transmission and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Gas Program). The Russian Government entrusted OAO Gazprom to act as the Program execution coordinator. The Company started implementing the Program’s provisions prior to its official approval.

New gas production centers have already been set up in Eastern Russia, namely the Sakhalin Region and the Kamchatka Territory, a gas production center is being shaped in the Republic of Sakha (Yakutia), the Irkutsk Region and the Krasnoyarsk Territory are next in turn.

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Gas resources development and gas transmission system formation in Eastern Russia
Gas resources development and gas transmission system formation in Eastern Russia

The primary development principles for a gas supply system in Eastern Russia are as follows:

  • giving priority to meeting Russian consumers’ demand for gas and maintaining sustainable gas supply throughout Russia by expanding the Unified Gas Supply System (UGSS) eastwards;
  • shaping a natural gas market on the basis of competitive pricing among various fuels.

The Sakhalin Island shelf is the main resource base for gas supply to consumers in Russia’s Far East. Gazprom participates in the Sakhalin II project as a major shareholder. The first Russian LNG plant was constructed as part of the project and Russian LNG export commenced.

Sakhalin III is another large-scale project of Gazprom. Here the Company holds licenses for the Kirinsky, Vostochno-Odoptinsky and Ayashsky blocks as well as for the Kirinskoye field, the first gas from which was supplied to consumers in the Far East in 2014.

In September 2010 the Company discovered a new field within the Kirinsky block – the Yuzhno-Kirinskoye field containing 636.6 billion m3 of natural gas. In autumn 2011 the Mynginskoye field containing 19.9 billion m3 of gas reserves was discovered there.

Besides, Gazprom constructed the first startup complex of the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS) with a view to develop gas supply to the Khabarovsk Territory and the Sakhalin Region and to arrange gas supply to the Primorye Territory. The annual throughput of the first startup complex totals 6 billion m3. In September 2011 consumers in Vladivostok received first gas.

In 2013 the Final Investment Decision was adopted for the LNG plant construction in Vladivostok with the annual capacity of 10 million t and the possibility for further extension. The project was named Vladivostok LNG and it is currently at the design stage.

In the Republic of Sakha (Yakutia) Gazprom operates in the Chayandinskoye field with gas reserves exceeding 1.4 trillion m3. Gas production will start in 2018. Gazprom constructs the Power of Siberia gas trunkline in order to deliver gas from Yakutia and then from Irkutsk. Gas processing and helium production capacities will be created in the Amur Region.

The Kovyktinskoye field in the Irkutsk Region with the reserves exceeding 2.5 trillion m3 of gas is at the stage of pilot commercial operation.

Geological exploration is underway in the Krasnoyarsk Territory. For instance, a new field – Abakanskoye – was discovered in 2010, the Ilbokichskoye and Novo-Yudokonskoye fields – in 2012, the VostochnoImbinskoye field – in 2014.

In the Kamchatka Territory Gazprom finished the pre-development of the Kshukskoye and Nizhne-Kvakchikskoye fields on the west coast of the Kamchatka Peninsula. The Sobolevo – Petropavlovsk-Kamchatsky gas trunkline has been constructed and gas is now being supplied to the Territory capital. Gasification of settlements located along the Sobolevo – Petropavlovsk-Kamchatsky gas pipeline route is well underway.

The fields of Eastern Russia feature complex gas composition, high helium content, oil rims and a high condensate factor. These features require a special approach to resources development in the Yakutia, Irkutsk and Krasnoyarsk centers as compared to Western Siberia. Here, it is necessary to fully utilize all components found in the produced gas. The point is not just to produce gas, but to set up a number of gas processing companies in Eastern Russia and export high value added products.

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Pipeline gas supply to China

Forming large gas production centers in Eastern Siberia and the Far East, building high-capacity transmission corridors makes it possible to establish a new Russian gas export center geared to the Asia-Pacific region.

In spring 2014 Gazprom and China National Petroleum Corporation (CNPC) signed the contract for the Russian pipeline gas supply in the amount of over one trillion m3 to China via the eastern route for 30 years. The contract became the biggest one in the entire history of Russian gas industry and unlocked a brand new market with a huge potential for Russian gas. 38 billion m3 of Russian gas will be annually supplied from the Yakutia and Irkutsk gas production centers via the Power of Siberia gas trunkline.

In May 2015 Gazprom and CNPC signed the Heads of Agreement for pipeline gas supply from Russia to China via the western route. The document outlines the main technical and commercial parameters of the future supplies. The western route envisages gas supply to China from Western Siberia’s fields in the amount of some 30 billion m3 of gas.

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Developing Russia’s Arctic shelf resources

Russia’s Arctic shelf is considered by OAO Gazprom as one of the most promising regions for discovering new hydrocarbon fields and developing the explored ones.

The initial aggregate hydrocarbon resources of the Russian continental shelf amount to nearly 100 billion t of fuel equivalent, 80% of which is gas. The bulk of hydrocarbon resources are concentrated in the Arctic seas, namely the Barents, Pechora and Kara Seas, with gas and condensate prevailing in the Barents and Kara Seas and oil – in the Pechora Sea.

Gazprom Group holds the development licenses for several Arctic fields, including Shtokman and Prirazlomnoye.

On December 20, 2013 Gazprom started oil production from the Prirazlomnoye field in the Pechora Sea. It is Russia’s first hydrocarbon production project in the Arctic shelf. The recoverable oil reserves of the field exceed 70 million t a year; after 2020 it is planned to recover over 5 million t of oil a year in the Prirazlomnoye field.

The Prirazlomnaya offshore ice-resistant stationary platform secures every process operation in the field – oil drilling, production and storage, end product processing and loading. It is an unparalleled platform designed and constructed in Russia on Gazprom’s request. It is intended for operation under extreme environmental and climatic conditions, meets the most stringent safety requirements and can resist high ice loads.

On April 18, 2014 the first oil cargo of 70 thousand t was offloaded from the Prirazlomnoye field. New Arctic oil was named ARCO (Arctic Oil).

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Gas transmission system development in Russia

The Bovanenkovo – Ukhta gas trunkline system is the first element of a multi-line gas transmission system intended to withdraw gas from the Yamal Peninsula fields and convey gas from the Bovanenkovskoye field to the UGSS. The system length will come to nearly 1,240 km. In 2012 the first gas pipeline string was put onstream. At present, the construction of the second string is underway.

The Ukhta – Torzhok gas pipeline became a part of the gas transmission system to convey Yamal gas to the Gryazovets gas transmission hub in Northwestern Russia.The gas pipeline section between Ukhta and Gryazovets was put onstream in 2012.

The Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS) is a top priority project within the Eastern Gas Program. The project promotes gas supply to the Primorye and Khabarovsk Territories and creates conditions for gas export to consumers in Asia-Pacific countries. In September 2011 the first startup complex facilities of the GTS were put into operation, gas supplies to consumers in Vladivostok were launched.

The Power of Siberia gas trunkline is designed for delivering natural gas from the Yakutia and Irkutsk gas production centers to Russia’s Far East and China. The gas trunkline will cross the Irkutsk Region, the Republic of Sakha (Yakutia) and the Amur Region and in future it will be connected to the Sakhalin – Khabarovsk – Vladivostok GTS. The Power of Siberia construction was launched in Septermber 2014.

The Southern Corridor gas pipeline system will make it possible to supply additional natural gas volumes to Russia’s central and southern regions as well as ensure uninterrupted gas supplies into the TurkStream gas trunkline. The construction of the project Phase 1 – Western Section (Pisarevka CS – Russkaya CS, more than 800 km long) is nearing completion; the construction of Phase 2 – Eastern Section (Pochinki CS – Russkaya CS, more than 1,600 km long) is underway.

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Liquefied natural gas

Global gas consumption growth annually averages 2.6% with liquefied natural gas (LNG) being a primary growth driver. LNG has become an integral part of the global gas trade. Liquefied gas deliveries are advantageous due to the market coverage opportunities irrespective of geographic location.

OAO Gazprom implements a phased strategy to expand its presence in the LNG market. Gazprom’s LNG supply efficiently supplements pipeline supply and makes it possible to enter new gas markets.

Gazprom Group has been making efforts to enhance its positions in the LNG market since 2005 through spot trading and exchange transactions. Sakhalin II, the world’s largest complex oil and gas project became the next phase of this strategy, embracing the development of two oil & gas fields offshore the Sakhalin Island, LNG production as well as hydrocarbon export. In 2009 Russia’s first LNG production plant was commissioned within the project. The bulk of the plant’s LNG is marketed under long-term contracts.

In 2014 the volume of Gazprom Group’s LNG sales considerably grew as compared to 2013: 52 LNG cargoes with the total volume of 3.4 million t (4.5 billion m3) versus 24 cargoes with the volume of 1.5 million t (2 billion m3) last year. In 2014 LNG was supplied to Asia-Pacific (primarily to Japan and South Korea) as well as Argentina and Kuweit. The total volume of LNG sales between 2005 and 2014 amounted to 13.1 million t (17.5 billion m3).

In 2014 a long-term contract with GAIL became effective for LNG supply to India in the amount of 2.5 million t a year.

Gazprom aims to speed up new liquefied natural gas (LNG) projects intended to increase the Company’s share in the global gas market. In 2013 Gazprom made a decision to move the Vladivostok LNG project to the investment stage. The plant capacity will amount to 10 million t a year. Asia-Pacific is the LNG target market. Presently the project is at its design stage.

In early 2015 Gazprom decided to bring the Baltic LNG project to its investment stage. The plant capacity will equal 10 million t a year with the possibility of expansion. The plant will be located in the vicinity of the Ust-Luga sea port.

In addition, Gazprom jointly with other shareholders of the Sakhalin II project considers the possibility of extending the LNG production by constructing the third LNG production train of the gas liquefaction plant. The design capacity of such a production train may reach 5.4 million t of LNG a year.

Gazprom Group actively enhances its presence in the sector of LNG marine transportation. Presently, the Group maintains a fleet of six cutting-edge hi-tech LNG carriers – Veliky Novgorod, Pskov, Amur River, Yenisei River, Lena River and Ob River. In 2012 Ob River became the first LNG carrier to complete the world’s first LNG supply via the Northern Sea Route.

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Nord Stream and TurkStream gas pipelines

The Nord Stream and TurkStream gas transmission projects open fundamentally new routes for Russian gas deliveries to Europe in order to enhance European energy security.

The Nord Stream gas pipeline commissioned in 2011 stretches for 1,224 km across the Baltic Sea from the Portovaya Bay (near Vyborg) to the German coast (near Greifswald). The new gas main ensured up to 55 billion m3 of Russian gas supplies to European consumers every year. The project implementation enabled Gazprom to diversify export flows and directly link Russia’s gas transmission networks with the European gas network.

On December 1, 2014 Gazprom and Turkish Botas signed a Memorandum of Understanding on constructing the TurkStream gas pipeline with the annual capacity of 63 billion m3 of gas from Russia to Turkey via the Black Sea.

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Developing hydrocarbon resources abroad

Pursuing the diversification policy within the general development strategy, Gazprom carries out geological exploration and develops hydrocarbon fields in such countries as Algeria, Bolivia, Venezuela, Vietnam, Iraq, Kazakhstan, Kyrgyzstan, Libya, Tajikistan, Turkmenistan and Uzbekistan.

Venezuela’s offshore blocks
Uzbekistan’s fields
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