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30 December 2014

2014: Turning Challenges into Opportunities

OOO Gazprom Export Director General Elena Burmistrova

Hardly any Russian company operating in the global marketplace would define the year of 2014 as a smooth and easy ride. For Gazprom Export, a natural gas supplier to Europe for over forty years, this was not an easy-going year either. Nevertheless, our company has managed to strengthen its market position, securing the kind of business breakthroughs that usually take many years to achieve.

In May 2014, Gazprom signed a long-term contract to supply Russian gas to China via the Eastern Route — the biggest deal in the gas industry’s history, both in Russia and worldwide. Signing this contract fits in well with the logic of Gazprom’s business diversification strategy. Under the terms of the contract, our company will supply 38 billion cubic meters of natural gas per annum to China over 30 years via the Power of Siberia pipeline, which will stretch 4,000 kilometers. This contract with China will accelerate the implementation of the extensive Eastern Gas Program, which entails gas supplies to a strategically important region of our country.

Just a few months later, Gazprom and CNPC made yet another contribution to the expansion of Russian-Chinese economic cooperation: in November, the two companies signed a Framework Agreement for the Western Route stipulating the supply of 30 billion cubic meters of gas per annum to China from West Siberian fields via the Altai pipeline. The purchase-sale contract and an intergovernmental agreement are expected to be signed in 2015.

Early December brought some important positive changes in the cooperation with Gazprom’s second-largest client in Europe: the Republic of Turkey. Russian President Vladimir Putin’s visit to Ankara enabled the two countries to outline new vistas in gas sector cooperation.

Gas intended for direct delivery from Russia to EU member states via South Stream will be routed first to Turkey. This will make it possible to ensure security of gas supply and increase volumes earmarked for the Turkish market, presently supplied via the Western route across Ukraine, while extra volumes of gas will be delivered to Turkey for subsequent supply to European customers.

Our established partners in Western, Central, and Eastern Europe are facing some difficult times at present. The European demand for natural gas has dropped under the impact of cheap coal for power generation and mild weather conditions.

Of course, all this has had an impact on Russian gas exports in 2014. All the same, Gazprom remains Europe’s leading gas supplier, strictly and conscientiously fulfilling its contractual obligations.

For instance, the past year has been extremely successful for promoting natural gas as a motor fuel. In 2014, Gazprom Export teamed up with Germany’s E.ON and other European companies to organize the eighth annual Blue Corridor Rally for natural gas vehicles (NGVs). In 24 days, the NGV convoy drove 6,600 kilometers (4,100 miles) along European roads. Twelve cities hosted roundtable discussions at which European politicians, analysts, and executives discussed the outlook for developing the use of gas-motor fuel and the obstacles in its way.

In 2014, Gazprom has set itself fundamentally new objectives for the years ahead. We are facing a great deal of work: over the next few years, we will be busy putting the agreement with China into practice. We will also design some new pipelines: to China via the Western Route and to Turkey across the Black Sea. We will also maintain an active presence in our traditional European market, in the hope that common sense and the need for environmental improvements will lead European regulators to let market mechanisms start working again.

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