Gazprom to continue evaluating its possible engagement in Russian and international venture funds
The Gazprom Board of Directors reviewed the possibility of co-investing in Russian and international venture funds. The issue was addressed in the context of fulfilling the assignments of Russian President and the Government.
The meeting highlighted that Gazprom as a global energy company was dealing with sophisticated projects on hydrocarbons production, transportation and processing. The unique natural and climatic conditions as well as mining and geological specifics of tapped or yet untapped fields in the Yamal Peninsula, Eastern Siberia, the Far East and the continental shelf predetermine the need to create new technologies, equipment, materials, develop the project management principles to ensure cost efficient production of hydrocarbons in these regions.
Unique natural and climatic conditions as well as mining and geological specifics of tapped fields predetermine need to create new technologies, equipment and materials for production of hydrocarbons
Gazprom purposefully concentrates its efforts and funds on meeting sci-tech and process challenges. At present, the Company is developing specialized innovative products and technologies through targeted financing and is exerting control over all stages of their development.
Evaluating the efficiency of co-investing in Russian and international venture funds, Gazprom sets the top-priority task to ensure its technological development. So, project implemented using this financial instrument should meet the core business demands and technological policy of the Company.
Projects in the energy sector are featured by a long-term investment cycle, high capital intensity and limited field of application. These factors determine the established global practice: the financing of innovative developments in the energy sector through conventional venture funds accounts for only 2 per cent of the total venture investments. As a rule, large oil and gas companies don't co-invest in conventional venture funds. If necessary, they set up dedicated venture funds that may engage stakeholders.
Independent venture funds are generally focused on profit-making and have secondary interest in an innovative product only in terms of the potential of selling it on a maximally broad market.
In most cases, Gazprom's innovative solutions require considerable investments, have no or few analogues, specific properties and operational features owing to the fact that they are tailored to particular promising projects of the Company. The anticipated economic effect for some technological innovations will be achieved only under the conditions and within the projects where they were initially planned to be used.
In this way, the financing of innovative solutions, Gazprom is interested in, through independent venture funds will have low commercial appeal for them. Besides, as venture funds search for and select projects independently, it should be expected that the majority of solutions in the project portfolio of the funds will not meet the needs of the Company.
In this regard, engagement in co-investing Gazprom's non-core projects through venture funds with the only purpose of making profit will disagree with a basic principle of the Company – purpose-oriented spending of financial resources. A high level of risk associated with venture investments will not allow Gazprom to obtain the expected results in dealing with the challenges of technological development.
Based on the meeting results, the Gazprom Management Committee was tasked to continue reviewing the Company's possible participation in Russian and international venture funds. The obtained results will be reported to the Board of Directors in the fourth quarter of 2013.
Pursuant to the Russian President's assignments of November 3, 2011 and the Russian Government's assignments of January 31, 2012, fully or partially state-owned companies with approved innovative development programs should address the issue of possible participation in co-investing in Russian and international venture funds on the basis of principles recommended by the Russian Government.