Board of Directors looks into improvement of independent gas producers' access to Gazprom's GTN regulations

Background

At present, the independent producers’ gas transmission licensing matters are being regulated by the Federal Law on gas supplies within the Russian Federation and the Provision on independent gas producers’ access to Gazprom’s GTN approved by the RF Government’s Directive N858 from 14 July 1997 and due amendments formulated in the RF Government’s Directive N334 dated 3 May 2001.

Under the existing legislation, the firms owning gas supply networks are committed to providing any companies operational within the RF with non-discriminatory access to spare capacities available.

In compliance with said requirements, Gazprom furnishes independent gas producers with access to the GTN as long as:

• there are spare capacities available over a projected period of gas deliveries;
• gas quality fits with existing standards and technical specifications;
• suppliers count on gas pipelines and branches with gas amount and quality measurement units installed.

To simplify the gas transmission licensing procedure, Gazprom developed new Draft guidelines for the independent gas producers’ access to Gazprom’s GTN licensing currently undergoing expert analysis and pending the Management Committee Chairman’s endorsement.

In April 2004, Gazprom established a Working Group in charge of working through financial and legal documentation stipulating independent gas producers’ involvement in expanding and upgrading Gazprom’s gas transmission capacities. With several options now available, the Working Group is endeavoring to come up with the most optimum solution.

In October 2004, Gazprom set up a Working Group engaged in stepping up proposals (covering improvement of the GTN access licensing inclusive) for a Draft federal law on gas main transportation.

Independent gas producers first gained access to Gazprom’s GTN in 1998 when six companies received authorization to pipe in a total of 28.2 bcm.

Subsequently, the number and annual gas amount of independent gas producers allowed into Gazprom’s GTN have grown in the way shown below:

• 1999 – 10 independent gas producers (a total of 83.7 bcm transmitted);
• 2000 – 20 independent gas producers (106.2 bcm);
• 2001 – 24 independent gas producers (92.4 bcm);
• 2002 – 33 independent gas producers (103.6 bcm);
• 2003 – 31 independent gas producers (95.4 bcm);
• 2004 – 39 independent gas producers (112 bcm).

As of 8 February 2005, 30 independent gas producers were licensed to channel gas by Gazprom’s GTN.

As of 1 January 2005, independent producers did not take off over 4 bcm of their gas contracted for transportation via Gazprom’s GTN, thus, posing substantial challenges to all the gas market players. A potential solution to this problem might be establishing a legal environment excluding potential long-term presence of independent producers’ gas in the GTN and stipulating administrative and economic sanctions for the violations committed.

Starting 1 January 2004, Gazprom has included a clause into its contracts with independent gas producers, imposing a monthly RUR 66/1,000 cu m fine for violating the GTN gas storage regulations.

The fine is levied provided that, by the reporting month-end, an independent gas company has transmitted via the GTN more gas than was contracted for.