Integrated bloc for Gazprom Group's international business formed
Within Stage Two of its internal reform JSC Gazprom’s organizational structure has undergone further changes.
The Company came up with a new international business model intended to improve the organizational structure of the Foreign Relations Department and Gazpromexport Ltd. (Gazexport Ltd.).
In accordance with said model, the Gazprom Group has formed an integrated bloc for its international business activities, with a Department within the parent company responsible for identifying and planning the corporate foreign affairs and Gazpromexport in charge of implementing the strategy developed.
To this end, Gazprom set up the Foreign Economic Relations Department and dissolved the Foreign Relations Department.
To be headed by Stanislav Tsygankov previously serving as Head of the disbanded Department, the Foreign Economic Relations Department’s operations will be supervised by Alexander Medvedev, Deputy Chairman of Gazprom’s Management Committee and Director General of Gazpromexport.
The establishment of the new Department pursues the objective of consolidating the entire international business of Gazprom within a single structural unit and streamlining the Company’s performance worldwide.
As part of the integrated block for foreign affairs, the Foreign Economic Relations Department will be mainly engaged in developing a strategy for and short-term planning of overseas activities, identifying options for international business development, managing foreign assets and purchase/sale transactions as well as implementing large international investment projects both in Russia (North-European gas pipeline construction, Shtokman and South Russian fields development, liquefied natural gas infrastructure construction) and abroad.
The new Department will also be in charge of implementing agreements on cooperation with state bodies and petroleum firms worldwide and providing support for Gazprom’s activities within international organizations and forums.
Shaping the new organizational structure will require delegating part of the international business development authority from Zarubezhneftegaz Ltd. and Gazpromexport to the Foreign Economic Relations Department expected to eventually consolidate all of the Gazprom’s international businesses including the coordination of east-oriented projects (with regard to foreign affairs), operations inside the former Soviet Union and management of international investment projects.
The new organizational structure of Gazpromexport hinges on the following principles:
- clearly specifying the functions of the Front-, Middle- and Back Offices;
- differentiating between management levels;
- delegating authority and responsibility;
- enhancing the organizational structure adaptability and flexibility;
- streamlining existing functions and processes;
- bringing the unit business names and job titles in line with the functions discharged;
- keeping pace with the best international practices.
Clearly specifying the functions of the Front-, Middle- and Back Offices is a key aspect of the Gazpromexport’s new structure.
The Front Office will handle gas, oil, refined products and oil chemicals export. The Middle Office will be responsible for supervising the corporate operating efficiency and filing the management’s accounts including risk, draft/budget, cash flow and activity management at the subsidiary level. To be engaged in calculations and accounting, the Back Office will be largely in charge of providing efficient support for the Front and Middle Offices business.
The model devised clearly outlines the process of interaction between the Foreign Economic Relations Department and Gazpromexport as well as identifies their roles, authority and responsibility sectors. This will help avoid overlapping responsibilities and will drive further efficiency of Gazprom’s international business.
“An aggressive foreign economic policy and a wider scope of business strategies worldwide (including the end-product portfolio, supply geography and resource base expansion) have pointed to the need of changing the corporate organizational structure. We made use of the best practices developed by the world’s most prominent top-down energy companies. Gazprom’s international business has been consolidated and geared up to achieve its most ambitious aspirations aimed at expanding the Company’s presence in international markets”, – stated Alexander Medvedev.
Information Directorate, OAO Gazprom