Board of Directors considered issue on long-term gas supply agreements with Russian consumers for 2008-2012
The Board of Directors convened on a meeting at the Gazprom Headquarters.
Gazprom’s Board of Directors took into consideration the information dedicated to preliminary results and progress with conclusion of long-term agreements for gas supply to Russian consumers over 2008 to 2012.
On November 30, 2006 the Russian Federation Government approved proposals allowing supply gas at regulated prices to power plants under five-year agreements. The respective minutes of the Government’s Meeting also stipulated, that alongside with power plants other industrial enterprises should be switched to long-term agreements.
On March 6, 2007 Gazprom and UES of Russia agreed on the basic principles underlying long-term agreements as well as volumes of supply to power plants under long-term agreements. As agreed, the annual volume of gas supplied in 2007–2010 to power plants at regulated prices accounts for 105 bcm including 103 bcm supplied to UES of Russia. Additional volumes are to be supplied based on a mutual agreement of the parties. The parties achieved the accord that the mainstay of the long-term contracts was the “take or pay” principle coupled with the right of UES of Russia subject to the availability of technical capacity to re-distribute uncommitted gas between its power facilities and re-schedule deliveries over subsequent periods.
The Directive of the Russian Federation Government dated May 28, 2007, “On Improvement of the State Regulation for Gas Prices” enabled Gazprom to apply price limits to extra gas volumes while supplying gas to the power industry beyond the agreed volume of 105 bcm. In 2006 the upper level of price limits exceeded the regulated prices 1.6 times, in 2008 they will exceed 1.5 times.
In pursuance of the above stated decisions Gazprom and UES of Russia jointly developed standard long-term contracts for power plants as well as a version of a standard long-term contract for industrial enterprises.
Long-term gas supply contracts awarding was a top-priority goal of the contract campaign in 2008. As a result, over 66 thousand long-term agreements were concluded with Russian industrial consumers (outside the utility sector) for supply of 185.4 bcm of gas, that constituted 80.4 per cent of the total gas volumes consumed by the industry.
The share of long-term agreements in the total gas volumes consumed by the key industries made up:
- Electric power industry – 89 per cent;
- Metallurgy industry – 91 per cent;
- Agro-chemistry – 90 per cent;
- Cement industry – 91 per cent.