Gas supply to the domestic market. Electronic trading platform operation. Russian regions gasification program execution

June 19, 2007

Participant:

  • Kirill Seleznev, Member of the Management Committee, Head of the Department of Marketing and Processing of Gas and Liquid Hydrocarbons, Gazprom, Director General, Mezhregiongaz.

Since the Briefings are held in the Russian language, all the related reference sources, videos and presentations can be viewed in the Russian version of Gazprom’s website. The background information and presentations in English will be placed at a later time.

Gas supply to the domestic market. Electronic trading platform operation. Russian regions gasification program execution

Reference to the press conference:

Gas supply to the domestic market

The Gazprom Group provided regular gas supplies to Russian consumers in 2006. Gas sales on the domestic market were at RUR 316.3 bcm. Gas volume produced by the independent producers and sold by Gazprom was at 9.7 bcm. In comparison with 2005 gas sales volume on the Russian market via Gazprom and its affiliated companies increased by 9.3 bcm or 3 per cent.

The Gazprom Group gas supply structure to consumers in 2006 is as follows:

  • 37% – power generation companies
  • 38% – other industrial consumers
  • 10% – municipal consumers
  • 15% – population needs

According to the regional section most of consumers were concentrated in the Central, Privolzhsky and Southern Federal Districts and estimated at 34, 32 and 14 per cent of the total gas consumption, respectively.

The Gazprom's policy to support independent gas producers in 2006 enabled to provide gas production increase from 93 bcm of gas in 2006 up to 105.8 bcm in 2006 or 12.7 per cent. The independent producers? share in the total Russian gas production has grown in 2006 up to 1.5 per cent and was at 16.1 per cent.

Electronic trading platform operation

In 2006 the Electronic Trading Platform (ETP) of Mezhregiongaz has completed the development of the 2nd generation programming complexes enabling to fasten the Russian Federation resolution execution as of September 2, 2006 #534 on the Gas Marketing Experiment Performance at the ETP. In the frames of the experiment it is planned to sell 5 bcm of Gazprom's gas during the 2006–2007 period at the ETP and the same amount of independent producers? gas.

The parity observance is an important condition of the experiment.

The trading sessions were very interesting to gas sellers (large oil and gas companies) as well as gas buyers leading by power generation, chemical and metallurgic industry.

Within the period from November 2006 to June 8, 2007 in the frames of the “5+5” experiment 3.3 bcm of gas were sold at the ETP.

The ETP's positive results and ETP's operation support by all leading gas market participants enabled to receive support of state authorities in organizing new forms of Gazprom's participation for gas market free sector operation. The Russian Federation resolution as of May 28, 2007 # 333 permits to supply gas to new consumers at prices exceeding the Russian Federal Tariff Service prices 60 per cent. This rule is will be also distributed among extra contract gas volumes requested by the existing consumers. Practically it means that along with the gas sales via the ETP Gazprom receives the right for gas sale in the free sector and under the direct contracts with consumers including a very important aspect – the long-term contracts. Creation of new sale segment requires distinct activities coordination of all Russian gas market participants.

Gasification program execution

In 2006 Gazprom will continue to gasify Russian consumers in the frames of the Gasification Program of the Russian Federation regions over 2005 to 2007. Gazprom constructs local pipelines, but construction of street gas distribution networks, inner yard networks, purchasing and installation of gas equipment will be provided due to attracting financial resources by the administration (government) of the Russian Federation constituent from the budgets of all levels and population's financial resources.

Investments during the 2005–2006 period in amount of RUR 22.8 bln (2005- RUR 5.2 bln, 2006 – RUR 17.6 bln) increased the Russian gasification level up to 58 per cent including 64 per cent in towns and cities and 40 per cent in rural area.

655 settlements, 2, 508 mln of apartments and households (1, 733 mln in towns and 775 in the rural area) were gasified. 13 thousand of municipal organization (hospitals, school, kindergartens, and others), 3 thousand rural heating plants, 330 agricultural enterprises were converted into natural gas. The gasification program covers 7 mln of Russian citizens in 53 regions of the Russian Federation.

In 2007 Gazprom plans to commit RUR 20.2 bln for construction of new gasification facilities enabling to ensure the investment volumes in the regions where schedule plans were successfully implemented and as well as to include 5 Russian Federation constituents (the Irkutsk Oblast, Yamal-Nenets Autonomous Okrug, the Republic of Karelia, Dagestan and the Altai Republic) in the Gasification Program in 2007. This year 58 regions participate in the Gasification Program execution, construction of 309 facilities (which are under construction) and star-up of 257 facilities construction. It is planned to complete the construction of 416 facilities. It will enable to increase the gasification level in Russia from 54 per cent as of January 1, 2005 to 62 per cent including 67 per cent in towns and cities and 44 per cent in rural area.