Alexey Miller's column

On significance of natural gas

“Views of Gazprom and DONG Energy regarding significance of natural gas fully coincide: extension of its consumption is important for environmental protection and future sustainable development of Europe. Moreover, the use of gas is all at once safer, more environmentally friendly and more cost-effective compared to use of any other sources of energy.”

On record high figures in the European gas market

“The European market is skyrocketing: this April, for instance, we are going to export more gas than in some of the winter months, and by December gas is expected to cost around USD 500 under our long-term contracts. I believe these are not the last record figures for this year.”

Speech by Alexey Miller at the festive event dedicated to the 50th anniversary of the Central Operations and Dispatch Department

Gazprom always fully meets its obligations to partners and, most importantly – we are confident that it will always act this way. To a great extent we owe to real professionals who work in the CODD, in our dispatch service. We call these experts “one-of-a-kind goods” since there are no educational establishments that teach dispatchers. They are flesh and blood of Gazprom, they have grown in the Company and know the industry perfectly well. They are the people who in a literal sense stay on duty day and night. Gazprom’s glorious duty.

Boris Posyagin and Alexey Miller at festive event dedicated to 50th anniversary of Central Operations and Dispatch Department

Boris Posyagin, Head of Central Operations and Dispatch Department, and Alexey Miller

About Gazprom’s first quarter performance

“Gazprom finished the first quarter of 2011 demonstrating the apparent success in major segments of the gas business.

By April 1 the Company produced 142.6 billion cubic meters of gas – nearly 2 billion cubic meters in excess of the planed level. This parameter is equal to the production level demonstrated by Gazprom in the first quarter last year against the background of the growing consumption in all of its sales markets after the global crisis. It is safe to say that the growing demand trend will sustain in the long run.

A considerably high level of natural gas consumption has been maintained in the domestic market and recent information indicates that Gazprom delivered over 103 billion cubic meters of gas to Russian consumers in the first quarter.

As for gas export by Gazprom within and beyond the FSU, including LNG deliveries from the Sakhalin II project, in the first three months of 2011 they showed almost a 30 per cent increase versus the same period of the last year: from 57 to 73 billion cubic meters. At the same time, the demand for Gazprom's gas beyond the FSU and, therefore, its purchases showed a 12 per cent increase according to the updated information: from 39.4 to 44.1 billion cubic meters.

I should highlight that spot gas prices in Europe leveled Gazprom's contract prices and even exceeded them over the last year. Thus, between January and March 2010 the average gas price under Gazprom's export contracts was at USD 293 which is 50 per cent higher than the spot price but in the first three months of 2011 the gap between the average contract and spot prices narrowed to 8 per cent (USD 346 and 320 for 1,000 cubic meters accordingly) while in some periods the gas price at the European trade floors exceeded the one of Gazprom reaching USD 400 for 1,000 cubic meters! As a result, linking of a portion of the contracted volumes to gas indexes, as European partners of Gazprom insisted, may have an inverted effect.

Thus, the first quarter results demonstratively show the soundness of our gas demand forecasts. Moreover, our experience has proven once again that the required balance of interests between the gas producer and the gas purchaser may only be ensured in case of deliveries under long-term contracts. There is no doubt: in the future reality Gazprom will see the buildup in all of its downstream operations on the basis of the existing long-term export contracts system.”

On PGU-450 combined cycle gas turbine unit commissioning at the Yuzhnaya CHPP in Saint Petersburg

“Today's event once again proves the status of Gazprom as the largest investor in the Russian power generation sector.

State-of-the-art technologies were used to construct the power unit of the Yuzhnaya CHPP. The technologies will provide for considerable resource saving in the course of operation and ensure a minimum environmental impact. I will particularly note that the main equipment of the new power unit was manufactured by the Russian machine building companies.

Commissioning of the new power unit solves such a pressing problem for Saint Petersburg and the Leningrad Oblast as energy shortage, increases reliability, offers wider opportunities for heat supply to the city's southern districts and allows meeting energy demands for the industrial and business complex development of the ring motorway.

Eleven is a special number for TGC-1. The company comprises 11 combined heat and power stations with PGU-450 of the Yuzhnaya CHPP being the eleventh startup facility in the history of TGC-1. This is the number of players in a football team. Therefore, we decided to delegate Alexander Kerzhakov, a forward of the Zenit football club whose number is eleven, with the right of driving up the power unit to its rated capacity.”

Alexey Miller and Alexander Kerzhakov participating in celebrations devoted to commissioning of new PGU-450 combined cycle gas turbine unit at Yuzhnaya CHPP of TGC-1

Alexey Miller and Alexander Kerzhakov participating in celebrations devoted to commissioning of new PGU-450 combined cycle gas turbine unit at Yuzhnaya CHPP of TGC-1