Statement by Alexey Miller at the “Gas Motor Fuel for European Environment” Conference within the European Business Congress

17th Annual General Meeting of the European Business Congress, Athens

Esteemed Ladies and Gentlemen,

Gazprom is a global Company with world’s richest reserves and highest output. Following the 2013 results, the Company was the first in terms of EBITDA, which totaled USD 63.2 billion. Gazprom views market diversification as one of its primary strategic goals, despite the fact that we are already operating in 51 countries.

Last week saw an undoubtedly a milestone event – we signed the contract for gas supply to China. It is a long-term contract for 30 years, providing for the annual supply of 38 billion cubic meters of gas. It is the largest contract in the history of the global gas industry. It is worth USD 400 billion. I should say that it is really a milestone event, as Russia, namely Gazprom, entered the Asian market with pipeline gas. It is the broadest, the most dynamically growing market, which opens up enormous horizons for suppliers. The significance of this contract will be appreciated later, as it will certainly affect the European prices as well. This contract opened up a new page called ‘the competition for Russian natural gas resources among the major markets’. This contract will influence very costly projects for gas liquefaction in Australia, Western Canada and East Africa.

Still, Europe has always been and will remain our number one market. Of course, Gazprom is committed not only to retaining its share in the European market, but to increasing it as well, bearing in mind, however, that we are going to boost our supply to the Asian market. The contract for 38 billion cubic meters of gas a year is just the beginning. There are new contracts ahead.

There is no doubt that today one of our strategic goals is increasing the reliability of supply. It’s needless to tell those present here today about how complicated the current situation is with gas supply to Ukraine. We hope that in the nearest days some agreements will be achieved and Ukraine will start paying for Russian natural gas. Gazprom issued an invoice for prepayment for June supply, setting Monday, June 2 as the deadline.

Of course, the reliability of supply to the European market may be enhanced by means of diversifying the export routes. One of the key joint projects today is South Stream. It was largely discussed at our Annual General Meeting of the European Business Congress. The project is being implemented in strict compliance with the adopted schedule. There is not a month’s delay from the initially agreed timeframes. The offshore section construction is within the schedule as well as the operations in Bulgaria, Serbia and Hungary. It is absolutely certain that first gas via the first string of South Stream’s offshore section will be delivered to Bulgaria as soon as at the end of the next year.

Naturally, when we mention the diversification of our markets we also mean the product range diversification and we will surely enhance our activities in the NGV segment.

At present, natural gas occupies an inadequately small niche in the vehicle fuel market and our aim is to change that situation.

It should be pointed out in this connection that despite the ambitious goals of the EU for diversifying energy sources in all the areas of consumption, the highest dependence on a single type of fossil fuel (95 per cent of the market) is still observed in the transportation sector. We consider a unified approach and adequate regulatory measures to be essential for establishing a solid foundation for the evolution of the NGV fuel market.

It’s worth noting certain differences between countries and regions. In such countries as India, China or Russia, the government authorities resolve environmental issues by means of providing targeted support or prohibiting certain technologies. As for the EU, another approach is adopted there and targets are set for reducing the emissions.

Right now the results are deplorable. For example, we observe considerable shifts in power generation, and such regulatory measures led to a sharp increase in coal-fired generation, thus causing pollution to grow. In some German regions – you know, they love football in Germany, and here’s a very illustrative example – you take a ball, stroke it with your finger and see a white trace on the grey ball. The situation should be changed by means of joint efforts. The ever more severe emission targets in the transportation sector are being met at consumers’ expense. In the end gasoline and diesel are becoming more and more expensive. Natural gas, as a real alternative, is given too little attention so far.

It should be mentioned that we also see some positive shifts. A government initiative, a proposal, which we think to be quite adequate, has appeared for setting up the infrastructure facilities for alternative fuels. Within the nearest two years the EU is to devise plans for developing a vast network of CNG filling stations located 150 kilometers away from each other as well as LNG stations 400 kilometers away from each other. We’ll wait and see how this government initiative is going to be implemented. This surely meets our business interests and together with our European partners we are ready to work on those plans.

Yesterday at the meeting of Gazprom’s Management Committee we actually considered the progress with executing the NGV Action Plan in the international markets, including the EU market. All in all, the vehicle manufacturing industry and the gas industry may become our natural allies to promote the use of natural gas in the transportation sector. Gazprom already closely cooperates with the key players of this industry, and these are not just Russian manufacturers, but well-known international brands as well, including Volkswagen, Mercedes, Fiat, Opel and many others. They offer an increasing number of car models running on natural gas. We, in our turn, are planning to substantially expand our filling stations infrastructure both in Russia and the EU, and we are ready to invest into such infrastructure abroad.

We are sure that wider use of natural gas will partially resolve the most pending issues of the European community. These are the issues of providing support to the economic competitive ability and at the same time of contributing to environmental protection. NGV fuel has become one of Gazprom’s priority businesses and we’ll be actively working in this sector.

Thank you for your attention!