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Gazprom directors completed 2008

The Board of Directors of Gazprom, in the almost complete absence of government representatives, approved yesterday the basic principles of the financial strategy, approved the budget for next year, a new procedure for placing orders, and took into account a number of other issues. Of the government officials at the event, which, contrary to tradition, began in the morning (usually scheduled for the afternoon), only First Deputy Prime Minister, Chairman of the Board of Directors Viktor Zubkov and Special Representative of the President of the Russian Federation for International Energy Cooperation Igor Yusufov were present. The Minister of Industry and Trade Viktor Khristenko, the head of the Ministry of Economic Development Elvira Nabiullina, as well as the former Minister of Property Relations Farid Gazizullin, representing the state, were not present. The head of Gazprom, Alexey Miller, was forced to occasionally leave the meeting, because the concern’s office on the street. Nametkin was visited by the energy ministers of gas exporting countries.

According to Gazprom management, for the company to operate during the financial crisis, it is necessary to prepare several budget options at different oil prices (and, accordingly, export revenues). The calculations were presented to the board of directors at the presentation of the basic financial plan, which was compiled within the framework of the official forecast of the Ministry of Economic Development (oil price 50 dollars per barrel and exchange rate 31.9 rubles per dollar). In addition, the concern considers it necessary to rank investments in projects according to their importance and reduce long-term financial investments. That is, it was decided to cut back on those items of capital investment that can be removed without compromising the timing and implementation of priority investment projects. Long-term investments for 2009 have already been sequestered to a minimum and amounted to 220 billion rubles. (a quarter less than this year). A Vremya Novostei source close to the council said that about 90 billion rubles. will invest in projects such as the development of the Shtokman and Prirazlomnoye fields, as well as Sakhalin-2. About 60 billion rubles. will be used to finance Nord Stream and buy out the next block of shares (12.5%) of Beltransgaz. Another about 36 billion rubles. Gazprom is going to spend on increasing the authorized capital of the Gas Energy Company, in which the generating assets of the concern will be consolidated. It is also planned to allocate funds for the acquisition from Eni and Enel of 51% in the authorized capital of Sever-Energia.

In addition, Gazprom’s financiers are going to mobilize its internal resources, reduce the volume of borrowings (which has long been limited to 90 billion rubles), improve the quality of management of temporarily free funds, and also more actively collect debits from the CIS countries, introduce an advance payment system with Russian consumers and optimize the procurement system. Traditionally, it has been proposed to strengthen control over borrowing by subsidiaries that have a certain degree of freedom (in particular, this applies to Gazprom Neft).

The Board of Directors of Gazprom also approved the transition to a single procurement system with government agencies proposed by the Ministry of Economic Development. In addition, a number of changes were made to the concern’s regulation “On the procedure for placing orders for the supply of goods, performance of work, and provision of services for the needs of Gazprom and its subsidiaries primarily on a competitive basis,” which secure the preferential rights of domestic products and services. To win the competition, foreigners will have to offer their goods 15% cheaper than their competitors from Russia. In this case, an application without indicating the country of origin of the goods will not be accepted for the tender.

Also, the directors of the company approved the actions of management to implement the strategy in the electric power industry (but at the same time, Mr. Zubkov personally entered into the protocol an instruction to report again on the results of the first half of 2009), and instructed management to complete the pre-investment stage of the South Stream project by mid-2010 year, approved the gasification program and formed a new audit committee (instead of the suddenly deceased Boris Fedorov, it was headed by the deputy chairman of the board of Gazprom, Mikhail Sereda).

Alexey GRIVACHS