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3 GAZPROM EXPORT world’s largest natural gas exporter 7 OVERALL SUPPLY STATISTICS 25 GAS TRANSPORTATION AND STORAGE 31 EXPORTS OF CRUDE OIL, PETROLEUM PRODUCTS, AND SULFUR 35 NATURAL GAS AS MOTOR FUEL 39 ECOLOGY 41 CHARITY AND SPONSORSHIP 1
• We supply natural gas to over 20 countries • In 2014, natural gas exports totaled to 146.6 bcm • Over 4 trln cubic meters of natural gas delivered to European countries since 1973
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PROFILE: GAZPROM EXPORT world’s largest natural gas exporter
OUR COMPANY: • •
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Supplies natural gas to over 20 countries; Exports gas condensate, crude oil, petroleum products, liquefied hydrocarbon gases, and other oil-gas and petrochemical sector products; Performs gas marketing in new markets, optimizes export flows, and analyzes and forecasts natural gas market trends; Participates in developing and implementing Gazprom Group’s gas and gas-fueled energy investment projects in Russia and abroad; Actively participates in developing cooperation with foreign partners. Gazprom Export is one of Russia’s most successful and advanced companies, with its export earnings contributing significantly to federal budget revenues. In 2014, natural gas exports to non-CIS countries came to 146.6 bcm.
meters. Gazprom accounts for nearly 70% of Russia’s gas production. In 2014, Gazprom Group enterprises produced 443.9 bcm. The length of gas pipelines and the gas transmission network totals 170,700 kilometers. Gas transport utilizes 250 linear compressor stations with a total gas pumping unit capacity of 46,100 MW. Gazprom operates 26 underground storage facilities and six gas processing plants in Russia.
CORPORATE HISTORY Stages of a long journey:
1973 V/O SOYUZGAZEXPORT The All-Union Foreign Trade Organisation (V/O) Soyuzgazexport was founded on April 23, 1973.
RUSSIAN GAS AND EUROPE
1991 GVP GAZEXPORT
Russia has 5.5% of the world’s proven oil reserves, 17.6% of coal reserves, and 24.7% of natural gas reserves. Gas ranks second after oil in the European continent’s energy consumption balance, and its proportion is expected to continue increasing. Given limited domestic gas reserves and declining selfsufficiency, Europe’s need for gas imports will grow. Gazprom Export is ready to make its contribution to meeting European consumer demand, using the Russian gas industry’s powerful potential.
In the autumn of 1991, Soyuzgazexport was incorporated into the state gas concern Gazprom as a state-owned foreign trade enterprise. By December of the same year, following the organization’s transition from the jurisdiction of the Russian Soviet Federative Socialist Republic to that of the Russian Federation, the state-owned foreign trade enterprise was renamed GVP Gazexport.
GAS RESERVES OF RUSSIA AND GAZPROM Gazprom Export’s strong export market position is underwritten by Gazprom’s gas reserves. Gazprom controls the world’s largest reserves of natural gas. It has nearly 17% of world reserves and 72% of Russian reserves. As at December 31, 2014, Gazprom Group’s gas reserves – according to the Russian classification (A+B+C1 categories) – stood at 36.07 trillion cubic 3
1993 VEP GAZEXPORT In 1993, GVP Gazexport was transformed into a foreign trade subsidiary of Russian joint-stock company (RAO) Gazprom, and became known as the foreign trade enterprise VEP Gazexport.
1997 OOO GAZEXPORT Limited Liability Company (OOO) Gazexport was established under Resolution No. 39 of the Board of Directors of RAO Gazprom, dated April 9, 1997 and Resolution No. 53 of the Board of Directors of OAO Gazprom, dated February 12, 1998. The Moscow Registration Chamber registered the company on May 12, 1999. OAO Gazprom is the company’s founder and 100% owner.
2006 OOO GAZPROM EXPORT In 2006, in accordance with its founder’s decision, OOO Gazexport was renamed OOO Gazprom Export. In November 2013, according to its founder’s decision, OOO Gazprom Export relocated to the city of St. Petersburg. 4
CORPORATE VALUES Russian gas supply is an essential element of Europe’s energy security, as evidenced by over 40 years of experience in cooperation. Gazprom Export’s management pays special attention to the company’s reputation in the eyes of partners and the public. Gazprom Export upholds the principles of social responsibility for the outcomes of its operations, and strives to contribute to developing the gas industry and the Russian economy.
Relevance of the company’s operations to the interests of gas importer countries: Our company guarantees reliable and sustainable gas supply to importer countries. The history of gas supplies to Europe shows that despite tumultuous political changes in the purchaser countries and the former Soviet Union alike, we are capable of ensuring uninterrupted gas supply to our clients.
Relevance of the company’s operations to Russia’s national interests: •
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Contributing to Russia’s energy export development and the maintenance of a positive foreign trade balance; Strengthening Russia’s position in the global fuel and energy market; Expanding the economic base for improving cooperation with countries that import Russian gas; Increasing foreign currency earnings; Attracting investment to the Russian gas industry; Improving Russia’s employment and income levels; Securing employment in gas extraction, processing, transportation, and distribution.
Registered address: 5A Galernaya Street, St. Petersburg, 190000, Russian Federation Head office location: 2aA Ostrovsky Square, St. Petersburg, 197022, Russian Federation Phone: +7 (812) 346 6700, Fax: +7 (812) 346 6710 E-mail: info@gazpromexport.com, post@gazpromexport.com Media contacts: comm@gazpromexport.com Website: www.gazpromexport.com
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OVERALL SUPPLY STATISTICS EUROPE Dynamics of gas supply to Europe
In total, over 4 trillion cubic meters of natural gas has been delivered to European countries since 1973. In 2014, Gazprom Export supplied 146.6 bcm of gas to European countries. Western European countries account for around 80% of gas exports from Russia, with 20% going to Central European states. The Western European market (including Turkey) consumes the bulk of Russian exports. In 2014, Gazprom Export delivered 117.9 bcm of gas to markets in this region. The major importers are: • • • •
Germany – 38.70 bcm Turkey – 27.33 bcm Italy – 21.68 bcm UK – 10.09 bcm
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Gazprom Export’s natural gas deliveries to Western Europe in 2014 (bcm) Austria
3,95
Denmark
0,41
Finland
3,11
France
7,10
Germany
38,70
UK
10,09
Greece
1,75
Italy
21,68
Netherlands
3,51
Switzerland
0,30
Turkey
27,33
SUPPLIES TO WESTERN EUROPE, %
The Eastern and Central European natural gas market is particularly important due to its geographical proximity to Russia. In recent years, partnership development has taken place against a backdrop of significant geopolitical changes and national aspirations to diversify energy supply sources. Nevertheless, Russian natural gas accounts for over half of this region’s gas consumption. In 2014, Gazprom Export sold 28.7 bcm of gas in this market. 8
The major importers are: • • • •
Poland – 9.10 bcm; Hungary – 5.33 bcm; Czech Republic – 4.76 bcm; Slovakia – 4.39 bcm.
Over 80% of our exports to Central Europe go to these countries. Gazprom Export’s natural gas deliveries to Eastern and Central Europe in 2014 (bcm) Bosnia and Herzegovina
0,16
Bulgaria
2,79
Czech Republic
4,76
Hungary
5,33
Macedonia
0,05
Poland
9,10
Romania
0,33
Serbia
1,36
Slovakia
4,39
Slovenia
0,43
SUPPLIES TO CENTRAL EUROPE, %
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AUSTRIA Austria’s largest company, OMV AG, has been the Russian gas industry’s main business partner for over 40 years. Until 1994, this company was 100% stateowned. The state remains its largest shareholder (via the Austrian Industrial Holding), with a 31.5% stake in OMV. In April 2004, OMV Gas GmbH (a 100% subsidiary of OMV AG) became the legal successor to contracts signed between Gazprom Export and OMV AG. In 1968, OMV became the first Western company to sign a long-term natural gas purchasing contract with the USSR. From the start of supplies to January 1, 2015, Austria received over 190 bcm of Russian natural gas, including 3.95 bcm in 2014. Due to Austrian gas market deregulation and the restructuring of OMV AG natural gas trade operations, the parties concluded an agreement that EconGas would replace OMV Gas International as the purchaser of Russian gas. On September 28, 2006, Gazprom Export cancelled its existing contracts with OMV AG and another local company GWH (renamed Gazprom Austria (GPA) from February 27, 2013). These contracts were replaced with new ones signed by Gazprom Export with EconGas, GPA, and Centrex for Russian natural gas deliveries to Austria (from November 1, 2006 to December 31, 2027). GPA and Centrex also gained the right to direct gas sales in the Austrian market: specifically, in the provinces of Carinthia, Styria, and Salzburg (with the two companies signing corresponding contracts with end consumers). Together with the Austrian company RAG and Germany’s Wingas, Gazprom Export is involved in the joint use of the Haidach underground gas storage (UGS) in Austria.
BOSNIA AND HERZEGOVINA Bosnia and Herzegovina, formerly part of Yugoslavia, have been receiving natural gas supplies since 1978. Prior to the break-up of the Socialist Federal Republic of Yugoslavia, gas was supplied under the Intergovernmental Agreement of 1988. 10
From 1993 to 1995, gas was supplied under contract with Progresgas-Trading, a Russian-Yugoslavian joint venture. Since October 1995, Gazprom Export has been supplying gas via the company Energoinvest d.d. Sarajevo. Founded in 1951, the state-owned Energoinvest d.d. Sarajevo is the leading energy company in Bosnia and Herzegovina. Our annual export volumes to Bosnia and Herzegovina do not exceed 400 mcm. The total volume of gas delivered under the current contract between 1997 and 2014 was over 4.4 bcm, including around 161 mcm in 2014.
BULGARIA Russia is the sole exporter of natural gas to Bulgaria. Deliveries began in 1974. Russian-Bulgarian cooperation is based on several documents, the most important being the General Agreement between member states of the Council for Mutual Economic Assistance (CMEA) on developing the Orenburg gas field and constructing the main Orenburg-Western Soviet Border gas pipeline, and the Yamburg Agreement between the USSR and Bulgaria on developing the Yamburg deposit and constructing the YamburgWestern Soviet Border gas pipeline. Gazprom Export’s main partners in the Bulgarian market are Bulgargaz EAD and Overgas Inc. Bulgargaz is a state-owned enterprise and a 100% subsidiary of Bulgarian Energy Holding EAD. The enterprise was established in 1974. In December 2006, Gazprom Export and Bulgargaz signed a Memorandum on the further development of Russian-Bulgarian gas sector relations. The Memorandum extended the contract for Russian natural gas transport via Bulgaria to other countries until 2030, while keeping booked transit volumes to 17.8 bcm a year. Overgas Inc. is a joint-stock company, 50% owned by Gazprom Export. Overgas Inc. is involved in constructing and operating Bulgaria’s gas pipelines and gas distribution networks, and delivering natural gas to end consumers. On November 15, 2012, Gazprom Export and Bulgargaz EAD signed a new long-term gas supply contract for up to 2.9 bcm per annum. The contract covers the supply
of natural gas from Russia to Bulgaria from January 1, 2013 to December 31, 2022. Gazprom Export and Overgas Inc. extended their current contract for gas supply to Bulgaria until the end of Q1 2015, with annual volumes of up to 400 million cubic meters (mcm). Bulgaria’s natural gas consumption in 2014 was around 3 bcm, including imports of 2.79 bcm (fully covered by supplies from Russia), and including 240 mcm of gas for compressor stations. As at December 31, 2014, the cumulative total of gas supplied to Bulgaria since the start of deliveries was around 162.3 bcm.
CZECH REPUBLIC Russian natural gas supplies to Czechoslovakia began in 1967. Gazprom Export presently has two long-term contracts for supplying natural gas to the Czech Republic: with RWE Supply & Trading CZ a.s. (formerly known as RWE Transgas) and with Vemex s.r.o. Russian natural gas transit via Czech territory is handled by Net4gaz– the operator of the Czech Republic’s gas transmission system. RWE Supply & Trading CZ a.s. is still Gazprom Export’s main partner in the Czech Republic. A long-term contract with RWE Supply & Trading CZ a.s. (RWE Transgas) was signed on October 15, 1998 and runs through to the end of 2035. For many years, Russian natural gas transit across Czech territory was based on a long-term contract signed on November 1, 1999 with RWE Transgas (subsequently RWE Supply & Trading CZ a.s. as of January 1, 2013). On April 1, 2013, RWE Supply & Trading CZ a.s. transferred this contract to Net4gaz – the operator of the Czech gas transmission system – in accordance with agreements reached by the parties. Russian natural gas deliveries for onward transit through the territory of the Czech Republic are carried out mainly through the Yamal-Europe and Nord Stream/OPAL gas pipelines through the Olbernhau/Brandov entry point. In March 2006, Gazprom Export was contracted to supply gas to Vemex, marking the start of supply diversification in the Czech market, along with – given Gazprom Group’s stake in Vemex – access to end consumers in 11
the Czech Republic. From January 1, 2007, in line with EU policy, the Czech gas market was fully deregulated. On October 10, 2007 Gazprom Export and Vemex signed a long-term supply contract from 2008 to 2017. In total, 4.76 bcm of gas was supplied to the Czech market in 2014 (including gas for compressor stations and buffer gas for the Damborice UGS). Vemex is a leader in the field of introducing and utilizing CNG filling stations in the Czech Republic. As at March 2014, the Czech Republic had 53 public CNG filling stations. CNG consumption in the Czech Republic grew 44% in 2013, and the number of filling station may triple in the next five years. Aside from the public filling stations, Czech drivers also use at least 110 individual filling devices.
DENMARK An agreement signed in 2006 on natural gas supply via the Nord Stream gas pipeline defined the basic terms for Danish company DONG’s purchases of Russian gas over a period of 20 years. Deliveries of Russian natural gas to DONG began with the commissioning of Nord Stream’s first line on November 8, 2011. In 2014, supply to Denmark amounted to 412 mcm.
FINLAND Natural gas from Russia has been supplied to Finland for over 40 years. The first contract was signed in 1971, for supplying up to 1.4 bcm per year. Gas actually started arriving in Finland in 1974, and to date Finland has taken delivery of over 117 bcm, including 3.11 bcm in 2014. For 25 years, the Russian party’s partner was Finland’s Neste company (renamed Fortum after merging with Imatran Voima in 1998), with which Gazprom has developed a strong relationship. For many years the companies have cultivated the Finnish natural gas market together. In 1994, this collaboration resulted in the founding of the joint-stock company Gasum, committed to importing and selling natural gas as well as operating and developing Finland’s gas transmission system. 12
In May 2012, Gazprom Export and Gasum extended the contract of 1994 for gas supply to Finland through to December 31, 2027.
FRANCE Russia and France have enjoyed around 40 years of successful and mutually beneficial cooperation in the area of natural gas supply. In this time, over 345.3 bcm of “blue fuel” has been exported to France. Exports to this country in 2014 came to 7.1 bcm. There are currently six major long-term contracts between Gazprom Export and GDF Suez for Russian gas supply to France. The first two contracts were signed on September 3, 1975 and entailed delivering gas to the SlovakAustrian border. Within the framework of the Gas for Pipes project, a third contract was signed on October 28, 1983 for delivering gas to the Czech-German border. On December 19, 2006, Gazprom Export and GDF Suez signed a major package of commercial agreements. This included: extending the existing contracts through 2031 and relocating the delivery points to the French border; selling new volumes through the Nord Stream pipeline; and transferring part of the natural gas volumes and the corresponding transport capacities to Gazprom Export for the purpose of operating in France’s end consumer market. On March 1, 2010 Gazprom Export and GDF Suez signed a MoU on additional supplies of natural gas and the Nord Stream project. Besides the GDF Suez partnership, cooperation with EDF has been developing actively since 2009: on November 27, 2009 Gazprom and EDF signed a MoU expressing their intention to enter into long-term mutually beneficial cooperation in the gas sector, electrical power, and UGS. As part of Gazprom’s strategy of entering the end consumer market, a new Gazprom Group company was registered in France in 2006: Gazprom Marketing & Trading France, engaged in supplying gas to end consumers in France.
GERMANY Germany has been, and remains, the largest buyer of Russian natural gas. Its total import volumes in 2014, including resales, came to 38.70 bcm. The total volume of natural gas sold to Germany since deliveries began (1973, including East Germany) is around 1 trillion cubic meters. Russian natural gas is supplied to Germany under Gazprom Export’s contracts with E.ON Global Commodities SE (formerly Ruhrgas AG), WIEH GmbH & Co. KG, WINGAS GmbH, and Shell Energy Europe Ltd.
With the aim of making natural gas sales more efficient and increasing market share in Germany, Gazprom and Wintershall AG (100% owned by BASF AF) have established two joint ventures in Germany: WIEH (1990) and WINGAS (1993). Several long-term contracts have been concluded with WIEH and WINGAS. Gazprom Export has signed an agreement with WIEH, WINGAS and WIEE extending these contracts until 2031. In 2013, WINGAS started receiving gas via the Nord Stream pipeline.
Joint-stock company Ruhrgas AG was founded in 1926. Its operations included the purchase and transmission of natural gas along main pipelines, with subsequent sales to gas distribution companies. The company also engaged in the whole range of issues related to gas transmission system design, construction, and operation.
When Gazprom Export’s subsidiary Gazprom Marketing & Trading Ltd. (GM&T) was established in Britain, it began to develop cooperation with WINGAS concerning gas sales in the British market. The first small-scale deliveries began in 1999. Shipments used the Gazprom-owned reverse flow capacities of the Interconnector gas pipeline.
Major German energy company E.ON AG acquired Ruhrgas AG in early 2003, becoming its sole shareholder.
In 2014, Gazprom Export supplied a total of 24.64 bcm to Germany, Belgium, and Britain via WINGAS and WIEH.
E.ON Global Commodities SE imports natural gas from Russia, the Netherlands, Norway, and Denmark, providing over 50% of total gas supply to the German market. Natural gas is delivered to E.ON Global Commodities SE for supply to Germany and Switzerland under several long-term contracts.
Shell Energy Europe Ltd. signed a 20-year contract with Gazprom Export for the supply of 1.2 bcm of gas per year.
In August 2006, Gazprom Export and E.ON Global Commodities SE extended their four main contracts to 2035. In July 2012, the contract terms with E.ON Global Commodities SE were adjusted in accordance with European market regulations. At the German regulator’s demand, in 2010 the company was split into trading and transportation companies. Since October 1, 2001, a long-term agreement and several short-term contracts have been in force with transport company Open Grid Europe GmbH (successor to E.ON Gastransport GmbH from the end of 2010) on Russian natural gas transportation via German territory to the Netherlands and Belgium. From the start of supply to the present, over 600 bcm of gas has been delivered to E.ON Global Commodities SE.
GREAT BRITAIN In December 1994, Gazprom became a shareholder in Interconnector (UK), operator of the Interconnector gas pipeline between continental Europe and Britain. Gazprom now owns 2 bcm per year of this pipeline’s forward flow capacity (toward Europe) and 6 bcm per year of reverse flow capacity (toward Britain). With the aim of optimizing the use of this gas pipeline’s capacities and furthering trade operations in Europe’s deregulated markets, a 100% Gazprom subsidiary – Gazprom UK Trading (now known as Gazprom Marketing & Trading, hereafter referred to as GM&T) – was established in Britain on May 6, 1999. GM&T’s chief fields of activity include: •
Trading operations across Europe’s major trade platforms, including trading in gas, electricity, crude oil, and petroleum products, as well as CO2 emission permits; 13
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Developing Gazprom Group’s electric power business; Selling gas and electricity to end consumers in Britain, France, Germany, and the Netherlands; Providing end consumers with services for metering consumption of gas, electricity, and other products; Developing LNG trade operations in both Atlantic and Pacific region markets; Selling LNG and trading CO2 emission quotas in the Asia-Pacific via GM&T Singapore; Selling gas to end consumers in the North American market via the GM&T USA subsidiary.
Having started with volumes of 260 mcm, Gazprom Group now supplies 10.09 bcm of natural gas per year to the British market (results for 2014). As well as Russian gas, GM&T’s portfolio also includes gas from other producers. For instance, GM&T has a contract with DONG (Denmark) for purchasing natural gas from the Ormen Lange field in the North Sea. GM&T also buys significant volumes of gas directly in the market. To enhance the reliability and flexibility of gas supply to Britain, the company is optimizing the Interconnector pipeline capacities it owns and the BBL pipeline capacities it leases. Another measure taken to improve reliability and optimize supply involves gas swap deals. These deals
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help lower transmission costs and ensure increased gas volumes in the portfolio for any given market, regardless of capacity loading in a particular section. GM&T also participates in operations such as exchanging pipeline gas for liquefied natural gas (LNG). Another strategy pursued to improve the reliability of gas supply to consumers involves optimizing and balancing the company’s own product portfolio. These measures include such transactions as hedging and signing multiple-component contracts involving bundled products (gas/electricity/ greenhouse gas emission permits). The sale of gas to end consumers is a gas business segment that enables revenue sources to be diversified. Moreover, direct gas deliveries to end consumers are additional guarantees of natural gas sales in the British deregulated market. In 2014, gas sales to end consumers in Britain (through GM&T’s subsidiary, Gazprom Marketing & Trading Retail) came to 3.36 bcm.
GREECE Russian gas exports to Greece began in 1996 under a contract between V/O Soyuzgazexport and the DEPA Public Gas Corporation of Greece, signed in 1988 and covering delivery of up to 3 bcm per year through 2016, inclusive. In 2014, this contract was extended to 2026.
DEPA is a state-controlled gas corporation established in 1988 to diversify Greece’s fuel and energy balance. It has exclusive rights to regulate and shape Greece’s natural gas market. Greece is gradually bringing its gas market functionality model in line with EU standards and requirements. The first steps in this direction entailed splitting off the transport unit of the DEPA national gas corporation into an independent specialized company, and providing potential new players in Greece’s gas market with access to the Greek transmission system. For the purpose of developing Russian-Greek gas industry cooperation, Prometheus Gas S.A. was established in 1991 with equal equity participation by Gazexport and Copelouzos Broz Group Ltd. Prometheus Gas S.A. operations primarily deal with the construction of energy facilities in Greece, in accordance with the Supplement to the Intergovernmental Agreement of 1987. Facilities brought online to date include eight branch gas pipelines, the Florina thermal power station (300 MW capacity), and a compressor station at Nea Mesimvria. As at December 31, 2014, a total of around 37.4 bcm of gas had been exported to Greece since the beginning of supplies. Supply to this country in 2014 amounted to around 1.75 bcm.
HUNGARY Natural gas supply cooperation with Hungary began in 1975, and until 1998 gas was exported under the intergovernmental agreements on developing the Orenburg and Yamburg gas fields. Panrusgaz, a Hungarian-Russian gas sector joint venture, was set up in 1994 to ensure that Hungary’s long-term imported gas needs would be met reliably, to develop mutually beneficial trade ties, and to maximize the use of opportunities based on strategic partnership. Importing natural gas is the company’s core business. Panrusgaz is Hungary’s leading natural gas supplier (around 65%). In 1996 long-term contracts were signed with Panrusgaz for natural gas supply to Hungary in 1996-2015. Under these contracts, gas is supplied to Hungary via two routes: through Beregovo (Ukrainian-Hungarian border) and Baumgarten (Slovak-Austrian border).
As at December 31, 2014, a total of 224.2 bcm of natural gas had been exported to Hungary since the start of deliveries. Supply to this country in 2014 amounted to 5.33 bcm.
ITALY ENI, founded in 1953, is Gazprom Group’s main partner in the Italian market. The company’s corporate structure has three business units: Exploration & Production, Gas & Power, and Refining & Marketing. Gas purchases and sales are handled by ENI Gas & Power S.p.A., part of the second unit. Gazprom Group supplies natural gas under three long-term contracts with ENI. Gas is also exported to other companies operating in the Italian market, such as Sinergie Italiane, Axpo Trading AG, ERG, and AEMME Linea Energie. In addition, Russian gas is delivered to Italy through subsidiaries JSC Promgaz (established on a parity basis by Gazprom and ENI in June 1993; Gazprom bought out ENI’s stake in late 2011) and PremiumGaz (established in 2008 with A2A S.p.A. and Iride S.p.A). Natural gas supply to Italy in 2014, under all contracts, came to 21.68 bcm. A total of around 562.06 bcm has been supplied to this country since 1974. Gazprom and ENI jointly implemented the Blue Stream project within their strategic alliance based on the Agreement signed in 1998. The pipeline system is operated by a dedicated Russian-Italian company called the Blue Stream Pipeline Company. The gas pipeline’s capacity is divided between Gazprom and ENI on a 50/50 basis. In 2010, the pipeline reached its designed capacity of 16 bcm per annum. Gazprom/Gazprom Export signed a Strategic Partnership Agreement with ENI on November 14, 2006. As a result, since April 1, 2007, Gazprom Group has also been able to supply Russian gas directly to the Italian market through the ENI company’s concession of its TAG gas pipeline capacities and gas volumes, around 3 bcm, to Gazprom Export.
MACEDONIA Cooperation with Macedonia’s gas industry began with the signing of a contract with Makpetrol A.D. in 1991 15
to build main and branch gas pipelines in Macedonia on general contract terms. The construction was completed in 1997. Russian gas exports to Macedonia started in 1997. As at January 1, 2015, a total of around 1.35 bcm of gas had been supplied, including around 46 mcm in 2014.
THE NETHERLANDS Gas and oil deposits were first discovered in the Netherlands at the beginning of the 20th century, with their commercial development beginning after the World War II. N.V. Nederlandse Gasunie trading company was established on April 6, 1963 for the purpose of creating an effective national gas supply system. It was authorized to purchase gas from producers, transport it, and sell it both domestically and abroad. Gasunie signed its first export contract with Belgium’s Distrigas in 1965. Despite its relatively small size and population, the Netherlands is currently Europe’s fifth-largest consumer of natural gas, due to the high level of gasification in the domestic, industrial, and power generation sectors. The overall share of gas in the national energy balance stands at around 48% (the EU average is 24%). The total length of gas transmission networks stands at 11,000 kilometers. The foundations of Gazprom’s business cooperation with Gasunie were laid in the framework agreement of 1996; besides Russian natural gas supply to the Netherlands, this also covered various forms of partnership in transmission, storage, enhancing gas supply flexibility, etc. A 20-year contract for natural gas sales to the Netherlands was signed in September 2000. The first deliveries to the Netherlands from Russia started on October 1, 2001 via the YamalEurope pipeline system. In 2014, Gazprom supplied 3.51 bcm of gas to the Netherlands. The Dutch government restructured Gasunie in accordance with EU directives. The legal unbundling of the company’s transmission and marketing units 16
was completed in July 2005. The state now owns 100% of the restructured transmission company N.V. Nederlandse Gasunie. Shares in the marketing unit, known as GasTerra from September 1, 2006, are still held by the old Gasunie shareholders, with the distribution of shareholder capital also remaining the same (Energie Beheer Nederland B.V. 40%, Exxon Mobil 25%, Shell 25%, and the state 10%). According to the new structure, GasTerra is now Gazprom Export’s counterparty under the contract for natural gas supplies to the Netherlands. N.V. Nederlandse Gasunie is Gazprom’s partner in the Nord Stream project. The Dutch company owns 9% of Nord Stream AG, the pipeline’s operator.
POLAND Poland is the oldest buyer of Russian gas. The first small-scale volumes were supplied to Poland from 1944. In recent years, Poland has ranked first in Eastern Europe in terms of Russian gas import volumes. Supply from Russia meets 60% of Polish demand for gas. Natural gas supply to Poland and transit via its territory are covered by long-term contracts with PGNiG SA and EuRoPol GAZ s.a., under an Intergovernmental Agreement dated August 25, 1993 on Russian gas supply to Poland and the creation of a gas pipeline system for gas transit through Poland to Western Europe. Polskie Gornictwo Naftowe i Gazownictwo (PGNiG) is Poland’s largest oil and gas company. It is involved in oil and gas field development, production, storage, and transmission of these primary energy products, construction and development of the national oil and gas transmission system, and gas imports and exports. The company was established as a state enterprise in 1982. In 1990, it was transformed into a 100% state-owned joint-stock company. Following partial privatization, the government’s stake is now 72.4%. EuRoPol GAZ, a Russian-Polish joint venture, was established in 1993 to design, finance, and build gas transit pipeline systems on Polish territory. The company owns the 684-kilometer stretch of the
Yamal–Europe gas pipeline that runs through Poland. Construction of the first leg of the Yamal–Europe gas pipeline was completed at the end of 1999. With five compressor stations now in operation, its current capacity is around 33 bcm per year. As at January 1, 2015, around 283.8 bcm of natural gas had been sold in Poland, including 9.1 bcm in 2014, 421 mcm of this being fuel gas. Intergovernmental and corporate agreements aimed at strengthening Russian-Polish cooperation were concluded in October 2010. This resulted in gradually increasing volumes supplied to Poland until the end of the term of the contract between Gazprom Export and PGNiG SA, as well as resolving issues related to the activities of EuRoPol GAZ s.a., especially tariff formation for transportation of Russian gas across Polish territory and the corporate governance of EuRoPol GAZ s.a.
ROMANIA The start of cooperation with Romania’s gas industry involved the development of the Orenburg gas condensate field and the construction of the Orenburg-Western Soviet Border gas pipeline, as stipulated in the 1974 General Agreement among member states of the Council for Mutual Economic Assistance (CMEA). Natural gas has been supplied to Romania since 1979, with market share amounting to 20-25% of total consumption in various years. Gas from the Russian Federation is supplied under long-term contracts with WIEE and Conef Energy for natural gas supply to Romania through 2030. As at January 1, 2015, a total of over 126.7 bcm had been supplied to Romania since the supplies began, including 0.33 bcm in 2014.
SERBIA Natural gas deliveries to Yugoslavia began in 1978. After the collapse of the Socialist Federal Republic of Yugoslavia (SFRY) in the early 1990s, separate Intergovernmental agreements on gas industry cooperation were signed with the new sovereign states. 17
A Russian-Serbian Intergovernmental Agreement was signed on February 7, 1995. To strengthen Gazprom’s position in the region, a new Russian-Serbian joint venture, Yugorosgaz (50% Gazprom-owned), was established in July 1996 under an Intergovernmental Agreement dated April 11, 1996. Yugorosgaz’s operations cover phased implementation of the construction plan for the southern branch of Serbia’s gas pipelines, gasification and gas supply to consumers in southern Serbia, and participation in joint energy projects. This company has been Serbia’s natural gas purchaser since 2007. On October 13, 2012, Russia and Serbia signed an Intergovernmental Agreement on natural gas supply in 2012-2021, allowing gas supply to be increased to 5 bcm per year. Based on an Intergovernmental Agreement dated March 27, 2013, Gazprom Export and Yugorosgaz signed a long-term contract for natural gas supply to Serbia until the end of 2021. As at January 1, 2015, a total of around 12.14 bcm of gas had been supplied under the contract with this company, including 1.36 bcm in 2014. Transmission, distribution, and storage of natural gas within Serbia are handled by the state-owned enterprise Srbijagas, established on October 1, 2005 by the government of the Republic of Serbia in the course of restructuring the state-owned enterprise Naftna Industrija Srbije (NIS).
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An Intergovernmental Agreement on the Banatski Dvor underground storage (UGS) project was signed on January 25, 2008. Banatski Dvor started operating in October 2011. The UGS has an active gas storage volume of 450 mcm, with maximum daily withdrawal productivity of 5 mcm. This storage facility guarantees reliable supplies of Russian gas not only for Serbia, but also for consumers in Hungary and Bosnia and Herzegovina.
SLOVAKIA Slovakia is a long-standing and reliable partner of Russia in the field of gas exports. Supplies of Russian natural gas to Slovakia started back in 1967 and continue to the present day. SPP a.s. is Gazprom Export’s chief partner in Slovakia. SPP a.s. is now 100% state-owned (through the State Property Fund). Moreover, SPP a.s. is the main stakeholder in Slovakia’s gas transmission system operator, Eustream a.s., as well as a number of other companies engaged in gas distribution, transportation, and storage. Gas supply to Slovakia is based on the 21-year Framework Agreement signed in 2008. Russian gas transit via the Uzhhorod corridor passes through the territory of the Slovak Republic. There is a current contract with Eustream a.s., the operator of Slovakia’s
gas transmission network, for gas transportation to Baumgarten (Austrian border) through 2028 and to Lanzhot (the Czech Republic border) through 2013. Since January 1, 2013, gas volumes previously transported to Lanzhot through the Uzhgorod transit corridor have been completely rerouted to the Nord Stream gas pipeline. In 2014, gas supply to Slovakia amounted to 4.39 bcm (including gas for compressor stations).
SLOVENIA Natural gas deliveries to Slovenia began in 1978. Since the break-up of Yugoslavia, cooperation has been based on an Intergovernmental Agreement signed on November 5, 1992. Gazprom Export’s partner in the Slovenian market is Geoplin d.o.o. Ljubljana, founded in 1975 and now the country’s largest importer of natural gas. The current contract runs through 2018. As at January 1, 2015, over 12.5 bcm of natural gas had been supplied to Slovenia since the beginning of supplies, including 0.43 bcm in 2014.
TURKEY In February 1986, based on an Intergovernmental Agreement dated September 18, 1984, a contract was signed with Turkey’s BOTAŞ company for supplying up to 6 bcm of gas per year for over 25 years (19872011). The first deliveries of natural gas to Turkey from the Soviet Union began in June 1987, by transit via Romania and Bulgaria using the specially-constructed Trans-Balkan pipeline. In 1998, a long-term contract was signed with BOTAŞ for supplying an additional 8 bcm per year via this route through 2022, inclusive. Until 2003, natural gas was delivered to Turkey only by transit through Ukraine, Moldova, Romania, and Bulgaria. In 2003, gas started flowing through the Blue Stream pipeline under a Gazexport-BOTAŞ contract dated December 15, 1997 and based on an Intergovernmental Agreement on Russian gas supply to Turkey via the Black Sea. The maximum annual capacity for supply via this route is 16 bcm.
The BOTAŞ state pipeline company was founded by the TPAO state oil company in 1974 in accordance with a Turkish government resolution. BOTAŞ has engaged in gas trading and transportation since 1986. Until recently, BOTAŞ had exclusive rights to oversee and structure the gas market in Turkey. With the aim of accession to the European Union, the Turkish government enacted a Natural Gas Market Act that entailed gradually eliminating the gas import monopoly by having BOTAS transfer pre-contracted gas volumes to private sector importers, on a tender basis (and subject to the gas seller’s approval). Given the deregulation of Turkey’s gas market, Gazprom Export agreed to transfer part of the volumes for one of its contracts in a tender called by BOTAŞ, and in 2007 it signed contracts with the four private companies that gained the rights to import gas into Turkey. The next step in deregulating the national gas market was the Turkish government’s admission of new private players into the market. Having considered the new realities, and at the request of the Turkish party, Gazprom Export signed new long-term contracts (through 2042, inclusive) with Turkish private companies in August 2012. The contracts allow for supplying up to 6 bcm a year of Russian gas to Turkey. The total supply volumes under these new contracts completely replaced the natural gas volumes formerly supplied to BOTAŞ under the contract signed on February 14, 1986. Gas supply under the new contracts commenced on January 1, 2013. On December 1, 2014, Gazprom Management Committee Chairman Alexey Miller and BOTAŞ Board of Directors Chairman Mehmet Konuk signed a memorandum of understanding on building a subsea gas pipeline across the Black Sea in the direction of Turkey. This new pipeline will have an annual capacity of 63 bcm, including 14 bcm for Turkish consumers and around 50 bcm to the Turkish-Greek border, where a delivery point will be organized. The pipeline’s starting point should be the Russkaya compressor station in the Krasnodar Region. As at December 31, 2014, over 349 bcm of natural gas had been supplied to Turkey since the beginning of supplies. Supply volumes for 2014 came to 27.33 bcm. 19
NEW MARKETS New markets in the Asia-Pacific Region In line with its global energy company strategy, and specifically with the aim of achieving geographic diversification objectives, Gazprom Group is interested in expanding its presence in Asia-Pacific Region (APR) markets. Interest in this region is based on the Asian energy market’s rapid growth and the location of Russia’s largest resource centers in direct proximity to that market. Gazprom Group’s APR target markets are China, South Korea, Japan, and India, to be followed at a later stage by niche markets, including Singapore.
Gas supply to China Moving into the Chinese market is a key element of Gazprom’s current strategy of diversifying gas export directions. China is already the world’s third-largest gas market, with annual natural gas consumption totalling around 180 bcm. Moreover, according to forecasts, China’s annual demand for this energy resource could reach 300-400 bcm by 2020. On May 21, 2014 Gazprom and China National Petroleum Corporation (CNPC) signed a Purchase and Sale Agreement for Russian gas to be supplied to
China via the Eastern route, with annual volumes of 38 bcm over 30 years. Russian President Vladimir Putin and Chinese President Xi Jinping were present at the signing of the historic agreement. The Technical Agreement – a supplement to the natural gas Purchase and Sale Agreement – was signed on October 13, 2014. This sets out the basic parameters for designing, building, and operating the cross-border section of the Power of Siberia gas trunkline. It also contains the basic technical and technological terms for delivering gas from the seller to the purchaser. The resources for fulfilling this contract will come from fields in the Irkutsk (Kovykta oil and gas condensate field) and Yakutsk (Chayanda oil and gas condensate field) gas production centers. Deliveries will be made via the Power of Siberia gas transmission system, with a total length of around 4,000 kilometers. The start of gas production at the Chayanda field is scheduled for late 2018. By then, the first section of the Power of Siberia gas transmission system will have come online, running from the Chayanda field to the city of Blagoveshchensk, as well as the primary gas processing facilities. This will enable direct gas supply to China to start in 2019, in line with contractual obligations. The next step in reinforcing RussianChinese gas sector partnership came in Beijing on November 9, 2014, when Gazprom and CNPC signed a Framework Agreement on natural gas supply from Russia to China via the Western route. Fulfilling this agreement will necessitate building a new gas transmission system, Altai, within the existing transport corridor from Western Siberia to Novosibirsk, with subsequent extension to the Russian-Chinese border. The gas pipeline, around 2,600 kilometers in length, will be equipped with modern powerful compressor stations, ensuring efficient and reliable export deliveries.
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LNG Expanding its presence in the liquefied natural gas (LNG) market is a promising activity area for Gazprom Group. Increasing LNG volumes in the Group’s supply portfolio makes it possible to achieve geographical diversification of supply, reduce transit risks, and increase export volumes by moving into new markets which are inaccessible for pipeline gas. LNG trading within Gazprom Group is handled by Gazprom Marketing & Trading. The LNG portfolio managed by this company consists of LNG volumes from the Sakhalin-2 project as well as LNG from projects outside Russia. This portfolio structure makes it possible to optimize trade flows efficiently and react to changing market circumstances in a timely manner. In future, the greater part of LNG volumes will come from various projects on Russian territory, including Vladivostok LNG, Baltic LNG, and the expanded capacity of the Sakhalin-2 liquefication plant. Completing these projects will enable a geographical expansion of supply, covering all the promising regional markets. Gazprom Group’s ability to compete in the LNG trade is based on the proximity of its liquefication projects to the major consumer markets, resource base for export, the Group’s own fleet of gas transport tankers, and a great deal of experience in LNG market trading.
Gazprom Group companies presently supply LNG to the Asia-Pacific’s biggest gas consumers: Japan, South Korea, China, India, and others. What’s more, there has been a trend in recent years for new LNG consumer markets to emerge – primarily in the growing economies of Asia (Singapore, Thailand, Pakistan, Vietnam, etc.), Latin America, and the Middle East, where significant domestic gas demand growth is being observed (Kuwait, the UAE, Bahrain). All these countries are choosing to build LNG terminals with a view to converting electric power generation and some industries to gas, and they are promising directions for Gazprom Group’s LNG supplies. Some shipments of LNG have already been delivered to countries such as Kuwait, Thailand, and the UAE. Growing the LNG export portfolio – by developing Russian projects, by pursuing opportunities to participate in third-party projects, and by carrying out trading operations – facilitates positioning Gazprom as a global energy company.
LNG supply to the APR As well as supplying pipeline gas to the Chinese market, Gazprom is also working on a project to build an LNG production plant outside the city of Vladivostok. This plant’s output will be supplied to
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the APR’s growing markets. The Vladivostok LNG plant will have an annual capacity of 10 million tons, with potential for expansion. Its first train will start operating in 2018. The design stage is now approaching completion. Successful achievement of this project’s objectives could create the second-largest export corridor for delivering Russian gas to the APR.
NATURAL GAS PURCHASES TURKMENISTAN The contract between Gazprom Export and Turkmengaz covers natural gas supply from Turkmenistan in the period from 2004 to 2028 under a long-term contract. Turkmen gas exports began in January 2004. Since 2010, both parties have used a pricing formula based on international petroleum product prices.
New markets in the Atlantic Basin Latin America is another region of interest for Gazprom Group’s business; not only for its extensive gas and oil reserves, but also due to rapid gas market growth in countries like Brazil, Argentina, and Mexico. Therefore, some countries in this region are not only potential sources of LNG, but potential sales markets as well. Gazprom Marketing & Trading Mexico gives Gazprom Group a presence in the Mexican market, leasing capacity at the Costa Azul regasification terminal to receive LNG from the Sakhalin-2 project. In 2013, Gazprom Marketing & Trading won an international tender to supply 15 LNG shipments totalling 1 million tons from Gazprom Group’s portfolio to Argentina in 2014-2015. Also among the Atlantic Basin’s promising markets for Gazprom Group’s LNG are the Middle East and North Africa: countries such as Kuwait, the UAE, and Egypt, where domestic demand continues to grow but domestic production is declining (along with exports in the case of Egypt and the UAE). Gazprom Marketing & Trading has already exported some LNG to Kuwait and the UAE, and negotiations for deliveries to Egypt are in progress.
LNG supply to the Atlantic Basin With the aim of expanding its presence in Atlantic Basin markets, Gazprom is also developing the Baltic LNG project. A decision to move the project to the investment stage was taken in early 2015. The plant will be built in the port of Ust-Luga, 160 kilometers from St. Petersburg, with an annual output capacity of 10 million tons. This project’s target markets are countries in the Atlantic Basin, along with India. 22
Gazprom Export purchased a total of 201.3 bcm of gas in 2004-2014, including 10.984 bcm in 2014.
UZBEKISTAN Gas deliveries from Uzbekistan started in 2003 under short-term contracts between Gazprom Export and Uztransgaz. Gazprom Export purchased a total of 27.33 bcm of gas in 2003-2014, including 3.627 bcm in 2014.
AZERBAIJAN In October 2009, Gazprom Export and the State Oil Company of the Azerbaijan Republic (SOCAR) signed a medium-term contract for supplying 0.5 bcm of natural gas per year from Azerbaijan in 2010-2015 through the Shirvanovka point of delivery on the Russian-Azerbaijani border. Natural gas supplies from Azerbaijan started in January 2010. In June 2010, the parties signed an addendum to the contract, allowing purchases of Azerbaijani gas to be increased to 1.0 bcm per year. A total of 5.4 bcm of Azerbaijani gas was purchased in 2010-2014, including 206 mcm in 2014. In January 2012 the parties signed a supplement to the contract, increasing the volume of gas purchases in 2012-2015 to 3 bcm per year. The parties are considering increasing the supplied volumes further, including gas from the Shah Deniz II field.
KAZAKHSTAN Kazakhstan is one of Gazprom Export’s long-standing partners. Due to the specific features of Kazakhstan’s
gas transmission system, natural gas trading with Kazakhstan makes extensive use of swap arrangements. Gazprom Export not only purchases Kazakh gas for the portfolios of its subsidiaries, but also supplies natural gas from Russia and Uzbekistan to the Aktobe and Kostanay regions
and consumers in Kazakhstan’s southern regions. In 2014, Gazprom Export purchased 11.87 bcm of gas from Kazakhstan. Our company’s partners in the Kazakhstan market are KazRosGas LLP (a joint venture of Gazprom and JSC NC KazMunayGas), KazTransGas, and others.
NATURAL GAS PURCHASES IN 2014, BCM
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GAS TRANSPORTATION AND STORAGE TRANSPORTATION Yamal-Europe The transnational Yamal-Europe gas pipeline passes through four countries: Russia, Belarus, Poland, and Germany. This export corridor increased the flexibility and reliability of Russian gas supplies to Western Europe. The European Union made the Yamal-Europe gas pipeline a Trans-European Networks (TEN) priority investment project. Construction began in 1994, and with the commissioning of its final compressor station in 2006. Yamal-Europe reached its design capacity of 32.9 bcm per year. The pipeline has 14 compressor stations, a pipe diameter of 1,420 millimeters, and a total length of over 2,000 kilometers (km). The line originates from the Torzhok gas transportation junction in Russia’s Tver Region, where it receives gas from the Northern Tyumen Regions (SRTO)-Torzhok pipeline. The Russian section is 402 km long, with three compressor stations: Rzhevskaya, HolmZhirkovskaya, and Smolenskaya. The pipeline’s Belarusian sector is 575 km long, with five compressor stations: Nesvizhskaya, Krupskaya, Slonimskaya, Minskaya, and Orshanskaya. Gazprom is the sole owner of the Belarusian sector of the pipeline. The Polish sector is 683 km long, with five compressor stations: Ciechanów, Szamotuły, Zambrów, Włocławek, and Kondratki. The Polish sector of the pipeline is owned by EuRoPol GAZ (a joint venture between Gazprom and Poland’s PGNiG). The pipeline’s westernmost point is the Mallnow compressor station near Frankfurt (Oder), close to the German-Polish border, where the pipeline connects to the JAGAL-Nord gas transportation system, which in turn connects it with the STEGAL West-MIDAL-Rehden UGS gas transportation system and STEGAL East-
Olbernhau, where the German and Czech transmission systems meet. The German part of the pipeline is owned by Gascade (formerly WINGAS Transport). WINGAS Transport GmbH was renamed Gascade Gastransport GmbH as of March 1, 2012. The name change had no impact on business relationships, and all existing contracts with WINGAS Transport GmbH remained unchanged. In order to ensure transportation to the customer delivery point, Gascade reserved additional pipeline capacity for supplies to the Netherlands, Belgium, and France.
The Ukrainian corridor The Ukrainian gas transport corridor includes the Urengoy-Pomary-Uzhgorod gas pipeline. This pipeline runs through Ukraine to Slovakia. Due to the expiration of contracts, a gas transit agreement was signed on November, 11 2008 with Eustream a.s., to transport a total of around 1 trillion cubic meters of gas over 20 years. Gas transit via Slovakia runs in the direction of Austria and plays an important role in supplying natural gas to Italy, Hungary, Slovenia, and Croatia. Russian gas transportation across Austrian territory to the Italian border uses the TAG gas pipeline, within contracted capacities. Another component of the Ukrainian gas transport corridor is its southern direction, running across Ukraine and Moldova to Romania. This country plays an important strategic role in the transit of Russian gas to the Balkan states and Turkey. In accordance with an Intergovernmental Agreement signed in 1986, a transit pipeline was built on Romanian territory, and this has been used to supply gas via Bulgarian territory to Turkey since 1987, to Greece since 1996, and to Macedonia since 1997. In order to increase Russian exports to the Balkan states and Turkey, an Intergovernmental Agreement to expand transit 25
pipeline capacity in Romania was signed in 1996. From 2002, transit capacity for exporting natural gas via Romania to other countries was increased to 18.7 bcm per year.
Blue Stream The Blue Stream gas pipeline delivers natural gas directly to Turkey across the Black Sea. Blue Stream supplements the Russia-Turkey gas transportation corridor running through Ukraine, Moldova, Romania, and Bulgaria.
The total length of the Blue Stream pipeline is 1,213 km, and its design capacity is 16 bcm of gas a year. The main partner in the construction of Blue Stream was Italy’s ENI, with extensive experience in building offshore pipelines. In March 2014, Blue Stream recorded an important milestone: its cumulative total of natural gas deliveries reached 100 bcm. In 2014, the volume of gas transported via Blue Stream came to 14.4 bcm.
Nord Stream The pipeline has made gas supply to Turkey more reliable and facilitated the development of Turkey’s gas market and gas infrastructure. It also makes it possible to cover demand spikes in Turkey due to repeated low temperatures in winter. Given that over 60 km of the pipeline’s Russian onshore section runs across mountain territory, and the depth of the offshore section reaches 2,150 meters in an aggressive hydrogen sulfide environment, some special technical solutions were required during construction in order to enhance the pipeline’s reliability. These solutions included using pipes made from high-quality noncorrosive steel with inner and outer polymer coatings, running stress tests on the pipeline, using smart inserts in the mountain and offshore sections, and so on.
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The Nord Stream pipeline links Russia and Germany directly. It has two lines (each with an annual capacity of 27.5 bcm), running along the Baltic Sea floor from Portovaya Bay near the city of Vyborg to the German coast near Greifswald. Its length is around 1,200 km. Gas deliveries started in 2011. Construction of the second line was completed in 2012, enabling the pipeline’s throughput capacity to reach 55 bcm. The Nord Stream AG (Switzerland) gas transmission company was established to plan, build, own, finance, and operate the gas pipeline. In September 2006 the final Shareholder’s Agreement was signed, as well as the Agreement on the basic terms for gas transportation.
Stakes in Nord Stream AG are distributed as follows: Gazprom (51%), E.ON Global Commodities (15.5%), Wintershall (15.5%), Gasunie (9%), and GDF Suez (9%). The Nord Stream gas pipeline plays an important role in ensuring reliable supplies of Russian natural gas to meet additional demand for it in Europe. This route makes it possible to bypass sometimes-unpredictable transit countries.
Turkish Stream The objectives for creating a new transport corridor in southern Europe are to increase the volume of natural gas exports to Europe and ensure supply reliability. This goal was initially assigned to the South Stream project. The pipeline’s offshore section, 931 km long, was supposed to be laid across the Black Sea floor from Russia to Bulgaria. The pipeline’s onshore section would then run through Bulgaria, Serbia, Hungary, Slovenia, and Austria. The main pipeline was supposed to have spurs leading to Croatia and Republika Srpska (a state formation within Bosnia and Herzegovina). The pipeline was intended to have an annual capacity of 63 bcm.
On December 1, 2014, Russian President Vladimir Putin announced that Russia could not continue working on the South Stream project. It was cancelled because Bulgaria had not issued a construction permit for the gas pipeline’s offshore section. At the same time, Gazprom and Turkey’s BOTAŞ Petroleum Pipeline Corporation signed a MoU on building a gas pipeline across the Black Sea in the direction of Turkey. Alexey Miller, Chairman of the Gazprom Management Committee, met with Turkish Energy and Natural Resources Minister Taner Yıldız on January 27, 2015. They considered the preliminary feasibility study results for the new gas pipeline and made a decision about its route. On February 7, 2015 Alexey Miller and Taner Yıldız determined the route’s key reference points and technical solutions for the gas pipeline on Turkish territory. The plan calls for Turkish Stream’s landing point to be in the European part of Turkey, near the town of Kıyıköy; the delivery points will be Lüleburgaz for Turkish consumers and a Turkish-Greek border sector near İpsala for European consumers. The gas pipeline’s offshore section will run across the Black Sea floor. 27
The maximum depth on the pipeline route is up to 2,200 meters. The subsea section will be 910 km long. The length of the Turkish onshore section will be 180 km. The pipeline’s four lines will have a total annual capacity of 63 bcm, with 47 bcm of this gas supplied to the Turkish-Greek border. The project meets all modern environmental safety standards. The construction and utilization technologies for the subsea gas pipeline will have minimal impact on the sea floor’s ecology and geology, water quality, and the marine environment, including the habitat of marine life, mammals, sea birds, and the fishing industry.
Power of Siberia The first joint of the Power of Siberia gas transmission system was welded at a ceremony in Yakutsk on September 1, 2014. This system will deliver gas from the Yakutsk and Irkutsk production centers to consumers in the Russian Far East and China. Its total length will be around 4,000 km, with an annual capacity of 61 bcm (including 38 bcmpa to Chinese market). The end of 2018 is the scheduled completion
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timeframe for a pipeline sector over 2,200 km long, running from the Chayanda field in Yakutia to the city of Blagoveshchensk (on the Russian-Chinese border). Further it is planned to build a section linking Chayanda with the Kovykta field in Irkutsk Region (some 800 km pipeline), and a section from Svobodny in Amur Region to Khabarovsk (1000 km). This will link the Power of Siberia to Sakhalin-Khabarovsk-Vladivostok gas transmission system.
GAS STORAGE In order to ensure uninterrupted gas supply to European consumers in peak demand periods or during gas transmission system maintenance, and in order to grow gas sales, Gazprom Group has adopted an underground gas storage system (UGS) development strategy. Potential storage facilities must be located close to pipelines used for transporting natural gas. As a rule, our company builds UGS facilities in cooperation with local partners. Between 2006 and 2014, our gas storage capacity in Europe increased from 1.4 to 5.4 bcm, and daily output rose from 18.2 to 74.6 mcm. Gazprom Group is involved in underground gas storage projects in the countries along Russia’s main export routes:
• Together with WINGAS, our company operates Europe’s largest UGS facility: Rehden in Germany, with a volume of over 4.0 bcm; • Gazprom Export, WINGAS, and RAG operate the Haidach UGS in Austria. After Phase 2 was commissioned, its active gas volume reached 2.83 bcm. The Haidach UGS ensures the reliability of natural gas supply toward the Baumgarten hub and to consumers in Slovenia, Croatia, Hungary, Austria, Germany, Slovakia, and Italy; • Together with VNG, we are working on the Katharina UGS (Germany) construction project. The design capacity of this UGS facility is 26 mcm per day, and the active gas volume capacity will be 629 mcm. Its current active volume is 219 mcm. This UGS facility ensures reliable supplies to Western Europe at the Mallnow, Waidhaus, Gaspool, and NCG stations, as well as through the Nord Stream gas pipeline; • In Serbia, our company has completed the Banatski Dvor UGS project with an active volume of
450 mcm of gas. Gazprom Group holds a 51% stake in this project. The UGS facility ensures the reliability of natural gas exports to Hungary, Serbia, and Bosnia and Herzegovina; • The Bergermeer UGS in the Netherlands was commissioned in 2014. This UGS facility is strategically located and has significant active gas reserves, from which Gazprom has booked 1.9 bcm in storage capacity. The Bergermeer UGS is intended to ensure the stable operation of the Nord Stream pipeline and gas supply reliability; • Construction of the Dambořice UGS facility has begun in the Czech Republic, in cooperation with Moravské naftové doly (MND). This UGS facility will be commissioned in 2016, with an active volume of 450 mcm. The project will ensure reliability of Russian gas supply via the OPAL and Nord Stream pipelines. Gazprom Group is also conducting feasibility studies for participation in UGS projects in Austria, Slovakia, Turkey, and a number of other countries.
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EXPORTS OF CRUDE OIL, PETROLEUM PRODUCTS, AND SULFUR CURRENT AREAS OF ACTIVITY In 2014, Gazprom Export exported around 6 million tons of liquid hydrocarbon products and refined products, to a total value of around $2.5 billion.
The corresponding contracts were concluded on a competitive basis, and under these, comprehensive services were provided to consignors: customs procedures, rail transport, reloading, quality analysis, in-port storage, and freight.
Gazprom Export’s product portfolio in 2014 covered a broad range of goods, including crude oil, gas condensate, gas-derived sulfur, fuel oil and gas condensate distillate, liquefied petroleum gas (LPG) and small-scale LNG (ssLNG), alcohols, helium (gaseous and liquefied), and carbon black.
Crude oil and petroleum products
Total refined product sales volumes grew 20% in 2014, owing to increased stable gas condensate production and Gazprom Export’s integration of Gazprom neftekhim Salavat’s products into its export system, leading to product range expansion, sales volume growth, and consequent revenue growth.
At the same time, a planned decline was observed in exports of gas condensate distillate and fuel oil, due to modernization of refining capacities and increased production of motor fuels for the domestic market.
Within the framework of efforts to optimize distribution channels and reduce costs, Gazprom Export used various forms of transport in delivering goods to inland and maritime transshipment ports in 2014.
Gazprom Export’s stable gas condensate (SGC) and petroleum products exports grew 10% by volume in 2014, primarily as a result of Gazprom neftekhim Salavat’s increasing sales of SGC and petroleum products.
Despite the fall of oil prices from $100 a barrel in September to $50 a barrel in December 2014, a number of trading policy optimization measures made it possible to compensate for this fall and achieve revenue growth across Gazprom’s product range relative to 2013.
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Sulfur
Oil and gas chemistry products
In 2014, Gazprom Export organized regular export deliveries of sulfur through the mainland ports of Kavkaz and Novorossiysk. It also initiated and established shipments of granulated sulfur to the port of Ust-Luga, as upgrades to this terminal’s technological capacities made it possible to arrange unimpeded transshipment. This diversified the geography of granulated sulfur export flows and reduced the risks of delivery disruptions due to potential (force majeure) closure of traditional shipment routes. Around 3.5 million tons of sulfur (gas-derived, technical, granulated) were exported in 2014.
The launch of Gazprom Gazenergoset’s new helium liquefication unit, located at the Gazprom Dobycha Orenburg helium plant, in June 2014 led to the resumption of liquid helium exports to European countries (Belgium, Germany, Italy) and Turkey.
Liquefied petroleum gas Liquefied petroleum gas produced by Gazprom Pererabotka and Gazprom Dobycha Orenburg is exported to countries in Central and South-Eastern Europe, as well as to CIS countries. Exports of around 300,000 tons a year are shipped by rail and sea under medium- and long-term contracts. 32
Activities under Regulation
the
European
REACH
In 2014, Gazprom Export and its Special Representative in the EU, GM&T France, continued to work on supporting Gazprom Group products registered in compliance with the requirements of REACH/CLP Regulations. This included conducting studies of component composition and physicalchemical properties in line with ECHA standards; updating registration dossiers and safety data sheets for products; and successfully passing an inspection by an authorized EU body (inspected by the French Ministry of the Environment).
FUTURE AREAS OF ACTIVITY
optimal export model for helium and LPG exports and negotiating with potential clients.
Eastern Gas Program Small-scale LNG (ssLNG) exports Gazprom’s plans for the Eastern Gas Program, besides its gas component as such, call for establishing a number of large-scale processing facilities in Eastern Siberia and the Russian Far East. As East Siberian fields are developed, large-scale helium and LPG production projects will become a separate area of activity, with Gazprom Group becoming a major supplier of these products to AsiaPacific Region markets. The signing of the contract for pipeline gas supply to China was followed by the approval of a comprehensive Action Plan for creating gas production, transmission, and processing capacities using gas from fields in the Yakutsk gas production center. In accordance with this Action Plan, Gazprom Export and other Gazprom Group companies have been tasked with developing an
Work is continuing on expanding Gazprom Export’s presence in Europe’s ssLNG markets, as well as diversifying ssLNG deliveries by road as well as through the use of various logistics options, including on a remote basis. Work continued in 2014 on establishing a client portfolio and an optimal configuration of capacities for storing LNG as bunker fuel in the Baltic Sea and North Sea regions. In cooperation with GM&T and Gazpromneft Marine Bunker, negotiations were held with the administrations of the Baltic Sea’s major ports. A pre-investment study was initiated for the purpose of planning activity aimed at developing small-scale LNG markets in Black Sea region countries (Southern and South-Eastern Europe, Turkey).
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NATURAL GAS AS MOTOR FUEL CNG AND LNG FUELING STATIONS OF GAZPROM GROUP IN EUROPE
Reducing harmful emissions in transport is a global problem. One way to solve it is through the use of environmentally clean fuels. Emissions can be reduced effectively by making the transition to a fundamentally new fuel: natural gas. Gas is readily available, reliable, environmentally friendly, and a less expensive fuel than conventional petroleum products. Gas-fueled cars emit a quarter less CO2 than cars with gasoline engines. Methane-fueled motors emit around 95% less carbon monoxide than diesel motors, and solid particle emissions from gas-fueled engines are practically zero. In the first decade of the 21st century, the number of gas-powered vehicles in use worldwide grew tenfold. Over 20 million cars, buses, and trucks around the world now run on methane. Gas-fueled vehicles still make up only 0.02% of total road vehicles, but their numbers are rising rapidly. A key problem in developing this segment is the lack of infrastructure for refueling with compressed and
liquefied natural gas (CNG/LNG). This infrastructure will need to be in place before the advantages of gas-fueled road vehicles, ships, and trains can be fully utilized. Gazprom Group has an interest in developing the gas motor fuel market – especially in Europe, where increasingly stringent environmental standards are creating high demand for alternative fuels. A key role in promoting natural gas as a vehicle fuel is played by gas refueling infrastructure on the ground. Gazprom Group is making a substantial contribution to its development:
• In Germany, our Gazprom Germania subsidiary operates 28 CNG filling stations. • In the Czech Republic, Vemex, a Gazprom Group company, has 12 CNG filling stations including two with garages, and plans to expand this chain into the adjacent country of Slovakia. • In Poland in 2012, Gazprom Germania joined Polish bus producer Solbus and the MZA transport company in running a pilot project that enabled the residents of several Polish cities to experience the advantages of municipal buses fueled by 35
liquefied natural gas. After that, in 2013, Gazprom Germania and Polish bus producer Solbus started delivering 11 LNG-fueled buses to the city of Olsztyn in northern Poland, and signed a contract to supply Warsaw with 35 LNG-fueled buses and develop refueling infrastructure. The new Euro 6 environmental standards being introduced from 2015 will make environmentally-friendly methanefueled buses even more competitive towards diesel engines. • In Italy, Promgaz, a Gazprom subsidiary, is aiming for a solid position in the country that is Europe’s leading gas motor fuel market. The company is engaged in market research, partner selection, cooperation with national and EU authorities, and technology exchange. These operations cover not only CNG for light vehicles, but also LNG for trucks and shipping. • In Croatia, a road-map was signed with LNG Croatia in September 2013, with the objective of running pilot projects for converting the country’s bus fleet to run on natural gas. Our company is actively involved in the work of international and national organizations to introduce small-scale LNG as a fuel for heavy trucks and municipal transport vehicles, as well as for sea and river vessels.
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Since 2008, Gazprom Group and E.ON Global Commodities (formerly E.ON Ruhrgas) have regularly organized the Blue Corridor Rally. Each year, a convoy of natural gas vehicles drives thousands of kilometers across Europe with the aim of showing that gigantic transport streams could have far less harmful impact on the environment if the development of infrastructure for natural gas vehicles is continued. In 2009-2014, according to statistics, the European countries on the Blue Corridor Rally route saw a 40% increase in filling station numbers (close to 600 new stations built); demand for natural gas doubled, while the fleet of natural gas vehicles grew 20%. In 2013-2014, Gazprom Group took part in the Scirocco R-Cup race series with the aim of promoting the use of natural gas as motor fuel. All stages of the races, held annually from 2010 to 2014, involved only commercially-available CNGfueled Volkswagen Scirocco cars, with 2.0-liter turbo engines. Gazprom was the exclusive supplier of fuel for these cars. Gazprom Group has over 4,000 natural gas vehicles at its disposal: the largest corporate fleet of its kind.
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ECOLOGY
Environmental protection and corporate environmental responsibility issues are particularly important in the world today. For Gazprom Export, doing business includes meeting the highest environmental standards.
Natural gas is the cleanest fuel from the environmental standpoint. Modern energy-saving equipment can burn it efficiently to minimize harmful emissions, including greenhouse-inducing carbon dioxide.
In supplying natural gas, our company pays great attention to the state of the gas transport network. Extrapolation of gas leakage measurement results shows that across Gazprom Group’s pipelines, including production facilities, total gas losses amount to only around 1%. Thus, gas supplies have minimal impact on the environment.
Protecting the environment and countering adverse global climate change is also becoming a business objective for our company. The Kyoto Protocol, aimed at gradually reducing carbon dioxide emissions into the atmosphere, provides for trading these emissions. Our UK-based subsidiary, Gazprom Marketing & Trading, is developing this business segment.
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CHARITY AND SPONSORSHIP As one of Russia’s largest energy exporters, Gazprom Export sees its task as not only growing its business successfully, but also striving to reinforce its status as a socially responsible company by following certain ethical standards of behavior, paying special attention to socially significant issues and endeavoring to do all in its power to assist in resolving them. Charity and sponsorship are integral corporate strategy components for Gazprom Export, which is not only a reliable business partner, but also a company interested in developing dialog between the public and business in various fields. Our strategy in the field of sponsorship and charity is based on quality long-term development of projects whose themes and geographical location are integrally linked to the company’s core business. Through its sponsorship and charity programs, Gazprom Export supports cultural, educational, sports, social, and other projects. In the area of social responsibility and charity in Russia, 2014 saw us working actively with children’s social institutions and organizations to carry out
projects aimed at assisting disabled children. These are long-term projects, characterized by integrated approaches to children’s treatment and rehabilitation issues. The children not only receive quality medical care, but are also involved in various adaptation programs that enable them to gain new social skills and ease the process of integration into normal life. We have continued our tradition of long-term work with children suffering from cerebral palsy, leukemia, and other conditions. A noteworthy social project outside Russia is the Open World International Children’s Project, running for many years in Austria and Germany. This project, under the auspices of UNESCO and UNICEF and the patronage of Austrian Social Affairs Minister Rudolf Hundstorfer and Vienna Mayor Michael Häupl, is based on inclusiveness principles; it aims to involve disabled and disadvantaged children in creative and social activities. In 2014, over a thousand children from Russia and several European countries participated in this project. Supporting educational programs is a priority for our company in the area of charity and sponsorship.
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We are developing the scholarship programs for students of various universities focusing on energy, entrepreneurship, environment protection, international relations, and economics.
a significant educational component. Musicians hold a series of workshops for children and students from the music schools, thus promoting interaction between two cultures not only on stage, but also beyond it.
For many years now, Gazprom Export has been actively involved in ensuring that the best examples of Russian arts are promoted abroad. An important place among them is held by the unique Stradivarius in World Capitals project, which our company has supported since 2011. In February 2014, a sold-out concert featuring Stradivarius instruments at London’s Barbican was one of the first major cultural events organized as part of the crossover British-Russian Year of Culture 2014.
The National Philharmonic in Sofia, capital of Bulgaria, hosted a concert by Russian violinist Tatiana Samouil with the Bulgarian National Radio Symphony Orchestra, conducted by prominent Bulgarian composer and conductor Emil Tabakov. This concert’s proceeds were donated to the Bulgarian branch of the International Red Cross for the purpose of assisting natural disaster victims in Bulgaria.
Another highlight of the crossover Year of Culture, organized with our company’s support, was the 21st Century Russian Seasons program tour by the Maris Liepa Foundation at the London Coliseum. Singapore, one of the Asia-Pacific’s most important energy markets, is the location of a successful annual cultural-educational project called Synergy in Music – part of Gazprom Export’s long-term initiative aimed at facilitating the development of cultural exchange and mutual understanding between Russia and AsiaPacific countries. A special feature of this project is that along with its general culture aspects, it also has 42
A noteworthy event in the field of culture and the arts was Photographs by Russian and Soviet World Press Photo Winners, 1955-2014 – a major project held in the capital of Slovakia. This extensive and exclusive display of the achievements of Russian photojournalists in the international press photography arena has toured a number of cities in Russia and abroad over two years, with our company’s support. In 2014, our company’s sponsorship and charity projects were included in the collection of best projects from Silver Archer – Russia’s most prestigious public relations development award – in the nomination categories of Best Project in Business Communications and Best Project in Social Communications and Charity.
Head office location:
2aA Ostrovsky Square, St. Petersburg, 197022, Russian Federation Phone: +7 (812) 346 6700 Fax: +7 (812) 346 6710 E-mail: info@gazpromexport.com, post@gazpromexport.com Media contacts: comm@gazpromexport.com Website: www.gazpromexport.com
Photo source: Gazprom, Gazprom Export
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