In 2008 Gazprom earned RUB 2,507.01 billion (net of VAT).
In 2008 Gazprom’s operating profit from sales was 35.72%; returns on assets were 2.80% and returns on shareholder equity were 3.62%.
Gazprom is constantly increasing its federal and regional tax payments as required by applicable law. Thus, in 2004 the Company paid RUB 229.7 billion, in 2006 – RUB 494.5 billion and in 2008 – RUB 685.8 billion.
Gazprom commits multibillion investments into the core assets, securing, thus, operational reliability for the huge production and technology complex and dynamic development of the Company. Neither the current production programs, nor the strategic projects are feasible without an active investment policy.
Capital investments of Gazprom Group in gas exploration and production in 2008 reached RUB 219.8 billion, i.e. 43.4% higher versus 2007. Major investment targets in gas production were:
Capital investments of Gazprom Group in oil exploration and production in 2008 totaled RUB 72.6 billion (RUB 56.4 billion in 2007).
In oil production the major investees during 2008 were the Priobskoye and Ety-Purovskoye fields owned by Gazprom neft.
Capital investments of Gazprom Group in gas transportation increased by 28.8% versus 2007 and totaled RUB 227.5 billion. With due regard of the ongoing crisis in the world economy, top priority was assigned to the Pochinki – Gryazovets, Gryazovets – Vyborg, Nord Stream gas pipelines construction and the expansion of the Urengoy gas transit hub.
The major projects planned for commissioning after 2010 are as follows:
In 2008 Gazprom allocated around RUB 35.8 billion for upgrading and modernizing the gas transmission system.
Capital investments of Gazprom Group in gas processing in 2008 increased by RUB 14.0 billion (45.5%) versus 2007 and totaled RUB 44.9 billion.
While running their business, Gazprom’s member companies consume over 600 thousand types of goods and resources, with big finance required for their procurement. It is obvious that the final results of Gazprom’s operations directly depend on the procurement policy efficiency.
The lineup of products is roughly the same for various gas industry companies. In such a situation, in order to avoid potential supplier dictated prices, the bulk of goods and resources should be acquired via an integrated channel. In Gazprom Group these functions are discharged by a specialized subsidiary company – OOO Gazprom komplektatsiya. It is inexpedient, however, to vest this structure with 100% of the procurement responsibilities, since each member company has a specific field of action. Moreover, subsidiaries may have unforeseen needs in this or that product (for instance, in case of emergency), which have to be met in a very prompt manner. That is why, around 80% of Gazprom Group’s current procurement requirements are satisfied via Gazprom komplektatsiya, with the rest acquired by subsidiaries independently.
In 2004 OAO Gazprom Board of Directors endorsed the Order Placement Guidelines for the supply of goods, execution of works and rendering of services for OAO Gazprom and its subsidiaries’ needs predominantly on a competitive basis. In compliance with this Provision, tender procedures are organized by the Contest Commission and the Tender Committee of Gazprom or contest commissions and tender subdivisions of Gazprom’s subsidiaries.
Tender advisories are published at www.zakupki.gov.ru Website, in the Tenders sections of Gazprom’s Website (www.gazprom.com) and in print media.
While in 2004 only 3% of overall procurement was by tender, this figure increased to 30% in 2005. In 2008 competitive procurement reached some 81%.
Another crucial fact is that in its procurement policy Gazprom has long been geared to domestic manufacturers. The share of foreign products in Gazprom komplektatsiya’s purchases is on a continuous decline: while in 2002 the purchases from beyond the former Soviet Union accounted for 17.9% of the overall procurement, in 2008 this figure shrank to 3%. Today Gazprom acquires abroad only unique and unrivalled in Russia products. Such an approach is favored by Russian manufactures. For instance, Russia’s leading machine-building companies supply Gazprom with gas pumping units at a far lower price than for customers abroad.
The tender system development allowed to save the Company’s costs: in 2006 – by 5.3%, in 2007 – by 3.9%, in 2008 – by 3.2%. Costs for Gazprom investment program targets reduced by 5.1%, 3.8% and 2.6%, respectively.
In recent years Gazprom has been actively developing the practice of tender-based awarding of construction contracts. Starting from 2010 contract awarding to construction companies on the tender basis is planned to be increased to at least 90% for new facilities.
It is important to note that focusing on Gazprom’s promising projects Russia develops new production capacity and enhances production technology. For instance, Gazprom’s needs in qualitative large diameter pipes have stimulated their manufacture at Russia’s largest pipe plants. It wouldn’t be an exaggeration to say that Gazprom’s product orders represent effective investment demand in the domestic industry.
Gazprom Group’s net debt at the end of 2008 slightly exceeded RUB 1 trillion. Although this figure might seem impressive, it is in fact nothing special for international energy companies.
First of all, repayment is spaced out many years ahead. Second, no company ever engages in largescale projects entirely on its own. Both domestic and Western lenders lend eagerly to Gazprom. No pragmatic international lender would give the Company a cent if they had the slightest doubt about its trustworthiness. Successful placement of Gazprom’s Eurobonds amounting to USD 2.25 billion in April 2009 under the credit resource deficit conditions became a noticeable event on the world’s financial markets.
Even in case of significant deterioration in the energy market behavior the most reputable international rating agencies left Gazprom’s ratings at the investment level. Thus, the market was clearly informed of Gazprom’s steady financial standing.
Today Gazprom’s policy is to stay focused on its core business, i.e. to extract, deliver, store and process hydrocarbons, and develop the electric power generation industry. However, Gazprom does own assets that are unrelated to its main business.
Such assets were chiefly amassed in the 1990s, when many Russian consumers practiced non-cash payments for gas such as offset schemes, securities or other “monetary equivalents”. As a result, Gazprom has accumulated quite a lot of irrelevant assets it is currently looking to get rid of.
According to the 2008 results, Gazprom earned RUB 36.7 billion on non-core asset sales (RUB 34.5 billion with no regard to deals effectuated within the Group).
The bulk of funds were received from sales of media assets owned by OAO Gazprom and its subsidiary companies (under the contracts effectuated earlier) – RUB 17.0 billion, as well as from sales of major construction assets owned by OAO Gazprom – RUB 8.5 billion.
