Gazprom

Gazprom is a global energy company. Its major business lines are geological exploration, production, transportation, storage, processingGazprom is a global energy company. Its major business lines are geological exploration, production, transportation, storage, processing and sales of gas, gas condensate and oil, sales of gas as a vehicle fuel as well as generation and marketing of heat and electric power.Gazprom views its mission in reliable, efficient and balanced supply ofnatural gas, other energy resources and their derivatives to consumers.Gazprom holds the world’s largest natural gas reserves. The Company’s share in the global and Russian gas reserves makes up 18 and 72 percent respectively. Gazprom accounts for 14 and 74 percent of the global and Russian gas output accordingly. At present, the Company actively implements large-scale projects aimed at exploiting gas resources of the Yamal Peninsula, Arctic Shelf, Eastern Siberia and the Far East, as well as hydrocarbons exploration and production projects abroad.Gazprom is a reliable supplier of gas to Russian and foreign consumers. The Company owns the world’s largest gas transmission network – the Unified Gas Supply System of Russia with the total length of over 168 thousand kilometers. Gazprom sells more than half of overall produced gas to Russian consumers and exports gas to more than 30 countries within and beyond the former Soviet Union.Gazprom is the only producer and exporter of liquefied natural gas in Russia.The Company is among Russia’s five largest oil producers and it is the largest owner of power generating assets in the country. These assets account for 17 per cent of the total installed capacity of the national energy system.Gazprom pursues the strategic objective of establishing itself as a leader among global energy companies by entering new markets, diversifying its activities and ensuring reliable supplies.

1989–1992: Inception: A separate Soviet gas industry was created in 1943. Large natural gas reserves discovered in Siberia and the Ural and Volga regions in the 1970s and 1980s enabled the Soviet Union to become a major gas producer. Gas exploration, development, and distribution were centralized in the Ministry of Gas Industry, which was created in 1965.In August 1989, under the leadership of the Minister of Gas Industry Viktor Chernomyrdin, the Ministry of Gas Industry transformed itself into State Gas Concern Gazprom, which became the country’s first state-corporate enterprise. The company was still controlled by the state, but now the control was exercised through shares of stock, 100% of which were owned by the state.When the Soviet Union dissolved in late 1991, assets of the former Soviet state in the gas sector were transferred to newly created national companies such as Ukrgazprom andTurkmengazprom. Gazprom kept assets located in the territory of Russia, and was able to secure monopoly in the gas sector. Assets in the oil industry, on the other hand, were divided among several companies.

1993–1997: Privatisation: Gazprom’s political influence increased significantly after the new Russian President Boris Yeltsin appointed the company’s chairman Chernomyrdin as his Prime Minister in December 1992. Rem Viakhirev took Chernomyrdin’s place as Chairman both of the Board of Directors and of the Managing Committee.The new government was eager to introduce economic reforms and began to privatize Gazprom. Following the Decree of the President of the Russian Federation of 5 November 1992 and the Resolution of the Government of Russia of 17 February 1993, the organization became a joint-stock company and started to distribute shares under the voucher method: every Russian citizen received vouchers to purchase shares of formerly state-owned companies. By 1994, 33% of the Gazprom’s shares had been bought by 747,000 members of the public, mostly in exchange for the vouchers. 15% of the stock was also purchased and allocated to Gazprom employees. The state retained 40% of the shares, but the amount was gradually lowered to 38%.Trading of Gazprom’s shares was heavily regulated, and the by-laws of the company prohibited foreigners from owning more than nine percent of the shares.Gazprom slowly established credibility in the western capital markets with an offering of one percent of its equity to foreigners in October 1996 in the form of Global Depository Receipts and a successful large bond issue of US$2.5 billion in 1997.

1998–2000: Tax evasion and asset-stripping: As the Prime Minister of Russia, Chernomyrdin was able to ensure that the state did not closely regulate Gazprom. As a result, the company was able to evade taxes on a large scale, and the state received little money in the form of dividends. The management and board members launched a massive asset-stripping, and Gazprom’s property was parceled out to them and their relatives. Some of the largest stripped assets were transferred to the controversial gas-trading company Itera. Chernomyrdin and Gazprom’s CEORem Viakhirev were leading figures in the process.In March 1998, for reasons unrelated to Gazprom, Yeltsin fired Chernomyrdin from his position as Prime Minister. On 30 June 1998 Chernomyrdin returned to the company as the chairman of the board of directors.

2000–2003: The Putin reforms: Gazprom’s situation changed abruptly in June 2000, when Vladimir Putin became the President of Russia. Putin launched a campaign to rein in the oligarchs and, per his policy of the so-called national champions, to establish state control in strategic companies. He launched an attack against what he saw as mismanagement and personal pilfering of state assets. After coming to power, Putin immediately fired Chernomyrdin from his position as the chairman of the company’s board and used the stock owned by the state to vote out Vyakhirev. The two men were replaced by Dmitry Medvedev and Alexei Miller, who had previously worked with Putin in Saint Petersburg. Putin’s actions were aided by shareholder activism of Hermitage CEO William Browder and former Russian finance minister Boris Fyodorov. Miller and Medvedev were assigned the task of stopping the asset-stripping, but also to regain lost possessions. By denying Itera access to Gazprom’s pipelines, Miller almost forced Itera to declare bankruptcy. As a result, Itera’s management agreed to sell the stolen assets back to Gazprom.

2005–2006: Establishment of government control: In June 2005, Gazprombank, Gazpromivest Holding, Gazfond and Gazprom Finance B. V., subsidiaries of Gazprom, agreed to sell a 10.7399% share to the state-owned company Rosneftegaz for $7 billion, at what some western analysts viewed as an undervalued price.The sale was to be completed by 25 December 2005, which, combined with the 38% share of the State Property Committee, gave the Russian government control over the company.As the Russian state had now acquired a controlling share, the 20% restriction on foreign investment in Gazprom was lifted, and the company became fully open to foreign investors.On 20 July 2006, the Federal Law “On Gas Export” granting Gazprom exclusive right to export natural gas was published, and hence came into force. It was almost unanimously approved by the State Duma on 5 July, by the upper house, the Federation Council on 7 July and signed into law by President Vladimir Putin on 18 July.

2007 and later: On 4 September 2012, the European Commission said it had launched an anti-trust case against Gazprom. The Brussels-based competition watchdog said it opened the formal legal probe based on “concerns that Gazprom may be abusing its dominant market position in upstream gas supply markets.”On 21 May 2014, A 30 year deal between Gazprom and China’s China National Petroleum Corporation (CNPC) which was 10 years in the making is estimated worth $400 billion, The agreement which was signed at a summit in Shanghai is expected to deliver some 38 billion cubic meters of natural gas a year eastward to China’s burgeoning economy, which will start around 2018.

Gazprom views its mission as ensuring a reliable, efficient and balanced supply of natural gas, other energy resources and their derivatives to consumers.

Establish itself as a leader among global energy companies by entering new markets, diversifying its activities and ensuring reliable supllies.