About Gazprom

The Russian joint-stock company Gazprom was founded in accordance with the Decree of the President of the Russian Federation of 5 November 1992 and the Resolution of the Council of Ministers of the Russian Federation of 17February 1993. One may say that the company inherited the structure of the Ministry of Gas of the USSR. After the fall of the Soviet Union, the country's oil industry fell apart. These parts were privatised. Strictly speaking, this was not the case with the country's gas industry. With some minor loses, the great part of gas resources were kept in control of Gazprom.

As you are aware, there are a lot of speculation about Gazprom being the weapon of the Russian government. This contradicts the public nature of the company. The Russian government is being only the largest shareholder with 50.01% stake. The rest are being publically traded both in Russia and in Western countries in a form ADRs (American Depositary Receipts).

 Reserves

Gazprom has more gas than any other gas company in the world, with about 17% of the world’s proven gas reserves, and over 60% of Russia’s reserves. This ammounts to around 29,1 trillion m3. Moreover, in 2005 for the first time in the history of the company, the additions to reserves exceeded output.

Encourages by the this fact, Gazprom launched a major investment program aimed to exploration of new fields of hydrocarbons. Implementation of the program from 2002 to 2030 is to increase the gas reserves by 23.5 trillion m3, and the condensate and oil reserves by 3,4 billion t

Up to 2010, the principal exploration targets will be the West Siberian, Timan-Pechora, and Caspian regions. The other exploration targets will be in the area of Kara Sea and in Eastern Siberia. In the longer term, priority will continue to be given to the Arctic regions of West Siberia, East Siberia, and the shelf of the Arctic seas. In addition, it is planned to initiate mineral exploration in new, so far uninvestigated regions of the Siberian and Far Eastern federal districts.

Gas Transportation

From the Soviet times, natural gas was transported via Russia's Unified Gas Transportation System (UGS). This is the largest system of its kind in the world. It is over 150,000 km long, has got over 250 compressor stations. The system was built more than 20 years ago and since then was functioning uninterrupted as a consequence of ever improving quality of maintenance.

In 2005 Gazprom alone extracted around 550 mln m3 of natural gas. Encounting independent producers and gas flow from Central Asian producers, the system tranferred almost 700 bln m3 of gas in 2005. In this situtation, Gazprom as the owner of the system is implementing an investment program to increase transportation capacity by at least 35 bln m3.

The UGS is the main cause of dispute between Russian government and the EU. The latter requests to liberalise the gas transportation market. At the first sight, this is a clearly economically beneficial to liberalise the market. However, the Russian side continuously rejects the request. From the European point of view, a liberalised gas transportation system in Russia would increase energy security of all 27 members of the EU.

Currently, independent producers already have the access to the UGS. The rates for transportation are set by the federal government. For example, in the end 2005 the rate was around 75 cents per 1,000 m3/100 km. As calculations show, this rate doesn't cover the costs of maintenance and needs to be increased by at least 25%.

The other problem is the UGS's highly centralised control and maintenance as well as a number of bottlenecks. Even partial privitisation may put the whole complex system in danger as a consequence of mis-coordination. The problem is further complicated by presence of 24 underground gas depots (UGD) on Russian soil only, whose total volume exceeds 60 bln m3.

By materials from Gazprom.com