Export Diversification Boosting Gazprom’s Competitivenes

Gazprom's Board of Directors noted that gas exports were essential for Russia's economy and fundamental for the energy cooperation between Russia and Europe. This is evidenced by a more than 45-year history of Russian gas supplies to European consumers. During that time, Gazprom's share in the European gas consumption increased substantially and hit a record level of 31 per cent in 2015.

The reliability of gas supplies to consumers is Gazprom's main competitive advantage. This is why the diversification of export routes and transit risk mitigation has played a crucial role in expanding the presence of Russian gas in the European market.

It was also noted that the key task in achieving export diversification is to strengthen the Company's position in the most promising and fast-growing gas market of Asia-Pacific, primarily by delivering gas to China. Gazprom is currently implementing an agreement on Russian gas supply via the eastern route. It is also planned to ramp up exports to China under supply projects via the western route and from the Russian Far East.

The build-up of Gazprom's global LNG portfolio through the development of the Company's production and LNG procurement is highly relevant to the diversification of export routes. Over the past years, Gazprom's LNG portfolio more than doubled to reach 3.56 million tons in 2015.

The expansion of Russia's only LNG plant, which was built within the Sakhalin II project and has an annual capacity of 9.6 million tons, is a high priority. The plant's throughput will increase 1.5-fold as soon as its third production train is put into operation. Baltic LNG is another priority project. Its design capacity equals 10 million tons per year.

In parallel with the diversification of routes and sales markets, Gazprom improves its contractual framework and introduces new types of trading with a view to boost the Company's competitiveness. Gazprom held two successful gas auctions, one for countries importing gas through Nord Stream and another for the Baltic states. In addition, the Company pays great attention to new and promising business areas, including small-scale LNG, as well as the manufacturing of highly processed products.

By exercising more flexibility in its export policy, diversifying export routes and sales markets, and pursuing promising business opportunities in the gas industry, Gazprom enhances its competitiveness in the long term.