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Gazprom holds meeting regarding the Western sanctions

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World Pipelines,

Gazprom’s board of directors noted the information regarding the effect of the Western sanctions on Gazprom Group in 2015 to 2016 and the corresponding mitigation measures.In a recent meeting, it was noted that Gazprom had assessed the potential effect of the sanction-related risks on the Gazprom Group and had taken a number of steps to mitigate against the negative consequences that could have arised.The Western sanctions have left Gazprom largely unaffected, both with respect to the execution and extension of existing contracts and the conclusion of new contracts for gas supplies with foreign parties. They have also had little bearing on the company's ongoing activities.

One of the most efficient mitigation measures is Gazprom's continuing comprehensive effort for technological independence and import substitution. The effort is meant to increase the share of domestic products in the group's production activities and to facilitate the development of Russian equivalents for imported equipment.

Foreign equipment currently accounts for approximately 5% (pipes – less than 0.1%) of the total procurements made by Gazprom group. Having imposed strict limits on the procurement of non-Russian equipment, works and services, the company seeks to diversify its imports by attracting suppliers from the likes of the Customs Union, the CIS, Asia-Pacific and BRICS.

Gazprom actively furthers its co-operation with Russian suppliers.

Last year, the company launched a new collaboration scheme for manufacturers based on long-term contracts for the batch production, supply and maintenance of import-substituting products in the amount equal to guaranteed future purchases.

Such long-term contracts were signed with TMK and United Metallurgical Company (OMK). Gazprom will receive casing and pump and compressor pipes made of corrosion-resistant materials from TMK and special purpose high temperature and heavy-duty ball valves from OMK. In addition, a joint venture was created with Vakhrushev Tomsk Electromechanical Plant for the implementation the project for manufacturing highly reliable blow-off and control valves.

Gazprom continues stimulating national industrial and scientific capacities. Together with 20 Russian regions, the company has been implementing the Roadmaps for the wider use of high-tech products, including import substituting ones, in the company's interest. That co-operation has resulted in the development and introduction of a number of products, among them wellhead and tree equipment, shut-off and control valves, pumps and compressors, power equipment, telemechanics systems and adsorbent materials.

Another issue raised at the meeting related to the compliance of individual members of Gazprom’s board of directors with the independent director criteria in accordance with item 109 of the Corporate Governance Code. It was decided that Viktor Martynov and Vladimir Mau would be independent directors.

The meeting also resolved to appoint a three member Audit Committee of the Gazprom board of directors.

Adapted from press release by Anna Nicklin

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