Gazprom’s financial information under International Financial Reporting Standards (IFRS) for the year ended December 31, 2016

Today PJSC Gazprom issued its audited consolidated financial statements prepared in accordance with International Financial Reporting Standards for the year ended December 31, 2016.

The table below presents the consolidated statement of comprehensive income prepared in accordance with IFRS for the years ended December 31, 2016 and December 31, 2015. All amounts are presented in millions of the Russian Rubles.

 

 

Year ended December 31,

2016

2015

 

 

 

Sales

6,111,051

6,073,318

Net gain from trading activity

3,382

3,704

Operating expenses

(5,244,983)

(4,635,502)

Charge for impairment and other provisions

(143,870)

(213,219)

Operating profit

725,580

1,228,301

 

 

 

Finance income

1,018,997

990,346

Finance expense

(543,370)

(1,409,087)

Share of net income of associates and joint ventures

82,872

106,560

Gain on disposal of available-for-sale financial assets

1,059

9,121

Profit before profit tax

1,285,138

925,241

 

 

 

Current profit tax expense

(218,113)

(102,223)

Deferred profit tax expense

(69,921)

(17,819)

Profit tax

(288,034)

(120,042)

 

997,104

805,199

Profit for the year

 

 

 

 

 

Other comprehensive income (loss):

 

 

Items that will not be reclassified to profit or loss:

 

 

Remeasurements of post-employment benefit obligations

33,118

(169,059)

Total items that will not be reclassified to profit or loss

33,118

(169,059)

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

Gain arising from change in fair value of available-for-sale financial assets, net of tax

62,133

43,172

Share of other comprehensive (loss) income of associates and joint ventures

(6,397)

28,699

Translation differences

(297,703)

282,924

Gain (loss) from cash flow hedges, net of tax

49,196

(22,862)

Total items that may be reclassified subsequently to profit or loss

(192,771)

331,933

Other comprehensive (loss) income for the year, net of tax

(159,653)

162,874

Total comprehensive income for the year

837,451

968,073

 

 

 

Profit for the year attributable to:

 

 

Owners of PJSC Gazprom

951,637

787,056

Non-controlling interest

45,467

18,143

 

997,104

805,199

 

 

 

Total comprehensive income for the year attributable to:

 

 

Owners of PJSC Gazprom

806,903

938,591

Non-controlling interest

30,548

29,482

 

837,451

968,073

Total sales (net of excise tax, VAT and customs duties) increased by RUB 37,733 million, or 1 %, to RUB 6,111,051 million for the year ended December 31, 2016 compared to the same period of the prior year. The increase in sales was mainly driven by an increase in sales of crude oil and gas condensate.

More detailed information concerning the main items of the sales’ structure for the year ended December 31, 2016 and December 31, 2015 is presented in the table below.

(RUB million unless indicated otherwise)

 

Year ended December 31,

2016

2015

Sales of gas

 

 

Europe and Other countries

 

 

Net sales (net of excise tax and customs duties)

2,140,027

2,165,500

Volumes in bcm

228.3

184.4

Average price, RUB per mcm (including excise tax and customs duties)

11,763.3

15,057.3

Former Soviet Union countries

 

 

Net sales (net of customs duties)

309,644

429,660

Volumes in bcm

33.2

40.3

Average price, RUB per mcm (including customs duties)

10,263.1

11,911.0

Russian Federation

 

 

Net sales (net of VAT)

819,924

805,615

Volumes in bcm

214.9

221.2

Average price, RUB per mcm (net of VAT)

3,815.5

3,641.3

Total sales of gas

 

 

Retroactive gas price adjustments

33,175

26,482

Net sales (net of excise tax, VAT and customs duties)

3,302,770

3,427,257

Volumes in bcm

476.4

445.9

 

 

 

Net sales of refined products (net of excise tax, VAT and customs duties)

1,497,562

1,555,591

Electric and heat energy net sales (net of VAT)

481,716

424,665

Net sales of crude oil and gas condensate (net of VAT and customs duties)

411,958

260,608

Gas transportation net sales (net of VAT)

198,971

193,965

Other revenues (net of VAT)

218,074

211,232

Total sales (net of excise tax, VAT and customs duties)

6,111,051

6,073,318

Net sales of gas decreased by RUB 124,487 million, or 4 %, to RUB 3,302,770 million for the year ended December 31, 2016 compared to the same period of the prior year.

Net sales of gas to Europe and Other countries decreased by RUB 25,473 million, or 1 %, to RUB 2,140,027 million for the year ended December 31, 2016 compared to the same period of the prior year. This was mainly driven by the decrease in average Russian Ruble prices (including excise tax and customs duties) by 22 %, which was partially compensated by the increase in volumes of gas sold by 24 %, or 43.9 bcm.

Net sales of gas to Former Soviet Union countries decreased by RUB 120,016 million, or 28 %, to RUB 309,644 million for the year ended December 31, 2016 compared to the same period of the prior year. The change was due to the decrease in volumes of gas sold by 18 %, or 7.1 bcm, and the decrease in average Russian Ruble prices (including customs duties) by 14 %.

Net sales of gas in the Russian Federation increased by RUB 14,309 million, or 2 %, to RUB 819,924 million for the year ended December 31, 2016 compared to the same period of the prior year. This is primarily explained by the increase in average prices by 5 % that was partially compensated by the decrease in volumes of gas sold by 3 %, or 6.3 bcm.

Net sales of crude oil and gas condensate increased by RUB 151,350 million, or 58 %, to RUB 411,958 million for the year ended December 31, 2016 compared to the same period of the prior year. This is explained by the increase in volumes of crude oil sold and the increase in average prices of Gazprom Neft Group for customers in Europe and Other countries.

Operating expenses increased by RUB 609,481 million, or 13 %, to RUB 5,244,983 million for the year ended December 31, 2016 compared to the same period of the prior year.

The increase in operating expenses is explained by an increase in a number of items such as:

“Purchased gas and oil” – the increase by RUB 109,113 million, or 10 % due to an increase in expenses for gas as a result of the change in the scope of consolidation related to the completion of the Swap Agreement between PJSC Gazprom and Wintershall Holding GmbH on 30 September 2015;

“Taxes other than on income” – the increase by RUB 95,265, or 12 %;

“Transit of gas, oil and refined products” – the increase by RUB 75,772, or 14 %.

In addition, the line “Foreign exchange rate differences on operating items” amounted to a net loss of RUB 52,880 million for the year ended December 31, 2016 compared to a net gain of RUB 25,581 million for year ended December 31, 2015 due to changes in exchange rates.

“Net finance income (expense)” include the net exchange gain of RUB 453,689 million for the year ended December 31, 2016 and the net exchange loss of RUB 464,049 million for the year ended December 31, 2015. For the reporting period the depreciation of US Dollar against the Russian Ruble resulted 17 %, the depreciation of Euro against the Russian Ruble resulted 20 % compared to the appreciation of US Dollar and Euro against the Russian Ruble by 30 % and 17 %, respectively, for the prior year.

Profit attributable to the owners of PJSC Gazprom for the year ended December 31, 2016 totaled RUB 951,637 million which is RUB 164,581 million, or 21 %, more than for the same period of the prior year.

Net debt balance (defined as the sum of short-term borrowings, current portion of long-term borrowings, short-term promissory notes payable, long-term borrowings, long-term promissory notes payable, net of cash and cash equivalents and balances of cash and cash equivalents restricted as to withdrawal under the terms of certain borrowings and other contractual obligations) decreased by RUB 150,225 million, or 7 %, from RUB 2,083,120 million as of December 31, 2015 to RUB 1,932,895 million as of December 31, 2016. This decrease was resulted from a decrease in borrowings denominated in Ruble terms due to the depreciation of US Dollar and Euro, that was partlially compensated by a decrease in cash and cash equivalents as of December 31, 2016.

More detailed information on the IFRS consolidated interim condensed financial information for the year ended December 31, 2016 can be found here.



Gazprom and ENGIE sign Memorandum of Understanding

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Isabelle Kocher, CEO of ENGIE, took place in Paris today.

The parties discussed the progress of and prospects for cooperation in the gas sector, focusing, among other things, on the Nord Stream 2 project. Particular attention was paid to Russian gas supplies to France. It was noted that gas exports to France had added 11.4 per cent in the period from January 1 to April 23, 2017, compared to the same period of 2016.

In the course of the meeting, Alexey Miller and Isabelle Kocher signed a Memorandum of Understanding. The document aims to promote cooperation between Gazprom and ENGIE.

Background

France's ENGIE SA (prior to 2015 – GDF SUEZ) is focused on natural gas exploration, production, processing and marketing, as well as power generation.

Gazprom and ENGIE cooperate in gas supplies, sci-tech development, and personnel training. The companies also pursue joint cultural projects.

In 2016, Gazprom exported to France 11.5 billion cubic meters of gas, which was 18.2 per cent higher than in 2015.

 



Nord Stream 2 AG and European energy companies sign financing agreements

The Nord Stream 2 project, being pursued by Gazprom, has taken today another important step towards its implementation, responding to the need of the European Union for additional gas imports and thereby improving security of supplies to Europe.

Nord Stream 2 AG signed financing agreements for the Nord Stream 2 pipeline project with ENGIE, OMV, Shell, Uniper and Wintershall.

These five European energy companies have committed to provide long-term financing for 50 % of the total cost of the project, which is currently estimated to be €9.5 billion. Each European company will fund up to €950 million. Gazprom is and will remain the sole shareholder of the project company, Nord Stream 2 AG.

The financial commitment by the European companies underscores the Nord Stream 2 project's strategic importance for the European gas market, contributing to competitiveness as well as medium and long-term energy security especially against the background of expected declining European production.

The 1,220-kilometer Nord Stream 2 gas pipeline, with a total capacity of 55 billion cubic meters a year, will provide a direct link between reliable Russian gas reserves and European gas consumers from the coast of Russia via the Baltic Sea to Greifswald, Germany. Construction work will begin in 2018 and will be completed by the end of 2019.

Nord Stream 2 AG and European energy companies sign financing agreements

Nord Stream 2 AG and European energy companies sign financing agreements



Viktor Zubkov meets with young ambassador of Football for Friendship project

Moscow. Viktor Zubkov, Chairman of the Gazprom Board of Directors, met with 12-year-old Zakhar Badyuk (Artyom, Primorye Territory), Russia’s representative in the fifth season of Gazprom’s Football for Friendship (F4F) international children's social project.

Meeting of Viktor Zubkov and Zakhar Badyuk, Russia’s representative in fifth season of Gazprom’s Football for Friendship international children's social project

Viktor Zubkov and Zakhar Badyuk

Held in the lead-up to the International Day of Football and Friendship, it was the first in a series of meetings between the young ambassador and various officials, including representatives of the Football Union of Russia and the Russian Olympic Committee, famous athletes, and renowned cultural figures.

In the course of the meeting, Viktor Zubkov emphasized the project’s importance and successes, while Zakhar Badyuk spoke about his F4F-related expectations and athletic achievements.

“The Football for Friendship project is based on the notions of honor, friendship, equality, peace, and health. These values should be taught at an early age. We see our goal as creating the conditions for that. With every year that passes, we engage more and more boys and girls in the project. This summer, 635 participants from 64 countries will gather in St. Petersburg,” said Viktor Zubkov.

“I am happy to represent Russia in the Football for Friendship project. I’d love to make friends around the world, and, of course, I hope we’ll win,” said Zakhar Badyuk.

Meeting of Viktor Zubkov and Zakhar Badyuk, Russia’s representative in fifth season of Gazprom’s Football for Friendship international children's social project

Zakhar Badyuk

Background

The Football for Friendship (F4F) international children's social project has been implemented by Gazprom since 2013.

The project is aimed at developing youth football and fostering tolerance and respect toward different cultures and ethnicities among children from across the world. The key values supported and promoted by the project's participants include friendship, equality, fairness, health, peace, devotion, victory, traditions, and honor.

The annual Football for Friendship International Children's Forum is the project’s most important event, bringing together young footballers from different countries who discuss worldwide promotion of the key values with media professionals and famous football players.

The F4F project has a special prize: the Nine Values Cup is a unique trophy awarded annually to a professional football club for the implementation of social initiatives based on the project’s values. The winner is chosen by young F4F ambassadors through a vote held in all countries participating in the project.

Thousands of participants join F4F every year. Since its inception, the project's geographical scope expanded considerably from 8 countries in 2013 to 64 in 2017. Hundreds of young athletes become ambassadors for the F4F movement and its values in their respective countries. The Friendship Bracelet, the official symbol of F4F, is worn by over 400,000 people across the world, including children, adults, well-known athletes and journalists, performers, political figures, and heads of state.

In 2017, the project’s participating countries are as follows: Algeria, Argentina, Armenia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bolivia, Brazil, Bulgaria, China, Croatia, the Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Ghana, Greece, Hungary, Iceland, India, Iran, Iraq, Italy, Japan, Kazakhstan, Kyrgyzstan, Latvia, Libya, Lithuania, Macedonia, Mexico, Mozambique, Netherlands, Norway, Pakistan, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Switzerland, Syria, Tajikistan, Tanzania, Turkey, Turkmenistan, Ukraine, Uruguay, the United Kingdom, the United States, Uzbekistan, Venezuela, and Vietnam.

The fifth season of the project is held in a new format. Instead of representing football clubs from different countries, young players are divided into eight international Friendship Teams. Eight-player teams consist of 12-year-old boys and girls, including those with disabilities. The F4F International Organizing Committee joined efforts with national football federations to select the players (one representative from each country).

Gazprom is a global energy company focused on geological exploration, productiontransportation, storage, processing and sales of gas (including as NGV fuel), gas condensate and oil, as well as generation and distribution of heat and electric power. The Company operates in Russia, Africa, Middle East, Europe, and Latin America, as well as Central, South and Southeast Asia.

Gazprom is the world's largest company in terms of natural gas reserves and production output, with gas delivered to consumers in Russia and more than 30 other countries. The Company is among Russia's four biggest oil producers and has the largest installed capacity for thermal energy in the country. Gazprom also holds the leading position in the global thermal energy market.

In addition to pursuing an active business development strategy, Gazprom pays great attention to social projects. The Company supports numerous sports organizations and events on a national and international scale.

 



Alexey Miller and Uzbek Deputy Prime Minister Gulomzhon Ibragimov see bright prospects for cooperation

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Gulomzhon Ibragimov, Deputy Prime Minister of the Republic of Uzbekistan, took place in Moscow today.

Working meeting between Alexey Miller and Gulomzhon Ibragimov, Deputy Prime Minister of Republic of Uzbekistan, in Moscow

At meeting

The parties noted that there were bright prospects for bilateral cooperation, addressing the priority goals in the implementation of the documents signed in early April 2017 in the presence of Vladimir Putin, President of the Russian Federation, and Shavkat Mirziyoev, President of the Republic of Uzbekistan. Particular attention was paid to the joint efforts with regard to geological exploration and engineering & innovation activities.

Alexey Miller at working meeting with Gulomzhon Ibragimov, Deputy Prime Minister of Republic of Uzbekistan

Alexey Miller

Gulomzhon Ibragimov, Deputy Prime Minister of Republic of Uzbekistan, at working meeting with Alexey Miller

Gulomzhon Ibragimov

Background

Gazprom’s main partner in Uzbekistan is Uzbekneftegaz National Holding Corporation focused on oil and gas prospecting, production, processing, transportation, storage, and marketing.

In 2002, Gazprom and Uzbekneftegaz signed the Agreement of Strategic Cooperation providing for Gazprom's participation in natural gas production projects within Uzbekistan under PSA conditions.

In 2006, Gazprom and Uzbekneftegaz inked the Agreement on the basic principles of geological surveys at investment blocks in the Ustyurt region of Uzbekistan.

On April 5, 2017, Gazprom and Uzbekneftegaz signed the contract for 4 billion cubic meters of Uzbek gas to be purchased by Gazprom annually in the period of up to 5 years starting from 2018, the Agreement on joint geological exploration and engineering & innovation work, and the Agreement of Cooperation in the area of staff training and retraining.

In 2016, Gazprom purchased around 6.2 billion cubic meters of natural gas from Uzbekistan.

 



Growth in Europe’s demand for Russian gas confirms importance of Nord Stream 2

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Rainer Seele, Chairman of the Executive Board of OMV, took place in Moscow today.

Working meeting between Alexey Miller and Rainer Seele, Chairman of Executive Board of OMV, in Moscow

At meeting

The meeting participants addressed issues related to bilateral cooperation. It was highlighted that Austria continued to increase its gas imports from Russia. Specifically, Gazprom’s exports to Austria between April 1 and April 19, 2017, were 69.9 per cent higher than in the same period of 2016.

Alexey Miller (center) at working meeting with Rainer Seele, Chairman of Executive Board of OMV

Alexey Miller (center)

Rainer Seele, Chairman of Executive Board of OMV, at working meeting with Alexey Miller

Rainer Seele

Speaking about Europe’s growing demand for Russian gas in light of the region’s declining indigenous production, the heads of the companies once again stressed the importance of Nord Stream 2 for ensuring reliable gas supplies to European consumers.

The parties also discussed further steps under the Basic Agreement regarding the asset swap.

Working meeting between Alexey Miller and Rainer Seele, Chairman of Executive Board of OMV, in Moscow

Rainer Seele and Alexey Miller

Growth in Europe’s demand for Russian gas confirms importance of Nord Stream 2

Nord Stream and Nord Stream 2 gas pipelines

Background

OMV is Gazprom’s main partner in Austria.

On December 14, 2016, Gazprom and OMV signed the Basic Agreement regarding the asset swap. According to the document, Gazprom will receive a 38.5 per cent stake in OMV Norge AS, a company focused on geological exploration and production in Norway. In exchange, OMV will obtain a 24.98 per cent stake in the project for developing Blocks 4 and 5 of the Achimov formations in the Urengoy oil, gas and condensate field.

Nord Stream 2 is the project for a transit-free export gas pipeline with the annual capacity of 55 billion cubic meters of gas running from Russia to Germany across the Baltic Sea.

Gazprom’s gas supplies to Austria grew by 37.9 per cent in 2016 compared to 2015. In the first quarter of 2017, Russian gas exports to Austria added 67.9 per cent against the same period of 2016.

 



Alexey Miller and Kuwaiti Ambassador Abdulaziz Al-Adwani address bilateral cooperation

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Abdulaziz Al-Adwani, Ambassador Extraordinary and Plenipotentiary of the State of Kuwait to the Russian Federation, took place in Moscow today.

The parties addressed bilateral cooperation in the oil and gas sector within the Memorandum of Understanding. Specifically, the parties discussed potential supplies of liquefied natural gas to Kuwait.

Abdulaziz Al-Adwani

Background

In 2015, Gazprom and state-owned Kuwait Petroleum Corporation (KPC) signed a Memorandum of Understanding. The document sets out the main areas of possible partnership between the two companies, particularly in the sphere of liquefied natural gas, liquefied petroleum gases and other petroleum products as well as scientific & technical cooperation and investments.

 



Gazprom forging ahead with its innovative projects

The Gazprom Board of Directors reviewed and approved the 2016 Progress Report on Gazprom’s Innovative Development Program until 2025 and took note of the information concerning the efficiency of R&D (research and development) investments.

It was highlighted that the successful implementation of measures under the Program helped the Company consistently raise its technological level and improve its production processes through the optimization of all types of resources. Gazprom’s innovative studies are aimed at designing and putting into place domestically-produced high-tech equipment and materials, as well as sophisticated process systems that have no foreign equivalents.

The creation of a new technology for producing methane-hydrogen mixtures is among Gazprom’s priority projects. By using such mixtures, the Company will be able to boost the energy efficiency of its gas compressor units and reduce the emissions of pollutants and greenhouse gases from gas turbine units.

Jointly with the Russian Academy of Sciences, Gazprom works to create compact systems with a long service life for storing fixed gas. A prototype of such system is already available. It is an adsorption gas terminal that can accumulate and deliver to consumers almost twice as much natural gas as a compressed gas tank with similar size and pressure parameters.

One of the key priorities in the development of Gazprom Group’s oil business is the advancement of horizontal drilling and multi-stage fracturing technologies used for, among other things, cost-effective development of hard-to-recover oil reserves. In the summer of 2016, Gazprom Neft carried out a 30-stage hydraulic fracturing procedure for the first time in Russia.

Gazprom is among Russia’s leading investors in innovations. Over 440 innovative developments were adopted at the Group’s facilities last year. The total effect from their utilization is expected to exceed RUB 279 billion.

In addition, the Company makes efforts to streamline its innovation management system, promotes sci-tech cooperation with its foreign partners, and deepens its engagement with Russian educational institutions. In 2016, the number of Gazprom’s core universities was increased from 9 to 12. Over the last year, those educational institutions prepared two new R&D programs in addition to the three programs under implementation in the interests of Gazprom. Five more programs are under development at the moment.

The Board of Directors reviewed and commended the work done by the Company with the purpose of implementing import substitution projects in 2016–2017. The Report on the implementation of the corporate import substitution plan in 2016 was approved. The Management Committee was tasked to continue its endeavors in that respect, including by enhancing cooperation with domestic suppliers in the oil and gas industry in order to attain operational improvement, stimulate technological and economic advancement, and make Russian products more competitive.

The Board of Directors reviewed and approved the proposals for ensuring compliance with the auditor’s recommendations following the audit of Gazprom’s Long-Term Development Program for 2015.

Background

Gazprom’s Innovative Development Program until 2025 was approved in June 2016. Its main goal is to continuously improve Gazprom's technological level and organizational structure to maintain its positions as a global energy company and a reliable supplier of energy resources.

 



Gazprom committed to constructive dialogue with investment community

The Gazprom Board of Directors commended the Company’s efforts with regard to investor and shareholder relations. The Management Committee was instructed to take further measures for improvement in that respect.

It was noted that the strengthening and development of long-term and constructive cooperation with the investment community was essential to boosting the Company’s investment attractiveness, increasing its market capitalization, and lowering the cost of its borrowings.

Gazprom continues to make efforts for greater openness and transparency, regularly arranging conference calls for investors and shareholders with the Company’s top executives, as well as holding meetings in Russia and other countries where most of the existing and potential investors are based.

Gazprom organizes study visits to the Group’s industrial and infrastructure facilities. During the visit to the Chayandinskoye field and the Power of Siberia gas pipeline site in 2016, the Company expanded the format of cooperation by holding a thematic roundtable that involved Gazprom’s executives and professionals, independent international experts, and over 60 investors and analysts.

The number of meetings between Gazprom’s representatives and investors in the course of investment conferences in Russia and abroad continues to grow: it went up by a quarter in 2016 compared to 2015.

Thanks to direct and systematic communication, the Company can promptly furnish financial market participants with relevant and correct information on all important developments concerning Gazprom’s businesses. The success of this practice is demonstrated by the fact that investors and shareholders show persistent interest in meeting with Gazprom’s executives and give optimistic estimates of the prospects for investing in the Company’s securities. Most analysts of major Russian and foreign investment banks recommend to ‘buy’ and to ‘hold’ in their analytical reports on Gazprom’s shares.

Gazprom’s debt instruments are in high demand. In 2016–2017, the Company placed Eurobonds at the lowest interest rates compared to other Russian companies, with the investor demand far exceeding the offer.

The Investor Day is one of Gazprom’s most ambitious annual events. In 2017, it was the second time that the Investor Day was held successfully in Asia-Pacific, namely in Singapore and Hong Kong. The aforementioned venues were chosen in view of Gazprom’s extensive efforts aimed at diversifying its investor pool and financing sources in the region.

Gazprom pays great attention to improving its corporate governance practices. In 2016, as resolved by the Board of Directors, the Company created a Corporate Secretary unit, established a Nomination and Remuneration Committee, and elected a new Audit Committee chaired by an independent director. Independent directors hold two of the three seats in both Committees.

In January 2017, the Moscow Exchange confirmed that Gazprom had fulfilled all quality requirements for corporate governance to retain its position on the top-tier quotation list.

The Company is committed to promoting efficient dialogue with the investment community. Gazprom will continue to strengthen its cooperation with investors from the U.S., Europe, Asia-Pacific, and other regions, as well as with participants of international debt markets, to explore the ways of improving its dividend policy, and to increase the transparency and quality of its corporate governance practices.



Over 6 billion cubic meters of hydrocarbons produced from Vietnam’s Moc Tinh and Hai Thach fields since 2013

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Nguyen Vu Truong Son, CEO and Member of the Board of Directors of Vietnam Oil and Gas Group (PetroVietnam), took place in Moscow today.

The meeting addressed the ongoing and future cooperation between the companies. Among other things, the participants discussed the joint hydrocarbon production efforts in Vietnam. It was noted that the cumulative output of the Moc Tinh and Hai Thach fields had totaled some 6.6 billion cubic meters since 2003 when Gazprom Group joined the project. In 2016, the parties achieved their yearly goals for hydrocarbon production (2 billion cubic meters) ahead of schedule. It was also stressed at the meeting that Gazprom International and PetroVietnam had completed the five-year program for drilling operations in December 2016, with a total of 16 development wells drilled at Vietnam's fields in compliance with the development plan.

Over 6 billion cubic meters of hydrocarbons produced from Vietnam’s Moc Tinh and Hai Thach fields since 2013

Moc Tinh field

Particular attention was paid to the progress of geological exploration at blocks Nos. 112 and 129–132 located on the shelf of Vietnam, as well as to the implementation of the development projects for the Nagumanovskoye oil, gas and condensate field and the Severo-Purovskoye gas and condensate field in the framework of Gazpromviet's activities.

The parties also addressed the prospects of their joint projects in the gas-fired power generation and NGV sectors.

Background

Gazprom's main partner in Vietnam is PetroVietnam Group focused on hydrocarbon exploration, production, processing, transportation and marketing.

Vietgazprom, a joint operating company established by Gazprom and PetroVietnam on a parity basis, is engaged in exploration in licensed blocks Nos. 112 and 129–132 located on the continental shelf of Vietnam. The development of block No. 112 resulted in the discovery of the Bao Vang gas field in 2007 and the Bao Den field in 2009.

The Moc Tinh and Hai Thach fields are located within licensed blocks Nos. 05–2 and 05–3 on the shelf of Vietnam. The project operator is the Bien Dong petroleum operating company. Gazprom is represented in the joint venture by Gazprom International, a specialized company for the implementation of oil and gas projects outside Russia.

In 2009, Gazprom and PetroVietnam signed the Agreement on Strategic Partnership providing for, inter alia, joint oil and gas projects in Russia, Vietnam, and third countries.

In 2015, Gazprom and PetroVietnam signed the Agreement on the major terms and conditions of developing the Nagumanovskoye (Orenburg Region) and Severo-Purovskoye (Yamal-Nenets Autonomous Area) fields. Gazpromviet (Gazprom – 51 per cent, PetroVietnam – 49 per cent) holds the development licenses for both fields.

In 2015, PVGAZPROM Natural Gas for Vehicles, a joint Russian-Vietnamese company focused on the use of natural gas as a vehicle fuel, was registered. The joint venture consists of Gazprom International (35.5 per cent), Gazprom Gazomotornoye Toplivo (35.5 per cent), and PETROVIETNAM GAS (29 per cent).

In 2016, Gazprom and PetroVietnam signed the Memorandum of Understanding on the development of new oil and gas projects, the Memorandum of Understanding on power generation, and the Addendum to extend the Cooperation Agreement on personnel training.