Speech by Alexey Miller at conference call on occasion of New Year’s Eve

Dear colleagues,

Today, we are taking stock of the year 2019. This year has already become a landmark in the history of the gas industry. A tremendous amount has been achieved.

First and foremost, the Power of Siberia gas pipeline has come onstream. As you know, on December 2, the Company launched Russian pipeline gas supplies to China. This is a market with enormous potential.

Power of Siberia is one of the most ambitious projects in the world gas industry. In a mere five years, we created a gas production center in Yakutia from the ground up. We laid a state-of-the-art gas pipeline from there. As you know, the work was carried out in extreme conditions yet to a high standard and ahead of schedule. Without a doubt, it was a huge victory achieved through the work of the whole team of Gazprom.

An important mission of Power of Siberia is to expand gas infrastructure in the east of our country – in Russia’s Far East and Yakutia. Needless to say, natural gas means a higher quality of life. Most notably in rural areas. Together, we are conducting this work all around Russia. Today, Gazprom is working in 69 regions of the Russian Federation, supplying gas to consumers in the domestic market. This year, we have brought pipeline gas to another 140 inhabited localities. More than 1,700 kilometers of gas pipelines have been built as part of our program for gas infrastructure expansion in the Russian Federation.

In the Kaliningrad Region, we have brought into operation an offshore LNG receiving terminal and the Marshal Vasilevskiy floating storage and regasification unit. We have created a totally independent and reliable route for supplying gas to the westernmost region of our country.

This year, as usual, we are providing our domestic and foreign consumers with reliable deliveries of gas in the required amounts. Exports to Europe are expected to total 198.8 billion cubic meters of gas by the end of this year. As you know, this will be one of the best totals in the history of the Company. I would like to note that, as of this December, the current daily volumes of deliveries to Europe are exceeding those of the same period last year.

In a few days, we will start supplying gas via the TurkStream offshore gas pipeline. We also have the completion of the Nord Stream 2 construction project ahead of us. The new offshore trunklines will improve energy efficiency in European countries. They will also help Europe achieve its environmental goals.

As you are well aware, last week marked the signing of a protocol on gas cooperation with Ukraine from 2020 onward. The document will allow the parties to, first and foremost, restore the balance between their interests and reduce the risks related to the transit of Russian gas to Europe.

The reliability of our gas supplies to Russia and abroad is underpinned by a robust resource base and a powerful production complex. By the end of 2019, we will have produced some 500 billion cubic meters of gas.

Together, we are steadily expanding the Yamal gas production center. In March, right on schedule, we started the full-scale development of the Kharasaveyskoye field. The field will come onstream as early as 2023 and will provide consumers with gas for more than 100 years.

Simultaneously, we continue to enhance the northern gas transmission corridor in order to transmit the gas produced in Yamal. Within the Ukhta – Torzhok 2 gas pipeline, we are preparing the launch of Novoyubileynaya, the first of the pipeline’s seven compressor stations.

We are building cutting-edge hi-tech facilities along the whole production chain. A great case in point is the Amur Gas Processing Plant (GPP), which will become one of the world’s largest. The project is 54 per cent complete, which means that it is already halfway through. The successful signing of project finance documentation for the Amur GPP, which took place this week, clearly demonstrates the high quality of our key investment projects.

In northwestern Russia, namely in Ust-Luga, we have launched the project to build an integrated complex for gas processing and liquefaction. It will be the core of a powerful, one-of-a-kind industrial cluster. The technological concept we have chosen will ensure excellent economic efficiency of this project.

Dear colleagues,

This year, we have made major decisions to improve the corporate structure of Gazprom. A lot of work has been done. And it is not yet finished. Our goal is to increase the systemic efficiency of Gazprom. The focus will primarily be on the operational and financial results.

The day before yesterday, the Gazprom Board of Directors approved the new revision of the Company’s Dividend Policy. Now, dividend amounts are inextricably linked to financial results under IFRS. Our target level is at least 50 per cent of the net profit under IFRS, and we will reach that level in the next three years. This approach is fully consonant with the interests of our shareholders and investors.

Since the start of these transformations, Gazprom’s capitalization has increased 1.7-fold and is now as high as USD 97 billion. Gazprom is now the largest Russian company, the number one company in terms of capitalization. Nevertheless, our shares have considerable potential for further growth.

In the power sector, 2019 marked the completion of the large-scale program under the capacity supply agreements. Over the course of eleven and a half years, Gazprom Energoholding brought into operation advanced facilities with a total capacity of 9 GW.

Our oil subsidiary – Gazprom Neft – is very close to reaching its strategic goal for production, i.e. 100 million tons of oil equivalent per year.

This year, the company commenced production activities in the oil rim of the Chayandinskoye field. And now, we have a video link with Igor Krutikov, Director General of Gazprom Dobycha Noyabrsk, and Vladimir Krupenikov, Director General of Gazpromneft-Zapolyarye.

Video link with Chayandinskoye field

Igor Krutikov: Good afternoon, dear Mr. Miller! Good afternoon, dear colleagues! I am happy to send my greetings to you from the Chayandinskoye oil, gas and condensate field. A little over three weeks ago, we commenced gas supplies to China via the Power of Siberia trunkline, and now we are ready to start feeding treated oil into the Chayanda – Eastern Siberia–Pacific Ocean oil pipeline.

The pre-development project is underway at the oil rim of the Chayandinskoye field, and the construction of key infrastructure and process lines for oil production and treatment has already been completed. Oil producing wells with treatment equipment and about 17 kilometers of in-field pipelines are already in active operation.

Also ready for operation are a sales oil treatment unit with an annual capacity of 131,000 tons, the Chayanda – Eastern Siberia–Pacific Ocean oil pipeline with a length of 72 kilometers and annual capacity of over 2 million tons, and the custody transfer point for the Eastern Siberia–Pacific Ocean pipeline system.

The oil rim is being developed by Gazpromneft-Zapolyarye under an operating agreement with Gazprom Dobycha Noyabrsk. Let me now pass the floor to Vladimir Krupenikov, Director General of Gazpromneft-Zapolyarye.

Vladimir Krupenikov: Good afternoon, dear Mr. Miller! Good afternoon, dear colleagues! Let me briefly outline the oil production and supply scheme arranged between the Chayandinskoye field and the Eastern Siberia–Pacific Ocean pipeline system.

Seven wells are currently active at the field, and the oil is fed from them into a treatment unit where it reaches marketable parameters. After that, tank trucks bring this oil to a comprehensive gas treatment unit where oil is mixed with gas condensate and then transmitted to the custody transfer point via the Chayanda – Eastern Siberia–Pacific Ocean oil trunkline. The oil is further sent to the Eastern Siberia–Pacific Ocean pipeline system.

The full-scale development of the oil rim at the Chayandinskoye field will commence in 2020. In the longer term, the Chayanda oil cluster will produce about 3 million tons of oil equivalent per year.

Igor Krutikov: Mr. Miller, we are ready to start feeding the treated oil into the Chayanda – Eastern Siberia–Pacific Ocean pipeline. Please give your permission to commence the supplies.

Alexey Miller: Permission granted.

Igor Krutikov: Dispatcher, the command is to start feeding the treated oil into the Eastern Siberia–Pacific Ocean pipeline system.

Dispatcher: The valve at the connection point to the oil trunkline is now open.

Igor Krutikov: Dear Mr. Miller! The Chayandinskoye field has started feeding its oil into the Eastern Siberia–Pacific Ocean pipeline system.

Alexey Miller: Mr. Krutikov and Mr. Krupenikov, thank you! Thank you for delivering a timely and high-quality result.

Video link ends.

Dear colleagues,

The targets set for this year have been achieved thanks to the hard and dedicated work of Gazprom’s team. And of course it would not be possible without their highly responsible attitude and professional excellence.

I would like to wish you a merry Christmas and a happy New Year!

I wish you and your loved ones happiness, good health, a flourishing life, and all the best!

Now, let us go on with our work.

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