GAZPROM INVESTOR DAY STRESS TESTED NOW BACK ON TRACK
/ 67 DISCLAIMER
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2 / 63 GAS BUSINESS STRATEGY MR. OLEG AKSYUTIN
DEPUTY CHAIRMAN OF THE MANAGEMENT COMMITTEE, HEAD OF DEPARTMENT, GAZPROM
/ 63 NATURAL GAS: THE FUEL OF THE FUTURE
SHARE OF NATURAL GAS IN THE ENERGY MIX
Coal Oil Natural Gas Nuclear power RES* Other
2020 2025 2030 2035 2040
Source: Wood Mackenzie Energy Transition Outlook STRATEGY *RES – renewable energy sources 4 / 63 NATURAL GAS: THE FUEL OF THE FUTURE
CONTRIBUTION SHARE OF NATURAL OF NATURAL GAS GAS IN THE ENERGY MIX to meeting the incremental energy demand
39% 25% 1,0001000 34% 900 2020 800 26% 700 24% 600
500 MTOE MTOE 400
300
200
100 1% 0 Natural Gas RES Oil Other
Source: Wood Mackenzie STRATEGY Energy Transition Outlook, 2020 5 / 63 STRATEGIC PRIORITIES OF GAZPROM
RESOURCE BASE 01 ensuring stable development of highly competitive upstream assets, and a flexible and adaptive natural gas supply network
DOMESTIC MARKET 02 ensuring energy security of Russian gas market and improving the environmental performance of the energy sector
EXPORT MARKETS 03 strengthening the position of leading natural gas supplier in Eurasia
ECONOMICS 04 ensuring continuous improvement in economic performance and dividend yields for shareholders
ENVIRONMENT ECONOMICS 05 contributing to the Paris Agreement objectives in lowering the level of GHG emissions
STRATEGY 6 / 63 RESOURCE BASE: DEVELOPING UNIQUE GAS PRODUCTION CENTRES FOR STABLE GROWTH
01
02
03 XX bcma - perspective fields XX bcma - producing fields
YAMAL OB AND TAZ BAYS & EASTERN SIBERIA AND SEA OF 04 PENINSULA NADYM-PUR-TAZ AREA THE RUSSIAN FAR EAST OKHOTSK
KEY FIELDS*: KEY FIELDS: KEY FIELDS: KEY FIELDS:
Bovanenkovskoye 140 bcma Kamennomysskoye-more 15.1 bcma Chayandinskoye 25 bcma Kirinskoye 5.5 bcma 05 Kharasaveyskoye 50 bcma Severo-Kamennomysskoye 14.5 bcma Kovyktinskoye 25 bcma Yuzhno-Kirinskoye 21 bcma Kruzenshternskoye 33 bcma Urengoyskoye 37.5 bcma
STRATEGY * Bcma - annual capacity (billion cubic meters annually); based on total capacity of various strata 7 / 63 DOMESTIC MARKET: EXPANDING THE GAS INFRASTRUCTURE TO SPUR SUSTAINABLE DEVELOPMENT
01 NATURAL GAS GAS DISTRIBUTION FUEL SUBSTITUTION CONSUMPTION GRID DEVELOPMENT AND CARBON IN RUSSIA IN RUSSIAN REGIONS* INTENSITY
550 02
Impact of coal Impact of natural gas replacement with 500 replacement with RES natural gas 100% 0 03
100 /kWh
450 2 200 CO 300 04 400 400 400 500 or less
Emissions reduction, g reduction, Emissions 600 05 445-620 350 * Technically feasible 700 2020 2024 2035 gas distribution grid development
STRATEGY Sources: Ministry of Energy of the Russian Federation, International Energy Agency 8 / 63 EXPORT MARKETS: GAZPROM IS NO. 1 NATURAL GAS SUPPLIER IN EURASIA
NATURAL GAS DEMAND IN GAZPROM’S TARGET MARKETS
EUROPE & CHINA GAS FORECAST DEMAND FOR IMPORTED GAZPROM’S 01 DEMAND OUTLOOK GAS IN EUROPE & CHINA POSITION 990 990 935 935 IN TARGET MARKETS 865 865
501 348 420 02
471 533 550 bcm 517 515 489
Annual Potential export volumes pipeline export 03 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 under LTCs capacity (as of 2021) in the long term* Europe gas demand China gas demand Total demand Indigenous production Demand for imported gas (Europe & China) Total demand
04 ~1/4 ~1/3 OF EUROPE AND CHINA 05 DEMAND BY 2030
* By modern pipelines
STRATEGY Source: IHS Markit, 2020 9 / 63 EXPORT MARKETS: POWER OF SIBERIA AS THE STRATEGIC CHOICE OF NATURAL GAS BUYERS IN CHINA
01 COST OF NATURAL STRATEGIC ADVANTAGES GAS IMPORTS AND DISADVANTAGES by source OF СHINA’S NATURAL GAS IMPORTS by source 02 2020 STATISTICS FOR CHINA’S CAPITAL REGION (BEIJING) Power LNG LNG Central based on customs data of Siberia (spot) (contracts) Asia
03 * ? COMPETITIVENESS
04 PROTECTION FROM PRICE VOLATILITY
** 05 STABLE SUPPLY LNG (spot) Power of Siberia LNG (avg, including Central Asia IN WINTER contracts)
Taxes on imported gas excluded, based on 1.2 USD/MMbtu regas fee without transmission tariff * Depends on the market environment STRATEGY for LNG; Sources: Wood Mackenzie 2019, IНS Markit 2020, China Customs, NDRC, Gazprom ** Depends on the weather 10 / 63 ECONOMICS: NEW PROJECTS TO DRIVE REVENUE GROWTH
01 INVESTMENTS PRODUCTION PIPELINE EXPORTS INCREMENTAL trn RUB, real 2020* bcm far abroad, bcm EBITDA FROM (including VAT) MAJOR NEW PROJECTS 02 trn RUB, real 2020 ``` +33% ``` +23% 03 1,3 -3% 500 453 199 179
0,9 04 ~ 05
2019 2020 2021-2030 2019 2020 2030 2019 2020 2030 (average) 3
STRATEGY * For 2021-2030 range 11 / 63 ENVIRONMENT: CARBON FOOTPRINT OF EUROPEAN NATURAL GAS IMPORTS FROM DIFFERENT SOURCES
01 EMISSIONS BY SEGMENT
g CO2e per unit of energy (MJ)
02 HUMAN c. 26 cm Nord Stream 6.3 FOOTPRINT (X) TurkStream 7.8
03 ELEPHANT up to 50 cm Qatar (LNG) 14.2 FOOTPRINT (2X) Algeria (LNG) 17.4
up to 1 m 04 TYRANNOSAUR USA (LNG) 23.8 FOOTPRINT (3X+)
SUPPLY CHAIN SEGMENTS SUPPLY CHAIN SEGMENTS Natural gas production and supply from all sources Liquefied natural gas (LNG) supply 05 Production and treatment Pipeline transportation Purification and liquefaction Transportation by LNG carriers Regas
STRATEGY Source: ThinkStep, 2017, 2020 12 / 63 ENVIRONMENT: GAZPROM’S PERFORMANCE
01 GAZPROM’S ENVIRONMENTAL GREEN GHG EMISSIONS FOOTPRINT REDUCTIONS SPENDING
(mt CO2E) in 2020 vs 2019 in 2021–2025**
02 117 -17% 0.5+ trln
03
101 04 - 21% Estimate
05
2019 2020
* Including methane ** Including gas infrastructure expansion in Russia STRATEGY 13 / 63 ENVIRONMENT: PROSPECTS OF ENGAGING IN HYDROGEN ECONOMY
ENERGY HYDROGEN 01 TRANSITION PRODUCTION COSTS
COMPREHENSIVE ASSESSMENT OF HYDROGEN 02 IMPACT ON THE GAS SUPPLY NETWORK 8 for potential transportation of methane-hydrogen mixtures 7
REDUCTION OF CARBON FOOTPRINT 6 03 of supplies through production and utilisation of methane-hydrogen fuel 5
/ kg H2 kg/ 4
04 LOW-CARBON USD 3 HYDROGEN PRODUCTION followed by its commercial production projects 2
1
05 HYDROGEN PRODUCTION 0 building capacities to produce hydrogen-containing From methane* From water gas that satisfies consumer requirements (using RES)
* Including carbon capture and storage STRATEGY Source: B. Parkinson et al. Levelised cost of CO2 mitigation from hydrogen production routes. Energy and Environment, 2018 costs for the upper limit of the range 14 / 63 CONCLUSION: WAYS TO ACHIEVE THE STRATEGIC GOALS
RESOURCE BASE DEVELOP 01 ensuring stable development of highly competitive upstream natural gas production centres, assets, and a flexible and adaptive natural gas supply network and unique fields
DOMESTIC MARKET IMPROVE 02 ensuring energy security of Russian gas market and improving access to the gas infrastructure the environmental performance of the energy sector and ensure reliable supplies
EXPORT MARKETS ENSURE 03 strengthening the position of leading competitive supplies of low-carbon natural gas supplier in Eurasia fuel via existing and new routes
ECONOMICS OPTIMISE 04 ensuring continuous improvement in economic CAPEX and performance and dividend yields for shareholders strengthen FCF
ENVIRONMENT FOCUS 05 contributing to the Paris Agreement objectives on replacing high-emission energy in lowering the level of GHG emissions sources and develop hydrogen technologies
STRATEGY 15 / 63 GAS DOWNSTREAM MR. VITALY MARKELOV
DEPUTY CHAIRMAN OF THE MANAGEMENT COMMITTEE, MEMBER OF THE BOARD OF DIRECTORS, GAZPROM
/ 67 GAZPROM’S UPSTREAM OPERATIONS AND HYDROCARBON RESERVES
GAZPROM’S UPSTREAM GAZPROM’S CURRENT OPERATIONS RESERVES
Gazprom accounts for* Natural gas production Russian classification** potential exceeds* 68% 12% 32.8 tcm 1,813 mt 500 bcmpa
International classification under PRMS standards (proven + probable)** ** 7,570 23.8 tcm 1,181 mt
Gazprom’s share of reserves* ** ** 191 71 28% % % 69 Other 17 In Russia companies Globally 3% Unallocated
DOWNSTREAM * As of the end of 2019, ** As of the end of 2020 17 / 63 GAS TRANSMISSION SYSTEM IN RUSSIA
GAS TRANSMISSION SYSTEM
23 UGSs 176,805 km 47,577 MW 190 mcmh length of gas pipelines gas compression capacities gas throughput capacity
72.3 bcm of operating reserve
843.3 mcm of maximum possible daily capacity
DOWNSTREAM 18 / 63 DOWNSTREAM
Gas processing, SOSNOGORSK GPP NOVOURENGOY CTP Existing assets 3 2.5 12.2 bcmpa Gas condensate processing Ongoing projects and oil refining, mtpa NADYM-PUR-TAZ CSP UST-LUGA GPC 4 45
52.5 50.3 ASTRAKHAN GPP bcmpa mtpa gas processing gas condensate 12 7.3 capacities in 2020 processing and oil refining capacities in 2020
100% 85% of helium production of sulphur production in Russia in Russia ORENBURG GPP & HELIUM PLANT 37.5 6.3 AMUR GPP 42 5.7% 20% GAZPROM of motor fuel of LPG production NEFTEKHIM SALAVAT SURGUT CSP production in Russia* in Russia 10 12
DOWNSTREAM * Excluding the volumes of Gazprom Neft 19 / 63 GAS PROCESSING STRATEGIC VALUE
Higher monetisation LARGEST GPP LARGEST HELIUM LARGEST GPP of fat gas reserves GLOBALLY PRODUCTION GLOBALLY IN RUSSIA thanks to higher value chain bcmpa mcmpa bcmpa products recovery
89 60
Product type diversification protecting against volatility 40 40 45 45 in commodity markets 42 42 38
Gas sales markets diversification on the back of higher PBU CENTRAL UST-LUGA AMUR AMUR SHUTE QATAR UST-LUGA AMUR ORENBURG LNG output GAS FACILITY GPC GPP GPP CREEK LNG 2 GPC GPP GPP
DOWNSTREAM 20 / 63 AMUR GAS PROCESSING PLANT
PROJECT GOAL: PRODUCTION OF GAS FOR EXPORTS AND SEPARATION OF VALUABLE NATURAL GAS COMPONENTS AMUR GPP 42 bcmpa 38 bcmpa feedstock gas marketable gas to China
EASTERN GAS PROGRAMME
Chayanda field Power of Siberia 2,400 ktpa 1,000 ktpa 500 ktpa 200 ktpa 60 mcmpa ethane propane butane pentane helium Kovykta Amur field AMUR GCC GPP
bln OVERALL PREFERNCES 11.4 EUR < 17 years 22 banks 74.6% total project financing from Europe, Asia and overall project Overall < 300 > 2 Customs financing period Russia providing financing progress Amur GPP savings property tax land tax payments 12 related to savings, Customs duty taxes and RUB bn insurance payments, RUB m >5,200 >68 2015 2021 2022-2024 2025 > 4,903 > 4,903 Launch of Start-up Start-up Reaching insurance VAT imports construction complex 1 other complex the full capacity payments tax release in Russia
DOWNSTREAM 21 / 63 ETHANE-CONTAINING GAS PROCESSING COMPLEX NEAR UST-LUGA RUSKHIMALYANS Ust-Luga GPC 18 bcmpa 45 bcmpa Marketable gas feedstock gas to customers
GPC
Gazprom’s Unified Gas Supply System 13,000 ktpa 3,600 ktpa 1,700 ktpa 100 ktpa LNG ethane LPG PEN-HEX
Nadym-Pur-Taz BALTIC CHEMICAL region PLANT GCC*
CO-FOUNDERS OF RUSKHIMALYANS GAZPROM’S LARGEST LIQUEFIED NATURAL GAS PRODUCTION PROJECT WITH A CAPACITY OF 13 MTPA TWO PRODUCTION TRAINS OF 6.5 MTPA EACH 50% 50% PJSC GAZPROM JSC RUSGAZDOBYCHA
DOWNSTREAM * Gazprom does not participate in the GCC project 22 / 63 DEVELOPING GAS SUPPLIES AND EXPANDING GAS INFRASTRUCTURE ACROSS RUSSIAN REGIONS
GAS SUPPLIES AND GAZPROM’S PLAN TO INCREASE GAS INFRASTRUCTURE As of the end of 2020 DOMESTIC GAS SUPPLIES THROUGH As of the end of 2025 EXPANSION IN RUSSIA GAS INFRASTRUCTURE EXPANSION 2016–2020 bcm 2021–2025 74.7 71.4 +21.8 260,0
2.0
24.4 238,2 0.7 9.8
thousand km % thousand
Length of gas pipelines Gas infrastructure Construction of gas penetration in Russia pipelines 2021 2026
DOWNSTREAM 23 / 63 IMPORT SUBSTITUTION EFFORTS
ESTABLISHING CAPACITY for import-substituting products used by Gazprom
Gazprom’s Corporate Imports FOCUS AREAS Substitution Plan • Offshore hydrocarbon production • Natural gas liquefaction The List of Critical Products • Hydrocarbons transportation and storage • Hydrocarbons processing • Power generation • Telecommunications
KEY PARTNERS INTERACTION FRAMEWORK • State-owned corporations • Metals and mining • Government-sponsored programmes • Long-term contracts and large industrial enterprises companies • Roadmaps • Agreements • Defense industries • R&D hubs • Special Investment Contract 2.0
IMPORT SUBSTITUTION EFFORTS MITIGATE THE RISK OF DEPENDENCE ON FOREIGN-MANUFACTURED EQUIPMENT
DOWNSTREAM 24 / 63 IMPORT SUBSTITUTION AT GAZPROM
ECONOMIC EFFECT from the import-substituting technologies
Overall economic effect from the import-substituting technologies in 2016–2020 >50 RUB bn
20 RUB bn 16.6 14.8
10 9.2 6.2 Actual 5.3 Forecast
2016 2017 2018 2019 2020 2021
DOWNSTREAM 25 / 63 GAZPROM GROUP’S POWER GENERATING ASSETS
Existing assets OGK-2 assets Projects to be launched in 2021 13% #1 Gazprom Group’s in Russia in terms share in electric power of installed capacity CHEREPOVETSKAYA generation in Russia and heat generation GRES as at the end of 2020
KIRISHSKAYA RYAZANSKAYA SURGUTSKAYA GRES GRES GRES-1
PSKOVSKAYA SEROVSKAYA TROITSKAYA GRES GRES GRES 79 38.3 NOVOSALAVATSKAYA GRES power plants GW in 18 Russian installed electric regions capacity
NOVOCHERKASSKAYA GRES SVOBODNENSKAYA TPP 131.0 117.6 ADLER TPP billion kWh million Gcal GROZNY electricity generation heat generation TPP STAVROPOLSKAYA GRES PANČEVO TPP 38 17,6 (REPUBLIC OF SERBIA) bcm thousand km natural gas length of consumption heating grids
DOWNSTREAM 26 / 63 GAZPROM ENERGOHOLDING’S EXPECTED PERFORMANCE IN 2020
NET PROFIT EBITDA FREE CASH FLOW RUB bn RUB bn 109 RUB bn 106
98 49 33 37 32 18 26
2020P Forecast post 2020 2020P Forecast post 2020 2020P Forecast post 2020 optimisation optimisation optimisation
Power generation operations Net profit in 2020 Dividends in 2020 provide stable cash flows even in is set to exceed are expected to be at least a challenging economic environment the target substantially on par with those paid for 2019
DOWNSTREAM 27 / 63 PROSPECTIVE POWER SHPP GENERATION PROJECTS 16.5 MW
KIRISHSKAYA GRES CAPACITY MODERNISATION 3 projects up to 190 MW PROGRAMME (CMP) Competitive selection of projects to upgrade TPPs * ST PETERSBURG 16 9÷14% 15 3 projects up to 336 years rate of projects underway MW (PJSC TGC-1) in 5 Russian regions contract term return
SURGUTSKAYA GRES-1 MOSCOW 2 projects up to 405 MW RES CAPACITY DELIVERY 4 projects up to 697 AGREEMENTS (CDA) MW (PJSC Mosenergo) Selection of generating assets based on renewables * 1 15 8÷12% SHPP project years rate of in Murmansk Region contract term return NOVOSALAVATSKAYA CHPP 3 projects up to 290 MW
REPUBLIC OF SERBIA REPUBLIC OF SERBIA Potential < 200 MW TPP < 200 MW TPP Up to 200 MW TPP projects: in Kragujevac in Bela Crkva/Panč Up to 200 MW W PP
DOWNSTREAM * Depending on long-term Russian Government bonds 28 / 63 INTEGRATED SYSTEM OF PROCESS SAFETY MANAGEMENT
PROGRESS OF GAZPROM’S PROCESS SAFETY MANAGEMENT SYSTEM DEVELOPMENT STRATEGY UNTIL 2021
TOTAL NUMBER INJURIES ACCIDENTS OF REGISTERED CASES AND INCIDENTS 120 77 39
59 Reduction by 39 Reduction by Reduction by 14 51% 49% 64%
2016 2020 2016 2020 2016 2020
GAZPROM’S PROCESS SAFETY MANAGEMENT SYSTEM DEVELOPMENT STRATEGY IN 2021–2030
THE GOALS OF THE STRATEGY MITIGATION OF ACCIDENTS, INCIDENTS, EMERGENCIES, FIRES
Improvement of the ISPSM with a view to supporting a safe working environment
Development of Development Introduction of ISPSM integration Sustainable development of Gazprom within new competencies of safe production digital technologies, with Gazprom’s the established process safety parameters and leadership skills processes artificial intelligence business processes and digitalisation
DOWNSTREAM 29 / 63 GAS EXPORT MS. ELENA BURMISTROVA
DEPUTY CHAIRMAN OF GAZPROM MANAGEMENT COMMITTEE, DIRECTOR GENERAL OF GAZPROM EXPORT
/ 63 GAZPROM: STRONG POSITION ON THE INTERNATIONAL MARKETS
Despite bearish market fundamentals of 2020, Gazprom sales GAZPROM’S SHARE to Europe in 2020 were among the top 5 in the company’s history IN EUROPE IN 2020
Gazprom Other Gazprom successfully defends its market share amid growing competition. The company’s share in European consumption was still over 32% and in the imports – about 56%
CONSUMPTION The company has successfully diversified the geography of its deliveries by sending gas via new routes to China and Europe. 32.2%
Rapidly expanding LNG sales open access to the new markets and clients
Gazprom’s Electronic Sales Platform trading has become a vital part of its business
With European demand and prices recovered, 2021 offers better prospects compared to the previous year
EXPORT * Import requirements adjusted for UGS balance 31 / 63 EUROPEAN GAS MARKET REBALANCED IN 2020
GAZPROM DELIVERIES Gazprom’s indispensable role is more than VS LNG VOLUMES IN 2020 just a front-runner on the European market
20 Gazprom LNG 18 Gazprom retained the role as the major supplier 16 on the flooded market in the first half of 2020, and acted as a stabilising supplier throughout the year 14
12
10 Being a low-cost producer, Gazprom managed
bcm to uphold deliveries in H2 2020 when flexible 8 LNG left Europe as a result of a price meltdown
6
4 In 2021, the price situation has already 2 improved, and we expect significant price growth over the year 0 January February March April May June July August September October November December
EXPORT Sources: PJSC Gazprom, Eurostat, National Statistics, IEA, IHS Markit 32 / 63 SEASONAL PRICE DEVIATION TO BE MORE PREDICTABLE IN 2021
END-MONTH STORAGE BALANCES MONTHLY INVENTORIES 120 Range of inventories in 2015-2020 SURPLUS VS AVERAGE IN 2014-2019 2019 2020 100 2021 96.7 Average level of gas inventories in 2015-2020 -15.6 2019 2020 81.1 30 28,5 28,8 80 +3.5 25,6 78.2 24,8 23,9 22,5
60 19,0 bcm bcm 20 17,8 16,1 13,8 14,1 40 13,1 12,5 12,6 13,1 9,7 10,5 9,7 34,37 10 9,1 7,0 20 5,9 4,9 3,5 1,6 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
High level of gas inventories in Q1 2020 European gas storage surpluses relative to their In spring 2021, storage reserves in Europe are much was due to an abnormally warm winter average level of 2014-2019 peaked in April-May below the average of the last decade due to a cold and the risk of interruption of the 2020. Afterwards the inventories began to snap and LNG lured away to Asia. This creates Ukrainian transit. As a result, significant decrease against the background of a significant a strong incentive to support gas demand in the reserves were created at the end of reduction in LNG supplies and rising gas storage coming summer, and also gas prices. The oversupply 2019 to secure the supply to Europe withdrawals in Q4 2020 situation of the early 2020 will not be repeated
EXPORT 33 / 63 GAZPROM EXPORT PORTFOLIO PROVIDES RESILIENCE IN A VOLATILE PRICE ENVIRONMENT
Gazprom uses a variety of price adjustment mechanisms to achieve SALES BY PRICING MECHANISM balanced revenue flows 160
140 133.7 More than 80% of the volumes delivered have a direct link to different trading hubs 120 111.3 110.3 indexes including spot and forward markets
100
80 Gazprom’s sales portfolio price composition $/mcm provided a premium to the average ‘month- 60 ahead’ prices of USD 23.4 / mcm last year
40 We are adapting our long-term contract 56.1% Prompt (Day-ahead and Month-ahead) 20 model in accordance with the market 30.9% Forwards (Quarter, Season & Year) development. Our balanced portfolio allows us to keep prices above the market without 0 13.0% Oil indexation Day-Ahead Month-Ahead Gazprom Portfolio weakening our positions
EXPORT 34 / 63 ELECTRONIC SALES PLATFORM: ADDING VALUE IN A YEAR OF VOLATILITY
GAZPROM SALES ON ESP IN 2020
ESP allows to optimise sales in periods BY COUNTRY GAZPROM SALES of down-nominations under the LTCs ON ESP, BY YEAR
39% Germany 30 27,1* ESP allows to compete 21% Austria 25 for sales outside the LTCs 20% Slovakia 20 15,1 11% Czech bcm 15 4% The Netherlands 10 ESP sales nearly doubled as 4% Hungary 5 1,7 compared to the previous year 1% Others (Italy and Turkey) 0 2018 2019 2020 BY INSTRUMENT Market area coverage was expanded Volume, mmcm after the start of sales to Turkey ESP GazEX Index, euro/MWh 5,000 14 4,007 4,411 Within-day, Day-Ahead 12 14% 4,000 Active sales of the newly added instru- and Weekend 10 2,616 2,941 ments, Season and Year, helped to mitigate 2% Balance of Month 2,704 3,000 2,460 2,435 8 the impact of volatility in gas markets 25% Month 2,000 6 1,389 1,092
32% Quarter 1,073 1,018 956 4 Volume, mmcmVolume, 1,000 euro/MWh Index, ESP sales enhance transit capacity 20% Season 2 utilisation ratios, increasing efficiency 0 0 7% Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec of Gazprom’s export flows
EXPORT * Including gas to be delivered in 2021 and 2022 35 / 63 DIVERSIFICATION OF MARKETS: NEW PIPELINE ROUTES TO EUROPE
Current routes
Gas supplies via TurkStream In operation since 2020 started in January 2020 Strategic project
Nord Stream In 2020 Russian gas was delivered via Nord Stream 2 TurkStream to customers in Turkey, Bulgaria, Greece, North Macedonia and Romania
Yamal-Europe via Ukraine In 2021 gas supplies via a new route to Serbia and Bosnia and Herzegovina started. After expanding of gas transmission systems in Bulgaria, Serbia and Hungary, we expect Russian gas deliveries to Hungary
TurkStream Nord Stream 2 offshore construction resumed in December, 2020. All works are being performed in line with the relevant permits BlueStream
EXPORT 36 / 63 DIVERSIFICATION OF PIPELINE GAS EXPORT ROUTES TO ASIA
EASTERN ROUTE POWER OF SIBERIA
Gas exports to China via the Power of Siberia gas pipeline totalled 4.1 bcm in 2020 and exceeded the minimum annual quantity
In Q4 Gazprom ramped up daily volumes upon requests from customer with a surplus against contractual obligations reaching 84% on 31 December, 2020 RUSSIA
In line with the Sales and Purchase Agreement Power of Siberia (up to 38 bcmpa after the ramp-up period), (Eastern route) Gazprom is increasing gas supplies in 2021
NEW GAS TRANSPORTATION PROJECTS ARE UNDER CONSIDERATION CHINA
EXPORT 37 / 63 GAZPROM’S LNG BUSINESS: BOOMING GROWTH
GAZPROM PORTFOLIO GAZPROM LNG LNG SUPPLIES, MMT PROJECTS In 2020, Gazprom LNG sales and client geography increased almost SAKHALIN 2 (T1,2) IN OPERATION twofold up to 110 cargoes and 8 14 countries, respectively 2019 2020 7,4 INDIA - 25% PORTOVAYA LNG UNDER CONSTRUCTION 7 cargoes 54 110 +1.5 mmtpa* countries 7 14 6 NETHER- 2x LANDS - 13% UST-LUGA UNDER CONSTRUCTION +13 mmtpa* A new Gazprom Export’s LNG office growth 5 in St Petersburg to enforce Gazprom FOB - 13% marketing activities for prospect Russian 4,0 3,7 3,8 GAZPROM LNG LNG projects and to supplement 4 3,6 UK - 9% 3,3 PORTFOLIO OVERVIEW Gazprom’s worldwide trading 3 KOREA - 8% LT LNG Purchase Agreements MT/ST/spot CHINA - 7%
2 SPAIN - 7% SEIC PURCHASE FRANCE - 6% 1.0 mmtpa/20y 1.2 mmtpa/8y 2.9 mmtpa/20y On 8 March 2021, Gazprom 1 JAPAN - 4% delivered the first carbon-neutral TAIWAN – 4% LT LNG Sale Agreements MT/ST/spot cargo of LNG in the Atlantic Basin 0 OTHER – 4%
2015 2016 2017 2018 2019 2020 SALES 2.9 mmtpa/20y
EXPORT * Nominal capacity 38 / 63 OIL BUSINESS MR. ALEXEY YANKEVICH
DEPUTY CEO FOR ECONOMICS AND FINANCE, GAZPROM NEFT
/ 63 FOCUS ON SUSTAINABLE DEVELOPMENT
2020 HIGHLIGHTS
INDUSTRIAL mt of CO * FAR 2 ACCIDENTS SCOPE 1+2 -16% ACHIEVED 0 0 ACHIEVED 26 GHG EMISSIONS y-o-y
NOTABLE PROJECTS
Biosphere 1MW solar Wind and geothermal Green Seismic and Biological water treatment power plant energy projects Clean Territory projects facilities on Moscow (2017) at Omsk refinery launched – with huge potential aimed at land and Omsk (2021) refineries 20MW expansion plan by 2021 in NIS (Serbia) and vegetation protection
OIL BUSINESS * Preliminary unaudited data 40 / 63 2020 HIGHLIGHTS
FINANCIAL RESULTS
82 28 22 ₽ 2,000 bln ₽118 bln ₽ 485 bln
-14
1Q 2020 2Q 2020 3Q 2020 4Q 2020
OPERATIONAL RESULTS
2,123 mtoe 40.4 mt 96.1 mtoe
OIL BUSINESS * Includes proportional EBITDA from associated and jointly controlled companies 41 / 63 DIVERSIFIED PROJECT PIPELINE
FCF generation before 2025 FCF generation after 2025
Recoverable reserves (p50)
MERETOYAKHANEFTEGAZ YENISEI 330 МТОЕ 313 МТОЕ NEOCOMIAN - JURASSIC DEPOSITS 766 МТОЕ
• Kharasavey • Bovanenkovo • Urengoy ZIMA 140 МТОЕ PROJECT TOLEDO 75 МТОЕ
OIL – RIMS PROJECTS 185 МТОЕ
• Chayandinskoye • Zapadno- • En-Yakhinskoye Tarkosalinskoye • Orenburg • Pestsovoye
OIL BUSINESS 42 / 63 WIDE RANGE OF PERSPECTIVE PROJECTS
Recoverable Specifics Projects reserves*
• Basis for future production • YENISEI • Major part of projects realized • TOLEDO EARLY STAGE 388 within partnerships to share EXPLORATION PROJECTS financial and geological risks МТОЕ
• Developing new projects to replace • THE ZIMA PROJECT production on mature assets and provide • MERETOYAKHA opportunities for production growth • OIL-RIM DEPOSITS AT OIL NEW • Synergies with existing infrastructure – 655 high economic efficiency • AND GAS-CONDENSATE PROJECTS FIELDS МТОЕ • Projects within partnerships launched in 2020 or planned in 2021 to share risks
• Projects with a predominant share • BOVANENKOVO of gas and gas condensate in hydrocarbon • KHARASAVEY NEW TYPES OF RESERVES – production, diversifying the portfolio 766 • URENGOY NEOCOMIAN-JURASSIC DEPOSITS in the face of OPEC restrictions МТОЕ • A new basis for cooperation
OIL BUSINESS * Р50 43 / 63 ESTABLISHING PARTNERSHIPS TO COMBINE RESOURCES AND SKILLS AND TO SHARE RISKS IN DEVELOPING NEW PROJECTS EFFECTIVELY
Projects’ increasing capital • Joint project to develop • Development of intensity and technological the Salym Group of fields fields in the Tomsk challenges demand not just • Exploration of Leskinsky and Omsk Oblasts the mobilisation of internal and Pukhutsyayakhsky license • Technological Company resources, but blocks collaboration on also the involvement of external (the Gydan Peninsula) Jurassic formations capital and technological expertise
The Upstream Division MERETOYAKHANEFTEGAZ is implementing a special Geological exploration Potential joint venture programme to develop skills in the Karabashsky zone to bring together financial in building partnerships with (Khanty-Mansi and technical resources, potential investors, technology Autonomous Okrug) competencies and expertise partners and contractors of partners for developing a major hydrocarbon cluster in Yamal
OIL BUSINESS 44 / 63 MODERNISATION BRINGS THE OPPORTUNITY West European TO CATCH UPCOMING MARGINS RECOVERY refinery average
2020 2021 2022–2025
MOSCOW REFINERY OMSK REFINERY MOSCOW REFINERY EURO+ facility commissioned Operational availability: 2021 Deep processing unit (DPU) 10.5 NCI • Greater throughput, reaching up to 12 mt • Deep processing unit (DPU) • Sulphur regeneration unit – • Higher light product yields Production of raw materials for operational availability: 2023 Group 2 and Group 3 base oils • Transition to four-year run-life • Operational availability • Delayed coking unit (DCU) • Better energy efficiency and lower • Hydrocracker: 2024 Increased production of Anode-grade coke environmental impacts • HGU*: 2024 • DCU: 2025
NIS (PANCHEVO REFINERY) up to 97.4% up to 98% Deep refining complex launched CONVERSION FACTOR CONVERSION GPN (AFTER LAUNCH OF DPU AND DCU) GPN FACTOR ONPZ • Increased Euro-5 fuel production MNPZ • Petroleum coke production launched • Full compliance with EU environmental standards CDU/VDU unit • Lower environmental footprint Separate refining of crude oil and gas condensate
up to 99% CONVERSION NIS FACTOR
OIL BUSINESS * Hydrogenation unit (HGU) 45 / 63 STRONG OPERATING AND FINANCIAL RESULTS AMID THE MARKET UNCERTAINTIES
NET PROFIT, ADJUSTED EBITDA MARGIN
147.0 24.3% 117.7 22.2% 12.8%
15.2
Company 1 Company 2 Company 1 Company 2
NET PROFIT PER UNIT, NET PROFIT MARGIN*
2.3 6.0%
1.1 3.2%
0.3 0.3%
Company 1 Company 2 Company 1 Company 2
Calculations are based on data of leading Russian oil companies as at 31 December 2020 OIL BUSINESS * Net income was adjusted for such one-offs as asset acquisition/disposal/impairment and tax effects 46 / 63 INDUSTRY LEADER IN TERMS OF EFFICIENCY IN 2020
CHANGE IN PER UNIT CHANGE IN PER HYDROCARBON PRODUCTION COSTS UNIT CAPEX COSTS 21.1% 6.4%
-4.4% 0.5% -4.7% 0.6%
Company 1 Company 2 Company 1 Company 2
ROACE* NET DEBT/EBITDA
6.2% 3.12 4.9% 1.32 1.2% 0.17
Company 1 Company 2 Company 1 Company 2
Calculations are based on data of leading Russian oil companies as at 31 December 2020 OIL BUSINESS * ROACE is calculated on the basis of adjusted EBIT (EBIT of subsidiaries + JO + JV) and the income tax rate taking into account the JV 47 / 63 FOCUS ON DEVELOPING THE MOST EFFICIENT PROJECTS WHILE OPTIMISING CURRENT CAPITAL EXPENDITURES
2020 INVESTMENTS, 2020 REGULAR INVESTMENTS,
414 6
131 Refinery 25 modernization Omsk 325 refinery programme aimed at increasing 93 light product yield 13
DOWNSTREAM Moscow refinery 277 232 Projects with
UPSTREAM a predominant share of gas and gas condensate in hydrocarbon production, 18 diversifying the portfolio in the face of OPEC restrictions Gas and condensate
New projects within partnerships launched in 2020 26 or planned in 2021 to share risks Partnerships
OIL BUSINESS Values may not converge due to rounding 48 / 63 FINANCE MR. FAMIL SADYGOV
DEPUTY CHAIRMAN OF THE MANAGEMENT COMMITTEE, CFO, GAZPROM
/ 63 EXTRAORDINARY SITUATION IN OIL AND GAS MARKETS IN 2020
DROP IN DEMAND DUE TO COVID-19 NATURAL GAS AND OIL RESTRICTIONS PRICES IN 2020 Rebased to 100% as at 1 January 2020
DISAGREEMENT OVER THE OPEC+ 200% TTF Natural Gas (USD) DEAL EXTENSION Brent (USD) 175%
150% more than a ABNORMALLY WARM WINTER four-fold drop in 125% x 4 natural gas prices +3ºC Europe’s average* winter t0 100% from 1981–2010 to 2020 75%
50% OVERSTRETCHED GAS STORAGE CAPACITIES 25% 38% 60% Historical level** March 2020** 0% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Sources: FactSet as at 31 December 2020, Copernicus Climate Change Service, U.S. Energy Information Administration; * Europe’s average temperature in the 2020 winter season (December to February) exceeded the 1980–2010 historical average by 3ºC. FINANCES ** Europe’s average gas storage capacity utilisation of 38% in March 2016–2020 as compared to 60% in March 2020. 50 / 63 CONSERVATIVE FINANCIAL POLICY
GAZPROM TOOK PROMPT ACTION TO RESPOND TO EXTRAORDINARY CIRCUMSTANCES
COST REDUCTION RESERVE FUND
• OPEX reduced by 20% The 2020 reserve fund • CAPEX reduced by 26% (RUB 696 bn) enabled Gazprom to finance all its obligations
BUDGET REVISION LIQUIDITY MANAGEMENT
• Monthly budget monitoring Consolidating liquidity of the Group’s • Carefully managing the subholding 582 companies:539 Russian companies’ budgets (primarily Gazprom and 43 foreign companies Neft and Gazprom Energoholding) Pooling RUB 722 bn on a master account as at 1 January 2021 Bank overseeing contracts worth of RUB 2,976 bn
FINANCES 51 / 63 POSITIVE IMPACT FROM MEASURES TAKEN IN 2020
Gazprom significantly reduced Cost reduction in 2020 its operating and capital expenses in 2020 was taken into account when setting expense caps for 2021
OPEX REDUCTION* CAPEX REDUCTION Gazprom’s OPEX, y-o-y, Gazprom’s CAPEX**, y-o-y, USD bn USD bn CAPEX REDUCTION BREAKDOWN* -20% -26% USD 7.3 bn -USD 2.3 bn -6% power generation business -USD 7.6 bn -USD 0.6 bn
-15% oil business 98,7 -USD 9.4 bn 28,1 78,8 20,8
-31% gas business 50 2019 Cost Market Protected FX and other 2020 2019 2020 CAPEX reduction optimization environment issues effects*** program changes
FINANCES * Based on management accounting, ** Including capitalized interest, *** Foreign exchange differences and other effects 52 / 63 DEBT MANAGEMENT
NET DEBT / EBITDA Without The measures additional measures, taken by the management Net debt / EBITDA could have helped contain exceeded 3.0х as at the end of 2020 the ratio growth 2,6
Comfortable level EBTIDA RECOVERY Increase in gas 1,5 exports and 1,4 prices in 2H DECREASE 1,4 IN BORROWINGS Borrowings through traditional 2.6x instruments PERPETUAL 0,8 down by BONDS Net debt / RUB 129 bn USD 1.4 bn EBTIDA EUR 1 bn in 2020 PROJECT FINANCING Yuzhno-Russkoye 2016 2017 2018 2019 2020 2021Е field, RUB 40 bn
FINANCES 53 / 63 STABLE CREDIT RATINGS AND EQUITY MARKET POSITION
RATING AGENCIES’ EQUITY MARKET PERCEPTION
REACTION • 75% of analysts recommending to buy Gazprom’s shares Thanks to the action taken by Gazprom to reduce the OPEX • No “sell” recommendations and CAPEX, all rating agencies affirmed the Company’s ratings • In 2020, Gazprom was the biggest issuer in MSCI Russia
SELL-SIDE ANALYSTS' RECOMMENDATIONS 36 % FOR GAZPROM’S SHARES BBB / Baa2 / BBB / of oil and gas stable stable stable majors had 75% 25% 15 AUG 2019* 12 FEB 2019* 27 FEB 2018* their ratings downgraded 58% 42% buy hold buy hold
Rating agencies % affirmed 27 AAA (RU) / AAA / saw their their previous 2019 2020 stable stable credit ratings outlook 2 FEB 2018* 2 FEB 2015* and outlooks move for Gazprom downwards**
Sources: FactSet at at 31 December 2020, S&P Global FINANCES * The date of the credit agency’s latest change of Gazprom’s rating; ** Based on data from 353 oil and gas companies according to S&P 54 / 63 STRONG COMMITMENT TO THE DIVIDEND POLICY
GAZPROM’S DIVIDENDS PAID IN 2020 DIVIDEND PAYMENTS
Amount of dividend of Net declared, RUB bn XX% income RUB Above the Dividend A near-record dividend payout 361 bn Policy level in the Russian market
27% 27% 30% 60 % 90 % 25 % 393 361 of oil and gas of oil and gas reduction companies companies in total payments cancelled/reduced cancelled/reduced to shareholders by oil dividend payouts* share buybacks* and gas companies* 190
THANKS TO CAPEX AND OPEX REDUCTION AND OUR CONFIDENCE IN SUSTAINABLE LONG-TERM FINANCIAL PERFORMANCE, 2017 2018 2019 GAZPROM GOES BEYOND ITS DIVIDEND POLICY COMMITMENTS
FINANCES * Chevron, Royal Dutch Shell, Total, BP, Equinor, ExxonMobil, Eni, ConocoPhillips, Rosneft, and Lukoil data 55 / 63 IMMEDIATE RESPONSE AND MARKET STABILISATION IN 2H 2020
MANAGEMENT ACTIONS Immediate measures to cut costs and manage debt and liquidity
2020 results: better MARKET STABILISATION than expected Average price for gas exports to Europe* Gas exports to Europe** Brent crude price USD / mcm bcm USD/bbl
Change Q-o-Q -18% -32% +6% +48% -20% -3% +15% +16% -4% -48% +39% +2%
173 52 162 45 60 40 39 110 117 43 44 31
2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FINANCES * Average price for gas to Europe and other countries according to 2020 IFRS Report; ** Based on Gazprom Export LLC deliveries 56 / 63 2020 RESULTS: PROVEN FINANCIAL STRENGTH
2020 FINANCIAL HIGHLIGHTS COMFORTABLE LIQUIDITY BY SEGMENT* POSITION USD bn Revenue EBITDA CAPEX*** USD bn USD bn USD bn
Power generation business Gas business (incl. miscellaneous segments) Debt repayment schedule, years Oil business 87.9 20.4 28,1 14,2 13,9
20,8 10,7 11,0 Gas business (incl. miscellaneous segments) 9,4 Oil business 8,2 Power generation business 6,7 6,6
Revenue and EBITDA, 2020 vs 2019** -26% % Gazprom Sector average 0 0 2019 2020 Liquidity 2021 2022 2023 2024 2025 2026-2030 2031+ cushion (26%) (35%) (29%) (45%)
FINANCES * Based on management accounting, ** Based on J.P. Morgan data, *** Including capitalized interest 57 / 63 2021 BUDGET: CONSERVATIVE APPROACH
CONSERVATIVE REVENUE GROWTH POSITIVE FREE COMFORTABLE ASSUMPTIONS OUTPACING EXPENSES** CASH FLOW** LEVERAGE** Average price for gas Revenue Free cash flow Net debt exports to Europe RUB bn RUB bn RUB bn USD / mcm Power generation business Oil business Gas business 174 170 7,346 3,856 3,758 134 6,322 (261) 0 2021 +27% +16% -3% 0 0 3,700 2020 2021 2020 2021 2020 2020 2021
Gas exports to Europe* EBITDA CAPEX Liquidity buffer bcm RUB bn RUB bn RUB bn Power generation business Deposits Oil business Cash 1,650 183 Gas business 1,494 1,507 175 1,604 1,467 1,052
+5% +9% +1% +57% 170 0 1,440 0 2020 2021 2020 2021 2020 2021 2020 2021
FINANCES * Based on Gazprom Export LLC deliveries, ** Calculations based on PJSC Gazprom and subsidiaries’ budgets 58 / 63 2021 - A GOOD START
EBITDA 50%+ growth y-o-y
OIL & GAS MARKETS Net profit significantly up ENVIRONMENT based on a considerable portion of fixed costs IN 2021 IMPROVED SIGNIFICANTLY Dividends KEY up y-o-y driven by higher net income FINANCIALS BACK TO FCF PRE-CRISIS FAVOURABLE in the positive, fully sufficient for dividend payout LEVELS CONDITIONS TO BOOST FINANCIAL Debt portfolio PERFORMANCE borrowings down by more than RUB 100 billion
ND/EBITDA below 2x
FINANCES 59 / 63 RAPID DIVIDEND GROWTH
RUB 12.55 DIVIDEND 2020 per share (RUB 297.1 bn) PAYOUT RATIO DIVIDEND BASE dividend for 2020 Minimum under Dividend Policy Actual RUB bn
459 594 50% 50% of adjusted net profit in 2020 – target achieved a year ahead 40% Target 36% 30% 50% at least 50% payout ratio starting from the payment of dividends for 2021 135
Payment of dividends from positive 2019 2020* 2021 Net Adjustments Adjusted free cash flow profit for non-cash items net profit
FINANCES * In accordance with the resolution of PJSC Gazprom’s Management Committee dated 14 April 2021 60 / 63 ESG: COMMITMENT TO RESPONSIBLE BUSINESS PRACTICES
KEY RESULTS GAZPROM’S CDP SCORE IN 2020 WAS UPGRADED*
Evaluation of low-carbon development scenarios up to 2050 is in process • up to B from B- in Climate change Climate change • up to B- from C in Water security Water security The Environmental Report, Annual Report and Sustainability Report disclosed simultaneously in line with the TCFD recommendations A-
Leading CDP Climate Change and CDP Water Security scores achieved B B B among the Russian fuel and energy companies
B- B- Gazprom’s shares included in MSCI ESG indexes C C
NEXT STEPS
Approve the Sustainable Development Policy F F F F
Establish the BoD Sustainable Development Committee Company 1 Company 2 Company 3 Gazprom Company 4 Company 5
Appoint a senior independent director Global companies Russian companies
FINANCES * Compared to Russian and international competitors based on public disclosure: Repsol, Equinor, Shell, Lukoil, Rosneft 61 / 63 GAZPROM’S UPSIDE POTENTIAL Rebased to 100% as at 1 January 2020, % Gazprom Pandemic outbreak, Overall market recovery MORGAN STANLEY 275 TTF full-scale lockdowns imposed. Upward trend for Gazprom “Gazprom is the most preferred stock Brent OPEC+ deal collapse shares on the back of the implemented initiatives in the EEMEA oil and gas market. 240 The company’s shares offer the highest 2022–2023 dividend yield compared to peers.” 205
170 J.P. MORGAN
135 “We see the LNG market Upside tightening through to ~2025 potential and consequently expect firm gas prices 100 and strong dividend growth (>20% CAGR) for Gazprom over the 2020 – 2025 period.”
65
30 SBER CIB JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR “Gazprom shares remain one of our top picks in the sector, as we expect the DPS
Gazprom announces new Gazprom announces Gazprom’s Board Gazprom’s Board Nord Stream 2 to double next year to R26 (11% yield) management incentive 20% cuts in CAPEX of Directors approves of Directors approves construction on the back of stronger earnings.” programme and plans to and OPEX 2019 dividend of the adjusted investment resumes focus on dividend payouts RUB 15.24 per share programme and budget
FINANCES Source: Bloomberg 62 / 63 GAZPROM’S INVESTMENT CASE
GREAT
Growth of UPSIDE shareholder value POTENTIAL for shareholder value
Higher dividend
Focus on sustainable development
Fundamental competitive advantages Positive FCF Robust financial position
FINANCES 63 / 63