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ОАО GAZPROM ANNUAL REPORT 2010 ОАО GAZPROM ANNUAL REPORT 2010 OAO GAZPROM’S MISSION OAO Gazprom’s mission is to ensure a safe, efficient, and balanced supply of natural gas, other types of energy resources, and refined products to consumers. OAO GAZPROM’S STRATEGIC GOAL OAO Gazprom’s strategic goal is to establish itself as a leader among global energy companies by entering new markets, diversifying its activities, and ensuring reliable supplies. PRINCIPLES OF OAO GAZPROM’S OPERATIONS raising the efficiency of operations; diversifying through high-performance projects to create products with high added value; increasing capitalization and credit ratings; meeting the interests of all OAO Gazprom shareholders; improving corporate governance; improving the transparency of financial and business activities; establishing personal responsibility in its leadership for managerial decision-making; minimizing specific adverse environmental impact from technological causes. 2 ОАО GAZPROM ANNUAL REPORT 2010 GAZPROM IS ONE OF THE WORLD’S LARGEST ENERGY COMPANIES GAZPROM GROUP ACTIVITY IN RUSSIA AND ABROAD IN 2010 FSU Countries Russia Japan Republic Venezuela of Korea European Contries Taiwan Bolivia China Vietnam Equatorial Algeria Libia Iraq India Guinea Hydrocarbons search and Gas transportation and Oil and gas condensate sales geological exploration underground storage Gas and gas condensate Electric power and heat Refined products sales production generation Oil production Spot sales of LNG Electricity sales Projects of methane Sales of gas, supplied by Oil products distribution production from coal beds gas trunk pipelines through gasoline stations Raw hydrocarbons network processing consumers 3 ОАО GAZPROM ANNUAL REPORT 2010 EXPLORATION AND PRODUCTION The worldwide leader in terms of natural gas reserves and production Rapidly growing oil segment 18 % of world’s gas reserves 2,88 oil and gas condensate reserves replacement ratio 70 % of Russian gas reserves 17 % increase of oil and gas condensate reserves 1,08 gas reserves replacement ratio as compared to reserves evaluation as of December 31, 2005 15 % of world’s gas production 9 % of Russian oil 78 % of Russian gas production and gas condensate production 6,806 operating gas-producing wells in Russia 5,941 operating oil-producing wells in Russia TRANSPORTATION AND STORAGE The world’s largest gas transportation system Developed infrastructure of UGSF in Russia and access to storage capacities abroad 161.7 length of gas 65.4 bcm the aggregate active capacity thousand km trunk pipelines of 25 underground gas of Unified Gas Supply System storage facilities in Russia in Russia 2.5 bcm access to active capacity 661.2 bcm the volume of natural gas of UGSF abroad transported through gas transportation system of UGSS in Russia REFINING Almost half of the total natural gas refining in Russia Leading position in oil and gas condensate refining among Russian companies st 1 place among Russian companies 14 % of total oil refining in Russia in terms of gas refining volumes 78 % oil refining depth 75.4 oil and gas condensate 52.5 bcm gas refining capacities million tons refining capacities 4 ОАО GAZPROM ANNUAL REPORT 2010 ELECTRIC POWER Leader in the installed capacity and electric power generation in Russia 17 % of Russian electric power generation 36.0 GW installed capacity of 82 power stations in Russia MARKETING The major natural gas supplier to Russian and FSU consumers The largest natural gas exporter in the European market Access to end consumers at foreign gas markets and growing sales of LNG A major player of international oil trade Increase of refined products sales, including retail sales Over 70 % share in the Russian 7 % of total Russian oil export gas market to far abroad 23 % share in the European 23.5 export sales of refined gas market million tons products (an increase of 19% against 2008) 1.82 LNG sales million tons (4x increase against 2008) 9 % share of oil products sales through a network of gasoline stations in total sales of refined products Note. Unless otherwise stated, figures are shown as of / for the year ended December 31, 2010 5 ОАО GAZPROM ANNUAL REPORT 2010 TABLE OF CONTENTS MAJOR RESULTS _________________________________________________________________________ 8 Gazprom Group’s results _____________________________________________________ 8 OAO Gazprom’s results _____________________________________________________ 10 ADDRESS BY THE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHAIRMAN OF THE MANAGEMENT COMMITTEE TO THE SHAREHOLDERS OF OAO GAZPROM _______ 12 MAJOR EVENTS ___________________________________________________________ 14 INNOVATIVE DEVELOPMENT _________________________________________________ 20 OAO GAZPROM’S BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE ____________ 26 Board of Directors _________________________________________________________ 26 Board of Directors’ report on OAO Gazprom’s development in priority areas of operation __ 29 Management Committee ____________________________________________________ 35 Compensation to the members of the Board of Directors, the members of the Management Committee and the Chairman of the Management Committee of OAO Gazprom _________________________________ 40 Liability insurance of the Board Members and the Management Committee of OAO Gazprom ________________________________ 41 MAJOR OPERATING RESULTS BY TYPES OF ACTIVITIES ___________________________ 44 Exploration and production __________________________________________________ 44 Gas transportation, storage and distribution _____________________________________ 57 Refining _________________________________________________________________ 69 Electric power ____________________________________________________________ 73 Marketing ________________________________________________________________ 77 ENVIRONMENTAL MEASURES, INDUSTRIAL SAFETY AND ENERGY EFFICIENCY _________ 89 Environmental measures ____________________________________________________ 89 Industrial and labor safety ___________________________________________________ 95 Energy saving and energy efficiency ___________________________________________ 96 SOCIAL POLICY ___________________________________________________________ 99 Managing human capital ____________________________________________________ 99 Social projects ___________________________________________________________ 101 INFORMATION FOR SHAREHOLDERS AND INVESTORS ____________________________ 103 Share capital ____________________________________________________________ 103 Share market and capitalization ______________________________________________104 6 ОАО GAZPROM ANNUAL REPORT 2010 Dividends _______________________________________________________________ 106 Corporate governance _____________________________________________________ 107 Asset management and improving corporate structure ____________________________ 115 Major transactions and interested party transactions _____________________________ 117 Key risk factors __________________________________________________________ 120 GLOSSARY OF BASIC TERMS AND ABBREVIATIONS _____________________________ 131 ANNEX _________________________________________________________________ 134 List of interested party transactions in 2010 approved by OAO Gazprom’s regulatory bodies _________________________________________ 134 Information about transactions with OAO Gazprom’s shares carried out by members of OAO Gazprom’s Board of Directors and Management Committee in 2010 _____________ 175 Information presented at OAO Gazprom’s corporate web-site ______________________ 175 ADDRESSES AND CONTACTS _______________________________________________ 176 Notes The term OAO Gazprom used in the Annual Report refers to the parent company of Gazprom Group, i.e., to Open Joint Stock Company Gazprom. Gazprom Group, the Group or Gazprom imply OAO Gazprom and its subsidiaries taken as a whole. Similarly, the Gazprom Neft Group and Gazprom Neft refer to OAO Gazprom Neft and its subsidiaries, Gazprom energoholding refers to OOO Gazprom energoholding and its subsidiaries. The Annual Report also contains information related to Gazprom Group’s business activities in the future, based on the forecast and estimates of Gazprom’s management derived from the current situation. Actual results may differ from the said forecast and estimates due to the effect of various objective factors. In the report, a number of Gazprom’s operating and financial results are stated in compliance with the principles for preparing Gazprom Group’s consolidated accounting (financial) statements in accordance with the Russian legislation (consolidated financial statements of Gazprom Group). At the same time, some results of OAO Gazprom and its subsidiaries are stated in compliance with the principles for preparing management accounting. Figures calculated using these methods may differ due to differences in methodolo- gies for preparing consolidated financial statements and management accounting. 7 ОАО GAZPROM ANNUAL REPORT 2010 MAJOR RESULTS GAZPROM GROUP’S RESULTS Increase in hydrocarbon reserves due Sales, to the geologic exploration RR billion million tce 761 797 800 4 000 3,661.7 700 678 3,384.7 3 500 3,118.5 600 3 000 500 2 500 400 300 2 000 200 1 500 100 583.4 468.8 547.7 bcm bcm bcm 1 000 0 500 2008 2009 2010 0 Gas Gas condensate Oil 2008 2009 2010 Hydrocarbons Net profit, production RR billion million tce 775.9 800 696 800 649 700 592 700 634.1 600 600 500 505.9 500 400 300 400 200 300 549.7 461.5 508.6 100 bcm bcm bcm 200 0 100