OREANDA-NEWS. October 3, 2011. The Gazprom Management Committee addressed the issue concerning the efficiency of natural gas transmission by independent producers via the Unified Gas Supply System, the marketing schemes as well as optimization of prices, amounts and sales markets for the gas purchased from and transported by independent producers between 2005 and 2010 and in the planned period between 2011 and 2013.

The meeting noted that Gazprom secured a high degree of reliability and sustainability of gas transmission. The Company's investment program prioritizes the projects for the gas transmission system (GTS) expansion and upgrade: they account for more than a half of total investments.

Between 2005 and 2010 Gazprom commissioned nearly 7.7 thousand kilometers of gas trunklines and laterals, repaired and retrofitted more than 15 thousand kilometers of gas trunklines. The number of malfunctions per 1,000 kilometers was reduced 3.5 times: from 0.14 in 2005 to 0.04 in 2010.

This large-scale work produced an important result – the amount of gas transmission by independent producers had significantly increased (33.6 per cent) between 2005 and 2010 reaching 75.6 billion cubic meters or from 8 per cent to nearly 11 per cent of the total amount of gas transported via the GTS.

At the same time, Gazprom is currently the only Company engaged in the GTS development and upgrade. Despite the prioritized financial status of this kind of activity, Gazprom's investment capabilities are rather limited here. This is primarily explained by a slow growth of the gas transmission tariff for independent producers that should be defined on the basis of economically viable expenditures. It is instead limited by the inflation level. As a result, before 2010 the actual profitability of transmission services for independent gas producers in Gazprom had been negative or close to zero.

In this context, Gazprom should resume a constructive dialogue with the Russian Economic Development Ministry, the Energy Ministry and the Federal Tariff Service on further improvement of tariffs for Gazprom's services on gas transmission rendered for independent gas producers. This will help transform the tariffs into an adequate source of investments in the GTS development.

The Management Committee tasked Gazprom's specialized structural units to proceed with the efforts on optimizing the prices, amounts and sales markets for the natural gas provided by independent producers. The efforts also stipulate incentives to encourage independent gas producers expand their activities to Russia's central and southern regions, enhancing the contracting discipline and further cooperation of Gazprom and independent producers on setting up joint ventures for gas sales. The Company should also focus to continue a dialogue with Russian Ministries in order to resume operation of the electronic trading platform and to launch exchange trading in natural gas.