OREANDA-NEWS. March 26, 2015. The Gazprom Board of Directors took notice of the information about the development of the exchange gas trading system. The Management Committee was tasked to proceed with this activity.

It was pointed out that in 2014 well-coordinated gas trading was launched at the St. Petersburg International Mercantile Exchange (SPIMEX). This is an important step for the Russian gas market development. An increase in the volume of exchange trade will provide for introducing market pricing principles as well as shaping up adequate price indicators for gas sold in the domestic market.

In addition, the existing Rules for gas trading at SPIMEX suggest that every trader should conclude a service contract for gas transportation with an authorized company Gazprom Mezhregiongaz Postavka. As a result, Gazprom has to purchase gas transportation services which actually the Company provides itself, creating the tax risks related to the costs on gas transportation and compensating the input VAT.

Therefore, early this year Gazprom had to suspend its participation in gas trading until the situation is resolved. By now, Gazprom has introduced some changes into the system of interaction among the Group’s organizations, mitigating the Company’s tax risks. At present, Gazprom has resumed gas trading at SPIMEX.

Gazprom will continue further improving the regulatory framework governing the operation of the Russian gas market. This includes the issue of amending the Rules for gas trading with a view to fully eliminate all the tax risks for the Company.

Background

For many years Gazprom has been actively engaged in organizing gas trading in Russia. First gas trading was launched at the Electronic Trading Platform (ETP) of Gazprom Mezhregiongaz and was successfully carried out between 2006 and 2008. In 2009 this experiment ended due to the absence of relevant decisions of the Russian Government on its prolongation.

Gazprom together with the federal executive authorities, involved institutions and organizations continued efforts aimed at developing well-coordinated gas trading in Russia. Steps were taken for working out a model and procedure of gas trading in Russia with the account of Gazprom Mezhregiongaz developments, relevant methodology & regulatory documents were devised, changes and amendments to the regulatory acts of the federal executive authorities were prepared as to organizing exchange trading and advancing the Russian gas market.

Following the Russian Government Resolution No. 566 dated June 19, 2014, Gazprom is allowed to sell at free prices up to 17.5 billion cubic meters of gas a year within well-coordinated trading, but the volumes of gas sold by Gazprom can’t exceed the volumes sold by independent producers.

Exchange gas trading at SPIMEX has been conducted on a monthly basis starting from October 24, 2014 on a front-month basis. Trading is carried out at physical points of the gas transmission system – balancing points where gas is delivered to customers. Presently the main balancing points are represented by the Nadym, Vyngapurovskaya and Yuzhno-Balykskaya compressor stations.

All in all, 534.2 million cubic meters of gas was sold at SPIMEX in 2014, about 80 per cent of it (429.4 million cubic meters) accounting for Gazprom’s resources.

286.6 million cubic meters of gas was sold at the exchange in January and February 2015; the whole volume was marketed by Rosneft.