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GAZPROM

October 11, 2010

Alexey Miller: The domestic market is becoming a top development priority for Gazprom

The domestic market is becoming a top development priority for Gazprom. This is what Alexey Miller, Chairman of the Company’s Management Committee said on Monday in his speech at the meeting in Novy Urengoy devoted to the draft General Scheme for the gas industry development until 2030.

He noted that while the export market had been the source of investment for Gazprom previously, the Russian market was replacing it as the source of investment. At the same time, domestic gas prices were still several times lower if compared to those in Europe.

According to Alexey Miller, if the domestic market reaches equal profitability with the foreign one, Gazprom could have earned RUB 1.5 trillion of additional income in the past decade. “This natural resource rent was redistributed to the industry,” said Alexey Miller. He also added that a 15 per cent growth in gas tariffs in 2011 would lead to a mere 1 per cent increase in the industrial product price.

In his speech the Gazprom Management Committee Chairman also touched upon the expected growth in the Company’s expenditures due to a higher severance tax and potential imposition of the gas trunkline property tax. According to his estimates, in the coming three years the respective expenditures may reach RUB 200 billion. In particular, the expected 61 per cent rise in the severance tax on natural gas in 2011 will boost the concern’s expenditures by RUB 48 billion. The potential imposition of the gas trunkline property tax will trigger additional expenditures of RUB 29 billion in 2012 and RUB 57 billion in 2013.

Alexey Miller believes that in order to build up gas production in the Russian Federation it is expedient to speak of the lower export duty and severance tax on natural gas produced in Yamal’s new production centers. “We could speak of a zero severance tax and a lower export duty on the gas produced in these regions,” he said.

The Gazprom Management Committee Chairman noted that the key outcome of the meeting in Novy Urengoy was that the domestic market development had become the Company’s top priority. “Once equal profitability is reached by January 1, 2014 it will be all the same for Gazprom where to get extra income – domestically in Russia, in Europe or Asia,” stated Alexey Miller.

 

 

 

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