'Gazprom' ( ; , sometimes transcribed as 'Gasprom'
[1]) is the largest
Russian company and the biggest extractor of
natural gas in the world. With sales of
US$ 31
billion in 2004, it accounts for about 93% of Russian natural gas production and with reserves of 28,800 km³, it controls 16% of the world's gas reserves (as of 2004
[2], including the
Shtokman field.) After acquisition of the oil company
Sibneft, Gazprom, with 119 billion barrels of reserves, ranks behind only
Saudi Arabia, with 263 billion barrels, and
Iran, with 133 billion barrels, as the world's biggest owner of oil and oil equivalent in natural gas.
[3]
By the end of
2004 Gazprom was the sole gas supplier to at least
Bosnia-Herzegovina,
Estonia,
Finland,
Macedonia,
Latvia,
Lithuania,
Moldova and
Slovakia, and provided 97 percent of
Bulgaria's gas, 89 percent of
Hungary's, 86 percent of
Poland's, nearly three-quarters of the
Czech Republic's, 67 percent of
Turkey's, 65 percent of
Austria's, about 40 percent of
Romania's, 36 percent of
Germany's, 27 percent of
Italy's, and 25 percent of
France's.
[1] [2] The
European Union gets about 25% of its gas supplies from this company.
[3] [4]
Apart from its gas reserves and the world's longest pipeline network with 150,000 km, it also controls assets in banking, insurance, media, construction and agriculture.
With over US$ 300
billion of
market capitalization (
as of June 2007), Gazprom is the world's third
largest corporation following this measure.
[5] [6] Gazprom chairman Alexander Medvedev says the company's market capitalization should quadruple to reach one trillion dollars by 2017, which would make it the world's biggest corporation.
[7]
History
1989-1992: Inception
A separate Soviet gas industry was created in 1943. Due to large natural gas reserves discovered in
Siberia, in the
Urals and in the
Volga region in the
1970s and
1980s, the Soviet Union became a major gas producer. Gas exploration, development, and distribution were
centralized in a state ministry.
In July 1989 President
Mikhail Gorbachev merged the ministries for oil and gas as part of his economic reforms, into a single industry, the Ministry of the Oil and Gas Industry of the USSR. A separate Soviet gas industry was again created in the early 1990s, before the break up of the USSR. In September 1990 the Gazprom board discussed transforming Gazprom into a joint-stock company. In 1991-92 talks were held between
Russia,
Ukraine and
Belarus over creating a tripartite joint-stock company with all three states holding shares.
However by June 1992 this was abandoned and Gazprom in Russia became a state company. In November 1992 Gazprom became a
joint-stock company (Russian: OAO), and it was to be partly
privatized as a single unit. This contrasted with the Soviet oil monopoly which was initially broken up into three separate companies before
privatization. Gazprom was privatized in 1994, with the state holding 40% of all shares. 15% were to be sold to workers and management at preferential prices. The leadership of Gazprom was able to keep control over privatisation by ensuring that sales of shares took place at closed auctions, which meant that the company could determine who attended the auctions.
Viktor Chernomyrdin headed Gazprom.
1993-1997: Privatization
After the new Russian President
Boris Yeltsin appointed Chernomyrdin to be his Prime Minister in December 1992, the political influence of Gazprom increased markedly. On January 26, 1993,
Rem Viakhirev became the Chairman of both the Board of Director and Managing Committee.
As the new government was committed to economic reform, Gazprom began to be privatized, becoming a
joint-stock company according to the Decree of the President of the Russian Federation of
November 51992 and the Resolution of the Council of Ministers of the Russian Federation of
February 171993, and starting to distribute
shares under the
voucher method, where every Russian citizen received
vouchers to purchase shares of formerly state-owned companies. However, trading these shares was heavily regulated, and the by-laws of the company prohibited foreigners to own more than 9% of the shares.
Gazprom slowly established credibility in the
western capital markets with an offering of 1% of its equity to foreigners in October 1996 in the form of London
Depository Receipts and a successful large
bond issue of US$ 2.5
billion in 1997.
On the second annual shareholders' meeting on May 31, 1996,
Alexander Kazakov, the Chairman of
Russia's State Property Committee, was appointed the Chairman of the Board of Directors, as the Russian law on JSC required the Chairman of the Board of Director and the Chairman of the Managing Committee positions to be occupied by different persons.
1998-2000: Scandals
In 1998 Chernomyrdin was fired from his position of Russia's Prime Minister by President Boris Yeltsin. At the same time, the
Russian government suddenly started demanding billions of dollars in back
taxes from Gazprom. When tax prosecutors started to
seize assets of Gazprom, the company gave in and paid. The company's records started showing a loss for the first time. The reasons are unclear and were explained either by an aging
pipeline transport network, by a management that was becoming increasingly
corrupt, or by pre-existing losses that appeared because of more transparent
accounting policies.
Gazprom conducted dubious transactions with the gas-trading company
Itera and a Gazprom/Itera joint-venture,
Purgaz, in the late 1990s, which allegedly benefited various management members and their relatives. Additionally, large-scale asset-stripping of Gazprom was going on by corrupt management and board members through various transactions involving the Gazprom daughter
Stroitransgaz and the regional gas company
Sibneftegaz. The Gazprom auditor
PwC apparently had signed off and covered these transactions.
[4]
The
investment fund Hermitage Capital Management, a
minority shareholder of Gazprom, reported on the scandals in October
2000: ''"Investors are valuing this company as if 99 percent of its assets have been stolen. The real figure is around 10 percent so that's good news"''.
[5]
On the fourth annual shareholders' meeting on June 26, 1998,
Farit Gazizullin, the new Chairman of Russia's State Property Committee, was elected Chairman of the Board of Directors.
On the fifth annual shareholders' meeting on June 30, 1998,
Viktor Chernomyrdin became the Chairman of the Board of Directors.
On the seventh shareholders' meeting on June 30, 2000 (the sixth took place on August 26, 1999), Deputy Head of
Russia's Presidential Administration Dmitry Medvedev occupied this position.
2001-2003: Reform years
Russian President
Vladimir Putin was actively pursuing reforms in the management of the company in the years following the scandals. This was aided by shareholder activism by Hermitage CEO
William Browder and former Russian finance minister
Boris Fyodorov.
On May 30, 2001, the Board of Directors replaced
Rem Vyakhirev, whose contract had expired, with
Alexei Miller as the new CEO to guide the reforms; Rem Viakhirev was moved to the position of Chairman of the Board at the 8th shareholders' meeting on June 29, 2001, temporarily replacing
Dmitry Medvedev who became his deputy.
In April 2001 Gazprom took over
NTV, Russia's only nationwide state-independent television station held by
Vladimir Gusinsky's
Media Most holding, which caused major changes in its editorial policy.
[8][9][10] On
November 82001 by the decision of a
Moscow court of
May 42001 a block of shares comprising 25% of stock capital of the
Media Most holding was transferred to
Gazprom Media[11], a media holding founded in 1998 and owned by Gazprom (In 2006 it was transferred to
Gazprombank, a subsidiary of Gazprom
[6]). In July
2002 Gazprom Media acquired all
Vladimir Gusinsky's shares in media companies of the holding, which resulted in dramatical changes of their editorial policy and closure of some publications.
[12] In June 2005 Gazprom Media purchased the influential Russian newspaper
Izvestia.
Until
2004 the Russian government held a 38.37% stake in the company, and had a majority on the company’s
board of directors. Gazprom provides 25% of all Russian tax revenues (averaging over US$ 4 billion annually between 1993-2003) and accounts for 8% of the nation’s
gross domestic product. Non-Russian investors may legally buy Gazprom shares only through Depositary Shares, which cost more than locally traded shares.
In
2004, President Putin announced that Gazprom was to acquire the state-owned oil-company
Rosneft and that this will "eventually lead to the lifting of foreign ownership restrictions on Gazprom shares", as the stake of the Russian government in Gazprom will rise from 38.37% to a controlling position.
[7]
However, Gazprom was foiled both in its attempt to acquire Rosneft, and its earlier attempt to buy the core asset of
Yukos, when Yukos filed for bankruptcy in Houston. Fearing that it would fall foul of US law, Gazprom backed away from buying Yukos' main asset when the
Russian government auctioned it in December 2004, leaving the more gung-ho Rosneft to buy it. After Rosneft had appropriated such a large and controversial asset, the technicalities of merging it into Gazprom became too complicated. Instead, Rosneft remained independent, to the delight of its own management. The state increased its stake in Gazprom to over 50% instead by paying cash for a 10.4% stake, thus fulfilling the main pre-condition for the abolition of restrictions on foreign ownership of Gazprom shares. At the time of writing, the market is still awaiting this move.
On
July 262004, Gazprom sold 49.979 percent out of its 100% share of the SOGAZ Ltd. insurance group to an unnamed purchaser for 1.69 billion
rubles
[13], and 26% more of SOGAZ in August 2004 for 879.3 million rubles.
[8] [14] In January 2005 it turned out that ABRos, a subsidiary of the
Russia bank, held a 49,97% share of SOGAZ.
[9] [16]
2005-2006
In
June 2005 Gazprombank, Gazpromivest Holding,
Gazfond and Gazprom Finance B. V., subisidiaries of Gazprom, agreed to sell a 10.7399% share to the state-owned company
Rosneftegaz for $7 bn, which was widely considered as an understated price
[10], by
December 25, which, combined with the 38% share of the State Property Committee, would give the state a controlling share.
[17]
In September 2005, Gazprom bought 72.633% of the oil company
Sibneft (now Gazprom Neft) for $13.01 billion, aided by a $12 billion loan from the West, which consolidates Gazprom's position as a global energy giant and Russia's biggest company. On the day of the deal the company was worth
£69.7 billion/US$123.2 billion, about the GDP of Ireland in 2004.
On
November 152005, Gazprom CEO
Alexei Miller and
Saint Petersburg governor
Valentina Matviyenko announced that
Sibneft is going to build the Gazprom City business center including a 300 meters high skyscraper with its headquarters on the right bank of the
Neva River in front of the
Smolny Cathedral in St. Petersburg, despite current regulations forbid construction of a building of more than 42 (48 with expertise approval) meters high there (See
Gazprom City).
On
January 12006, at 10:00 (Moscow time zone), Gazprom ended the delivery of gas for the
Ukrainian market, calling on Ukraine's government to pay increased fees that partially reflect the globally increased fuel prices. See:
Russia-Ukraine gas dispute.
During the night of
January 3 -
January 42006,
Naftohaz Ukrainy and Gazprom negotiated a deal that has resolved the long-standing gas price conflict between Russia and Ukraine, to the satisfaction of both parties.
As the Russian state had acquired a controlling share of Gazprom, in the very beginning of
2006 20% restriction on foreign investment was lifted and Gazprom became fully open to foreign investors.
[11][12]
In April 2006, Gazprom market cap was US$ 270 billion.
On
July 202006, the Russian federal law On Gas Export granting Gazprom exclusive right to export natural gas was published and hence came into force (Full text in Russian:
[18]). It was almost unanimously approved by the
State Duma on
July 5, by the
Federation Council of Russia on
July 7 and signed by
Vladimir Putin on
July 18.
[13]
On
April 3 2006, Gazprom indicated it would triple the price of natural gas sold to
Belarus after
December 31 2006. In December 2006 Gazprom threatened a cut-off of supplies to
Belarus at 10 a.m. Moscow time on
January 12007, unless it agrees to raise the price it pays for the gas from $47 to $200 per 1,000 cubic metres or cedes control over its distribution network.
[14] Analysts suggested Moscow could penalise
Alexander Lukashenko, President of Belarus, for not delivering on pledges of
closer integration with Russia[15], while others noted that other friendly countries like Armenia pay for the gas as much as Belarus with the new level and this had nothing to do with any punishments
[19]. Later Gazprom requested $105 price
[16], yet Belarus was still firm on the demands refusing the agreement. It responded that if supplies were cut, it would deny Gazprom access to its pipelines, which would hurt gas transportation to Europe.
[17] However, on
January 12007 (Moscow time zone), just few hours before the deadline, Belarus and Gazprom signed the last-minute agreement. Under the agreement, Belarus undertook to pay $100 per 1,000 cubic metre in
2007. The agreement also calls for Gazprom to purchase 50% of the shares in
Beltransgaz, the Belarusian pipeline network.
[18] Immediately following the signing of this agreement Belarus declared a $42/ton transportation tax on Russian oil travelling through the Gazprom pipelines crossing its territory. (See
Russia-Belarus energy dispute)
On
December 21,
2006, Gazprom took control over a 50%-plus-one-share stake in
Royal Dutch Shell's
Sakhalin-II project
[19][20] after Russian regulators had withdrawn an environmental permit for Sakhalin-II on
September 18,
2006, citing damage to salmon streams. The latter event was widely interpreted as a move by the Russian government to force a renegotiation of the Sakhalin-II deal.
[21].
2007
On
July 4 2007 the
State Duma passed a bill giving Gazprom and
Transneft the authority to create their own security forces with greater powers than other
private security firms.
[22] Gennady Gudkov, a deputy in the State Duma who opposed the bill, raised concerns by calling it a “Pandora’s box... This law envisages the creation of corporate armies. If we pass this law, we will all become servants of Gazprom and Transneft.”
Deputy
chief executive Alexander Medvedev announced the company would aim to achieve a market capitalization of $1 trillion dollars "in a period of seven to ten years." He added: "we'd like to be the most-valued and most-capitalised company in the world."
[23]
In June 2007,
TNK-BP, a subsidiary of
BP Plc agreed to sell its stake in
Kovykta field in Siberia to Gazprom after the Russian authorities questioned BP's right to export the gas to markets outside Russia.
[24][ BP sells Kovykta gas field stake to Gazprom ][ Moscow Presses BP to Sell a Big Gas Field to Gazprom ][ Gazprom, BP and TNK-BP enter into agreement on major terms of cooperation ] On June 23, 2007, the governments of Russia and
Italy signed a memorandum of understanding to cooperate on a joint venture between Gazprom and
Eni SpA to construct a 558-mile (900 km) long gas pipeline to carry 1.05 Tcf (30 billion cubic meters) of gas per year from Russia to Europe. The
South Stream pipeline would extend under the
Black Sea to
Bulgaria with a south fork extending to Italy and a north folk to
Hungary.
[25][ Gazprom, Eni plan big gas pipeline bypassing Turkey ][ Eni and Gazprom sign the agreement for the South Stream Project ]
Following the alleged violation of previous agreements and the failure of negotiations, on August 1, 2007 Gazprom announced that it would cut gas supplies to
Belarus by 45% from
August 3 over a $456 million debt.
[Gazprom to halve gas to Belarus in debt row ''Reuters'', published 2007-08-01, accessed 2007-08-01] Talks are continuing and Belarus has asked for more time to pay. Although the revived dispute is not expected to hit supplies to Europe, the
European Commission is said to view the situation 'very seriously'.
Shareholders
As of
29 December 2006, Gazprom's main shareholders were:
[ Gazprom's Annual Report 2006 ]
★
State Property Committee of Russia (Rosimushchestvo) - 38.373%
★
Gazprombank (nominal holder) - 41.235% (including 13.2% of ADR holders)
★
Rosneftegaz - 10.74%
★ Gerosgaz - 2.93%
★
E.ON Ruhrgas - 2.5%
The Russian Federation controls through Rosimushchestvo, Rosneftegaz, and Rosgazifikatsiya 50.002% of shares in Gazprom.
Management
As of December 2006, its board of directors consists of Dmitry Medvedev (Chairman, First Deputy Prime Minister of the Russian Federation), Alexei Miller (Deputy Chairman), Alexander Ananenkov (Deputy Chairman), Burckhard Bergmann (Chairman of the Executive Board of E.ON Ruhrgas AG, member of the Executive Board of E.ON AG), Farit Gazizullin, German Gref (The Russian Federation Minister for Economic Development and Trade), Elena Karpel (Head of the Department for Pricing and Economic Expert Analysis, Member since June 252004), Mikhail Sereda, Boris Fyodorov (Gazprom’s Shareholder), Viktor Khristenko (The Russian Federation Minister for industry and energy) and Igor Yusufov (Special Envoy of the RF President for International Energy Cooperation and Ambassador at Large of the RF Ministry of Foreign Affairs) [20].
Former Members of the Board: Alexandra Levitskaya (until June 252004).
Gazprom's Management Committee as of December 2006: Alexei Miller (Chairman, Member since 2001), Alexander Ananenkov (Deputy Chairman, Member since December 172001), Valery Golubev (Deputy Chairman, Member since April 182003), Alexander Kozlov (Deputy Chairman, Member since March 182005), Andrey Kruglov (Deputy Chairman, Head of the Department for Finance and Economics, member since 2002), Alexander Medvedev (Deputy Chairman, Member since 2002, Director-General of Gazexport Ltd.), Mikhail Sereda (Deputy Chairman, Head of Administration, Member since September 282004), Sergei Ushakov (Deputy Chairman, Member since April 182003), Elena Vasilyeva (Deputy Chairman, Chief Accountant, Member since 2001), Bogdan Budzulyak (Head of the Department of Gas Transportation, Underground Storage and Utilization, Member since 1989), Konstantin Chuichenko (Head of Legal Department, Member since 2002), Viktor Ilyushin (Head of the Department of Relationships with Regional Authorities of the Russian Federation, Member since 1997), Olga Pavlova (Head of the Department of Asset Management and Corporate Relations, Member since 2004), Vasiliy Podyuk (Head of the Department of Gas, Gas Condensate and Oil Production, Member since 1997), Vlada Rusakova (Head of the Department of Strategic Development, Member since September 52003), Kirill Seleznyov (Head of the Department of Marketing and Processing of Gas and Liquid Hydrocarbons, Member since September 272002, Director-General of Mezhregiongaz Ltd.). [21]
Former Members of the Management Committee: Nikolai Guslisty (1997 - March 182005), Yury Komarov (August 82003, - May 122005), Alexander Ryazanov (2001 - November 152006), Mikhail Akselrod (until March 182005), Boris Yurlov (until April 162004), Nikolai Gornovsky (until April 182003), Vladimir Leviev (until April 182003), Sergey Lukash (until April 182003), Vladimir Rezunenko (until June 262003), Alexander Krasnenkov (until August 82003).
Shares of the members of the Board of Directors and Management Committee (as of September 52005, [22]):
★ Alexander Ananenkov - 0.00709654%
★ Alexander Ryazanov - 0.00513865%
★ Bogdan Budzulyak - 0.00443534%
★ Vasily Podyuk - 0.00131962 %
★ Elena Karpel - 0.00086595%
★ Vlada Rusakova - 0.00019009 %
★ Andrey Kruglov - 0,00006336 %
★ Boris Fyodorov - 0.00000422%
★ Alexei Miller - 0.00000027%
Others have no share.
Sponsoring
Gazprom is the sponsor of Russian Premier League football club FC Zenit St. Petersburg. On January 1, 2007 Gazprom also became the sponsor of the German Bundesliga-Club FC Schalke 04. In order to become better known in Germany, the company pays up to €25 million a year to Schalke.
See also
★ List of Gazprom's subsidiaries
★ List of Russian companies
★ Gazpromavia
★ Blue Stream - Major trans-Black Sea gas pipeline co-owned by Gazprom
★ Nord Stream - Planned gas pipeline between Russia and Germany
★ Russia-Belarus energy dispute
★ Russia-Ukraine gas dispute of 2005
★ CentGas consortium
★ Shtokman field
★ Sakhalin-II
★ Gazprom City
★ Energy policy of Russia
References
1. ''Gazprom'' is a contraction of 'Газовая промышленность' (''Gazovaya Promyshlennost''), meaning 'gas industry'.
2. Numbers from Financial Times: "Energy of the State", March 14 2006; older data is available online at Gazprom reserve statistics
3. Article about reserves after Sibneft acquisition
4. Gazprom: Russia's Enron?, ''BusinessWeek online'', February 18, 2002
5. ''Gazprom and Hermitage Capital: Shareholder Activism in Russia'', 2002, Stanford Graduate School of Business Case IB-36
6. http://www.kommersant.com/tree.asp?rubric=3&node=33&doc_id=600194
7. Hermitage news item about the raising of the stake of the Russian government to a controlling interest in 2004
8. Who sold SOGAZ? by Pavel miledin et al., Vedomosti #144 (1184), August 132004 (in Russian, subscription required)
9. SOGAZ sold to St. Pete by Pavel Miledin et al., Vedomosti #9 (1290), January 212005 (in Russian, subscription required, full text freely available here: [15]).
10. Kremlin agrees price for Gazprom, BBC News, June 162005.
11. Gazprom: Open for Global Investors by Jason Bush, BusinessWeek, January 132006.
12. Gazprom opens doors to foreigners, BBC News, June 242005.
13. Duma votes for Russian gas export monopoly by Neil Buckley and Tobias Buck, The Financial Times, June 162006.
Duma approves Gazprom export bill, BBC News, July 52006.
Gazprom’s Monopoly On Exports Backed by Duma by Stephen Boykewich, The St. Petersburg Times #1184 (50), July 72006.
14. Russian gas demands irk Belarus, BBC News, December 182006.
15. Putin turns on close ally Belarus by Neil Buckley, Financial Times, December 132006.
16. Belarus-Gazprom Gas Talks Reach Impasse by Steve Gutterman, The Washington Post, December 262006
17. Belarus gas row 'may hurt Europe', BBC News, December 272006.
18. Belarus, Russia sign new gas deal, CNN, December 312006.
19. http://news.bbc.co.uk/2/low/business/6201401.stm
20. http://business.guardian.co.uk/story/0,,1977430,00.html?gusrc=rss&feed=24
21. Russian oil reversal stirs outcry, Kramer, Andrew E., , , International Herald Tribune, 2006
22. Gazprom to raise its own private army to protect oil installations
23. Russian giant Gazprom aims to be the world's first ,000 billion company Griffiths, Katherine
24. "BP Set to Leave Russia Gas Project", by Guy Chazan and Gregory L. White, Wall Street Journal, 2007-06-23 p. A3
25. "Gazprom Pipeline Plan May Fuel Worry" by Gabriel Kahn, Wall Street Journal, 2007-06-25 p. A11
External links
★ gazprom.com
★ Data
★
★ Yahoo! - OAO Gazprom Company Profile
★
★ OAO Gazprom - 1992-2001 history of the company in Russian
★ Articles
★
★ Michael Freedman and Heidi Brown: Energy Tsar, in: Forbes International, July 24 2006
★
★ Alexander's Gas & Oil Connections - Gazprom
★
★ Guardian.co.uk: Gazprom bond in heavy demand
★
★ Businessweek article about 1998-2000 management scandals
★
★ Schroeder - Putin Pact: Germany and Russia Divide Europe Again
★
★ Russia - To Be Feared... For Now (analysis of Russia policy relevant to Gazprom)
★
★ The Energy Dimension in Russian Global Strategy by Martha Brill Olcott, Rice University, October 2004 (.pdf).
★
★ State of the Gas Industry of the Russian Federation, February 2006, Analytical Report of the Institute of Natural Monopolies Research, Moscow, March 2006 (in Russian, .pdf).
العربية
中国
Français
Deutsch
Ελληνική
हिन्दी
Italiano
日本語
Português
Русский
Español
