Key Risk Factors
Strategic, country and regional risks
Risks related to the global economy
An unfavourable economic environment can lead to a slowdown in energy demand and drive the cost of borrowed capital.
Risk management / mitigation
To ensure growth of energy sales, PJSC Gazprom considers numerous markets and distribution channels and expands the uses of natural gas. To maintain its financial stability, PJSC Gazprom optimises its leverage.
European gas market risks
The European Union (EU) pursues a policy of diversifying its gas supply sources and increasing the share of natural gas exchange trade, while reducing the share of fossil fuels in the EU’s overall energy mix, which affects PJSC Gazprom as one of the main suppliers of natural gas to the EU countries.
Risk management / mitigation
To minimise the risk of lower supply levels, a set of initiatives continue to be implemented to both build new infrastructure and bolster demand for natural gas as the greenest fossil fuel, and strengthen PJSC Gazprom’s position in the sectors with a potential for extra supplies.
Sanctions risk
Sanctions against Russian companies imposed by the USA, the EU and other countries.
Risk management / mitigation
PJSC Gazprom pursues a policy of ensuring technological independence and import substitution. Sanctions are monitored on an ongoing basis, including potential new sanctions by the USA and the European Union against Russia and Russian nationals.
Natural gas transit risks
Gas transmission via third countries is associated with the risks of the counterparties defaulting on their transit obligations.
Risk management / mitigation
A number of measures are taken such as diversification of export routes, expanding access to UGSFs abroad and development of LNG trade.
Unconventional gas development risks
Under certain conditions in gas markets, growing LNG exports from the USA, including LNG from shale gas, may compete with Russian pipeline gas supplies. In Europe, shale gas production prospects have not been confirmed. China produces shale gas, but these volumes have little impact on the gas balance and the country’s growing dependence on gas imports.
Risk management / mitigation
PJSC Gazprom continuously monitors the evolution of the shale gas industry and developments in other unconventional hydrocarbons industries around the world. The monitoring results, including the economics of unconventional gas production and its potential as a competition to PJSC Gazprom in its existing or prospective markets, are reviewed by the Company’s governing bodies on a regular basis, which enables the Company to efficiently plan its exports and adapt to external changes in the long term.
Risks related to the development of renewable energy sources
Renewable energy output can be expected to grow in some countries, which may squeeze gas consumption in these markets.
Risk management / mitigation
The use of natural gas, inter alia, for power generation offers consumers economic, technological and environmental benefits, which, PJSC Gazprom believes, will support natural gas as common energy source. In most cases, renewable electricity generation supplements other sources and may entail certain risks for the natural gas market if subsidising renewable energy is maintained at national and/or supranational levels.
Market, financial and credit risks
Foreign exchange risks
Changes in currency exchange rates that affect income and expenses denominated in foreign currencies.
Risk management / mitigation
PJSC Gazprom ensures the optimal ratio of assets and liabilities denominated in foreign currency, calculates earnings considering the foreign exchange risk and forecasts exchange rates to develop a forecast balance. The risks of market changes in exchange rates and interest payments are hedged, and the leverage is optimised.
Credit risks
Counterparties’ default, delayed or incomplete discharge of financial obligations.
Risk management / mitigation
The creditworthiness of counterparties is assessed and monitored. Payment terms and measures to secure counterparties’ payments (guarantees, letters of credit, prepayment) are determined. Credit limits are set, and compliance of counterparties with such credit limits is monitored by PJSC Gazprom and Gazprom Group entities.
Market price and size risks
Adverse economic conditions, lower energy demand and prices, decreasing and/or low stock exchange prices over a long period of time, which may have a negative impact on gas prices and exports.
Risk management / mitigation
PJSC Gazprom diversifies markets and distribution channels for energy sales, expands the uses of natural gas, optimises contractual terms reflecting current market conditions, and determines permitted transaction types and financial instruments.
Environmental risks
Environmental risks associated with production and business operations
The key operations, including hydrocarbon production, transportation, processing, and storage, carry such environmental risks as pollution caused by possible accidents during production and business operations, potential impact on ecosystems, resulting in land and water pollution, deterioration of soil and vegetation, and erosion, which may lead to ecosystem degradation and loss of habitats of rare and endangered plants and animals.
Risk management / mitigation
In line with the Environmental Policy, PJSC Gazprom takes environmental protection efforts, arranges for environmental insurance, introduces green technologies, and implements programmes and initiatives to reduce its environmental impact, including:
- analysis of potential adverse environmental impacts and consequences of identified accidents and emergencies,
- emergency prevention, containment, mitigation and management of impacts,
- assessment of environmental damage in case of accidents and emergencies.
Comprehensive measures are taken to improve the reliability of pipeline systems, stabilize landscapes and restore soil and vegetation.
Climate risks
Risks related to climate change
Possible climate changes, adverse natural and hydrometeorological phenomena that may cause damage to buildings and infrastructure, pipelines, utility systems. Many of PJSC Gazprom’s gas fields are located in Western Siberia, where adverse climatic conditions can make production more difficult and costly.
Risk management / mitigation
Reducing GHG emissions is part of PJSC Gazprom’s corporate strategy. PJSC Gazprom takes efforts to minimise the negative impact of climate changes on its operations. Energy efficiency and energy saving efforts include relevant programmes, development and implementation of efficient technologies for various climatic conditions, programmes to improve the efficiency of gas production and transportation systems and operation of the gas transporation network.