Letter to Shareholders by the Chairman of PJSC Gazprom’s Board of Directors and the Chairman of PJSC Gazprom’s Management Committee
Dear Shareholders,
In many respects, 2019 was a hallmark year for Gazprom, as the Company implemented strategic projects to diversify its business, strengthen its position in the global energy industry and develop the Russian economy.
In 2019, Gazprom launched the first-ever Russian pipeline gas supplies to China, one of the world's most promising gas markets. Having been commissioned by the Company, the Power of Siberia gas pipeline became the mainstay of a new powerful system of gas exports and gas supply to Russia's eastern regions.
Gazprom finished the construction of TurkStream, a new, high-tech pipeline for exporting gas to Europe, with January 2020 seeing the launch of commercial gas supplies across the Black Sea. The Company also continued the construction of the Nord Stream 2 gas pipeline linking Russia and Germany via the Baltic Sea. Green energy supplies taking low carbon footprint routes are fully in line with the interests of our customers.
In 2019, Gazprom's gas exports to Europe, Turkey and China were 199.3 bcm – one of the best results in the Company's history. The Company continued to live up to its reputation as a responsible supplier by flexibly responding to market demand and offering a wide choice of contract terms to its customers. The extension of contracts for gas transportation across Belarus and Ukraine negotiated in 2019 was also an important factor in this context.
In 2019, Gazprom Group produced over 500 bcm of gas, the highest level for the last eight years starting from 2012.
The Bovanenkovskoye field is becoming an increasingly significant contributor to production, serving as a core asset for the Yamal gas production hub. The Company has already started field infrastructure construction at the Kharasaveyskoye field, another core asset of the Yamal megaproject.
The Yamal Peninsula is a giant gas-bearing basin which will supply Russian and international consumers for more than 100 years.
During the year, the Company continued to actively ramp up the capacity of the Northern Gas Transmission Corridor to the Baltics, in order to supply Yamal gas to Europe, while for the eastern route, the Power of Siberia 2 gas pipeline entered the pre-investment phase in 2020.
Further streams of revenue for the Group in the coming years will include projects for processing and recovering valuable components from natural gas produced in Eastern and Western Siberia. Overall project completion for the Amur Gas Processing Plant (GPP) stood at 55.2% at end-2019, with the first trains to be commissioned as early as 2021, while the Ust-Luga complex is already in early stages of construction.
In 2019, as in previous years, Gazprom fully supplied the domestic demand, as Russia is a priority market for the Company. Gazprom will continue to secure domestic gas supplies in the future, enhancing supply reliability and creating new options. For example, since January 2019, the Kaliningrad Region has been able to draw supplies from an offshore gas receiving terminal and the Marshal Vasilevskiy fl oating storage and regasifi cation unit. The creation of this alternative supply option has fundamentally improved the energy security of the region.
The Company has historically placed a special focus on the expansion of gas infrastructure. This socially signifi cant project covered 66 Russian regions in 2019, focused primarily on rural areas. In total, gas network grew by 1,880 km over the year to cover 305 new locations. As at 1 January 2020, the gas penetration rate in Russia reached 70.1%.
The expansion of gas infrastructure is fi rst and foremost focused on creating the necessary environment to improve the country's quality of life and boost its industrial output. With the support of Russian regional authorities, Gazprom has started work on new gas infrastructure expansion programmes for the fi ve-year term up to 2026.
Another highlight of 2019 is the successful completion of Gazprom Group's large-scale power generation capex programme. Since 2007, Gazprom energoholding companies have built close to 9 GW of advanced generating capacities, including Unit 2 at the Grozny TPP commissioned in summer 2019. Additionally, Gazprom energoholding has commenced the construction of its fi rst international power plant in Pančevo, Serbia.
PAO Gazprom Neft has continued improving its operational performance, consistently ramping up its annual production to the 100 million tonnes of oil equivalent target. The subsidiary will reach this target, among other factors, through further integration with Gazprom Group's operations. Gazprom has decided to use Gazprom Neft's broad experience and expertise to develop complex hydrocarbon deposits.
Dear Shareholders, The Company continues to steadily grow while maintaining a considerable safety margin, improving its effi ciency across all business lines and achieving excellence in corporate governance. The headwinds faced by the global economy in 2020 will not prevent PJSC Gazprom from making progress towards its long-term strategic goals.