The Board of Directors took notice of the information relevant to application of the Guidelines for goods purchase, work completion and services rendering in Gazprom Group. The Guidelines had been enacted on January 1, 2011.

It was highlighted that the total of 9,132 competitive purchases worth RUB 611.3 billion had been made in 2011 on behalf of Gazprom Group. The prices had been reduced by 8.1 per cent versus the initial (maximum) values, having a RUB 54.1 billion economic effect.

The share of the Competitive Purchases Department in overall competitive purchases of Gazprom Group made up 58 per cent. On behalf of Gazprom and its subsidiary companies the Department had made the total of 697 competitive purchases, which is twice as many as in 2010 (326). The cost of purchases reached RUB 354.2 billion, the economic effect – RUB 38.8 billion.

The high economic efficiency of the competitive purchases was underpinned by streamlining of the system of goods purchase, services rendering and work completion in Gazprom Group as well as the aforementioned Guidelines adoption. For instance, the Company introduced the annual plan of the Group's competitive purchases and the purchases announcement practice. It also optimized the online analysis of market prices for purchased goods (work, services), extended the search of potential bidders, primarily direct producers and authorized dealers (distributors).

In addition, the Board of Directors stressed high transparency of the competitive purchases being held by the Department. More than 93 per cent of competitive purchases were arranged through open bidding in 2011, except for the cases when notifications or purchasing documents contained information constituting state secrets or the customer's commercial secrets. Moreover, in competitive purchases the total of 79 (2.7 per cent) tender bids out of 2,912 submitted bids were rejected for substantial reasons.

With a view to ensure the transparency of purchases, Gazprom publishes on its website the plan of open competitive purchases, announcements of purchases, notifications and documents, detailed information about the purchases. The website also provides the results of open competitive purchases and data on the respective agreements reached.

Background

In October 2010 the Gazprom Board of Directors endorsed the Guidelines for purchase of goods, completion of work and rendering of services for Gazprom Group. The document regulates the purchasing procedures and formulates the unified purchasing rules for Gazprom Group.

The purchasing principles outlined in the Guidelines fully comply with the Federal Law on Purchases of Goods, Work and Services by Individual Types of Legal Entities No.223 adopted on July 18, 2011 and enacted on January 1, 2012.

In November 2010 the Competitive Purchases Department was set up as a new structural unit of Gazprom on the basis of the Tender Committee. The Department acts as a procurement management center for Gazprom Group.