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GAZPROM

July 12, 2006

The Board of Directors approves strategic development targets of Gazprom

A Board of Directors’ meeting has commenced at the Gazprom Headquarters.

The Board of Directors approved strategic development targets of Gazprom over a 10-year period. The targets list includes the basic performance indicators characterizing the Company’s development efficiency. These indicators are as follows:

  • economic profit growth – positive;
  • return on equity – not less than 6 per cent (conservative oil price forecast);
  • equity/debt ratio – not more than 40 per cent;
  • production rate – not less than 550 bcm of gas (in the vicinity of the Unified Gas Supply System);
  • sales volume – not less than 490 bcm of gas;
  • inventories amount – not less than 29 tcm of gas;
  • reserve replenishment coefficient – not less than 100 per cent.

The Board of Directors tasked the Management Committee with organizing the work to achieve the preset strategic development targets.

Reference:

On September 28, 2005, the Gazprom Board of Directors approved a list of strategic development targets subject to approval by the Board of Directors. Setting strategic developments targets when planning the business activity is a substantial factor for higher operating efficiency and market capitalization of the world’s largest oil & gas companies. Global energy companies employ Key Performance Indicators, which are in most cases identical to strategic development targets of Gazprom. When identifying its strategic development targets Gazprom takes into account the Company’s performance specificity and development prospects.

On June 22, 2006, the Gazprom Management Committee approved the Gazprom Planning Rules using strategic development targets. The Planning Rules contemplate devising a Company’s development program over a 10-year period. The program must include a list of priority projects, capacity commissioning and relevant capital investment projections, major operating, financial & economic development indicators.

Improving the planning system based on the Planning Rules aims to reinforce the interconnection between the Company’s management system elements (long-, mid- and short-term planning systems, budgeting systems, cost management, control, motivation systems) and ultimately to ensure the conformity of the Company’s financial & economic activity with its strategic goals.

The planning system using strategic development targets will enhance business transparency and will give investors an objective idea of Gazprom’s probable development in a long run.

 

 

 

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