On the threshold of Gazprom's annual General Shareholders Meeting the Company's headquarters hosted today the Press Conference “Gas Supply to Domestic Market. Executing Russian Regions Gasification Program”. Taking part in the Press Conference was Kirill Seleznev, Member of the Management Committee, Head of the Gas and Liquid Hydrocarbons Marketing and Processing Department, Gazprom; Director General, Gazprom Mezhregiongaz.

It was highlighted during the Press Conference that Gazprom Group was the largest gas supplier to the domestic market, accounting for its 73.1 per cent share in 2012. It was noted that independent producers had more favorable conditions for gas sales to domestic consumers and that resulted in an increase of their Russian market share. The bulk of their gas is sold in the non-regulated sector to solvent industrial consumers in the Russian constituent entities close to production areas. In 2012 the average distance of gas transmission by Gazprom Group exceeded by over 1.8-fold that of independent producers.

Kirill Seleznev said that Gazprom was not only keen to retain its share of the Russian gas market, but also had plans to slightly increase it. In particular, this may be achieved by attracting new consumers as part of the large-scale Russian Regions Gasification Program, including in the Siberian and Far Eastern regions.

In 2012 Gazprom Group sold 249.7 billion cubic meters of gas – a 5.9 per cent fall versus 2011 (265.3 billion cubic meters). Gazprom's proceeds from gas sales in Russia (net of VAT and excise duty) reached RUB 740.3 billion in 2012, surpassing the 2011 level by 2.4 per cent.

The Press Conference placed a special focus on the Russian Regions Gasification Program results. It was stressed that between 2005 and 2012 some RUB 180 billion had been allocated under the Program, excluding over RUB 100 billion channeled by Gazprom for the construction of gas branches and gas distribution stations being an integral part of the regional gasification process. As a result, between 2005 and 2012 Russia's average gasification level increased from 53.3 to 64.4 per cent, including from 60 to 70.1 per cent in cities & towns and from 34.8 to 53.1 per cent in the rural area.

However, the authorities of only 11 out of 40 regions with gas facilities constructed in 2012 fulfilled their consumer preparation obligations fully in line with synchronization schedules for gasification programs. In 14 regions the authorities are behind these schedules.

In 2013 it is planned to invest RUB 33 billion 400 million into the Gasification Program.

In the meantime, the growing gas debt of Russian consumers remains a rather acute problem. The total debt of all consumer groups to Gazprom for the fuel supplied in 2012 increased by RUB 45.7 billion versus 2011 to RUB 143 billion. The bulk of the total debt is owed by such consumer groups as utility companies – RUB 43.1 billion (30 per cent of the debt) and the population – RUB 53.1 billion (37 per cent).

In addition, a typical problem here is the unlawful diversion of funds received by management companies from the population for the heat supplied as well as the establishment of unfair companies taking municipal boiler houses on lease for one heating season in the aim of deliberate bankruptcy.

Answering questions from the media about the gasification prospects for the Chuvash Republic, the Tula, Leningrad, Tyumen Regions and other areas, Kirill Seleznev stressed that just like in the previous years the Company's investments into the gasification of each particular region would depend on how the regional authorities met their obligations in respect of consumer preparation for gas supply and on the situation with gas debts in the regions.