The Management Committee has approved today the Gazprom’s Cost Management Conception that is now pending endorsement by the Board of Directors.

The Management Committee entrusted Gazprom’s respective business units with devising a plan of measures aiming to create a corporate cost management system.

The Conception identifies key approaches to setting up the corporate cost management system and sets forth requirements to its elements, taking into account Gazprom’s business peculiarities and development strategy.

Ensuring efficient use of resources, achieving the corporate decision-making soundness and quality, coming up with exhaustive, comparable and transparent spending data as well as delegating due authority and responsibility over the efficient use of resources is in the main focus of the Conception.

The Conception is based on a consistent approach to managing costs on a systematized basis, with special emphasis laid upon the United Gas Transmission System security and technological safety.

Simultaneously, the Conception stipulates the application of a norm, standard and target system, an integrated system of feasibility documentation classification and encoding, systems of managerial documents and incentives as well as a whole range of cost management automation facilities. The above-mentioned systems have been to this or that extent forwarded to Gazprom, with some of them still undergoing development. The Conception-related measures will be stepped up in accordance with the plan of measures aiming to create the corporate cost management system.

As it was pointed out at the Management Committee meeting, putting the Conception into practice would enhance the efficiency and transparency of the corporate business, make a positive impact on Gazprom’s capitalization and investment attractiveness and solidify the corporate standing on the international and domestic fuel and energy markets.

Reference:

Starting 2002, Gazprom has been involved in the implementation of the Cost Management Program, on the one hand, proving to be effective but, on the other hand, showing that potential reduction of operational costs is limited and further direct slashing of costs might affect the United Gas Transmission System operability. As a result, a decision has emerged to shift over towards a comprehensive and systematized cost management system. In March 2004, Gazprom’s Management Committee adopted a resolution to develop the Company’s Cost Management Conception.

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