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Cost Optimization in Gazprom Core Operations

Source: 1/22/2013, Location: Asia

The Gazprom Management Committee Chairman Alexey Miller approved the Company's Comprehensive Cost Optimization Plan for 2013. The document contains a comprehensive list of special-purpose measures aimed at reducing investment, operational and administrative costs of the Company, as well as provides for rigid control over expenditures and the implementation of the said measures.

Particularly, in 2013 Gazprom will keep holding down prices for purchased goods, works and services. One of the mechanisms is acquiring goods (services) at prices showing a no less than 20 per cent reduction as compared with those predicted by the Russian Ministry of Economic Development. As previously, open tender procedures will be maximally applied.

Provided that gas transmission projects have for years been a basic expenditure item in the Gazprom Investment Program, the Company will go on cooperating with pipe manufacturers based on long-term contracts using a pricing formula. Such a practice already proved to be successful in 2012. The application of the formula helped not only to retain the prices at the 2011 level, but also to reduce them.

The Company will also keep optimizing the Investment Program for 2013, 2014 and 2015 as well.

Energy saving measures remain an important element of the cost optimization efforts. The measures within the Gazprom Energy Saving and Energy Efficiency Enhancement Program for 2013 will be specified in the nearest future.

The approved plan of measures specifically focuses on the introduction of innovations and advanced engineering solutions. A corresponding program will be completed in the first quarter of 2013. Moreover, the plan provides for developing the Program for the Unification of Design Concepts for Gazprom Production Facilities.

Similar documents targeted at cost optimization beyond the parent Company will be developed by Gazprom subsidiaries in January 2013.

“Gazprom met the 2012 Cost Optimization Plan. In 2013 we will proceed with enhancing the expenditure efficiency and rigidly controlling this process. The task is as follows – in 2013 some RUB 50 billion has to be saved in our core operations,” said Alexey Miller.

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