OREANDA-NEWS. On March 28, 2007 the Board of Directors’ meeting is in progress at the Gazprom Headquarters, reported the press-centre of  Gazprom. The Board of Directors has taken into account the information on the measures taken by Gazprom to decrease expenses and tasked the Management Committee with continuing the work to improve the Company’s operating efficiency through cost reduction.

Reference:
Gazprom carries out the work to optimize and decrease expenses in the following basic areas:
introduction of sci-tech progress achievements, energy saving equipment and technologies;
development of personnel strength, man-hour and resource consumption standards;
appraisal of projects included in Gazprom’s investment program;
negotiation of prices for crucial goods and services;
restructuring of subsidiary companies and conveyance of social, cultural and household facilities to municipalities;
introduction of competitive procedures.

In particular, Gazprom conducts the purposeful work to apply modern and economically sound technical solutions with a view to increasing operating pressure, using pipes with smooth-wall lining and applying high efficiency and reliability gas pumping units. This work will permit to decrease capital investment in gas pipeline construction by at least 20 per cent. The Company has introduced a gas pipeline inspection system giving an annual economic effect of up to RUR 6 bln through prevention of probable accidents and gas losses. When repairing pipelines Gazprom applies new insulation coatings with improved characteristics and a service life of 25-30 years, which is 2-2,5 fold up on the former coating life. In 2006 the implementation of energy saving measures enabled to save 3,4 bcm of natural gas, 394 mln kW of electricity, 146,000 Gkal of heat energy and 492,000 t of diesel and boiler-furnace fuel.


Gazprom has adopted a number of documents regulating the utilization of basic resources for intra-corporate technological needs in the main business segments. All investment projects included in investment programs are subjected to expert scrutiny. At the same time, taking into account the existing practice, a facility construction budget may shrink 6-30 per cent based on the expertise results. Prices of crucial goods and services are approved based on a market situation, with a comparative analysis performed as regards the correlation of prices, quality and consumer parameters of purchased products with parameters and prices of similar products in Russia and abroad. In order to reduce social infrastructure maintenance costs, 4,020 social facilities were transferred to municipalities in 2005 and 2006. Along with the above work, cost growth rates are, to a large extent, controlled through the budgeting process, an integral part of which is the development and implementation of the Cost Optimization (Reduction) Program.  In particular, as a result of the actions taken to optimize (decrease) expenses over 2006, Gazprom Group has obtained a RUR 12,38 bln effect.

At present the cost optimization (reduction) work is mainly focused on switching from occasional measures to comprehensive management of expenses based on the provisions set forth in the Gazprom Cost Management Concept approved by the Company’s Board of Directors. The Concept determines the basic approaches to a corporate cost management system currently under development and imposes requirements to its elements with due regard of the performance specificity and development strategy of Gazprom.