2.1. Mission and Strategy

The Company’s long-term strategic planning relies on a system of strategic target indicators (STI) coming in the shape of well-balanced targets that span the entire range of operations and define the quantitative dimension of strategic goal setting.

The Long-Term Development Program of PJSC Gazprom is developed annually in accordance with the Company’s Planning ProceduresApproved by resolution of the Management Committee of the Company No. 34 dated June 26, 2006 based on the STIs and incorporating the Guidelines on Long-Term Development Programs for Strategic Open Joint Stock Companies and Federal State Unitary Enterprises, and Open Joint Stock Companies in which the Aggregate Share of the Russian Federation Exceeds 50%Instruction of the Government of the Russian Federation No. ISh-P13-2583 dated April 15, 2014. Once pre-approved by the Management Committee, the Program is submitted for approval to the PJSC Gazprom Board of Directors.

PJSC Gazprom’s form of incorporation is private property with the stateowned stake. The Russian Federation controls the majority stake in the Company directly and indirectly (over 50%).

As of the end of 2019, PJSC Gazprom granted 345 companies the right to use its trademarks in the Russian Federation, and concluded 122 license and 243 sub-license agreements for the use of its trademarks in the Russian Federation and 46 foreign countries.

^* Compared to the previous year.

Gazprom is one of the world leaders in natural gas reserves and production, holding a significant share of the Russian market in liquid hydrocarbons production and processing. Gazprom is a leader on the Russian electricity and heat market in terms of installed electric and thermal capacity and the country’s largest heat generation company.

⁽¹⁾ Share of PJSC Gazprom’s gas supplies under contracts of Gazprom Export LLC in consumption of gas in Europe (other than FSU states).

The Gazprom Group’s 2019 operating results highlight its scale of business.

⁽¹⁾ Including the share in production of organizations in which Gazprom has investments classified as joint operations.

In 2019, Gazprom brought into operation major strategic projects and reached important agreements, including the following achievements.

• Gas supplies to China commenced via the Power of Siberia gas pipeline.
• The TurkStream gas pipeline was put into operation.
• The Chayandinskoye field was put into operation.
• A transit contract with Ukraine was signed.
• An offshore terminal and the Marshal Vasilevskiy floating storage and regasification unit were provided to supply gas to the Kaliningrad Region.
• Power Unit No. 2 of the Grozny TPP was brought into operation; the unit is the final facility within the program under capacity supply agreements.

The key milestone of 2019 was the launch of the Power of Siberia gas trunkline. Russia started its first-ever pipeline supplies of natural gas to China: gas from the Chayandinskoye field (Yakutia gas production center) is now fed into China’s gas transmission system (GTS). With Power of Siberia brought into operation, Gazprom can now widen cooperation with Russian companies, create new jobs, and provide gas to the regions covered by the gas trunkline. Power of Siberia was built using solely pipes of Russian manufacture. The project was carried out with a particular focus on maintaining a high level of process and environmental safety. The solutions included minimally manned technologies, comprehensive process automation, and the use of renewable energy sources.

In 2019, Gazprom also brought into operation top-priority facilities at the oil rim of the Chayandinskoye field. At the Kovyktinskoye field (Irkutsk gas production center), development drilling began. The Company continued the construction of the Amur Gas Processing Plant (GPP), one of the world’s largest facilities of this kind, and the expansion of the Sakhalin — Khabarovsk — Vladivostok gas pipeline between the cities of Komsomolsk-on-Amur and Khabarovsk.

With the addition of the TurkStream deep-water gas pipeline in 2019, the capacity of Russia—Turkey gas transmission systems expanded, paving the way for the Russian gas to reach not only Turkey, but also, in transit, Southern and South-Eastern Europe.

Full-scale development began at the Kharasaveyskoye field (Yamal gas production center) in 2019. A unique fishbone multilateral well with eight sidetracks was builtProject of JSC Messoyakhaneftegaz, a joint venture between PJSC Gazprom Neft and PJSC NK Rosneft at the Vostochno-Messoyakhskoye field in the Tazovsky District of the Yamal-Nenets Autonomous Area. Gazprom continued expanding the Northern Gas Transmission Corridor by building compressor capacities at the Bovanenkovo — Ukhta 2 gas pipeline. Preparations were underway at the Ukhta — Torzhok 2 gas pipeline to put a new compressor shop into operation. The Bovanenkovo — Ukhta 3 and Ukhta — Torzhok 3 gas pipelines were being designed. The Nord Stream 2 gas pipeline construction project reached the final stage. As of the end of December 2019, in total 94% of the pipeline (in all sections) was laid in the Baltic Sea. The creation of an integrated gas processing and liquefaction complex near Ust-Luga began.

In order to enhance the Kaliningrad Region’s energy security with due consideration of the region’s geographical setting, Gazprom implemented an alternative gas supply project to provide liquefied natural gas (LNG) deliveries by sea. An offshore terminal and the Marshal Vasilevskiy floating storage and regasification unit can now be used for the purpose of gas supplies to the Kaliningrad Region.

Most of Gazprom’s capital expenditures under the Investment Program are earmarked for its gas business. Gas investment peaked in 2019 as the three strategic projects — Power of Siberia, Nord Stream 2, and TurkStream — were underway at the same time.

The investments made under the 2019 Investment Program totalled RUB 1,322.58 billion.

PJSC Gazprom’s investment program for 2020 approved by resolution of the Board of Directors No. 3362 dated December 24, 2019 provides for RUB 1,104.7 billion of capital expenditures.

• Kovyktinskoye;
• Urengoyskoye (Achimov deposits);
• Kamennomysskoye-Sea;
• Kharasaveyskoye;
• Yuzhno-Kirinskoye.

• Development of gas transportation facilities of the UGSS in the North-Western Region, Gryazovets — Slavyanskaya compressor station (CS) segment;
• Power of Siberia (the Kovykta —Chayanda segment);
• Sakhalin — Khabarovsk — Vladivostok (expansion);
• Nord Stream 2;
• Bovanenkovo — Ukhta 2 (CS);
• Power of Siberia (expansion: loopings of the second string and the CS);
• Ukhta — Torzhok 2 (CS);
• Bovanenkovo — Ukhta 3;
• Ukhta — Torzhok 3.

• LNG production, storage and shipment terminal in the vicinity of the Portovaya CS;
• Amur GPP;
• Integrated gas processing and liquefaction complex near Ust-Luga.

One of the milestones of 2019 was the approval of PJSC Gazprom’s new Dividend PolicyApproved by resolution of the PJSC Gazprom Board of Directors No. 3363 dated December 24, 2019. Based on the 2019 results, the Company will pay out a total of RUB 360.8 billion in dividends (RUB 15.24 per share), or 30% of the net profit under IFRS attributable to the shareholders of PJSC Gazprom. The target level of dividend payout is at least 50% of the adjusted net profit under IFRS in 2021.

One of the priorities embedded in the Gazprom Group’s development strategy is to enhance the efficiency of the Group’s operations, which is achieved through a variety of means that include effective and consistently optimized tax administration.

Gazprom is among Russia’s largest taxpayers. In 2019, the Group’s tax payments totalled RUB 3,077.150 billion, 62.8% of which were the mineral extraction tax and customs duties.

The Company has in place the Tax Strategy of PJSC GazpromApproved by resolution of the PJSC Gazprom Management Committee No. 48 dated December 7, 2017 that sets out long-term tax goals and targets. The Tax Strategy is aimed at implementing the corporate strategy and is geared towards cementing PJSC Gazprom’s status as a global energy leader. A special authorized Department of PJSC Gazprom is responsible for carrying out the Tax Strategy.

PJSC Gazprom implements a single tax policy and ensures uniformity in the application of the tax legislation by the Gazprom Group entities.

PJSC Gazprom’s Management Committee approved the PJSC Gazprom tax policy framework for 2020 and for the planning period of 2021–2022Approved by resolution of the PJSC Gazprom Management Committee No. 2 dated January 23, 2020.

PJSC Gazprom’s plans regarding the tax policy for the following three years include:

1. Digitalisation in the sphere of taxation. PJSC Gazprom actively cooperates with the Federal Taxation Service of Russia in this area. In 2020–2022, the Company plans to continue with a set of initiatives designed to expand the application of up-to-the-minute digital technologies in the taxation procedures of PJSC Gazprom, from accounting, tax statistics collection and consolidation, and tax forecasting to tax risk management processes and interaction with tax authorities as part of tax control.
2. International taxation. One of the Tax Policy’s targets is to ensure that the Gazprom Group is able to adapt to the changes in Russian and international tax legislation on profit distribution introduced by the BEPS Action Plan and to provide ways of mitigating the Group’s tax risks.
3. Ensuring the Gazprom Group’s compliance with the tax laws on transfer pricing when preparing reporting documents on the Group’s international entities, as well as the compliance with the Russian laws on tax control over the pricing of transactions between interdependent parties.
4. Shaping a favourable tax regime for the Gazprom Group.