2.8. Contribution to National Industrial Development

RUB 3,174.6 billion

value of goods and services procured by the Gazprom Group from Russia-based (resident) companies

99.5%

share of domestic products in centralized supplies to PJSC Gazprom

59%

share of SME suppliers among counterparties

RUB 35.5 billion

economic benefit from import substitution activities in 2016–2019

The Gazprom Group increases the share of goods procured from domestic manufacturers and actively engages with SMEs and Russian suppliers of innovative technologies, thus spurring the country’s industrial development.

 

Procurement

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The Gazprom Group companies carry out large-scale procurement of goods, works and services, thus supporting regional economies and creating new jobs. Procurement is part of the Group’s supply chain management.

 

For the Gazprom Group’s supply chain chart see page 40 of the PJSC Gazprom Annual Report 2019

 

The Company’s procurement activities are primarily governed by the Regulation on Procurement of Goods, Works and Services by PJSC Gazprom and Gazprom Group CompaniesApproved by resolution of the Board of Directors of PJSC Gazprom No. 3168 dated October 19, 2018 (as amended by resolution of the Board of Directors of PJSC Gazprom No. 3337 dated November 19, 2019). In late 2019, the document was amended to include, apart from other things, a requirement for the new procurement by-laws adopted by the Gazprom Group companies to comply with the Regulation on a mandatory basis.

In 2019, PJSC Gazprom developed and adopted PJSC Gazprom’s Program to Improve the Procurement Management with the goal of optimizing its uniform procurement systemApproved by order of PJSC Gazprom No. 239 dated May 24, 2019. One of the Program’s goals is to encourage competition in procurement from SMEs.

The Gazprom Group is committed to responsible partnership and extensive use of electronic information technologies in its relations with all suppliers. To participate in electronic procurement procedures, suppliers need to be registered with the Electronic Trading Platform of Gazprombank (GPB ETP). The platform is integrated with the Unified Information System in the sphere of public procurement and the Automatic Electronic Procurement System of PJSC Gazprom. Fair competition among suppliers is ensured, among other things, through pre-qualification.

Most of procurement at the Gazprom Group is performed through competitive bidding. In 2019, competitive bidding and market research resulted in the signing of 16,900 contracts worth RUB 520 billion, and the savings amounted to RUB 19.6 billion. In 2019, 99.8% of the Group’s competitive bidding and market research procedures were performed in electronic form. SMEs accounted for more than a half (59%, or 13.6 thousand) of the Gazprom Group’s total number of suppliers (22.9 thousand) under the contracts for the provision of goods, works and services signed in 2019.

For the purpose of streamlining the interaction with entrepreneurs, PJSC Gazprom offers the web portal of the Single Point of Contact System that enables the entrepreneurs to submit their innovative proposals to the Company. In 2019, PJSC Gazprom received 93 submissions from SMEs through the Single Point of Contact System.

Small businesses have an opportunity to participate in small-scale procurement, submitting their bids for contracts worth up to RUB 1 million, and can also use the GBP ETP’s Small-scale Procurement Trading Portal. As of December 31, 2019, price lists with a total of 369,000 items were placed on the Portal by over 11,000 suppliers, including over 8,500 SMEs. In 2019, the orders placed through the Trading Portal amounted to RUB 3.128 billion, including RUB 2.147 billion attributable to the orders placed with SMEs.

Potential bidders have an opportunity to submit suggestions, comments and complaints through the Procurement section of the Company's official web site. All the feedback received in 2019 was reviewed and addressed.

Questions from Stakeholders

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Are suppliers assessed for compliance with environmental and social criteria?

As per the Regulation on Procurement, the documentation for the suppliers includes the safety requirements to products, works and services as set out by the procuring party and provided for by technical regulations in compliance with the legislation of the Russian Federation.

Apart from that, PJSC Gazprom carries out the pre-qualification procedure for its suppliers (contractors, vendors) in order to compile the Gazprom Group’s Register of potential bidders who meet the corporate requirements. To verify whether a supplier complies with the requirements (including those related to environmental, industrial and occupational safety), the Company conducts technical audits at the supplier’s production site at the pre-qualification stage.

For example, in 2019, Gazprom Neftekhim Salavat assessed its suppliers against social criteria using the “Business Reputation” indicator. Only 266 (26%) out of 1,023 new suppliers passed the assessment.

Import Substitution

The Company’s import substitution activities are conducted in accordance with the PJSC Gazprom Corporate Import Substitution PlanApproved by order of PJSC Gazprom No. 97 dated February 26, 2018. In 2019, the Company drafted an updated Plan for the period until 2025, covering the gas, oil and power generation businesses and including the information about the results brought about by the integration of activities in developing high-tech import substituting products. The Plan also sets out the set of the activities required for phased replacement of imported products with competitive Russian alternatives.

In 2019, PJSC Gazprom extended its collaboration with the constituent entities of the Russian Federation based on the roadmaps that aim at producing a range of goods in accordance with the Сorporate plan and the List of Priority Products for Import Substitution and Production Localization to Promote the Technological Development of PJSC GazpromThe third version was approved by order of PJSC Gazprom No. 229 dated June 13, 2019. In 2019, 20 roadmaps were implemented in 25 constituent entities of the Russian Federation.

Gazprom continued to implement and sign new long-term contracts with Russian manufacturers for full-scale production, supply, repair, servicing and maintenance of import substituting products against guaranteed supply volumes in the future years. In the reporting period, nine long-term contracts were implemented.

In 2019, the Company signed a long-term agreement with Almaz—Antey Air and Space Defence Corporation JSC for the supply of import substituting products against guaranteed volumes to be purchased in the future years. Almaz—Antey is to arrange serial production of equipment for offshore hydrocarbon production, as well the delivery of the equipment to PJSC Gazprom and the technical maintenance, support and repair services required for it.

 

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According to the information provided by the centralized supplier Gazprom Komplektatsiya LLC, domestic products account for 99.5% of the materials and equipment (M&E) procured.

 

Share of domestic M&E in the supplies by Gazprom Komplektatsiya LLC, 2016–2019, %

PJSC Gazprom pays particular attention to research-intensive and high-tech areas, such as LNG and offshore hydrocarbon production.

To make management decisions regarding the substitution of imported technology, equipment and materials more grounded, PJSC Gazprom performs an annual assessment of economic benefits delivered by the import substitution measures. The total economic benefit from import substitution amounted to RUB 35.5 billion in the period from 2016 to 2019.

For information on the economic benefit from the implementation of import-substituting technologies see Appendix 4