The Gazprom Board of Directors took note of the information about the Company's procurement process performance in 2015.

It was highlighted that Gazprom had established an efficient vertically integrated procurement system. The system is underpinned by the principles of open information, transparency, promotion of fair competition, and wider and simpler access to the procurement process. The whole process is closely monitored, from shaping the demand for goods, works, and services up to performing contracts. All available cost optimization techniques are applied to each stage of the procurement process, which is crucially important under unfavorable conditions in the global commodity markets.

Thanks to this approach, Gazprom maximizes cost efficiency and receives in a full and timely manner the required materials, equipment, and services, which meet the Company's high standards of pricing, quality, and reliability.

In most cases Gazprom and its subsidiaries follow a competitive procurement process. About 95 per cent of competitive procurement is conducted electronically via the Electronic Trading Platform of Gazprombank (ETP-GPB) integrated with the Russian Unified Information System in the field of procurement. In 2015, the competitive procurement process resulted in over 17 thousand contracts with a total value of RUB 1.03 trillion. The consequent savings (the difference between the initial and final contract prices including costs of the procurement process) made up RUB 33 billion.

An essential objective of Gazprom's procurement activities is to enhance access to the Company's procurement opportunities for small and medium-sized enterprises (SMEs). To this end, the Company simplified to the extent possible the procurement procedures for SMEs. Specifically, the procurement process was converted into electronic format, with a minimum number of documents and no financial support for bids requested.

In accordance with Russian Government Directive No. 1352 dated December 11, 2014, Gazprom approved the List of goods, works, and services to be procured from SMEs and submitted it to the Unified Information System in 2015. The Company conducted procurement procedures involving exclusively SMEs and the procedures that required subcontracting SMEs. Gazprom's contractual partners include over 700 SMEs.

Last year, Gazprom initiated the launch of the Small Procurement Trade Portal (online shop) at ETP-GPB to simplify the procedures for small procurements (under RUB 500 thousand). The Portal gives suppliers an opportunity to offer their goods, works, and services to potential clients and to accept or reject pre-orders. In 2015, the Portal was used by over 2,100 suppliers (more than 88 per cent of whom were SMEs) who posted their price lists for 47 thousand items of goods, works, and services.

The pilot program for the partnership between Gazprom and SMEs has been launched. The program outlines measures aimed at building the network of highly qualified and responsible suppliers and increasing interaction with SMEs that produce innovative and high-tech products.

In addition, a simple submission and review procedure for proposals on introducing innovative developments of SMEs into Gazprom's production activities was developed in 2015. The procedure, named the Single Window System, represents a clear and transparent mechanism for submission and review of innovative proposals made by SMEs through Gazprom VNIIGAZ, a unified “single window” operator.

At the end of the meeting it was remarked that Gazprom would continue to further enhance and improve the efficiency of its procurement process with regard to the current macroeconomic context and expanding requirements of the legislation.