Gazprom Case Study Solution

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5.WHAT IS THE EXTENT OF R&D? IS IT CENTRALIZED? WHO TAKES THE DECISION REGD. THE NEW PRODUCT? R&D execution implies theoretical end experimental studies to solve engineering, economical, social and other problems, search for principles and ways to create (upgrade) production and technologies, elaborate specifications. Pre-investment studies asses engineering capability and economical feasibility for the projects implementation as well as suppose selection of the optimal option for the project implementation. R&D and pre-investment studies performed by Gazprom are of paramount importance for taking reasonable managerial decisions, providing conditions for permanent development of the Company's technology, forming mid- and long-term development…show more content…
Domestic market strategy In the domestic market Gazprom pursues the primary goal of securing uninterrupted gas supplies to the country while maintaining the economic efficiency level of gas sales. Natural gas produced by Gazprom Group and supplied to Russian consumers remains the only type of fuel with the state-regulated price. According to the decisions by the Russian Government, in the medium term domestic gas prices will gradually attain the level of equal profitability in the foreign and domestic markets. Consumer demand will be fully met through exchange technologies in gas trading. Gazprom is currently engaged in arranging gas exchange trading in the domestic market. Export strategy Gazprom’s export strategy is based on the long-term contract system under the take-or-pay principle, with the contractual gas price pegged to the petroleum product price as the industry benchmark ensuring a foreseeable basis in planning a normal investment…show more content…
In May 2007 the Russian Federation Government adopted Directive No.333 setting out a number of actions aimed at pricing liberalization in the gas industry. In particular, Gazprom was entitled to supply gas to a certain consumer group at contract prices, while the FTS regulates the upper price threshold. In 2011 the threshold was equal to 10 per cent of the regulated price. On December 31, 2010 the Russian Federation Government adopted Directive No.1205. The Document specifies a transition period (from 2011 to 2014) when wholesale gas prices will be regulated for all consumers (except for population) on the basis of a price formula stipulating stagewise transition to equal profitability of export and domestic gas sales with consideration given to the cost of fuel alternatives. Stagewise transition to equal profitability between 2011 and 2014 is assured through special discount rates integrated by the Federal Tariff Service into the formula and bringing the price level in compliance with the Russian Government set average parameters of annual changes in wholesale gas prices for all consumers except for the

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