gm&t magazine issue 1

THE MAGAZINE FOR GAZPROM MARKETING & TRADING CUSTOMERSISSUE 1

Leading the wayCEO Vitaly Vasiliev outlines GM&T’s business plans for 2009

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Published in February 2009 by: Gazprom Marketing & Trading, Gazprom House, 60 Marina Place, Hampton Wick, Kingston upon Thames KT1 4BHEdited, designed and produced by: beetroot, 44 New Inn Yard,London EC2A 3EY. Tel: +44 (0)20 7749 0180Printed by: Newnorth on environmentally-friendly paperViews expressed in GM&T magazine are not necessarily those of the company. Permission to reprint any article will usually be given on application to the publisher – call +44 (0)20 8614 1312

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This year, 2009, will mark the 10th anniversary of Gazprom’s entry into the UK energy market. Throughout this magazine you will find stories of how our business has developed over time. Today we are a leading global energy trader and marketer, with its HQ in Kingston upon Thames and regional offices in Manchester, Paris and Houston. Our business is led by an international team of energy specialists.

Throughout this year there will be a series of events to mark our ten-year milestone, and the fifth anniversary of creating an energy-trading platform to serve customers in liberalising

markets. GM&T magazine is the first in a series of communications planned for our anniversary, and I hope to meet many of our customers and counterpartsat events throughout the year.I hope that you enjoy reading

our magazine and that you will be interested to learn more about how we have developed and built our market presence overthe past decade. If you have any comments or questionsabout the magazine or GM&T in general, please contact us [email protected].

Andrey MikhalevManaging DirectorGazprom Marketing & Trading

Much to celebrate

Inside this issue

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13Regulars10 Trading placesA look at GM&T’s offices worldwide

15 Emerging marketsEntering Ireland’s retail gas market

18 PeopleGala dinner and Mount Kilimanjaro climb

4Liquid goldGlobal LNG Director Frédéric Barnaud outlines his plans for the business in 2009

7Sustained effortMeeting demand for carbon credits while protecting the planet

13Flow businessGM&T Retail is helping to raise Gazprom’s profile in the UK

16Ready for anythingHow a diverse portfolio can help GM&T and its customers beat the global credit crunch

TODAY WE ARE A LEADING GLOBAL ENERGY TRADERAND MARKETER

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View from the top

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Expanding ourhorizonsGazprom Marketing & Trading has achieved tremendous growth since it was founded in 1999. For the last five yearswe have reinvented our business to enable us to marketand trade a wide range of energy products besides gas.

The strength of our underlying gas portfolio, together with the success of our core trading business, has given us the platform to diversify and expand. We recently establishednew business units – LNG, Carbon, Power and Retail –and entered new markets such as France, Belgium, Ireland and the US.

Our expanded portfolio gives us the opportunity to sellmore energy products to customers and this is the focusof our 2009 business plan.

The company is now capable of offering complex solutions on a regional or global scale rather than just a single solution to a single market. Just as important, the synergies that exist between gas, electricity and carbon give us a huge competitive advantage as these products are intrinsically linked to each other, providing numerous opportunitiesfor cross-selling.

By expanding our marketing and trading capability, we are confident we can maintain supply and develop products for customers in the current economic climate. We are mindful of the global ‘credit crunch’, but we believe our front and back-office systems provide a sound base for a stable and sustainable business. It helps that our business model is based on physical supply. We are backed by a parent company which has the world’s largest gas reserves and a35-year history of reliable gas supply to European markets.

We are also aware that managing energy consumptionand carbon emissions is increasingly important to our customers – a challenge we can help them meet through our carbon and smart-metering offers which can offset emissions and save energy.

From supplying LNG to trading carbon credits, this first issue of GM&T magazine highlights the company’s recent activities and our plans for the year ahead. I hope you enjoy the magazine and wish you a happy and prosperous 2009.

Best regards,

Vitaly VasilievChief Executive OfficerGazprom Marketing & Trading

OUR EXPANDED PORTFOLIO GIVES US THE OPPORTUNITY TO SELL MORE ENERGY PRODUCTS TO CUSTOMERS


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393billion

LNG

CAREER PATH: FREDERIC’S CVEducated at l’École Nationale

des Ponts et Chaussées in Paris, the Oxford Institute for Energy Studies, and Cass Business School in London

Entered energy industry in 1990 when he joined Total

Joined GM&T as LNG Director in June 2008 from Total Gas & Power

Having lived in France, Polynesia, Senegal, Germany, Portugal and Switzerland, Frédéric is quite pleased to have settled in London, which he now calls “home” having spent longer there than anywhere else

THE NUMBER OFCUBIC METRES THATGLOBAL LNG TRADE IS EXPECTED TODOUBLE TO BY 2015

Liquid


Across the globe, demand for gas is on the rise. As economies and requirements for cleaner power generation around the world grow, so does the need for gas.It comes at a time when gas production in developed countries is declining and they now need to import a significant proportion of their gas to satisfy demand.

This is where liquefied natural gas (LNG) – and GM&T – comes in. LNG is natural gas that has been cooled and converted to liquid form, shrinking the gas to 600 times smaller than its original volume so that it can be transported in large quantities via sea to anywhere in the world.

As a result, LNG is expected to help fill supply gaps in the global gas market, with the International Energy Agency forecasting that LNG trade will almost double between 2006 and 2015, to393 billion cubic metres a year.

For GM&T the business opportunities were compelling and, in July 2008, Gazprom Global LNG was launched under the leadership of Frédéric Barnaud, previously Head of LNG Trading at Total Gas & Power. His brief was clear – to accelerate the long-term development of Gazprom’s marketing and trading activities in LNG and establish its identity in the marketplace.

We caught up with Frédéric once he’d settled into life at GM&T’s London offices.

Frédéric, what was the thinking behind the launch of Gazprom Global LNG?The launch enables us to go out and promote our LNG and trading expertise globally and respond to rising demand from new markets. This global approach is also important over the short term as we seek to increase our participation in the LNG spot markets and ship chartering.

How did the LNG business performin 2008?Overall our performance was very good, although in the first half of 2008 the LNG market was quite tight, owing to difficult supply conditions. In the second half of the year our focus was on short-term initiatives critical to long-term growth, such as adapting our processes to meet increasing volumes of shipments, hiring the right people with expertise in LNG and negotiating new supply contracts. And a few very exciting deals enabled us to beat our gross-margin target.

Can you tell us about these new supply contracts?We’ve successfully negotiated a number of big deals in recent months across two distinctive contract types – term contracts and spot cargoes.

One term contract we agreed saw us purchase a ‘strip’ of eight LNG cargoes, worth more than £250 million, from Abu Dhabi Gas Liquefaction Company (ADGAS) in the United Arab Emirates. These consignments, shipped in specially-designed LNG supertankers, were sold to two Japanese customers – the Tokyo Electric Power Company and the Tokyo Gas Company – to meet growing local demand for clean energy. Under the contract they receive one LNG shipment every month between August 2008 and March 2009.

We’ve won significant spot contracts, too. For example, we recently purchased an LNG consignment by competitive tender, which was then shipped by a chartered vessel from Trinidad, around the Cape of Good Hope, to Japan. The whole process was quite complex, as we had to ensure the ship’s tanks were cooled to -1600C before loading the LNG cargo and then minimise the consumption of expensive bunker fuels by the vessel during her voyage.

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LNG

With its new global LNG business up and running and Frédéric Barnaud, Director of Gazprom Global LNG, now at the helm, GM&T is well placed to meet growing demand worldwide for liquefied natural gas

Read on foR: out of hours

-160 CthE tEMPErAturE A GAZProM shIP’s tANKsWErE CooLED to BEforEthE LNG CArGo WAsLoADED for Its VoYAGE 8

thE NuMBEr of LNG CArGoEs GAZProMBouGht froM ADGAsIN A DEAL WorthoVEr £250 MILLIoN

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So what are the plans for LNG in 2009and beyond?We aim to expand the business by developing our spot and term contract activities. On the spot side, we will become more competitive through our interaction with GM&T’s gas portfolios in Europe.

We are well placed to meet shifts in the global energy market, particularly in emerging markets in the Middle East and Asia.

In particular, Gazprom is developing the Sakhalin LNG plant in the far east of Russia. With a capacity of around 10 million tonnes a year, the plant will meet the growing demand for LNG in Japan, South Korea, Mexico, and the US. We’re also a partner in the development of a regasification terminal in Canada for LNG from the future Shtokman field in northern Russia.

There’s a lot of growth in demand and global trade, partly because investment in LNG production and storage facilities in previous years is now feeding through to the marketplace. There’s also greater demand for LNG from the power-regeneration market and increasing investment in smaller-scale energy facilities all over the world.

Tell us about the Gazprom Global LNG team and how it operates.The team is based at GM&T’s UK offices in London and works closely with Gazprom colleagues in Moscow on LNG commercial negotiations and business development.

The team recently doubled in size to eight people and we’ve recruited from some of the best-known companies in the LNG sector, including BG Group and BP. I envisage the team expanding to 15-20 people in two to three years’ time as our trading and operations functions develop. Trading LNG cargoes is a very physical business which involves a lot of paperwork and interaction – for example with vessels’ masters, port agents and surveyors worldwide – so it requires considerable attention to detail.

Finally, how are you finding life at Gazprom since joining from Total in June?It has been great. On a personal level, it has been hugely rewarding setting up the Gazprom Global LNG team. The team is young, multicultural, quick to respond and very business-focused, and I’m finding it extremely exciting working for the biggest gas company in the world.

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LNG

600THE NUMBER OF TIMES SMALLERTHAN ITS ORIGINAL VOLUME THATNATURAL GAS IS SHRUNK TO SO ITCAN BE TRANSPORTED IN LNG FORMIN LARGE QUANTITIES VIA SEA

Since joining Gazprom, Frédéric has devoted most of his energies to organising the company’s new global LNG business unit. But when he finds the time, he loves nothing more thanto visit the Middle East.

He says: “I enjoy Middle Eastern culture and art, having travelled extensively in the region. From Egypt to Persia, those regions have been at the heart or our civilisations and religions, hence their power of attraction beyond their natural beauty.

Frédéric loves to go horse riding in the region. “My favourite pastime is riding in the morning sun on the edge of sandy dunes, especially in the desert area between the United Arab Emirates and Oman.”

Frédéric also likes browsing the souks (Arab bazaars) for delicate Persian miniatures. He reckons there is no better negotiation school than spending hours in the souk! Frédéric also enjoys opera and classical music.

Out of hours


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CARBON

Read on foR: a day in the life of arthur tait

From sealing the world’s biggest-ever carbon deal to financing a project to protect the Indonesian rainforest, 2008 was quite a year for Gazprom Marketing & Trading’s Carbon business. Since its launch in September 2007, the business has made a healthy profit and participated in several projects to reduce CO2 emissions and generate carbon credits.

Demand for carbon credits has been booming ever since the United Nations introduced the Kyoto Protocol in 2005 to

combat global warming. Under Kyoto, industrialised countries must reduce total greenhouse gas emissions by an average of five per cent by 2012.

GM&T started trading carbon credits under the EU Emissions Trading Scheme in 2006, set up to help companies comply with Kyoto. Under the scheme, companies in energy-intensive industries are issued with permits to produce CO2; if they want to emit more than their quota they must buy carbon

credits. As a result, the value of carbon trades worldwide more than doubled to£41 billion in 2007, says the World Bank.

With its global reach and multi-commodity portfolio, GM&T is in a great position to satisfy the growing demand. As Arthur Tait, GM&T Global Carbon Director, says: “We can provide a full range of products and services including long-term carbon-supply contracts to help customers achieve their carbon-neutral goal.”

Gazprom Marketing & Trading has emerged as a major player in the global carbon market – and its customers are enjoying the benefits

effortSustained

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CARBON

Sustainable developmentTo complement its carbon offering to customers, GM&T is directly sourcing and financing global Clean Development Mechanism (CDM) projects. The CDM was introduced by Kyoto to help reduce carbon emissions and promote sustainability in developing countriesnot signed up to the Kyoto Protocol. Through the mechanism, companiescan gain Certified Emission Reduction (CER) certificates by investing in sustainable development projects in developing countries.

GM&T is involved in several CDM projects. In April, the company signeda six-year agreement with Brazilian energy firm Propower do Brasil to acquire CER credits awarded to Propower’s biomass power-generation plant in Guarapuava, Brazil.

In December, a joint agreement was signed with SUN Group, a major Indian investment company (see page 12). “India is a very big market and we expect to launch eight or nine CDM projects there in the next 12 months,” says Arthur. “We’ve found that the way to get a foot in the door of a country is to team up with a well-respected company in that country, such as SUN Group.”

GM&T is financing smaller CDM projects, too, including a wind farm located in what Arthur describes as “the windiest part of all Latin America”. The company is also backing a reforestation project in the Indonesian rainforest. “This is more of a ‘publicity’ project but

represents our first serious look at voluntary credits, which could be sold into the US market as well as the UK. More and more companies are keen on going green and we can help them.”

Delivering downstreamLast year also saw GM&T secure some major downstream deals. In February, the company concluded the first Russian-Japanese transaction of forward-delivered CER certificates with Japanese trading house Marubeni Corporation (see page 12).

Having gained a foothold in the Japanese market, GM&T then sealed what could end up being the world’s biggest-ever carbon deal in November when it agreed to sell Russian carbon credits into Japan.

Another long-term deal was recently signed with a company in China that wants to take award-winning technology it has developed for reducing emissions globally.

Arthur describes the Carbon team behind all these deals as small but very capable. “Currently there’s only six of us, but we’re well supported by functions such as Risk, Finance and Legal.” The Carbon team plans to expand to 10 people soon.

Joining the dotsOne of those new recruits might be based in Moscow – the home of GM&T’s parent company, Gazprom. There’s enormous potential to generate carbon credits in Russia through Joint Implementation (JI)– a Kyoto mechanism that works the same way as CDM but involves projects in developed countries – and GM&T Carbonis working with Gazprom Export on severalJI emission-reduction projects. “These projects will generate carbon credits and my team can ensure we have a market for these credits,” explains Arthur. “Much of my role is about joining the dots.”

Arthur’s team has also developed close links with businesses within GM&T. “Every business within the company is now trading carbon along with other products. Our Retail businesses, for example, are selling carbon credits to customers so they can offset the gas they buy.”

For Arthur, who joined GM&T in 2006 after Gazprom bought Pennine Gas, the company he ran with Jon Feingold (now Managing Director of UK Retail), heading up the company’s Carbon business has been a whirlwind ride. “We’ve come a long way in a short space of time.”

Clearly, GM&T is well on its way to achieving its ambition of becominga highly-profitable player in the globalcarbon market. The company may have sealed the world’s biggest ever carbondeal in 2008, but there’s a lot moreto come.

MORE AND MORECOMPANIES ARE KEEN ONGOING GREEN AND WE CANHELP THEM

Arthur TaitGM&T Global Carbon Director

If growth in the global carbon market is being driven by the Kyoto Protocol, the multimillion dollar question is: what will happen when the Protocol expires at the end of 2012?

Arthur Tait, GM&T Global Carbon Director, is hopeful a successor to Kyoto will be agreed at the UN Climate Change Conference in Copenhagen at the end of 2009, following on from the UN conference held in Poznan (pictured) in December 2008. “The general consensus is that something has to happen in Copenhagen,” he says. “My view is that there will be a post-2012 treaty that the US will join and a new carbon-credit scheme that will be universal.”

BEYOND KYOTO:A UNIVERSAL SCHEME?

Whatever the outcome, Arthur is confident GM&T will cope. “We have to keep our options open, but we’ll make sure we’re flexible enough to handle whatever happens.”

Although the US hasn’t signed up to Kyoto, interest in carbon trading in the States is increasing. GM&T is taking steps to capitalise and is recruiting someone to represent the Carbon team in Houston. “US companies struggling because of the credit crunch are unlikely to volunteer to buy carbon credits, but that could change. We believe we can gain an early lead in the US carbon market, which has the potential to be one of the biggest in the world.”


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My day

An (un)typical dayThere’s no such thing as a typical day in this job! I’m based at our Kingston office in the UK, but I travel abroad a lot to negotiate deals. It’s a balancing act because I’m building a new Carbon team while at the same time building a global business, which requires me to spend a lot of time abroad.

To help ensure everyone in the team works together, wherever we are in the world, we all dial in to a conference call on a Friday afternoon and discuss the deals we’re working on. I also

keep in contact with my colleagues via mobile

email – I don’t go anywhere without my PDA.

Sealing the dealSusan Tesselaar, Senior

Originator in our team, has taken the lead in landing our deal with Indian investment company SUN Group. Because she’s been immersed in

the deal, my role has been to take an overview of the deal to help her with it.

The SUN Group deal is enormous, but it often takes as much time to do a small carbon deal as a big one.

Avoiding a culture clashThe whole team travels extensively,

meeting some major counterparts.Each country we visit has a different culture. Part of our success is respecting those cultures and it’s an aspect of the job I love. I believe that if you go to, say, Japan, you should act Japanese.On an upcoming visit there, I’ll bemeeting senior government officialsand will have a courtesy salute in which

the Japanese officials will be on one side of the room and I’ll be on the other side,making polite conversation.

I rarely have time for sightseeing on business trips as most of my time is spent meeting counterparts, but occasionally, I’ll

Doing deals, adapting to different cultures… and scuba diving in the Maldives. Arthur Tait, GM&T Global Carbon Director, talks about his life both inside and outside work

stay on for the weekend and see the sights. Overall, though,business travel isn’t as glamorous as it sounds – you spend much ofyour time on a plane.

Life in the fast laneI’m the envy of a lot of our competitors as I can take a carbon deal to our investment committee and get a decision straight away on whether to invest millions of poundsin it, rather than waiting for the request to go up and down the chain. This speed of response is going to get harder as we grow, but I believe it’s essential that we maintain our entrepreneurial edge.

Home from homeDuring the week, I live near our offices in Kingston but still have a house in Cheshire where I lived before joining GM&T, and that’s where I have my real fun – I have two horses and a pool table there. I have a season ticket for Sale Sharks (one of England’s top rugby union teams) and sometimes go to watch Manchester United play at Old Trafford, even though ‘my team’ is Sunderland. My life in Kingston tends to be more low key, but I can usually relax by getting some exercise or reading.

Taking a vacationI fell in love with Laos when I went there on a charity project to look after orphans. The country is very poor but incredibly beautiful, too, with a wonderfully simple life. I also really enjoyed holidaying in the Maldives where I went scuba diving every day. At the other extreme, several colleagues and I recently climbed Kilimanjaro (see page 19), but I’m not sure I would call that a vacation! And I love the energy of China. In my lifetime, I expect the country to surpass the USas the world’s biggest economic power.

TURN TO PAGE 12 fOR: SHARING THE CREDIT


GLOBAL REACH

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In line with Gazprom’s strategic objective of becoming a leader among global energy companies, GM&T’s vision is to become a leading energy marketing and trading company. This means operating on a global trading platform to move into liberalising and downstream markets.To support our business units

we have built our presence in key geographical markets, enabling us to create innovative solutions to our customers’ energy needs. These pages show our marketing offices in Kingston upon Thames, Manchester, Paris and Houston and how you can contact them.

HOUSTON

Gazprom Marketing& Trading USA, Inc.

Bank of America Building,700 Louisiana Street,Suite 2500, Houston

TX 77002, USAT: +1 (281)404 4500

TRADINGPLACES

30+ THE NUMBER OF COUNTRIES FROM WHICH GM&T EMPLOYS PEOPLE 27BCM

THE AMOUNTOF GAS SUPPLIED GLOBALLYBY GM&T

JohnHattenberger

President & MD,GM&T USA

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GLOBAL REACH

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100THE NUMBER OF COUNTERPARTSGM&T WORKS WITH2007

THE YEAR GM&T’s HOUSTON OFFICE OPENEDM

KINGSTONUPON THAMES

GM&T’s head officeand location of its energy

trading, carbon andorigination businesses.

Gazprom Marketing& Trading Limited

Gazprom House, 60 Marina Place, Hampton Wick, Kingston upon

Thames KT1 4BH, EnglandT: +44 (0)20 8614 1312

PARISGazprom Marketing &Trading France SAS

68 avenue des Champs-Élysées,75008 Paris, France

T: +33 (0)1 42 99 73 50

Iouri VirobianPresident,

GM&T France

GLOBAL LNG

Gazprom Global LNGGazprom House, 60 Marina

Place, Hampton Wick, Kingston upon Thames

KT1 4BH, EnglandT: +44 (0)20 8614 1312

MANCHESTER Gazprom Marketing& Trading Retail Limited

Bauhaus, 5th Floor,27 Quay Street, Manchester

M3 3GY, EnglandT: +44 (0)845 230 0011

Jon FeingoldManaging Director,

GM&T UK Retail

FrédéricBarnaudDirector,

Gazprom Global LNG


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CARBON

Monday 8 December was a momentous day for Gazprom Marketing and Trading – its Carbon business signed major offset deals with Japan’s Marubeni Corporation and India’s SUN Group

Sharing the credit

Marubeni Corporation, exclusive supplier of carbon-offset credits to Japan’s national government, has signed a cooperation agreement with GM&T that will provide a secured route for the sale of Emission Reduction Units (ERUs) to the Japanese emissions market.

“This is a highly significant deal for both parties,” said Arthur Tait, Global Carbon Director, GM&T. “It provides a secure market for Gazprom’s pipeline of JI (Joint Implementation) credits, and provides Japan with a credible alternative to Assigned Amount Units (AAUs) in the face of challenging Kyoto targets. Despite current global economic conditions, Marubeni and Japan’s commitment to stand firm to Kyoto obligations should be commended by the international carbon community.”

Japan can use either ERUs from the JI mechanism of the protocol, or AAUs, to comply with Kyoto Protocol targets for climate protection though 2012. Under Kyoto, Japan’s targetis to cut emissions by six per cent compared with 1990 levels.

The structured agreement between GM&T and Marubeni builds on existing trading relations between the two companies. In February 2008, GM&T announced the conclusion of its first Russian/Japanese transaction of forward-delivered Certified Emissions Reduction unitsunder the Clean Development Mechanism of the Kyoto Protocol with Marubeni.

The transaction represented Gazprom’s first-ever carbon deal with a major downstream customer.

Big in JapanSUN is shiningGM&T could gain a strong foothold in India’s fast-growing carbon credits market – thanks to a joint agreement reached with SUN Group, an Indian investment company. Both companies expect the agreement to pave the way for the launch of several Clean Development Mechanism projects in India next year.

Alexander Medvedev, Chairman of GM&T’s Board, Deputy Chairman of Gazprom’s Management Committee and General Director of Gazprom Export, talking at the deal-signing ceremony at the Mandarin Oriental Hotel in London in December, said: “This is a significant agreement and not only for both our companies. It is an agreement that could strengthen the bond between India and Russia and benefit society.”

Also taking part in the signing was Nand Khemka, Chairman of SUN Group. He said: “We’re delighted to have reached this agreement with Gazprom. Both countries have a tradition of working together and this unique cooperation between our companies could add to this tradition.

“By helping to reduce emissions, this deal has a lot of good in it. We have to address the issue of climate change for the next generation.”

SUN Group, a leading investor in India, Russia and other emerging markets, is developing a strong presence in the energy sector and is active in oil, gas, and mining. The company has more than 100 people working at its global offices, principally in London, Moscow and New Delhi.

Gazprom’s Alexander Medvedev (left) and SUN Group’s Nand KhemkaGazprom and Marubeni directors at the signing in London


UK RETAIL

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The final link in the chain. That’s how Jon Feingold, Managing Director of Gazprom Marketing & Trading’s UK Retail business, describes his team. “While OAO Gazprom extracts natural gas from the ground, we’re the only business sporting the company name that sells the gas direct to the end-user,” says Jon. “We’re the first 100 per cent Gazprom brand outside of Russia, so the way we do business can have a huge bearing on the company’s reputation.”

Since it started trading in June 2006, UK Retail has been thriving. Having started out only selling natural gas to SMEs (small to medium-sized enterprises), the business now supplies all segments of the UK retail gas market except households and has already gained a market share of two per cent.

UK Retail, whose office is now based in Manchester, England, currently supplies gas to around 13,000 sites; the amount of gas it supplies topped two billion cubic metres in 2008. “This might not sound very significant in terms of the overall UK market but it highlights just how fast we’re growing,” says Jon. “We win a lot of business via brokers, which is why we’ve been able to grow as quickly as we have.”

No business is too large or too small to buy

gas from UK Retail. “Our customers range from fish-and-chip shops to large manufacturing companies.” Customers include Chelsea Football Club, high-street retail chain Bhs and car-repair specialist Kwik Fit.

UK Retail is winning customers thanks to a comprehensive product range which includes fixed and flexible gas-supply contracts. “We believe we have the most complete product range on the UK market,” says Jon. As the business has grown, it has developed a number of new products and services for customers including Site Services, Energy Management, and Automated Meter Reading.

Customers are also being offered GM&T products besides gas, such as carbon. A major retailer recently agreed to buy carbon credits from GM&T to offset the gas it purchases from UK Retail. Jon declares: “Our 2009 offering is not just about gas – it’s about energy solutions.”

Managing growthAs UK Retail grows, one of its biggest challenges is managing growth – something it has achieved so far. Our brokers and customers tell us that our level of service remains excellent.”

To handle its rapid expansion, UK Retail has more than doubled the size of its workforce to around 30 employees since it started trading and has developed a sophisticated online billing system. “We’ve put a lot of effort into developing the system and we have an IT department that sits in our Manchester office, giving us flexibility and control,” says Jon.

Customers can use the secure online billing system to analyse bills. “This makes the whole process quicker, easier and cheaper for our customers,” says Jon. The system has proved so popular that UK Retail is migrating to a larger website to cope with demand. UK Retail isn’t a remote business, though: it works with its customers on their physical

With a product range that’s second to none, Gazprom Marketing & Trading Retail is making quite a name for itself in the UK. We visited the business’s Manchester office to learn more

WE HAVE STRICT PROCEDURES IN PLACE FOR MANAGING CREDIT BUT WE REALISE THAT SOME OF OUR CLIENTS MIGHT STRUGGLE IN THE CURRENT ECONOMIC CLIMATE. WE WILL WORK WITH THOSE CLIENTS TO HELP THEM AS BEST WE CAN

Jon FeingoldManaging Director, GM&T UK Retail

Manchester United and Chelsea are GM&T customers

businessFlow

Read on foR: AUTOMATED METER READING


UK RETAIL

gas requirements. UK Retail has an Energy Services team to help customers with meter installations, gas-pipe works, and energy solutions such as Automated Meter Reading.

This year will see UK Retail move into the non-daily metering market, while Jon is also keen to establish a presence in the domestic gas and electricity markets. “Our target is to be supplying 19,000 sites with gas by the end of 2009, and to gain a 10 per cent share of the market by 2012,” he says.

UK Retail is also looking beyond Britain to grow its business and entered the Irish retail gas market in 2008 (see page 15). Jon is conscious, however, of the need to grow at a sensible pace. “It’s important we maintain our strong reputation, because once you lose that reputation you never really get it back.”

Credit crunchJon is also aware that the global credit crunch could hit UK Retail’s customers hard. “I think the next 12 months will be very difficult,” he says. “We have strict procedures in place for managing credit but we realise that some of our clients might struggle in the current economic climate. We will work with those clients to help them as best we can.”

Yet despite the economic downturn, he expects UK Retail to continue to grow andis looking forward to spearheading the business’s development. Jon, an American from near Boston in Massachusetts, has lived in England for the past 15 years and loves life in the UK. “I feel more English than American now!” he jokes.

For Jon, whose company, Pennine Natural Gas, was acquired by GM&T in 2006 to enable Gazprom to enter the UK retail gas market, being able to compete with energy giants such as Total, E.ON and Centrica is a dream come true. “I always wished we could compete against the larger competitorson a level playing field and now we can.”

A GOOD READRetail gas customers are looking to become more energy efficient to cut costs and reduce their carbon footprint. To help them, GM&T launched an Automated Meter Reading (AMR) service in 2008.

“AMR is an up-and-coming industry,” says UK Retail Managing Director Jon Feingold. “It makes it easier for customers to monitor their energy usage.”

GM&T paved the way for its AMR service by acquiring an equity stake in TruRead, a leading UK-based AMR supplier, in March 2008. TruRead’s technology enables remote reading of meters for gas and electricity without human intervention.

The AMR system is complimented by UK Retail’s online Energy Management system. “A customer might want to compare gas usage at sites at certain times of the day,” suggests Jon. “It’s a great tool for helping customers identify and reduce energy waste.”

AUTOMATED METER READING IS AN UP-AND-COMING INDUSTRY. IT MAKES IT EASIER FOR CUSTOMERS TO MONITOR THEIR ENERGY USAGE

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Emerging markets: Ireland

Ireland is far more famous for exporting pints of Guinness than importing litres of Gazprom gas, but that could all be about to change. After acquiring a licence to ship gas into Ireland, Gazprom Marketing & Trading Retail entered the Irish retail market in August 2008 and started flowing gas to Irish customers two months later. Although it’s early days, the number of commercial customers GM&T Retail has in Ireland is already in double figures.

Having established itself in the UK retail gas market, it made perfect sense for the business to expand into Ireland. Jon Feingold, Managing Director, UK Retail, explains: “We decided to use the expertise and experience we’ve gained in supplying gas to the UK to other markets, and decided that Ireland was the best place to start. The Irish retail gas market is considerably smaller than the UK’s but the products sold in both markets are almost identical.

“What’s more, a number of our UK customers have sites in Ireland and as yet no gas supplier is supplying both markets, with like-for-like products, so we are responding to our customers’ needs.”

Not that GM&T is entirely new to the Irish retail market. “Our team has a lot of experience working within the Irish gas sector as we have been there for the past two years supplying around 20 per cent of the country’s gas through wholesale supply,” says Jon.

The Irish retail gas market still represents a learning curve for GM&T. The company runs its Irish operations from its Manchester office in England, but could well open an office in Ireland once fully established there.

GM&T Retail’s entry into Ireland’s open gas market has been a success so far. Jon says: “We’re targeting and winning new business at the large-customer end of the market as the larger gas users are fairly fluid in changing suppliers and the systems are in place. Our range of products is the same as in the UK, so we’re offering gas users in Ireland something new. Until recently the Irish market was a closed one which means there’s little variety in terms of gas products on the market. We believe we have a lot to offer customers.”

With its foot firmly in the door, GM&T Retail is planning to extend supply in Ireland to smaller customers in 2009. And Jon is confident that GM&T Retail can gain a two per cent share of the Irish retail gas market by the end of 2009. That might not make the Gazprom brand as famous as Guinness in Ireland just yet, but it would be a decent start.

Flying the flag

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TRADINGTRADING

As one of the first four employees of Gazprom Marketing & Trading, Daniel Gornig knows just how far the company has come since opening its first UK office in 1999.

“When I joined in April 2001 there was just a handful of us working out of a serviced office,” recalls Daniel, Gas Portfolio Manager at GM&T. “There was little demand for gas from Russia as the UK gas market was the cheapest in Europe, but Andrey (Mikhalev, Managing Director of GM&T) envisioned the UK running out of gas and having to import it.”Andrey was proved right. “With gas

supplies becoming scarce, prices became so high that the UK looked to import gas,” says Daniel, and it became financially feasible for us to transport gas across Europe to meet that demand.”

The volume of gas that Gazprom supplies to the UK – north-west Europe’s second largest gas market after Germany – has been growing ever since, from 200 million cubic metres of gas in 2001 to eight billion cubic metres in 2008.

“We’ve never failed to deliver gas,” says Daniel proudly. “We trade at every gas hub in Europe and if we ever experience bottlenecks in supply, we do gas swaps with counterparties to ensure we can move supplies from A to B.”

Daniel’s role, supported by colleagues Gavin Steyn and Alex Demidov, involves optimising GM&T’s physical gas portfolio by sourcing gas flow from Russia and finding the best way of placing it in the different

markets Gazprom operates in. The team works closely with GM&T’s Trading desk, led by Head of Global Trading Jon Larsen.

Trading platformThe company’s gas portfolio has provided a platform for trading across all markets and the company has developed relationships with more than 100 counterparts across Europe. “We expect to see an increase in trading in 2009 as a result of our new businesses such as Power and Carbon,” says Daniel.

Although GM&T expects to further expand its gas portfolio in 2009, Daniel is keeping

LEADING FROM THE FRONTKeith Martin (left) joined GM&T as Head of Trading in 2005, after 15 years at a leading global energy company.

“It has been an amazing time at GM&T as we have seen scalable growth in all commodities, markets and geographies,” says Keith, now Director of Front Office, heading the Trading, Origination, Carbon and Retail business groups.

“It is always satisfying to build your own team from scratch, and we have attracted some exceptional people – energy specialists from around the world. The

team has grown significantly in the time I have been here, adding value directly to GM&T and the Gazprom Group.

“We have built a reputation in our markets for innovation, delivery and customer service. This, coupled with our strong team and robust portfolio, will ensure that we are in good shape to maintain our successful path in the years ahead to be an integrated global player, whatever challenges the markets face.”

When he is not travelling to meet customers and counterparties, Keith tries to find time to watch his beloved Liverpool FC.

Having established a presence at every gas hub in Europe, Gazprom Marketing & Trading has a strong platform from which to expand its trading activities in 2009

anythingReady for

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GM&T Trading isn’t only growing its portfolio – it’s also growing its reputation as a company committed to liberalising energy markets.

“We’ve always been a front-runner in creating liquidity in new markets,” says Gas Portfolio Manager Daniel Gornig. “We’ve supported the development of Holland’s gas trading platform TTF, and we’re now supporting France’s gas trading platform APX.”

The company is also helping to develop the BBL pipeline between the Netherlands and the UK. “Gazprom is often seen as an old-guard company,” notes Daniel, “but we’re helping gas markets to function; not blocking them like it’s sometimes claimed.”

POSITIVE ENERGY

a close eye on the global economic downturn. “We have widespread financial exposure to customers, some of which are big banks,” he acknowledges. “We can’t completely remove the risk we face but through our diverse trading portfolio, we’re able to limit our exposure.”

From keeping tabs on financial markets to planning expansion, Daniel’s role is demanding but it’s one he enjoys.

“I’m surrounded by smart people from different nationalities which is great,” he says. “When you socialise after work, there’s always someone telling stories from home.”

From left: Gavin Steyn, Alex Demidov and Daniel Gornig

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TRADING

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People

GM&T celebrated a successful 2008 by holding a Gala Dinner for employees, business partners and customers in December. The dinner, attended by 130 guests, took place in the grand setting of the Wallace Collection in London, home to one of Europe’s finest art collections. Guests got the chance to view paintings by artists such as Rembrandt, Hals and Velazquez.

The guest of honour was Alexander Medvedev (pictured left), Chairman of GM&T’s Board, Deputy Chairman of Gazprom’s Management Committee and General Director of Gazprom Export, who gave a short speech thanking GM&T’s business partners and customers for working with the company in 2008 and for making the year such a successful one.

Mr Medvedev also praised the performance of GM&T UK Retail. “Since we entered the UK market two years ago we have seen very strong growth and much of this is down to our brokers and counterparts,” he said. “We came to the UK with a simple philosophy: to treat every client, whatever their size, with the same importance of a big counterparty and I think we have achieved that.”

Jon Feingold, Managing Director of UK Retail, also said a few words, thanking everyone who has contributed to the business’s success and reflecting on how far it has come since it was acquired by GM&T in 2006. “We were a small UK supplier with big ideas and we had been looking for a major player to provide us with backing,” recalled Jon. “I said at the time that teaming up with GM&T was a match made in heaven and I stand by that – GM&T has given us the foundation to realise our growth plans.”

Toasting oursuccess


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Charity

When it comes to raising money for good causes, Gazprom Marketing & Trading staff don’t do anything by halves. In September, a group of employees took on the daunting challenge of climbing the 19,000-foot peak of Kilimanjaro in Tanzania – and raised thousands of pounds for charity in the process.

The team – Arthur Tait, Elena Sidorochkina, Gavin Steyn, Alex Smith, Anne Sheen and Anton Kovalchuk – paid for the trip themselves, while the company made a donation to their chosen charity, SOS Children’s Villages, to

bring the sum raised to £20,000. The team presented the cheque to the charity at an orphanage in Tanzania en route to the peak.

The expedition was something no one in the team will ever forget. “It was a scary but beautiful experience and to see the sun set over Africa was incredible,” recalls Arthur. “When we neared the summit, we couldn’t go faster than a short crawl due to the lack of oxygen but the teamwork was amazing – there’s wasn’t a single cross word uttered by anyone throughout the climb.”

Summit toshout about

Some pictures from the charity climb


Gazprom Marketing & Trading LimitedGazprom House60 Marina PlaceHampton WickKingston upon Thames KT1 4BHEnglandT: +44 (0)20 8614 1312F: +44 (0)20 8614 1313W: gazprom-mt.com

Gazprom Marketing & Trading Retail LimitedBauhaus5th Floor27 Quay StreetManchester M3 3GYEnglandT: +44 (0)845 230 0011

Gazprom Marketing & Trading USA, Inc.Bank of America Building700 Louisiana Street, Suite 2500Houston, TX 77002USAT: +1 (281) 404 4500F: +1 (281) 404 4501

Gazprom Marketing & Trading France SAS68, avenue des Champs-Élysées75008 ParisFranceT: +33 (0)1 42 99 73 50F: +33 (0)1 42 99 73 99

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