The Nature of Gazproms Global Strategy - Case Study Example

Running Head: THE NATURE OF GAZPROM’S GLOBAL STRATEGY (Your Name) (Institution’s Name) Gazprom is a Russian company in which the government has recently reclaimed control over majority stake, it remain the world’s largest producer, holder and exporter of natural gas. Traditionally, the company’s business has concentrated on FSU and Europe. At the moment, Gazprom is setting motivated targets to increase gas exports globally by starting piped gas and LNG to the Asia-Pacific region alongside LNG deliveries to the USA. The company’s goal of developing itself to a world-class gas company and liberalization of trading Company shares, are attracting equity and strategic investors across the globe. According to the 2020 Russian Energy strategy, the EU is expected to be a traditional export market for Russia. The strategy also proposes diversifying export markets so as to minimise dependence on the European market. Russia is planning to diversify its export routes, to shun dependency on third countries. Diversifying its markets will heavily contribute to the 2020 Russian energy strategy through increased revenue and reduced dependency on the European market. (Guy and Gregory, 2007) The company’s financial base, for example, ownership of 100% shares in seven gas companies will greatly impact on the strategy of controlling and developing new gas provinces. Financial preparedness has seen the announcement to develop the Shtokman field with the absence of foreign companies, this will not only facilitate the strategy but will also ensure its achievement. It has stated that no foreign organisation will get ownership stakes in the Shtokman field license, a clear illustration of a move towards controlling major production assets in Russia. Another significant component of the Gazprom strategy is to have an access to the gas in Central Asia, with an aim of saving some money through postponing the development of expensive and difficult fields in Russia and instead buying cheaper gas from central Asia Republics. Another main aspect of Gazprom strategy is obtaining assets in the European distribution. (Guy and Gregory, 2007) The well organized human resource at Gazprom have seen the commencement on a program of emergency measures, regarding gas export, this ensures that the company is always prepared should there be excessive demand in its products. The human resource management at Gazprom has been resourceful in making crucial decisions at the 2006 to 2010 period, this has been very instrumental in achieving its strategies. Finances raised from the liberalization process have helped the company in raising capital for its business expansion activities thus achieving set strategies. The gas production has since stabilized though with uncertain projection since human resource management has been limiting upstream activities in Nadym-Pur-Taz region (NPTR), its main giant gas field. The financial preparedness by the company will ensure that the plan to develop new gas provinces (Eastern Siberia, Yamal and Far East) is achieved. On the other hand, the company is planning to attract foreign partners who will help in developing Shtokmanovskoye field and install an LNG Plant that is export oriented. Since the management finds it difficult to develop the two projects simultaneously due to limited finances, they have opted Yamal to be its new region for gas production. To embark on the Shtokmanovskoye project the company will first find answers to the stern challenges of implementation program, market opportunities and investment. There are also plans to sustain gas deliveries to international markets through developing and maintaining the gas transportation system. The company is also shifting the focus of European exports to Baltic Sea and North-Western Europe region through the Construction of theYamal-Europe and North European gas pipelines. The company is also giving priority to a direct gas transportation leg from Yamal to Central Russia, this will definitely boost the company’s profitability as a result of the gas that will be supplied to its main domestic industrial consumers, particularly to the power generating plants. Through the reconstruction of the Central-Asia-Centre gas pipeline system the management will help Gazprom expand its business opportunities, incorporating larger Central Asian gas volumes to its supply balance, based on long-term accord in the governments of the concerned countries. Another invention is plans to link Ukraine’s transportation system with the Bogorodchany-Uzhgorod pipeline which will help build up Gazprom’s market position in Central Europe countries. The key external intention of the company’s management board is to expand the Russian gas exports on a worldwide scale. The new market opportunities will help the company in achieving its strategies. The management is planning to grow and secure markets shares on foreign markets by integrating Central Asian and Russian gas flows under the firm’s control, and later embarks on marketing the gas in FSU and Europe. (Guy and Gregory, 2007) Marketing techniques has seen Gazprom put more focus on deeply integrating intercontinental downstream markets. Gazprom has been able to penetrate new market territories following the liberalization of the gas market in Europe. This has assisted the company in taking measures to reach final consumers in its long-established markets. United Kingdom and Germany are outstanding examples of markets where the company has started supplying gas to final consumers through joint venture marketing. Innovation is greatly assisting the company in achieving its strategies, the firm has started with spot deals and short term contracts, long term contracts will remain to be the foundation for export operations. Therefore, Gazprom is preparing itself to face strong competition in Europe, as well as in trying to open new gas markets in North America and Asia-Pacific areas where LNG is expected to impact heavily. (Krame, 2006) The human resource department has seen the company abandon earlier practices of low gas prices through steadily growing its exports thus intensifying its control over the gas markets in the FSU countries. This has played a great role in achieving its marketing strategy. Diversification” has been the main theory in explaining the country’s current efforts in export underpinned by the principle of single export channel, which Gazprom supports as a way of staying away from export markets competition necessitated by different Russian gas suppliers. It’s no doubt that finance, marketing human resource management and innovation (as discussed above) have contributed in one way or the other in the company’s currently pursued strategies. The management is optimistic of realizing a successful development of export capability as well as in attainment of its set strategic tasks. A combination of higher returns from foreign gas markets, conducive environment around Gazprom, production growth and strong reserves replacement and evolution of the Russian gas market will place Gazprom in that position of an international energy super-major. Exports are projected to grow in all major international gas markets i.e. US, Asia-Pacific and Europe, as the Russian domestic market becomes the main revenue generator for Gazprom making it the international investor’s preferred choice. (Krame, 2006) References Guy, C. and Gregory, L. (2007): Bp Set to Leave Russia Gas Project, Wall Street Journal Krame, A. (2006): Russia Oil Reversal Stirs Outcry, London, Cambridge University Press Gazprom’s Strategic objectives, Retrieved on October 16, 2007, from www.gazprom.com Read More