March 2009 - Gazprom Export expands its risk measures with Lacima’s software

20/03/2009

Gazprom Export, a subsidiary of energy giant Gazprom, selected Lacima Group back in 2007, to develop an integrated risk management system, to quantify and measure the impact of market and volumetric risks on its revenues and profits.
 
Lacima’s energy risk management system is used to value Gazprom Export’s complicated contract portfolios that include legacy long term gas contracts indexed to oil, oil distillates and coal, and contracts indexed to various gas indices, which feature complex pricing formulas and a set of daily, monthly, quarterly and yearly volume constraints.
 
As a result of the evolution of Gazprom Export’s risk management processes, the company has now extended its use of Lacima’s risk analytics functionalities significantly, to support new products traded and to measure new risk factors.
 
Mr Vyacheslav Salychev, Head of Risk Management, from Gazprom Export says, “We selected Lacima’s energy risk management software for its wide ranging valuation and risk measurement capabilities, coupled with its flexibility to incorporate our custom models into an integrated risk analysis framework. Furthermore, Lacima’s quantitative expertise helped us to address data availability issues for calibration and modelling, which further allowed us to improve accuracy of the results.”

For potential future exposure, Gazprom Export benefits from the ability to calculate the maximum exposure to counterparty credit risk for each given confidence level and sub-period. The company is able to assess marginal earnings at risk by each risk factor type / types of factors across its portfolio. Commissions associated with certain contracts and/or 3rd-party gas suppliers are captured and accounted for in earnings at risk measures.

Gazprom Export benefits from the ability to model prices with data combinations of monthly and daily resolutions, and incorporate jumps into calibrations of daily data, to improve modelling of gas prices and to support modelling of new products such as electricity. Furthermore, the company is able to “plug in” its custom estimation and generation modules, and assign these to any risk factors in Lacima’s energy risk management system together with Lacima’s models.

Dr Chris Strickland, Director of Lacima Group says, “We are delighted at this major project milestone. Our work with Gazprom Export demonstrates Lacima’s edge over its competitors to deliver software solutions hand in hand with quantitative expertise to solve complex contract modelling, valuation and risk analysis requirements. We look forward to an ongoing collaboration with Gazprom Export and its subsidiaries.”

About Gazprom Export
Gazprom export is the world's largest supplier of natural gas. The company is 100% owned by Gazprom, the world's largest gas company basically focused on geological exploration, production, transmission, storage, processing and marketing of gas and other hydrocarbons. Gazprom's mission is to provide effective and well-balanced gas supply to Russian customers and to safely implement long-term gas export contracts.

Gazprom possesses the world's largest natural gas reserves. The Company's share in the global and Russian gas stocks makes up 17 and 60%, respectively, with its overall reserves estimated at 29.85 tcm and currently priced at US$ 182.5 bln. Gazprom's share in the global gas production is nearly 20%. For more information, visit www.gazprom.com

About Lacima Group
Lacima Group is a specialist provider of energy and commodity pricing, valuation and risk management software and advisory services. Based on its internationally acclaimed research in energy risk modelling, Lacima’s solutions help energy trading organisations to effectively quantify and manage risks associated with structured contracts and physical assets across multiple commodities and regions. For more information, visit www.lacimagroup.com.

Contact for press enquiries:
Ms Naheed Sharmin
Marketing Manager
Lacima Group
Direct tel:  +44 (0) 20 7036 0360
Email: naheed.sharmin@lacimagroup.com

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