Gazprom gives up the position of a super-rich corporation

Experts are confident that the gas giant, having lost the European super-profitable market, will not be able to replace it with anything. Emphasis will now have to be placed on the domestic consumer as well.

Yekaterina Maksimova

According to the results of 9 months of 2022, PJSC Gazprom reduced gas production by 17.1% (to 313.3 billion cubic meters). This is the worst figure in recent years.

Prior to the start of the special military operation, Gazprom reported record production volumes. Thus, from January 1 to February 15, 2022, gas production amounted to 70.1 billion cubic meters of gas. The company then said that this was the best interim figure in three years. Further - until the end of March - the giant reported on production "at the level of the same period last year." But production has been on the decline since April.

First, Gazprom produced 1.3% less, then 2.5%. In May already by 4.8%. Then, on an increasing basis, and now, according to the results of three quarters of 2022, the decrease in production amounted to 17.1%. This is minus 64.8 billion cubic meters of gas.

According to PJSC Gazprom, gas exports to the EU countries for the first nine months of this year decreased by more than 40% (this is minus 58.9 billion cubic meters of gas). But against this background, the corporation reports on the growth of gas exports to China via the Power of Siberia gas pipeline.

In 2022, judging by the plans, Power of Siberia supplies are expected to reach 15 billion cubic meters of gas, but this figure is likely to be exceeded.

By 2024 alone, deliveries through the Power of Siberia gas pipeline should amount to almost 40 billion cubic meters per year.

The Russian company traditionally does not disclose the proceeds from the sale of gas to China, but experts have been saying for years that China is buying Russian gas at bargain prices.

Promsvyazbank analysts believe that Gazprom, having turned towards Asia, will not be able to replace its losses in Europe.

"Gazprom" disclosed some operational data for 9 months. It cannot be said that they were unexpected: given the problems at the Nord Stream and the gradual refusal of Europe from Russian gas, a reduction in supplies to non-CIS countries was inevitable. In September, Gazprom delivered only 4.7 billion cubic meters there. m, which is 68% lower y/y and almost 70% lower than the average monthly level in 2021. Gazprom is reorienting itself to Asia: deliveries through the Power of Siberia are in excess of contractual obligations, and by the end of this year they may amount to 18-20 billion cubic meters. Nevertheless, it is not yet possible to fully replace the falling European volumes," analysts assess the prospects of the gas giant.

Against the backdrop of such prospects, one recalls the story of many years ago, when social media “exploded” because of an obscenely expensive handbag stolen from a Gazprom cleaning lady, which thieves pulled out of the victim’s luxury car. Soon such stories, apparently, will become archaic.

According to the results of the first half of the year, when the decline in gas production and exports was not so large-scale, PJSC Gazprom announced that it had received net profit for the six months of 2022: 2.5 trillion rubles.

At the end of 2021, we recall that PJSC Gazprom received a record profit of 2.1 trillion rubles (according to IFRS). Sales revenue increased by almost 60% and amounted to 10.2 trillion rubles. Net proceeds from the sale of gas increased by 85% to 5.6 trillion rubles. In the same 2021, Gazprom produced more than 514 billion cubic meters of gas, which is 62.2 billion cubic meters more than in 2020.

"Due to high gas prices, Gazprom was able to get record financial results in the first half of the year. In the second half of the year, the results will also be quite good, but weaker (due to reduced supplies)", - Promsvyazbank analysts predict.

"Renaissance Credit" analysts add: "The failure of the Nord Streams and the problem with their maintenance limits gas supplies to the European market, which may become a factor in slowing down the company's development next year".

Aleksey Belogoriyev, Deputy Director for Energy at the Institute of Energy and Finance , noted in an interview with Novye Izvestia that Gazprom is not all that bad anyway. And if it is impossible to supply gas to Europe, the giant will have a domestic market. Plus export opportunities - China, Turkey, EAEU countries, LNG supplies.

"They {export opportunities} are much less profitable. The same LNG supplies still bring us much less money, especially to the budget. But all the same, exports will remain . Another thing is that Gazprom will stop being that "cash cow", "The super-rich company that we are used to. There will be no such margin, the usual super-profit. There will be just such a state-owned company with moderate profitability. Moreover, the main source of profit will come from the domestic market", - Aleksey Belogoryev believes.