Gazprom profits rocket to Dh26bn

Russian gas producer share of the European gas market rose to a record high 36.7 per cent last year from 34.7 per cent in 2017

Gazprom headquarters in Moscow. The company reported a doubling of full-year earnings. Reuters

Russian gas producer Gazprom on Monday reported a doubling of annual net profit to 1.456 trillion roubles (Dh26.07 billion) led by record-high sales to Europe.

Gazprom is a lynchpin of Russia's commodity-dependent economy with its sales accounting for over 5 per cent of country's $1.6tn annual gross domestic product.

Last year, Gazprom's exports to European countries and Turkey reached a record-high of almost 202 billion cubic metres despite calls from the European Commission for EU states to diversify away from Russian energy imports amid wider political tensions.

Gazprom has been going through an unprecedented management reshuffle which saw exports boss Alexander Medvedev and Andrey Kruglov, who oversaw the company's finances, leaving the company.

Alexei Miller, who is close to Russian President Vladimir Putin, is still at the company's helm.

The reasons behind the high-profile departures have not been revealed. Some analysts and sources have pointed to internal infighting and poor results of some of the company's units, namely Gazprom Marketing & Trading.

After record-high gas exports to Europe last year, Gazprom's exports have declined this year, partly due to warmer weather, Reuters said. Gas sales to Europe account for almost 70 per cent of Gazprom's gas revenue.

Gazprom’s share of the European gas market rose to a record high 36.7 per cent last year from 34.7 per cent in 2017.

Revenue rose to 8.22tn roubles from 6.55tn in 2017, the company said.

The firm is sticking with a conservative natural gas production outlook for 2019 as warm weather and growing competition from super-chilled fuel reduce European demand for supplies piped from Russia.

“We plan to produce 495 billion cubic metres of gas this year,” deputy chief executive Vitaly Markelov said, reiterating a conservative forecast the company’s executives made in February.

That volume would mark Gazprom’s first drop in output in five years, from 497.6 billion cubic metres in 2018, according to Bloomberg. The energy company revises its output plans several times a year based on demand in Europe, its largest market. The region currently has plenty of gas in storage after a warm winter reduced consumption.

Gazporm's results come after two Chinese companies signed agreements with Russia's Novatek on Thursday to buy a combined 20 per cent stake in its new liquefied natural gas project, Arctic LNG 2.

Novatek gave no financial details in a statement announcing the agreements.

Russia aims to be a major player in LNG. So far, Russia has two LNG plants in operation: Gazprom-led Sakhalin-2 in its far east region and Novatek's Yamal LNG, on the Arctic Yamal peninsula.

Last week, Novatek officially launched its second LNG plant in the Baltic Sea port of Vysotsk but of a much smaller scale than Yamal LNG, Sakhalin 2 or planned Arctic LNG 2.

The Arctic LNG 2 deals were for China National Oil and Gas Exploration and Development Company and Cnooc to buy a 10 per cent stake each in the project set to become Novatek's third LNG plant in Russia. CNODC is a subsidiary of China National Petroleum Corporation .

"China represents one of the key consuming markets for our LNG sales," Novatek's CEO Leonid Mikhelson said at the time. "Arctic LNG 2 will be a game changer in the global gas market."

Earlier this year, France's Total, already a shareholder in Novatek itself and its Yamal LNG project, bought a 10 per cent stake in Arctic LNG 2 project.