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Gazprom: Goliath is not going to surrender

Gazprom: Goliath is not going to surrender

Contradictions between major players on the Russian gas market keep accumulating. Depressed demand on the market and increased supply by independent producers restrict gas output of Gazprom and sharpen competition for financially reliable consumers creating the ground for new intrigues around configuration of the sector.

The situation on foreign markets is positive. Russian gas exports to the European Union keep growing. The increased demand for gas imports, concerns about reliability of transit via Ukraine, and mutual tiredness of sanction policies form the background for settlement of gas disputes and for development of constructive cooperation on new projects.

The Asian direction is not left unattended. Decline in revenues from domestic supplies, due to redistribution of the profit margin and departure of premium clients to independent producers, and from exports over low prices of hydrocarbons create problems for Gazprom’s financial standing. Growth in the tax burden on Gazprom contributes to these problems. Nevertheless, a comfortable level of debts and access to Western and Asian markets of capital, coupled with optimization of expenses on gas purchases and investments, enable Gazprom to hold its ground even in current conditions.

This report by the NESF analyzes the current standing of Gazprom.

The report elaborates on the following issues:

  • Gazprom is surrounded by independent producers: the situation on the domestic gas market

    • The situation regarding supply and pricing
    • Development of exchange trade
    • New proposals by independent producers on gas sector restructuring, Gazprom’s counterattack
  • Gazprom on foreign markets

    • New leap into Europe: How long will it last?
    • The problem of transit via Ukraine, the fate of new pipeline projects
    • The Turkish saga
  • Financial and economic standing of Gazprom

    • Taxation of Gazprom
    • Dynamics of revenues and expenses
    • Investment policies
    • Debt burden
  • The medium-term forecast of developments

    • What will happen to restructuring on the domestic market?
    • What awaits Gazprom on foreign markets?

Contents of the report:

INTRODUCTION 3
Chapter 1. DOMESTIC GAS MARKET 4
1.1. Demand, pricing 4
1.2. Production circuit 8
1.3. New round of struggle for sector restructuring 14
1.4. Gas trade on exchange: interim results, prospects 19
Chapter 2. GAZPROM ON EXTERNAL MARKETS 22
2.1. Gas supplies to EU-28 22
2.2. Gazprom and Turkey 28
2.3. Ukraine, new pipeline projects 31
Chapter 3. FINANCES OF GAZPROM 42
3.1. Revenue and expenditure 42
3.2. Taxation of Gazprom 45
3.3. Investments. 47
3.4. Debt burden/td> 50
Chapter 4. FORECAST. 54
4.1. Domestic market 54
4.2. Exports 56
Date of release: January 18, 2017

If you are interested to obtain please contact » Elena Kim

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Analytical series “The Fuel and Energy Complex of Russia”:

New OPEC+ Deal and Future of Oil Business in Russia
Gazprom on the background of external and internal challenges
Regulation of Oil and Gas Sector in 2019 and Prospects for 2020
Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia
The tax system in the oil and gas sector continues to undergo radical changes. The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT. The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment. The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.
Ukrainian Gas Hub: Climax at Hand
The “zero hour” comes in less than a month: the contracts for gas transit through Ukraine and for supplying Russian gas to the country terminate at 10 am on 1 January. Meanwhile, Gazprom and Naftogaz are very far from looking for a mutually acceptable solution. The entire European gas business is watching intently the negotiations between Russia and Ukraine. Everyone is waiting for a new “gas war”: the January 2009 events proved to be a serious test both to European consumers and to Gazprom as a supplier. Is there still a chance of agreement? If there is not, will Gazprom cope with its obligations to deliver gas to Europe? Is Russia bluffing as it assures that the new infrastructure and gas in underground storage facilities will enable it to get by without Ukrainian transit even as soon as this winter? What will happen to Ukraine itself at the beginning of 2020?

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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