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Non-Public Budget Indicates Gazprom Plans to Increase its European Market Share by 2%

Russia’s state owned gas giant Gazprom (ticker: OGZPY, Gazprom.com) is hoping to increase its share of the European market to 33% this year, 2% more than in 2015. The company also plans to continue growing through 2018, despite its public message of maintaining supply, according to non-public documents obtained by Bloomberg.

The company also held an annual investor meeting in New York, with another scheduled in London later this week, for the first time since 2014. Last year, Gazprom decided not to hold its annual meeting and instead focused more of its attention on Asian markets. Experts who spoke with Oil & Gas 360® said that the Russian company might have trouble breaking into new markets, however.

During the investor meeting, the company’s deputy head Alexander Medvedev said Russia has “the most competitive” gas price in the European Union now and Gazprom is not concerned about rivals in the region, including LNG from the United States.

“In a five-year perspective, the cost of U.S. LNG is seen higher than forward prices at the British Hub NBP,” said Medvedev. “Imports of North American gas to Europe will be limited.”

Gas exports to Turkey and the EU and the Baltic States are seen at 162.6 Bcm (5.7 Tcf) this year, up from 159 Bcm in 2015 and above a record 161.5 Bcm in 2013, according to the budget obtained by Bloomberg. Supplies are seen at 166.1 Bcm in 2017, with 166.3 Bcm in 2018. Most of the increase in flows is expected to go through the Nord Stream Pipeline to Germany.

Gazprom testing plans at $20 oil, while sub-$40 oil is pounding company’s financials

Despite hopes for great exports to Europe, Gazprom still faces substantially lower profits amid the global oil glut. The company’s contracts are tied to oil prices, with Q1 prices down 37% year-over-year, according to Chairman Viktor Zubkov. The company’s revenue may fall below $28 billion this year, the lowest since 2004, if the average oil price remains below $40 per barrel.

The company has reserves to cope with the situation though, said First Deputy Head of Gazprom’s Financial Department Igor Shatalov. The company’s plans for this year assume a “conservative” $35 per barrel average, and Gazprom is testing plans with crude as low as $20 per barrel, according to Shatalov.


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