Gazprom Approves $14.7bn Budget, Notes Difficulties

Gazprom’s board has examined the Russian monopoly’s preliminary operating results for 2016 and its projected investment program, budget (financial plan), and cost-cutting program for 2018–2019, it said in a website statement December 19. It has also approved next year's investment programme.

Next year it will spend roubles 910.67bn ($14.7bn) of which roubles 625.455bn are for construction projects and roubles 285.09bn are for long-term financial investments. It did not give figures for this year.

In line with Gazprom's budget (financial plan) for 2017, borrowings will total roubles 288.26bn. The approved financial plan will allow Gazprom to stay in the black, it said. Cost cutting will trim roubles 12.24bn from the plan.

Among the factors affecting it, it lists the low oil price; the industry-wide reduction in capital expenditure; delayed final investment decisions for gas liquefaction capacities across the world; the recovery of Chinese demand for gas; the lifting of economic sanctions against Iran; and the signing of the Paris Agreement on climate change.

Gazprom CEO Alexei Miller

(Credit: Gazprom)

Despite that, however, "it was noted that the events of 2016 had not led to a substantial revision of the long-term outlook for the global energy market."

In this context, Gazprom continued its systematic efforts to diversify gas supplies and increase its share in the key markets of Europe and Asia-Pacific.

Among other things, European export routes Nord Stream 2 and Turkish Stream are progressing; and to the east, the Power of Siberia gas trunkline (eastern route of Russian gas supplies to China), and the Amur gas processing plant are going according to schedule. Gazprom has also signed a memorandum of understanding on the Baltic LNG project with Shell; and another MoU on underground gas storage and gas-fired power generation in China. 

The board said that despite the changes in the external environment, "Gazprom's positions would remain stable in the long term," thanks to "its vast gas reserves, well-developed production and transportation infrastructure, long-term contracts, and diversified export routes," among other things.

William Powell