Gazprom Presents EC with Settlement Terms: Press
Gazprom has presented proposals to the European Commission (EC) that it hopes will end the five-year anti-monopoly probe into the company’s operations in central and east Europe, the Russian gas holding said December 27, according to numerous press reports, including Tass, quoted below. There was no statement on its website as of December 28.
"Our proposals were prepared in follow-up of a series of consultations by among the EC, Russia and Gazprom held since 2013. We held a range of meaningful discussions with the EC, where parties had an opportunity to discuss in detail all matters giving rise to concerns of the EC. Proposals tabled by Gazprom are an outcome of serious work and demonstrate our readiness to address comments of the European party on gas market issues in due course, where it is justified and possible," Gazprom deputy CEO Alexander Medvedev said.
Medvedev also expressed hope that "the EC – and ultimately the market – will positively respond to our proposals, which should make possible to reach progress within the framework of this case and achieve its completion in the nearest future."
The EC and Gazprom reached progress in settlement of the antimonopoly probe opened by the EC against the Russian gas holding, EC competition commissioner Margrethe Vestager said in October after consultations with Gazprom in Brussels. At that time, Medvedev committed to offer proposals no later than Christmas.
Gazprom's deputy CEO, Alexander Medvedev
(Credit: Gazprom)
Europe's gas markets have changed a lot since the probe started, including: the virtual abandonment of oil indexation in some regions of Europe; the arrival of LNG import terminals and interconnectors that reduce some countries' reliance on Gazprom; the drop in gas demand for industry and power generation; and Gazprom's own introduction of gas auctions.
Exports up, profits down
Despite the availability of US and other LNG, Gazprom has had a record year for European gas exports over a number of time periods this year, although this greater volume was sold less profitably owing to low prices.
This year, it forecasts profitability to be 25%, down by 6 percentage points from 2015. Deputy chairman of the management committee Andrei Kruglov told the in-house magazine December 28 that this can be "primarily attributed to the downturn in the oil and gas markets, the increased tax burden, and the upsurge in low-margin trading operations thanks to the consolidation of trading businesses in Europe. It should be noted that Gazprom is reducing its expenses, which partly offsets the aforementioned factors."
Considering the financing requirements of the investment program and the deterioration in the energy markets, the free cash flow will be significantly lower in 2016 than in the previous years. Capital investments will be close to the level of cash flow from operations. We are trying to maintain the positive trend for this indicator.
William Powell