Gazprom Sells More But Earns Less
Russian gas export monopoly Gazprom saw its profit drop by about a tenth in H1 2016 compared with the year before, falling from Rbs 691.3bn ($10.6bn) to Rbs 625.4bn ($9.6bn). Higher costs and lower oil prices were the main reason it gave.
It said its "continuing strong financial performance combined with a unique asset base ensure both dividend payments and the ability to fund further investment in major value adding projects." The biggest projects in Gazprom's in-tray are eastern Siberian upstream gasfield developments and the Power of Siberia export line to China; and Nord Stream 2 pipeline.
Gazprom CEO Alexei Miller and China's ambassador to Russia, Li Hui met in late August (Credit: Gazprom)
Net sales of gas rose by Rbs 136.51bn, or 8%, from Rbs 1,618.8bn to Rbs 1,755.3bn ($27bn).
Net sales of gas to Europe and other countries – which it also calls the 'far abroad' and includes Turkey – rose by 19%, to Rbs 1,128.3bn ($17.4bn). This rise was driven by the 36% increase in volumes of gas sold: 109.4bn m³ to Europe and other countries, up from 80.4bn m³ in H1 2015. That factors in an increase of 49% to 58.1bn m³ to these markets during January-March 2016, disclosed on August 10.
Gazprom said that H1 2016 sales to its customers in both the Russian Federation and the former Soviet Union were down, collectively by 14bn m³.
The average Russian ruble price (including excise tax and customs duties) fell by 18% compared with the same period of the prior year. Sales to Former Soviet Union countries fell 27%. The change was owing to less gas at a lower price. Net sales of gas in the Russian Federation fell 1%, as although the average ruble price rose 8%, it sold 9% less gas.
Its share of profits from associates and joint ventures fell by Rbs 27.6bn to Rbs 33.8bn ($521mn), mainly resulting from Sakhalin Energy Investment Company – the integrated LNG project in Russia's far east – contributing Rbs 33.17bn less than last year. This was partly compensated by Rbs 15.52bn more from Gazprombank and its subsidiaries.
Charge for impairment and other provisions rose by Rbs 33.85bn or 114 % for the six months, mainly driven by an increase of charge for impairment allowance for doubtful trade accounts receivable of Naftogaz Ukrainy; and charge for impairment allowance for doubtful prepayments.
The cost of transiting gas, oil and refined products rose by a quarter to Rbs 303.79bn ($4.7bn), up from Rbs 242.83bn for the same period last year. This increase was mainly driven by an increase in transit of gas through the territory of Ukraine denominated in rubles and the activity of the Gazprom Germania Group, which carries out Gazprom's trading and supply activities in Europe.
William Powell