Gazprom’s Record Budget – and Borrowing
A week after Russian giant Gazprom approved its historic record budget for a year of $21.9bn, the company’s CEO Alexei Miller told president Vladimir Putin November 28 that 2019 will be even more expensive than 2018, rising 9.3% to $24bn.
Credit ratings agency Fitch in its recent review noted that Gazprom will have to borrow $10.35bn/yr and that by early 2020 the debt will have increased by $30.85bn: “Gazprom in the next three years will have to borrow a record amount to finance its mega-pipelines bringing gas to Europe and China,” it said.
Miller told Putin – who installed him in his present position as boss of Gazprom in 2002 – that the budget hike was due to peaking investment needs for the implementation of the company’s most important strategic projects: NordStream 2, TurkStream and Power of Siberia. Miller said that the investment program for next two years would be the maximum as the first two are due to be completed by end of 2019.
The three major mentioned projects will cost the gas giant about $20-25bn.
Throughout 2017, Gazprom will have a negative cash flow. In 1H 2017 capital expenditure for construction was almost rubles 800bn ($13.71bn), yielding an operating profit of only rubles 450bn. According to Fitch, this situation will continue for some years.
In November, Gazprom signed several credit deals with foreign financial entities like Mizuho Bank, SMBC, and J.P. Morgan and Unicredit.
Gazprom’s official website also covered the meeting between Putin and Miller, quoting the company’s CEO as saying the development of Chayandinskoye field as well as the construction of the Amur gas processing plant were on the agenda for the next few years, both being related to the Power of Siberia export project.
As of last October more than 1,095 km of the Power of Siberia pipeline, or 50.7% of the total length of its prime section from the Chayandinskoye field to Blagoveshchensk (the border with China) had been built. Gazprom also finished Turkstream in its territory recently and started laying pipes in Turkish waters.
Miller also said that “we expect the total amount of gas produced by Gazprom in 2017 to reach 470bn m³, about 12% more than 2016. As for exports, if the trend observed over the past 11 months continues – and in that period we delivered 13.5bn m³ more than in the same period of 2016 – Gazprom will set an all-time record for the Company’s gas exports with 192bn m³ supplied in 2017”.
In 2017 Gazprom intends to increase supply to domestic markets by 5bn m³, he said.