December 30, 2009, 01:53 / Business

Gazprom does not believe that it has lost Europe

The minimum production in its entire history, a collapse in exports and a blow to its image in Europe - these are the results of the outgoing year for Gazprom. The concern is confident that this is temporary, but experts do not share its optimism Elena Mazneva

“This crisis does not affect Gazprom in any way,” its director Alexey Miller assured last fall. “We stand firmly on our feet.” By that time, Urals had lost 29% in price, and Rosstat stated: of all industries, only the food industry is growing.

As a result, Gazprom faced its own individual crisis: a 19-day conflict with Ukraine in January, a collapse in exports in the first quarter (against the backdrop of a cold winter in Europe and the highest prices this year) and the lowest gas production in history at the end of the year ( see figure and www.vedomosti.ru).

HOW IT ALL BEGAN

The year began with a traditional gas war with Ukraine: Naftogaz and Gazprom did not agree on a contract, from January 1 Ukraine stopped receiving gas, from January 7 Russia was left without transit to the EU, and half of Europe was left without gas.

18 countries were affected. Slovakia and Hungary declared a state of emergency, and mobilization firewood was burned in Transnistria. Neighbors connected by a pipe helped each other: for example, the Czech Republic took fuel from Gazprom’s main competitor, Norway, and supplied it to Slovakia. “EU citizens are caught in the crossfire in this fight,” said the President of the European Parliament, Hans-Gert Pettering. “European countries have run out of patience,” echoed Czech Prime Minister Mirek Topolanek.

An agreement was reached only on January 19. Gazprom lost about $2 billion in revenue during this time. Nobody assessed the image losses. But interruptions in transit “arose solely due to the fault of the Ukrainian side,” a Gazprom representative assures.

"FAST AND FLEXIBLE"

“We went through the winter as usual. Volumes are decreasing slightly, and, of course, this is due to the economic crisis,” Miller told Prime Minister Vladimir Putin in April. There were no statistics for the first quarter at that time. And when it appeared, it turned out that “a little” was a 45% collapse in exports, a 39% drop in supplies to Europe and a 13% drop to Russian consumers (all to the level of 2008). And it wasn’t just about the besieged January.

At the same time, Europe reduced gas consumption by only 6%: the decline in industry was compensated by the cold. And Norway increased supplies by 11% (IEA data); for the first time in many years, Norwegian gas was slightly cheaper than Russian gas, and spot fuel prices were several times lower.

Gazprom also lagged behind in Russia: here gas demand fell by 6% (data from the Ministry of Energy), and, for example, the largest independent fuel producer, Novatek, co-owned by oil trader Gennady Timchenko, increased sales by 5%.

Gazprom expected a decline in demand due to the crisis, its representative now says. “The company has adjusted production volumes for the year, Gazprom works based on the market, quickly and flexibly responding to changes in demand.” But there are also limits, he adds: the same Novatek has no obligations to provide priority supplies to industrial enterprises and the population, it is not limited by state price regulation and therefore can pursue a more flexible policy. For example, it can sell gas to Gazprom at prices that provide profitability to both companies upon resale.

In fact, Gazprom was losing ground because it was not used to real competition - neither in Russia nor in other countries, says the manager of TNK-BP. And in January, Europe realized: there are alternatives to Russian gas, adds Mikhail Korchemkin, director of East European Gas Analysis.

NEW FORECASTS

Thanks to rising prices in Russia and the CIS, as well as the weakening of the ruble, Gazprom's finances did not suffer as much: revenue according to IFRS for the first half of 2009 decreased by 8% compared to last year, profit - by 35%. Statoil did worse: its revenue in national currency fell by 34%, and profit by 89%.

Gazprom is not changing its long-term forecasts yet. In the first quarter, European exports fell because customers expected Gazprom prices to fall following oil; this is not a long-term trend, a representative of the concern notes: “The global crisis is a temporary phenomenon.” By 2020, Gazprom will still increase its market share in Europe to a third, he is sure.

European consumers have different estimates: by 2020, the share of Russian gas in the EU will drop to 20%, according to a recent review by the European association of mineral fertilizer producers Efma.

Korchemkin is also afraid of this: Gazprom is relying too much on the “take or pay” principle in contracts with Europeans, which guarantees the supply of 160-168 billion cubic meters by 2025. m of gas per year, but whether sales will be higher is a big question. The behavior of the Europeans at the beginning of the year should have made Gazprom think, but it is not abandoning plans for large-scale construction of new gas pipelines, including export ones (according to all stated plans, their capacity can reach 340 billion cubic meters per year). “And this is perhaps the most dangerous thing for Gazprom: the billions invested in unnecessary gas pipelines will not work,” the expert sums up.