Author`s name Dmitry Sudakov

Gazprom’s income drops five times

The reduction in demand for natural gas turned out for Gazprom to be an almost fivefold profit slump. It can be explained with the reduction of gas consumption in the far and near abroad as well as with the price cut on European long-term contracts and the January transit crisis with Ukraine. The Central Asian plots did their bit too: Gazprom gets the Asian gas three times more expensive now, The Vedomosti newspaper wrote.

The sales volume of Gazprom in the 1st quarter is unknown as well as its purchase amount in Central Asia. However, Gazprom’s production has decreased by 18% by the 1st quarter of 2008 and its gas export from Russia is one and a half times down (including by 40% - export in Europe ). The reduction of the profit tax rate and the price rise were expected to improve the situation, but they compensate the decrease in deliveries in Europe in part only: the deficit in Gazprom’s income before the collection of duties totals 80 billion rubles.

Gazprom expects that the demand for gas may improve in Europe by the end of the year. According to forecasts, the export will decrease by 8% in relation to 2008 (including the CIS). The matter is Gazprom has higher prices than many other suppliers do in the EU, a manager of the gas giant explains. Some rivals of Gazprom have even higher production in relation to the level of the 4th quarter.

According to the forecast from the Ministry for the Economic Development, the average European price of Gazprom will go down to $205 for 1,000 cubic meters in the 3rd quarter. At the same time, the demand will rise – the Europeans will begin to fill their gas storages.