Gazprom to refund $4.7bn to EU customers
Moscow, February 9, 2013
Gazprom, one of the world's top gas producers, expects to hand $4.7 billion in price cuts to European consumers this year, company officials said, and vowed to make good on dividend promises despite the cash flow hit.
Customers and competitors have been pressing the state-controlled company to cut its prices in Europe, where it generates nearly 60 per cent of its revenues from gas sales.
In response to falling demand due to Europe's economic slump, energy efficiency drives and competition from liquefied natural gas, especially in its main market, Germany, it has amended long-term contracts with some European clients.
Gazprom set aside 133 billion roubles ($4.4bn) for 2012 refunds, and said yesterday it paid out only $2.7 billion.
Analysts say price concessions to the likes of Polish gas monopoly PGNiG, may help Gazprom rebuild its one-quarter share of the European market, and meet its goal of raising gas exports to Europe by 10 per cent this year to 152 billion cubic metres (bcm).
"It looks like Gazprom may sell at least 150 bcm to Europe. Last year was very bad for them, while they also offered some discounts for their gas," Uralsib analyst, Alexei Kokin, said.
Sources have said that Gazprom may cut gas prices to Europe this year to levels comparable to those on the spot market, where prices undercut the formula linked to oil prices in Gazprom's long-term contracts.
Rival suppliers such as Norway's Statoil have adapted pricing policies proactively to increase gearing to prices on Europe's increasingly active gas trading hubs.
Among other challenges, domestic rivals, led by independent producer Novatek, want to overturn Gazprom's monopoly on exporting gas, enshrined in a 2006 law. Novatek has been lobbying for the rights to export liquefied natural gas by ship.
President Vladimir Putin's energy policy commission is due to meet on Wednesday to discuss the Novatek proposal, which reports suggest has won backing from Rosneft, the state oil major headed by longtime Putin ally Igor Sechin.
Gazprom's declining cash flows have called into question its ability to boost dividends while funding vast investment projects, including plans to expand its pipeline export routes.
Analysts who saw an investor presentation in Moscow said Gazprom aimed to pay 2012 dividends of eight to nine roubles per share, down from 8.97 for 2011. But for the current year it expects dividends to rise to between eight and nine roubles. – TradeArabia News Service