Gazprom, the world’s largest gas producer, is a Russian company established in 1989, which
majorly deals in the extraction, transport, production, sale of natural
gas and fuel gas for the vehicles, gas condensate
and oil as well as development and marketing of heat and electric power. The company is mainly owned by Russian
Government, though it’s technically private. Their headquarters located
in Moscow. They monopolize
their domestic market, making 75% of Russia’s gas.
Gazprom enjoyed sky-high gas
prices for years but when it comes to its downturn, it is breathtaking. When in its
peak in May 2008, the company’s market capitalization hit $367bn (£237bn), hence made
it world’s most profitable companies. Alexander Medvedev (Gazprom’s deputy
chair) repeatedly envisioning that
Gazprom could be worth $1 trillion within a decade.
But that prediction disappeared in the air when since 2008,
Gazprom’s value has collapsed. It had a market capitalization of $51bn – lost
more than $300bn, and had dropped net income shockingly 86% by the end of the
When oil slumped
globally it has become anxiety for Gazprom, which sells much of its gas to
Europe at rates associated to the price of oil. Prices on the spot market in
Europe, Gazprom’s revenues key sources, have more than halved in the past two
years. Many analysts assumed that slumping demand in Russia, China and Ukraine
as well as a potential boost in exports of liquefied natural gas from the US,
will ultimately push down prices further. Gazprom’s European customers were started realizing that they
might have other choices. The prices it can charge are dropping, and with them
the firm’s likelihood.
Experts say Gazprom’s main problem is that Vladimir Putin’s (Russian President) treated
it as his weapon. Examples include the company’s purchase of major
Russian media outlets, bullying
or favoring the devotion of neighboring states and sponsoring the fancy Olympic Games in
used Gazprom as a tool of foreign policy, for instance during political rows he
cut off gas supplies to Georgia, Ukraine, Moldova and Belarus, rather than investing sufficiently in
exploration and for the goodwill, Putin used it to fulfill his agenda of
recapturing public control over the oil fields, and of private industries etc.
Gazprom has been a victim of huge stress. Its export revenues dropped by 23% in 2015 due to volume cutback
and currency fluctuations. Cash flow has turned negative as natural gas prices
in Europe remain below $200 per 1,000 cubic meters and access to international finance
markets has been narrowed by U.S. sanctions that were introduced in Sept 2014.
But instead of all the difficulties, Gazprom is
trying to fight back. It is building a giant pipeline called the South Stream
and providing more gas to the heart of Europe by expanding a northern pipeline.
To develop new markets in Asia it is also struggling to build LNG (liquefied
natural gas) plants.
Recently, OMV AG of Austria’s signed agreement
with Gazprom at St. Petersburg International Economic Forum. Gazprom has also signed a good 12 year agreement
to supply LNG to Ghana National Petroleum Corporation (GNPC). Moreover on May 15, 2017, Gazprom, CNPC, and
China Huaneng Group signed a Memorandum of Understanding
to build joint efforts in the power sector within China.
and Pakistan have also signed an agreement on LNG supplies. The deal opens a
door for Gazprom and Pakistan LNG Ltd to build a long-term agreement on Russian
Today, Gazprom is like a hulk, dominating 16% of the
world’s gas supply and operating everything from an oil division to supplying
electric power and running a television station as well.