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Gazprom on the background of external and internal challenges

Gazprom on the background of external and internal challenges

The year 2019 was rather nervous for Gazprom.

There was significant reshuffle in the company for the first time since 2011 that affected main directions of business and that continued the internal restructuring of divisions responsible for key construction projects and the procurement system.

The show titled “The Future of Gas Transit through Ukraine” continued throughout the whole year and ended with the signing of contracts just on December 31. It was accompanied by fierce battles around the TurkStream and the Nord Stream 2. As a result, the former will be launched on 8 January 2020, and the latter was subjected to American sanctions at the end of 2019 – as a result, it has 160km of the two lines not laid yet. In the meantime, a serious breakthrough took place in the eastern direction – the Power of Siberia was put into operation marking the first serious step towards diversification of Russian piped gas exports.

Positions of Aleksey Miller, whose dismissal was predicted throughout the whole year, strengthened – he actually managed to prevent appointment of outsiders to top posts at Gazprom and even got rid of some disloyal colleagues in the management board. He is unlikely to leave his post before the Nord Stream 2 story is over – on the contrary, he has a chance to demonstrate his managerial skills in countering the sanctions.

Gazprom reinforced its positions on the Russian market on the background of problems of independents that kept struggling to maintain production of natural gas for domestic consumers. Attempts to start deep restructuring of the sector in favor of independents were suspended.

However, the struggle for Gazprom restructuring will revitalize in 2020. It will also include the question of liberalization of piped gas exports.

The report will elaborate on the following issues:

  • Gazprom’s new administrative structure

    • Main changes in the top management, their administrative and substantive components
    • Restoration of unity of the exports division
    • The new investment and procurement division and consolidation of construction assets
    • Reforms in the sphere of sales and in the financial division
    • HR successes and failures of Aleksey Miller
  • Gazprom on the domestic market

    • The situation around production of hydrocarbons
    • Growth in gas demand and problems of independent producers
    • Decline of the exchange trade
    • Pricing and domestic revenues of Gazprom
  • Gazprom on the European market

    • Competition with LNG and decrease in prices s
    • Struggle for new potential niche
  • Ukraine gas transit and bypassing gas pipelines. Analysis of the latest contracts with Ukraine

    • Successes and difficulties in creation of the new transmission infrastructure
    • The future of gas supplies to Europe and Turkey
  • The Power of Siberia and the Chinese market

    • Prospects of expansion of exports to China
  • Gazprom’s financing standing and new investment priorities

    • The situation around revenues of the company
    • Gazprom’s debt burden and new dividend policy
    • The stake on gas chemistry
    • The path from pipes to LNG
  • Medium-term forecast of developments: HR, structure, exports and finances

Contents of the report:

Introduction 3
Chapter 1. HR revolution at Gazprom 4
1.1. Consolidation of foreign economic division 4
1.2. Sales division. Relocation of Kirill Seleznev 6
1.3. Redistribution of powers. New investment and procurement division 7
1.4. From production to Gazprom Nedra 9
1.5. Changes in financial division, consolidation of construction assets 10
1.6. New administration structure at Gazprom 12
Chapter 2. Gazprom on the domestic market: fragile status quo 15
2.1 Expectation of record high output amid slower production growth 15
2.2 Supplies to the domestic market, the exchange depression 19
2.3 Pricing and revenues of Gazprom on the domestic market. 22
Chapter 3. European market: overproduction and transit risks 26
3.1. Gazprom on markets of European states. Competition with LNG 26
3.2 Turkish market, TurkStream 30
3.3 Ukraine gas transit prolongation 33
3.4 Nord Stream 2, TurkStream: USA declares sanctions to Europe 37
Chapter 4. Power of Siberia, access to the Chinese market 40
4.1 Power of Siberia: the launch of new “project of the century” 40
4.2 Amur gas processing plant, Amur gas chemical complex 42
4.3 Situation on the Chinese market: looking for domestic reserves 45
Chapter 5. Financial standing of Gazprom after completion of big construction projects 50
5.1. Exports to Europe let profits down 50
5.2. Capital investments of Gazprom Group, investment program: from transportation to processing 53
5.3. Debt burden, new dividend policy of Gazprom 58
Chapter 6. Medium-term forecast of developments 62
Date of release: February 4, 2020

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Analytical series “The Fuel and Energy Complex of Russia”:

Outlook for Russian LNG Industry
Russian Energy and West One Year after Ukraine Conflict Began: Are There Connections Still?
Green Agenda in Russia during Bitter Conflict with West
After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.
Oil and Gas Sector Regulation in 2022 and Prospects for 2023
Gazprom at the Forefront of Economic and Political Battles with Europe
Gazprom is being actively thrown out of the market. Its annual supplies to Europe have shrunk from the previous 150 billion to 65 billion cubic metres of gas. European officials assure that they have already learnt how to live without Russian gas, so they will bring its purchases down to but nominal values in 2023. Their main hope is liquefied natural gas. Today the EU must make a crucial decision: whether it has passed the point of no return in gas business with Russia and whether it is certain that its economy will endure without supplies of Russian pipeline gas. Or, on the contrary, Europe will realise after all that the gas balance will not be achieved and the payment for so headlong a rush for LNG will be disproportionate. Assessment of the potential volume of LNG that will appear on the market before the end of the current decade will be the most important factor for making the decision.

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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