Gazprom’s New Focus On Production

Russian gas export monopoly Gazprom plans to increase investment in gas production and transportation substantially while cutting spending on acquisitions. This will reassure European customers concerned about its capacity to meet export commitments. However, Gazprom’s capacity to deliver will be severely tested as it tackles an array of ambitious projects.

Gazprom has been under fire at home and abroad for failing to invest in new production. The company has channeled much of its strong cash flow of recent years to non-core acquisitions, including:


–a $13 billion stake in the Sibneft oil company;

–European downstream assets;

–media interests; and

–stakes in several power plants in Russia.

In 2007, it paid $10 billion for a 50% stake in the Sakhalin-2 project–at the expense of Shell and its Japanese partners–and an increased stake in Moscow’s main power utility, Mosenergo. As a result, it twice reduced its investment program for the year.

Forbes