The Russian state-owned gas company Gazprom is to refund 78bn roubles (£1.5bn) to gas customers on the continent, it said on Thursday just days after the European commission started an investigation into its sales practices.
Gazprom revealed that its first-quarter net profits had plunged by almost a quarter to 357bn roubles as foreign buyers scaled down demand due to warmer weather and the group opted to compensate buyers for previous high prices.
To add to the company’s troubles the Russian government has proposed sharp increases in the mineral extraction tax for natural gas in the next few years, which could impinge on the company’s gas production, even potentially making some fields unprofitable to develop.
The operator has just pulled the plug on its proposed flagship Arctic gas field, Shtokman, amid speculation that the shale gas “revolution” in north America has undermined Russian hopes of shipping gas to the US.
Gazprom supplies more than a quarter of Europe‘s gas consumption, and several EU states rely on the company for most of their needs, being locked into long-term contracts, in some cases of periods up to 30 years.
Western analysts said the quarterly figures showed net sales of gas falling by 17%, while operating expenses rose by 13%, despite Alexey Miller, chairman of its management committee, describing it as the most efficient group in the world.
Andrew Neff, a Russia energy analyst at the consultancy IHS, said key buyers had turned away from “high-priced, time-lagged, oil-indexed, Russian pipeline gas in their long-term contracts”.
The refunds to eastern and central European buyers have not stopped the investigation by Brussels, which said it was concerned that the natural gas producer was abusing its dominant position.
Sergey Kupriyanov, a Gazprom spokesman, took the unusual step of sending a letter of admonishment to the FT newspaper about a recent comment piece on the company’s troubles. His letter said: “I was disappointed to find the tired and simplistic argument that Gazprom is “down”, threatened by the potential shale gas exports from the US. It remains to be seen whether the shale gas boom will revolutionise the European gas market.”