Gazprom reports worst half-year results in its history

Russian giant Gazprom has reported its worst half-year results in history. In the first half of 2015, natural gas production fell by 13.1 % to 209 billion m³ and natural gas exports by 12.9 % to 88.5 billion m³.

According to Russian analysts, the company needs to reassess its development strategy and seek new customer markets.

The half-year results were published in a report prepared by the Russian Ministry of Economic Development for the first half of this year. According to the ministry's estimate, Gazprom's production will fall by 7.2 % for the full year to 414 billion m³ of natural gas – the lowest result in the company's entire history.

The results come at a time when Gazprom is unable to sell surplus gas volumes due to falling demand in its key markets. Experts believe the negative results stem from a poorly designed corporate strategy, but also believe the end of the year could improve the situation.

Gazprom made mistakes in forecasting developments in key markets

According to energy analyst Ilya Balakirev, Gazprom's situation has been affected by a number of factors, some of which could have been better forecast and controlled.

„This primarily concerns forecasts of developments in Ukraine and the US shale gas boom. Above all, however, it concerns Gazprom's misguided calculations, as it continually increases production without properly taking demand trends into account,“
Ilya Balakirev

However, Balakirev added that Gazprom's plans operate on the scale of decades rather than months, meaning monthly declines in demand may not be so serious.

Gazprom also hopes that demand in Europe will continue to grow, as evidenced by the beginning of 2015, when gas consumption in Europe increased by 12 % year on year (although this was largely due to this year's colder winter).

According to analysts, developing new markets is crucial for Gazprom, including supporting LNG terminals and expanding in Asian markets, as it has been steadily losing its position in Europe, particularly to Norway.

„In the short to long term, Gazprom has two options – radically change the company's strategy or expand into new markets,“
Ilya Balakirev 

It is already clear that Gazprom is seeking to develop infrastructure in order to increase its sales. Whether in Europe through the Turkish Stream pipeline or the expansion of the Nord Stream pipeline, or in Asia through construction of the Power of Siberia pipeline to China.