Gazprom, the world’s largest gas producer, is a Russian company established in 1989, whichmajorly deals in the extraction, transport, production, sale of naturalgas and fuel gas for the vehicles, gas condensateand oil as well as development and marketing of heat and electric power. The company is mainly owned by RussianGovernment, though it’s technically private. Their headquarters locatedin Moscow. They monopolizetheir domestic market, making 75% of Russia’s gas.Gazprom enjoyed sky-high gasprices for years but when it comes to its downturn, it is breathtaking. When in itspeak in May 2008, the company’s market capitalization hit $367bn (£237bn), hence madeit world’s most profitable companies.
Alexander Medvedev (Gazprom’s deputychair) repeatedly envisioning thatGazprom 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 – lostmore than $300bn, and had dropped net income shockingly 86% by the end of theyear.
When oil slumpedglobally it has become anxiety for Gazprom, which sells much of its gas toEurope at rates associated to the price of oil. Prices on the spot market inEurope, Gazprom’s revenues key sources, have more than halved in the past twoyears. Many analysts assumed that slumping demand in Russia, China and Ukraineas 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 theymight have other choices. The prices it can charge are dropping, and with themthe firm’s likelihood.Experts say Gazprom’s main problem is that Vladimir Putin’s (Russian President) treatedit as his weapon.
Examples include the company’s purchase of majorRussian media outlets, bullyingor favoring the devotion of neighboring states and sponsoring the fancy Olympic Games inSochi.Heused Gazprom as a tool of foreign policy, for instance during political rows hecut off gas supplies to Georgia, Ukraine, Moldova and Belarus, rather than investing sufficiently inexploration and for the goodwill, Putin used it to fulfill his agenda ofrecapturing public control over the oil fields, and of private industries etc.Indeed,Gazprom has been a victim of huge stress. Its export revenues dropped by 23% in 2015 due to volume cutbackand currency fluctuations. Cash flow has turned negative as natural gas pricesin Europe remain below $200 per 1,000 cubic meters and access to international financemarkets has been narrowed by U.S. sanctions that were introduced in Sept 2014.But instead of all the difficulties, Gazprom istrying to fight back.
It is building a giant pipeline called the South Streamand 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 (liquefiednatural gas) plants.Recently, OMV AG of Austria’s signed agreementwith Gazprom at St. Petersburg International Economic Forum. Gazprom has also signed a good 12 year agreementto supply LNG to Ghana National Petroleum Corporation (GNPC). Moreover on May 15, 2017, Gazprom, CNPC, andChina Huaneng Group signed a Memorandum of Understandingto build joint efforts in the power sector within China.
Russiaand Pakistan have also signed an agreement on LNG supplies. The deal opens adoor for Gazprom and Pakistan LNG Ltd to build a long-term agreement on RussianLNG supplies.Today, Gazprom is like a hulk, dominating 16% of theworld’s gas supply and operating everything from an oil division to supplyingelectric power and running a television station as well.