MOSCOW: Russian gas export monopoly Gazprom said its first-quarter net profit fell 24 percent as sales dropped and it repaid money to European clients who complained its prices were too high, although the profit fall was less sharp than expected.
Gazprom has agreed to adjust long-term deals with major European customers. The repayments exceeded 78 billion roubles ($ 2.4 billion) in the first quarter, it reported yesterday.
Gazprom had to bow to the pressure from European companies, including Germany’s top utility E.ON, which suffered squeezed margins due to a rise in gas prices embedded in the long-term contracts that make up the backbone of the Russian gas exporter’s deals.
Even so, the European Commission this week launched a probe into Gazprom’s practices in central and eastern Europe, saying it was concerned the natural gas producer was abusing its dominant position in the region’s upstream gas supply markets. Several of Gazprom’s clients, including Polish gas monopoly PGNiG, have launched an arbitration process against the company, seeking a lower gas price.
Analysts also said that Gazprom’s bottom line suffered from Russia’s decision to cut gas prices for Belarus, which is set to buy more than 22 billion cubic meters from its neighbor in 2012, by as much as 40 percent last November.
Alexei Kokin, oil and gas analyst at Uralsib, said Gazprom has no option but to offer further discounts in gas prices — which are pegged to rising oil prices — for its customers. “Gazprom will have to continue to cut prices. The (EU) investigation only strengthens customers’ positions and increases their chances for discounts,” he said.
Gazprom’s January-March net profit attributable to shareholders fell to 357.84 billion roubles from 467.97 billion roubles in the same quarter a year ago.
, although it exceeded the 344.93 billion estimated in a Reuters poll of analysts.
Sales decreased to 1.22 trillion roubles from 1.32 trillion roubles in the previous year, below the 1.24 trillion forecast by analysts.
Gazprom Q1 profit down 24% on lower sales
