Gazprom has cut its investment program for 2024

Gazprom said it plans to reduce its investment program for 2024 by a fifth, to 1.57 trillion rubles. The decline in investment, mainly directed towards the construction of new infrastructure, occurs against the backdrop of a decline in exports to Europe and an increase in the tax burden on the sector. At the same time, Gazprom may require large investments in the construction of the Power of Siberia-2 gas pipeline if a contract with China is signed.

Gazprom will reduce its investment program for 2024 by 20%, to 1.57 trillion rubles, compared to the previous year, it reported company November 23. The scope of Gazprom’s investment program and budget for the next year was approved by the board, and then the parameters will be approved by the board of directors.

Gazprom’s investment program for 2024 includes funds for the development of gas production centers on the Yamal Peninsula and the east of the Russian Federation, the Power of Siberia gas pipeline, Gazprom’s gas processing complex, gasification of Russian regions, as well as projects that ensure peak gas balance. The company did not specify which specific objects of the investment program were reduced.

In October, Gazprom, as part of the traditional autumn adjustment revised program for 2023, reducing it to 1.97 trillion rubles. from the originally planned 2.3 trillion rubles. For 2022, the investment program in its original version was planned in the amount of 1.758 trillion rubles, later it was increased to 1.98 trillion rubles. The investment program for 2021 amounted to RUB 1.185 trillion. against the planned 902.4 billion rubles.

The reduction in Gazprom’s investment program is due to the loss of a significant part of export revenue due to reduced supplies to Europe, lower gas prices and an increase in the tax burden, due to which it is planned to partially cover budget expenses.

Yes, company received profit of 296 billion rubles. in the first half of the year, which is 8.5 times lower than a year earlier. The head of the State Duma Energy Committee, Pavel Zavalny, in early November estimated Gazprom’s losses from the increased tax burden and decreased exports at 1 trillion rubles.

Gazprom’s investment program is divided into three components: capital construction, long-term financial investments, and the acquisition of non-current assets. At the same time, capital construction takes up more than 80% of the entire program, and usually these projects are reviewed first. As Kommersant’s interlocutors in the market note, Gazprom’s priority will remain the fulfillment of existing contractual obligations: gas supply via the Power of Siberia and the Sakhalin-Khabarovsk-Vladivostok gas pipeline, development of the Yamal fields. “Most likely, the current restructuring simply implies a shift in lower-priority projects and an increase in planned implementation deadlines, that is, a redistribution of money over time,” believes one of them.

At the same time, a contract with China for the construction of the Power of Siberia-2 gas pipeline may be signed by the end of the year, which will require Gazprom to seriously intensify investments.

Although the project has been discussed for several years, its possible cost has never been stated. However, Kommersant’s interlocutors believe that if the current situation with export supplies continues or worsens, “Power of Siberia-2” can hardly be implemented at the expense of Gazprom. “The total cost of building the system may be 30% more than the entire 2024 investment program,” says one of Kommersant’s interlocutors.

Sergei Kondratyev from the Institute of Energy and Finance notes that, based on data from past years, less than 15% of all investments in gas transportation are usually spent on the reconstruction of old capacities. The share of investments in the development of the gas transportation system in Gazprom’s investment program in past years did not exceed 40%, so it cannot be said that Gazprom will necessarily reduce costs in this area. At the same time, the expert agrees that “it is logical to shift the financing of facilities for which firm agreements have not yet been reached.”

Tatiana Dyatel