Gazprom will reduce its investment program for 2023

Gazprom, as part of the traditional autumn adjustment, plans to reduce the volume of its investment program for 2023 by 14%, to 1.97 trillion rubles. Such a reduction is rare; usually the program is revised upward. Due to lower gas prices in the company’s remaining markets in Europe and a reduction in export volumes, the company is forced to save.

Gazprom proposes to reduce its investment program for 2023 by 334.34 billion rubles, to 1.965 billion rubles, reported monopoly on October 24 following the traditional autumn review of parameters. The state corporation approves the investment program for the next year in December, adjusting it in the fall, as a rule, in the direction of increasing expenses.

Last time Gazprom reduced its investment program in 2020 due to the consequences of the COVID-19 pandemic. In 2022, the investment program was initially planned at 1.758 trillion rubles, but then increased to 1.98 trillion rubles in the fall. The company associates the current adjustment with changes in macroeconomic indicators and market conditions.

As Famil Sadygov, Deputy Chairman of the Board of Gazprom, explained, the new version of the budget reflects a reduction in revenues from gas sales due to a decrease in market prices in the first half of 2023.

This year Gazprom has not published data on the forecast of the average export price for gas, on the basis of which the budget is set. According to the base scenario of the socio-economic forecast of the Ministry of Economy, the average export price in 2023 was supposed to be about $700.3 per 1 thousand cubic meters, but in reality it turned out to be significantly lower: now the Ministry of Economy expects an average price of $435 per thousand cubic meters at the end of the year . Now gas in Europe is trading at $540 per thousand cubic meters.

The price reduction “was adequately reflected in our operating costs – the total effect of their optimization will be more than 1 trillion rubles. savings,” notes Mr. Sadigov. He added that the planned volume of the reserve fund at the end of 2023 has been increased to 385 billion rubles, which “will strengthen our budgetary position for the next period.”

The investment program for 2023 includes funds for the development of the Power of Siberia gas pipeline and its supporting fields, as well as the expansion of the Yamal gas production center. Gazprom, having significantly reduced its presence in the European market, is trying to redirect exports to China and Turkey, which requires significant investment in infrastructure.

But this year, no contract was concluded for the supply of gas to China via the Power of Siberia-2, which might require the purchase of pipes and other equipment.

According to Famil Sadigov, the approved financial plan will ensure that Gazprom’s obligations are covered without a deficit and in full. Decisions on raising borrowed funds within the framework of the borrowing program are planned to be made based on market conditions, liquidity and financing needs, also follows from the company’s message. “The amount of financial borrowing included in the budget will contribute to the fulfillment of all our obligations and will ensure the necessary level of liquidity and an acceptable debt burden,” noted Mr. Sadigov.

Sergei Kondratiev from the Institute of Energy and Finance believes that the revision of the investment program, in addition to a decrease in revenues from gas exports, was associated with the extremely high bar announced for 2023. “This is a record plan, and to implement it, Gazprom would need to attract all available resources. Now the program has been revised to the level of last year, also a record, and one and a half times higher than the average level of 2018–2021,” he notes.

According to the analyst, in the coming years the company will increase its debt burden, as export revenues have fallen, while investments and tax payments have increased manifold.

In Mr. Kondratyev’s opinion, the reduction in the debt burden is unlikely to begin before 2026-2027.

Tatiana Dyatel