MOSCOW: Zoya Danilina, who owns some 700 shares in Gazprom, says investors don’t have to look far to understand that Russia’s most powerful company has lost its way.
Danilina remembers when her shares were worth over 300 roubles each. Now they fetch about 100 roubles.
“There have been much better days, when tables were served with black and red caviar,” she said on the sidelines of Gazprom’s annual general meeting in Moscow on Friday, looking at a plate of boiled buckwheat, a popular staple food in Russia.
In the caviar era, Gazprom head Alexei Miller, a close ally of President Vladimir Putin, was overseeing a company with the world’s third-largest market value at $360bn. In 2007, he promised to boost it to $1 trillion.
Fast forward several years and Gazprom, still the world’s largest gas producer and holder of 15 percent of global gas reserves, is worth $77bn and could fall further as it faces a series of setbacks.
The biggest blow came from a shale gas revolution that has unlocked vast reserves in the United States.
US prices have crashed, closing America as a prospective market for Gazprom, diverting cheaper liquefied natural gas (LNG) cargoes not needed in the United States to Europe, undermining Gazprom’s position in its core market.
Europe, tied to Gazprom by a Soviet-built pipeline network, has balked at its contracts that tie gas prices to more expensive oil.
Last year, Miller was forced to offer billions of dollars in what Gazprom described as “rebates” to European buyers.
On Thursday, Germany’s RWE said it won an arbitration case against Gazprom, which further loosened the price link to oil and raised the prospect of more price concessions.
Gazprom expects its 2013 earnings to fall by 10 percent, marking a second yearly decline.
The stock market now values Gazprom — the world’s third-biggest company by earnings behind ExxonMobil and Apple — at only two times its 2012 earnings of $38bn. That makes it the cheapest large-cap stock on an already cheap Russian market.
Investors could possibly forgive those setbacks if they were confident Gazprom could expand in the fast growing global LNG markets, while charging rising prices at home.
“Our goal is to control around 15 percent of the global market for liquefied natural gas,” Miller, 51, told the annual general meeting on Friday.
But such hopes were dealt heavy blows over the past month.
Putin signalled last week the gradual end of Gazprom’s monopoly on exports of LNG and opened the way for rivals Novatek and Rosneft to compete for huge new Asian markets.
Reuters
