Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Miller Says Gas Exports Jump 30% to $14.5Bln

Gazprom will post record export revenues of $14.5 billion this year, up 30 percent over last year, CEO Alexei Miller said Wednesday.

Miller said Gazprom is working on a new upstream strategy to boost production and that the government should allow the company to raise prices on the domestic market to help finance expansion.

He also reiterated Gazprom's intention to take part in the privatization of two key Central European gas companies -- Czech Transgas and Slovak SPP -- whose main revenues come from transporting Russian gas to Western Europe, Prime-Tass reported.

Miller made the announcements a day after returning from a gas conference near Gazprom's main production fields in Western Siberia that was attended by President Vladimir Putin, who called on Miller to streamline the sprawling company and leapfrog over profiteering middlemen who are making huge profits on exports to Europe.

Putin said Gazprom is losing a margin of up to 200 percent by selling to intermediaries rather than directly to European clients, who end up paying up to three times the initial export price.

Miller said Gazprom will proceed with its pricing policy and demand a 24 percent tariff hike for domestic deliveries, which are several times lower than world rates. The cost of gas in Russia is a politically sensitive issue because much of the nation depends on Gazprom supplies for heating. Miller, however, said raising prices 24 percent would only increase inflation by six-tenths of a percent, Interfax reported.

Gazprom needs the tariff hike to finance an extensive $5 billion-a-year investment program to maintain production at old fields and begin and increase production at new ones.

Miller said by 2010 he expects new fields to contribute 100 billion cubic meters a year to its current annual production of about 520 bcm. He also said that the gas giant is capable of boosting its output on the world market from current levels of about 130 bcm to 175 bcm or 200 bcm by 2008.

But none of that is possible without higher domestic prices, analysts said. Energy Minister Igor Yusofov said Tuesday that he favored raising prices by as much as 30 percent, but Putin said the hike will have to wait until winter is over.

"It is a very good sign that the government has shown support for the hike. It means that it understands Gazprom would not be able to come up with necessary funds for exploration otherwise," said Vladislav Metnev, analyst with Renaissance Capital investment bank.

Metnev said a hike would be sensible since the record export revenues are based on unusually high world oil prices for most of this year. Gas prices are closely linked to oil prices, but there is generally a lag of several months, and oil prices have been falling since July.

Miller said that although the creation of an OPEC-type cartel for major gas producers in not an option, a dialogue between energy ministers of exporting countries could help stabilize prices.

Miller also said Gazprom has offered to build an underwater gas pipeline from Iran to India, as well as to any other "interested" country in the region, Prime-Tass reported.