Slumping Gazprom

From Guy Chazan in the Wall Street Journal:


Gazprom has also been hit. Last summer, Mr. Miller boasted it would be the world’s biggest company by market value within seven to ten years, with a capitalization of $1 trillion. At the time, Gazprom’s market cap was $360 billion. Now it’s around a quarter of that.

Worse lies ahead. Natural gas prices tend to follow oil prices with a six- to nine-month lag: With crude down more than $100 since reaching a record high of $147 a barrel in July, gas prices are expected to fall steeply next year. That will mean a sharp decline in Gazprom’s export revenues from mid-2009.

Still, Mr. Putin, addressing the gas exporters’ forum, warned that the price of gas would inevitably rise again in coming years. Producing gas fields are in decline, he said, and most untapped resources are in remote areas. Russia will need to invest billions of dollars to develop new fields in places like the Yamal Peninsula and the Barents Sea, which lack basic infrastructure and will need to be connected by pipeline to areas where gas is consumed.

Gazprom said Tuesday its board had approved investments for 2009 of $32.5 billion, up 12% from this year’s levels.

“That means that despite the global financial crisis…the era of cheap energy, including cheap gas, is ending,” Mr. Putin said.