The "national heritage" without a fortune: Gazprom has become unprofitable due to taxes and domestic prices

Alexey Gromov, Principal Director on Energy studies and Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented on the weak financial statements of Gazprom by the end of 2023 to the Novye Izvestia Internet portal.

Alexey Gromov was skeptical about the positive forecasts of some analysts:

— It was very strange to read analysts who argued that the Gazprom group would show good performance at the end of last year. Or someone said that Gazprom's unprofitability would be at a minimum level. We must understand that the main profitability of the Gazprom Group is the profitability from exporting natural gas to the EU countries, it is this area of Gazprom's activities that has always been considered the most premium — in terms of profitability. According to the results of the last two years, our exports in the European direction have fallen by almost 5 times. It is obvious that Gazprom's profitability will decrease sharply.

— It is also clear why the group is going at a loss. With the reduction of the main income item, export volumes decreased by 5 times, gas prices fell, because in 2022 there were extremely high prices, especially in Europe, which also provided additional profit for the Gazprom group. Now prices have dropped significantly. They are still higher than in 2021, but it is one thing to sell gas for 350-400 dollars per 1,000 cubic meters, and another thing to sell gas at an average price of 700-800 dollars, as it was at the end of 2022," the expert says.

Now there are proposals to help the "national heritage" from the National Welfare Fund. The figure is 400 billion rubles. Alexey Belogoryev did not get into this idea:

— There is a discussion of the payment from the NWF, there is no such decision yet. But this is a very strange idea, because the financial problem with Gazprom is largely related to the additional fiscal burden. From 2023 to 2025, Gazprom will take an additional 1.8 trillion rubles in total. This is three times the loss that was announced. If there were no such tax burden, then there would be no loss either. If the state takes this money into the budget, and then gives it through the national welfare fund, then this is a social game. I don't think that's going to happen.

In the era of superprofits in Gazprom, the increase in tax payments would have been overcome without looking. However, in 2023 it was introduced based on the results of the second half of 2022, knowing that the situation would not only change, but would change dramatically for the worse.

Alexey Belogoryev argues:

— Gazprom will undoubtedly become a profitable company as soon as additional taxes are no longer charged from it. In terms of total revenue, I do not think that any breakthrough should be expected in the export markets in the next few years, because the growth of physical supplies is accompanied by a decrease in margins due to falling prices.

Alexey Gromov believes that now is the best time to reform the industry and introduce the market into the gas sector. Then Gazprom's revenue in the country will grow. Well, reducing costs within the company will increase financial discipline:

— There are issues of management expenses of the company, there are issues of optimization of the company's personnel. We know perfectly well that Gazprom did not follow these directions, ensuring the efficiency of its work through exports.