Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча


Peculiarities and Irregularities of Financial Reports of Gazprom


Gazprom reallocates costs and reports unreal trends

1. More costs reallocated to the transmission segment

The nine-month financial report of Gazprom shows that the Russian gas monopoly is increasing its transmission expenses by allocating more costs to the gas transportation segment.

Table 1. Operating Expenses of Gazprom, RUR Billion

Expense item

2008-Q1

2008-Q2

2008-Q3

Q2-Q1(1)

Q3-Q1(1)

Purchased oil

35

46

53

11

18

Purchased gas

103

101

128

-2

25

Staff cost

72

58

55

-14

-17

Depreciation

56

43

46

-13

-11

Taxes other than profit tax

64

61

61

-3

-2

Other operating expenses

208

181

181

-27

-27

Total operating expenses:

537

489

524

-48

-14

Expenses by segment (2)

 

 

 

 

 

- Gas production

61

60

52

-2

-9

- Gas transmission

79

98

113

20

34

(1) Reported quarter minus the 1st quarter of 2008.

(2) External expenses that are reported as operating costs.

In Q3-2008, nearly all operating expenses of Gazprom were lower than these of the 1st quarter. The cost of purchased gas is the major growing component of the operating expenses of the gas business of Gazprom. In Q2 and Q3-2008, the total operating costs of Gazprom were lower than in Q1-2008.

In Q2 and Q3-2008, operating costs reported as external expenses of the gas transmission segment were higher than in Q1-2008 by 25% and 43% respectively (total expenses of the transmission segment were up by 17% and 29%). Apparently, Gazprom reallocated more costs to the transmission segment. It looks like the higher is the price of Turkmen gas, the higher gets the transmission expense.

It indicates that Gazprom is getting ready to file a new application for an increase of the state-regulated tariff for gas transit services. This is a bad news for the independent gas producers in Russia.

2. Unreal trends

As usually, the reported segment expenses of Gazprom for the 4th quarter show unreal trends.

From Q4-2007 to Q1-2008, gas production increased by 3% while the total production expense decreased by 8%. This is impossible.

Figure 1. Quarterly Production Expense of Gazprom

 Figure 2. Quarterly Transmission Expense of Gazprom

Note: The charts show the total expenses of the production and transmission segments of Gazprom.

From Q4-2007 to Q1-2008, the volume of gas delivered by Gazprom pipelines increased by 7% while the total transmission expense dropped 11%. This is not possible.

Figure 2 also illustrates the growth of the transmission expense in Q2 and Q3 of 2008.

Starting from 2006, the total transmission expenses of the 1st or 4th quarter go down despite the growth of the gas volumes delivered by Gazprom pipelines. These irregularities indicate that the reported quarterly expenses are wrong.

Mikhail Korchemkin

March 10, 2009

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Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email: info@eegas.com
Reproduction or use of materials is allowed only with reference to East European Gas Analysis or www.eegas.com