Fitch Gloomy on Gazprom

Sales prospects for Russian gas giant Gazprom are not good in 2013, according to influential ratings agency Fitch.

Gazprom's sales are likely to fall further in 2013 as weak economic conditions lead to continued low demand in Europe, the company's key market for natural gas, Fitch says in a new analysis headlined on its website.

Gazprom has a monopoly on the export of Russian natural gas, Fitch notes, and also dominates in supply to countries formerly in the Soviet Union. But disagreements with customers such as Ukraine, as well as the global recession, have dinted demand for energy product. Fitch gives as one example that in the second half of last year Gazprom "generated over 76% of its revenue from sales of gas outside of the Russian Federation, which accounted for only 44% of its gas sales by volume".

Fitch concludes that Gazprom's position in Europe remains somewhat challenging, and refers to full analysis in its 2013 Outlook: EMEA Oil and Gas, published in December. But it qualifies its prognosis with a belief that prices and volumes of European gas under take-or-pay arrangements will remain stable.

Last week the Russian Ministry of Energy said that total natural gas production in the country fell by 2.2% in 2012 to 655 billion cubic meters (bcm), while Gazprom's gas production declined by 5.1% to 482bcm. Russian gas sales abroad in 2012, mainly to Europe and the FSU, fell by 8.7% to 186bcm.