Gazprom Keeps Within 2019 Spending Plan

Gazprom is on track to meet its original target for capital investment in 2019, having often had to raise spend projections in the course of previous years.

The company’s board of directors has approved a plan to spend rubles 1.323 trillion ($21bn) this year, which is rubles 3.142bn less than its target set out in December 2018, it said on October 22. Some rubles 962.2bn will be spent on construction projects, rubles 180.5bn on acquisitions and rubles 179.9bn on financial investments. An increase in acquisition costs was more than offset by a reduction in financial expenditure.

Gazprom typically sets conservative targets for spending capital before a year starts, only to raise them, sometimes several times, because of cost overruns or new investments being sanctioned. Based on this year’s projection, Gazprom’s capital expenditure is set to fall for the first time in three years. The company spent rubles 1.344 trillion in 2016, rubles 1.406 trillion in 2017 and a record rubles 1.796 trillion in 2018.

The bulk of spending in recent years has gone towards Gazprom’s three main export pipeline projects, Nord Stream 2, TurkStream and Power of Siberia, as well as supporting midstream and upstream investments in Russia. All three are now nearing completion.

Gazprom’s pledge earlier this year to raise its dividend ratio to 50% of net profits within the next few years has been taken as a sign that the company is adopting a more frugal spending policy. But ambitious new projects it has recently unveiled, including the $11bn Baltic gas chemical complex, raise doubts whether this is the case.