"Gazprom loses $30 million daily due to the loss of the European gas market

Russia's Gazprom continues to take leaps and bounds towards the financial abyss after losing its key European market and failing to negotiate new contracts with China.

In the first half of 2024, the company posted a net loss of 480.6 billion rubles under Russian Accounting Standards (RAS), according to its report published on Tuesday, cited by The Moscow Times.

Compared to the same period last year, Gazprom's losses increased by 88%, and the average rate at which it lost money reached 18.5 billion rubles a week ($215 million) – of which it pays out 2.55 billion rubles a day ($30 million), or 106 million rubles an hour.

These are the results of Gazprom's gas business – they are disclosed in its RAS reporting, which excludes subsidiaries, including its oil business, LNG and power assets, says BCS analyst Ronald Smith.

Although Gazprom's gas revenues increased by 6% to RUB 2.9 trillion, the rate of loss growth was almost 15 times higher, and foreign currency reserves on the accounts of the parent company decreased by a third to RUB 46.5 billion.

"The RAS report confirmed that the company's gas business fared worse in the first half of the year than in the first half of 2023," Smith concludes.

This is to be expected, he continues: "The market price of gas on European trading platforms has fallen sharply this year compared to last year. And the growth in volumes could only partially compensate for the cheap gas."

Since the beginning of 2023, Gazprom's accumulated losses have exceeded a trillion rubles. Last year, for the first time in a quarter of a century, Gazprom made a net loss under international standards (IFRS), i.e. taking into account all subsidiaries, and its amount of RUB 629 billion was a record for the entire period of the company's existence.

Gazprom's exports have plummeted to 69 billion cubic metres, the lowest since 1985, supplies to Europe have fallen to 28 billion cubic metres, or the lowest level since the late 1970s, and gas production is now the lowest in the company's history.

"Gazprom was left unable to sell gas after the Kremlin ordered it to shut off the valve on the pipes leading to Europe.

Plans to negotiate with China on the 50 billion cubic metres per year Power of Siberia 2 pipeline have turned into a fiasco: according to the FT, Xi Jinping has agreed to buy Russian gas only at domestic Russian prices, i.e. about $60 per thousand cubic metres.

This will make the project unprofitable for Gazprom, given that it will have to pay a multibillion-dollar bill for the construction of the pipeline, says BCS's Smith.

"Gazprom is in a bind, and they know it," the experts say. It is possible that the company will have to be rescued by the state in the near future, MMI analysts wrote earlier.

Background. As previously reported, Gazprom doubled its total losses in the first half of 2024. The company's losses reached 480 billion rubles.