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4 I Companies & Markets bne December 2021
Gazprom made huge profits from soaring prices during the European gas crisis and intends to plough the profits back into new infrastructure.
Gazprom says it will use windfall gas crisis cash to up boost capex
Newsbase staff
Capital spending levels at Russia’s Gazprom are once again creeping upwards, as the company prepares to ramp up gas supplies to China and expand development in the Russian Arctic.
Gazprom has earned hansom profits during the European gas crisis this year and intends to plough some of that windfall cash back into new infrastructure.
The state-owned gas behemoth has abandoned its promise of less than two years ago to be more fiscal prudent, spurred on by soaring gas prices that have led to a spike in its profits.
Under a programme announced on November 26, the company plans to invest RUB1.76 trillion ($23.3bn) in 2022, up from a target of RUB1.185 trillion for this year. Gazprom’s actual capital expenditure next year is expected to come
to RUB1.4 trillion, but additional funds in the investment programme will go towards long-term financial investments and the purchase of long-term assets, its management has said. Borrowing from outside the company is expected to total RUB272.8bn in 2022.
These funds will partly be allocated towards additional upstream development in Eastern Siberia. Gazprom has been
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sending gas to China since December 2019 and is now investing in expanding supply at the Chayandinskoye field in the Yakutia region, which at full capacity is expected to flow 25bn cubic metres (bcm) per year of gas. In the mid-2020s it also intends to commission the Kovyktinskoye field in the neighbouring Irkutsk region, which will have a similar peak capacity.
Gazprom also has to fund further development of the Power of Siberia pipeline that delivers this gas to China. And investment will also be allocated to the Amur gas processing plant that handles these supplies.
Arctic spending
Moving up north, Gazprom said some of the funds would
go towards additional development at fields on the Yamal Peninsula. Yamal is tipped to become Russia’s biggest hub for gas production. This will come on the back of field development by Novatek, which is ramping up LNG exports to Asia and Europe, and Gazprom, which has set sights on expanding pipeline supplies to Europe and sending additional volumes
to China via a planned second pipeline through Mongolia.
The only Gazprom field on Yamal currently in production is Bovanenkovo, but this project alone has a capacity of 115 bcm per year, most of which is shipped to Europe. Gazprom kicked