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August 27, 2009

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Gazprom profit dives 62% on gas shipments

RUSSIAN gas monopoly Gazprom yesterday reported a 62 percent plunge in net profit for the first quarter of 2009, when the company was hit hard by disruptions of gas supplies to Europe and the plunging value of the ruble.

Net profit at the world's largest gas producer dropped to 103.7 billion rubles (US$3.3 billion) during the January-March period from 273.4 billion a year earlier. Sales rose 2 percent to 931.4 billion rubles.

The company reported a 140.4 billion ruble foreign exchange loss as the ruble's value declined dramatically since last fall, when Russia entered its first recession in a decade. The currency's drop caused net debt to rise 17 percent in the first quarter to 1.2 trillion rubles.

A gas price dispute with Ukraine in January also contributed to the massive drop in Gazprom's earnings. At the time, Russia suspended gas shipments to Europe via Ukraine - about 20 percent of Europe's total gas consumption - for two weeks.

Gazprom's export volumes to Europe and other countries excluding former Soviet Union republics fell 31 percent in the first quarter to 31.7 billion cubic meters from a year earlier. They rose, however, by 28 percent in value terms to 433.2 billion rubles.

Drop likely

The company's deputy chief executive, Alexander Medvedev, said in late June that Gazprom sales volumes are expected to decline by about 40 percent this year despite increased consumption in Europe in recent months.

The firm earlier said it would slash its US$29.4 billion investment program by 30 percent this year, citing inadequate demand.

Gazprom also revealed in its first-quarter report that it spent US$1.7 billion between April and June this year to double its stake in oil producer Sibir Energy to 55 percent.

Sibir Energy, a Russia-focused oil producer that runs the Moscow Refinery with Gazprom Neft, agreed to a takeover bid from Gazprom's oil arm in May.


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