Gazprom needs to make serious cuts due to the crisis

The world's largest gas company, Gazprom, is struggling with low natural gas prices. Analysts estimate that the company could cut future new projects or need to significantly increase its debt.

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The Financial Times reports that the company will either close new projects or should substantially increase its total debt. For example, only 400 km instead of 800 km of the gas pipeline to China was completed this year, but the work continues. In rubles, operating profit fell about 6 percent last year. It can be assumed that Gazprom's revenues this year, at best, will be within expenses, says the Financial Times.

Natural gas prices, like oil prices, have fallen within a few months to unusually low levels. The price of natural gas for delivery to Europe - Gazprom's most important market - has dropped by about half over the past two years. In addition, by analogy with the oil market, the young, competitive industry in the US is tuned in to the European market and Gazprom is forecast to reduce its market share. The company expects export prices to average $ 200 per thousand cubic meters of gas this year. In 2014, they were still around $ 350.

Low natural gas prices are not the only problem for the gas company. In their home market, as a result of political pressure, most of the newly named competitors have divided the company. Market capitalization has dropped more than 80 percent in dollar terms since 2008.

“Gazprom is already accustomed to living according to the communist idea that everything is available in abundance. They never had to deal with real scarcity and could afford everything. Soon they will have to rethink everything, ”writes the Financial Times, quoting investment bankers.

Higher borrowing rates are also offered as a complement or alternative to savings. Analysts believe that the company's debts to Sberbank may double in the next three to four years.