MOSCOW (Igor Tomberg, for RIA Novosti) - Last week's annual Gazprom shareholders' meeting involved discussion of a number of issues vital to the gas behemoth's activities, but experts say that overall it produced were no surprises.
It was announced that the state had completed acquisition of 10.7% of Gazprom shares from the gas giant's subsidiaries, and that liberalization of the gas market would be completed by yearend. This will depend on amendments to current legislation to allow foreigners to purchase Gazprom shares.
But promises by government representatives to lift some restrictions on purchases of Gazprom shares did not impress investors much, and the company's share price remained unchanged.
The government has made such promises before, for example, in November 2003 and September 2004. President Vladimir Putin promised that the "protective barrier" would be lifted when the state received a controlling stake in the monopoly in exchange for 100% of shares in state oil company Rosneft. The statement livened up a depressed market at the time, but the deal was never completed, and some doubt whether it ever will.
Analysts say that real action is needed to increase investor interest in purchasing securities, rather than just empty words from officials. At present no date has been set for completing liberalization, but analysts say that before lifting current restrictions the state will likely have to sell its stake in Rosneft to repay credits incurred during the purchase of Gazprom, as well as to sell Rosneftegaz, a holding company specially created to handle the acquisition of Gazprom shares.
Although much has been said about the strategic importance of increasing Gazprom's market capitalization, current opinion suggests that share liberalization is not an end in itself for the state. The state has no real long-term interest in Gazprom shares: What is more important is gas-market reform, currently a non-issue. Difficult decisions lie ahead, and Gazprom shareholders were anxious to raise the question of gas tariffs ahead of the shareholders' meeting.
Doubts also remain about the strategy of turning Gazprom into a major global player through the acquisition of oil assets in Russia and abroad, as announced by CEO Alexei Miller. Although expanding the company's oil interests is currently extremely tempting, the goal set by Miller of a 55:45 ratio for oil and gas interests may prove unrealistic.
Last year, Gazprom produced 490 million oil-equivalent tons of gas, while oil production was a shade under 460 million tons. Various estimates have been made for this year, but common consensus is that it is unlikely to be over 470 tons - less than the amount of gas produced by Gazprom. For Gazprom to increase its oil interests to the level Miller wants, it would have to buy up Russia's entire industry.
It is also not obvious why Gazprom wants to become an oil and gas giant. No other company in the world is anywhere close in terms of gas potential to Gazprom, which controls roughly one third of world reserves of top-quality gas. At the same time, the company is facing problems. It has to maintain its transportation infrastructure while at the same time develop the Yamal and Shtokman deposits, projects likely to cost billions of dollars. Gazprom does not have the financial clout to do this and buy up everything that comes its way. Currently, it is unlikely to be able to acquire a major Russian company, beyond possibly some portion of TNK, or a stake in Sibneft, Rosneft, or Yukos. On top of this, it still has some $20 billion in debt to service.
Experts say that the relatively little money the company will get by selling shares to the state should be invested in business development, and not on acquiring oil interests.
Overall, most analysts agree that the shareholders' meeting was a positive development. Despite various delays, Gazprom is by all accounts heading toward full liberalization of share operations. In addition, it is continuing to restructure its numerous subsidies, improving management, and making them more transparent. Yet doubts caused by its huge debts remain, greatly weakening the effect of the plans announced to turn it into an oil and gas major.
Dr. Igor Tomberg is a senior researcher at the Russian Academy of Sciences' Institute of International Economic and Political Studies.
