Gazprom profits hit by weak rouble

Gas pipes owned by Gazprom in Kiev Image copyright Reuters

Russia's largest energy company, Gazprom, has reported a big drop in annual profits after being hit by the fall in the value of the rouble.

The company reported a net profit of 159bn roubles ($3.1bn: £2bn) for 2014, down 86% from a 1.14-trillion-rouble profit the year before.

Last year's fall in oil prices also contributed to the plunge in profits.

At the same time, a debt and pricing dispute meant Gazprom cut gas supplies to Ukraine, one of its key markets.

Gas sales to Europe and other countries declined by 8.5%.

Image copyright Reuters
Image caption Mild winters in Europe led to a lower energy supply from Gazprom

Perfect storm

Energy analyst David Hunter at consultancy Schneider Electric said: "Gazprom is facing a perfect storm of faltering European gas demand, economic sanctions on Russia, the falling rouble and global oversupply in liquefied natural gas.

"This is a subtext to a larger geopolitical story, with Europe keen to create an 'energy union' and reduce its dependence on Russian gas, particularly on its eastern borders.

"On the upside, there has been a 30% bounce in oil prices from January lows, which, if sustained, will feed through into revenues in the medium term. The rouble has stabilised recently, and around 30% of European gas demand is still being met by Russian supply.

"In the longer term, Russia is looking east to Chinese markets as an outlet for its vast reserves and an alternative pipeline market to Europe in future.

"Still, these are challenging times for the company."

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