Gazprom to pay Kremlin £8.6bn after record profits | Gazprom

Russian state-backed energy firm Gazprom is poised to hand a bumper £8.6bn payout to the Kremlin after notching up record profits.

The company reported a net profit of 2.5tn roubles (£35.8bn) for the first six months of this year. Oil and gas prices soared during that period, pushed higher by concerns over supplies after Russia’s invasion of Ukraine.

The Kremlin owns 49.3% of Gazprom and will share in a 1.21tn rouble payout, after its board proposed a 51.03 rouble per ordinary share payout to investors. The decision will be put to shareholders at an extraordinary general meeting on 30 September.

The dividend represents a setback in the west’s efforts to choke off the Russian economy through sanctions. The UK and Europe have also moved to phase out Russian oil and gas imports to prevent the west funding Vladimir Putin’s regime. However, Russia has instead ramped up oil exports to Asia and gas prices have soared in response to Gazprom cutting supplies into Europe.

Gazprom’s deputy chief executive, Famil Sadygov, said: “Despite sanctions pressure and an unfavourable external environment, the Gazprom Group reported record IFRS revenues and net profit in the first half of 2022, while reducing net debt and leverage to a minimum.”

The payout follows the decision in June to cancel Gazprom’s annual dividend for the first time since 1998. The decision sent its shares plunging by near 30% in a day.

The dividend decision comes as energy companies and politicians face a nervous wait to see whether Russia switches gas supplies through the Nord Stream 1 pipeline into Europe back on.

Russia said it had stopped the Baltic Sea pipeline’s flow from 5am on Wednesday for three days to carry out repairs.

Gazprom has reduced gas its output in recent months to the lowest level since 2008. In July, the flow was stopped for 10 days for scheduled maintenance but at only 20% of capacity amid a row over the failure to return equipment due to sanctions imposed on Russia.

A fresh row was brewing on Wednesday when Gazprom chief executive, Alexei Miller, said that Siemens Energy was unable to perform regular maintenance of equipment for the Nord Stream 1 gas pipeline.

The Russian energy giant’s head also said that major maintenance of Nord Stream 1 equipment is not possible because of western sanctions, the Interfax news agency reported.

This week one of France’s largest gas suppliers, Engie, said that Gazprom would further reduce deliveries to the company due to a disagreement over the application of some contracts. Gazprom had already substantially cut deliveries to Engie, which has a 9% stake in Nord Stream 1, since the start of the war.

On Wednesday, the dispute escalated as the Russian company prepared to halt all deliveries to its French contractor from 1 September, citing missing payments.

Gazprom said the decision to suspend gas supplies to Engie was down to the French firm not paying in full for July deliveries of gas. It is understood Engie had deducted “compensation” for the fall in gas supplies in recent weeks from the payment.

European governments have accused Putin of weaponising gas supplies during the conflict in Ukraine. Moscow denies doing this and has cited technical reasons for supply cuts.

The European Commission is examining options to make an emergency intervention into wholesale gas markets amid fears over soaring bills and blackouts this winter.

European nations are on average ahead of gas storage targets set by the EU ahead of the winter. Europe’s storage facilities contain around 84bn cubic metres (bcm) of natural gas, ahead of the 65bcm 1 September target and nearing November’s 88bcm goal.

France, Poland, Italy and the Czech Republic have already hit November’s target while Latvia is the only country behind its September goal, energy consultancy Aurora said.

Germany has the most storage space left to fill, at 2.6bcm, because it has higher targets and vast storage facilities.

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