Randy Kirk

Mechel Trouble Spells Buying Opportunity for Gazprom

Good article -- Gazprom is still absolutely in favor by the Russian government, as the former Chairman of Gazprom, Dmitry Medvedev, is now president of Russia! Also note, it is very likely that Gazprom will report significantly higher income through 2011, due to the fact that Russia is raising domestic gas prices by over 20% per year, in order to bring Russian natural gas prices to international levels by 2011 (right now Gazprom earns the majority of its net income from International (non-Russian) sales). Reference: www.redorbit.com/news/.../

""Domestic prices are currently state-regulated and, accordingly, lag prices abroad. The domestic price is barely 20% the price abroad. But that difference will diminish steadily. The government has approved an increase of about 25% a year, but with the understanding that netback parity will be achieved from January 1, 2011," he said."

The main concern with investment into Gazprom is the achievability of its next generation of natural gas supply, mainly Gazprom's projects on the Yamal Peninsula. These are likely to be expensive and technically difficult although there is little doubt that, geologically, massive reserves exist in the gas fields of Yamal.