Gazprom SWOT and PESTLE Analysis
COMPANY PROFILE -Gazprom
Business Sector :Energy
Operating Geography :Russia, Asia, Global
About Gazprom :
Gazprom is a global energy headquartered in Moscow, Russia. It currently operates in 20 countries across 4 continents and holds the world’s largest natural gas reserve. It accounts for 12% of the global gas reserves. It exports gas to more than 30 countries beyond the former Soviet Union. Gazprom is involved in exploring, producing, transporting, storing, processing and selling oil and gas condensate and in generating and marketing of heat and electric power. The company has more than 469,000 employees as of January 2018. Gazprom’s mission as per its annual report is “Reliable, efficient and balanced supply of natural gas, other energy resources and their derivatives to consumers. Gazprom’s goal is to “Establishing itself as a leader among global energy companies by diversifying sales markets, ensuring reliable supplies, improving performance, and leveraging R&D capabilities.”Gazprom Revenue :
Roubles 6,546.1 billion (FY ended December 31st 2017) (y-o-y 7% growth)
Roubles 6,111.1 billion (FY ended December 31st 2016)
Ownership / Major shareholders :
As of 31st December 2017, the major shareholders of the company are as follows –1) The Russian Federation represented by the Federal Agency for State Property Management (38.37%)
2) AO ROSNEFTEGAZ (10.97%)
3) AO Rosgazifikatsiya (0.89%)
Competitive Analysis of Gazprom
| 1. Vertical integration and an established portfolio of long-term contracts 2. Focus on Technology 3. Dominant Market share 4. Political support from government 5. Consistent financial performance 6. Transportation, Underground Storage and Distribution | 1. Restricted number of markets with gas export mostly to stagnated European gas markets |
| 1. European and Asian market 2. Increasing market for LNG Projects 3. Expansion of Pipeline | 1. Growing natural gas producers globally 2. Project delays due to US sanctions 3. Increasing focus on renewable energy |
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Strength
1. Vertical integration and an established portfolio of long-term contracts: One of the key principles of Gazprom is reinforcement of vertical integration. Based on the vertical integration principle Gazprom aims to develop the oil sector by increasing the annual oil production to 80 million tons by 2020.Gazprom underpins European gas market through long-term contracts with oil-pegged prices and take-or-pay clauses. Gazprom signs long term contracts of up to 25 years with Central and Western European countries to export gas. The intergovernmental agreements are vital for stable and sustainable supply of gas. Long term contract guarantees that producers and exporters returns on multibillion investments on major gas projects. Both the exporter and the importer benefit out of long term contracts. Current portfolio of long term contracts signed by Gazprom amounts to 4 trillion cubic meters over the contract duration.
2. Focus on Technology: Gazprom has always had a futuristic view in conducting their business operations. They have constantly invested in technological innovation and development. The R&D initiative such as technology for extracting helium in East Siberian fields helps Gazprom gain a competitive advantage. Gazprom has been making efforts to develop electromagnetic sounding of oil and gas deposits. It is a technique which uses ultra-short high power pulses to explore anisotropic near wellbore area. A set of technical requirements for the hydrocarbon prospecting, exploration, and development software was developed in 2017. Gazprom has invested heavily in research to develop technologies, materials and engineering solutions for their 1000 km gas trunkline system from Bovanenkovo to Ukhta which operates in extreme climatic and geographical conditions. Gazprom has planned to use advanced knowledge-intensive technologies and equipment in constructing the Power of Siberia trunk gas pipeline.
3. Dominant Market share: Gazprom is the world’s largest producer of gas. It is responsible for 17% of world’s total production and has 18.4% of world’s natural gas reserves. As on 31 December 2017, out of the total 49.3 tcm of explored gas reserves in Russia, Gazprom group accounts for 35.4 tcm , companies outside Gazprom group accounts for 12.6 tcm and open acreage holds 1.3 tcm.
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Weakness
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Opportunity
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Threat
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Key Business Segments / Diversification :
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Gazprom SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.
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