Gazprom is blaming higher than expected operating costs for a dramatic drop in profits. Second quarter profits for this year fell 25 per cent to 103 billion roubles – more than $US 4 billion.
The profit figures were more than a billion dollars below the forecasts from analysts polled by Interfax. The fall comes despite a 30 per cent increase in first-quarter sales to former Soviet republics due to higher prices. Gazprom says higher than expected operating costs are the main reason for the poor results. Oil and gas analyst at Veles Capital, Dr. Dmitry Lyutagin, says the cost of doing business hit Gazprom's bottom line. “Commercial expenses like banking and insurance charges, as well as pay increases, which were around 19%. The cost of the gas which Gazprom buys also went up by 22%,” Lyutagin said.