Russia’s state-owned gas producer has been forced into a fire sale of luxury property following the collapse of its European business.
Gazprom is reportedly preparing to put its Italian palazzo-style export headquarters and other luxury properties on the market as the business scrambles for savings.
The plush office building in Saint Petersburg, which sits in the prestigious Ostrovskogo Square next to the Carlo Rossi-designed Alexandrinsky Theatre, features glass-panelled rooms, sound-proofed conference rooms and a six-storey atrium.
When it was opened six years ago, the building was hailed as “symbolic” by Gazprom chief executive Alexei Miller – a trusted ally of Russian president Vladimir Putin – who added: “Europe will increasingly need Russian gas.”
Gazprom chief Alexei Miller (left) is a trusted ally of Vladimir Putin – Alexander Kazanov/AFP
Yet this confident prediction was stretched to breaking point by Russia’s invasion of Ukraine.
In a standoff with European countries, who imposed sanctions on Moscow, Putin was accused of energy “blackmail” after Gazprom reduced gas supplies to Germany and some Baltic countries which were highly dependent on Russia.
It prompted a major effort by European Union member states to find alternative supplies.
Since then, Russian gas exports to Europe have plunged by 75pc and the last operational pipeline to the Continent – which ran via Ukraine – was shut down in December.
European countries do still import some liquefied natural gas (LNG) from Russia, with a record 24.2bn cubic metres imported last year, according to Rystad Energy. A large proportion of LNG brought to Europe also now comes from the US and Qatar.
However, Gazprom has been hit hard because its relationship with Europe depended on pipeline supplies which have now almost completely dried up. Novatek, another Russian gas company, is a much bigger producer of LNG.
Gazprom’s sales via the Urengoy-Pomary-Uzhhorod pipeline – the route which closed in December – were alone thought to be worth up to $6.5bn (£5.3bn) per year.
Following the earlier closure of the Nord Stream and Yamal pipelines, the only way Gazprom can now pipe gas to Europe is via Turkey using the TurkStream and Blue Stream pipelines under the Black Sea.
Against this backdrop, the company is mulling a fire sale of properties and has slashed staff numbers at its export business from a peak of 600 to just a few dozen, sources including an unnamed executive told Reuters.
Cuts are also being considered at the company’s main business.
One source told Reuters that Gazprom Export had been reduced to “a shell”, rendering its plush offices in Saint Petersburg surplus to requirements.
Managers reportedly assumed that Europe would come back “begging” for Russian gas supplies to resume, but the sanctions have remained in place, with the EU planning to phase out Russian fossil fuels completely by 2027.
An executive said: “We proved to be wrong.”
Ashley Kelty, an oil and gas analyst at Panmure Liberum, predicted that Russian pipeline gas could once again flow to Europe in the event of a Ukraine peace deal.
However, he said European leaders were likely to be more wary of it in future and would only use it as a way of balancing their exposure to American exports.
Mr Kelty said: “The only alternative to Russian LNG has been to buy from the US.
“So the question is, do politicians in Brussels prefer to be beholden to Trump or Putin?
“I don’t doubt Gazprom’s ability to come back. The only question would be around political interference.”
Since the outbreak of war in Ukraine, countries including Germany – which was previously entirely dependent on pipelines for supplies – have also opened a string of LNG import facilities, giving them more import routes.
Mr Kelty said: “If you do have multiple sources for the gas, it will bring prices down.
“But LNG prices are going to fall from next year anyway. There’s more capacity coming online.”
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