Is Gazprom a Good Business Gas Supplier?

The Russian company entered the UK market in 2006, when it purchased Pennine Natural Gas and has supplied industrial and business users through its subsidiary Gazprom Marketing and Trading, This was the companies first retail brand outside of Russia. The company renamed the subsidiary as Gazprom Energy towards the end of 2011. In November, the company won the ‘Supplier of the Year’ award at the annual Energy ‘Buying & Supplying’ Excellence Awards. These compare business energy providers and recognise the top independent suppliers in the UK gas market.

The Evening Standard has reported Gazprom’s growth in market share in parts of the UK commercial gas market, reputedly arising out of aggressive pricing strategies. Its customers comprise approximately 38,000 industrial and commercial sites that include Manchester United, McDonald’s, NHS , Chelsea F.C. and Bhs.

Although the company entered the British market in 2006, this growth in its UK presence is relatively recent. Such an expansion by a provider with the backing of one of the largest energy companies in the world is likely to result in a shift in the market balance among the existing big six providers (British Gas, Scottish Power, SSE, EdF, Eon and nPower). To compare business presence and place it in context, Gazprom has approximately 10% of the business market and 20% of the companies sector, the latter being a high-energy user. The Russian company have reportedly also been interested in acquiring the German utitlity firm, RWE’s UK subsidiary, Npower’s gas-fired power plants in Pembroke and Staythorpe, Nottinghamshire, which would increase its presence as a UK gas producer.

In November, Russian Prime Minister Vladimir Putin announced that Gazprom would increase its ownership of Belarus pipeline firm Beltranshaz from 50% to 100%. In return, Belarus would benefit from a 60% reduction in gas prices. In September, Gazprom also signed contracts with three Western European companies to build the South Stream gas pipeline into Eastern Europe. The three companies - French company EdF, Italian Eni and German energy company Wintershall - will take a combined interest of 50%, while Gazprom controls the remaining 50%. The project is to transport natural gas from Russia to Europe under the Black Sea and will eventually supply ten countries in Europe once it has been completed; expected to be in 2015. In August, Gazprom reported a rise in three-month profits to £12 billion, which was an increase of 40% on the same period last year. If one were to compare business gas sales it would equate to a rise of 38%. In total, the company supplies a quarter of Europe’s gas.

Gazprom is also established in Ireland, France and the Netherlands and in November was reported to have acquired a German energy company, Envacom. Additionally, the company holds licences to supply gas and power or electricity in Norway, Romania and Slovakia. When we compare business performance we see Gazprom Energy experienced 100% growth for 2010 with expected revenues in 2011 of just under £1 billion.