Global Risk Insights: Five Major Challenges Facing Russia’s Gas Giant Gazprom

The leadership of Gazprom — the state-owned company which in the past has accounted for about one-fifth of Russia’s budget revenues—is upbeat about the energy giant’s prospects, formally pursuing a range of ambitious projects. Yet, these projects conceal a struggling gas giant.

From the proposed Turkish Stream pipeline to a planned expansion of Nord Stream and the construction of the Power of Siberia pipeline, Gazprom is looking to expand and implement projects with big price tags.

There are indications, however, that the state-owned company is struggling. The energy giant’s natural gas production fell by 12.9% in the first half of 2015 compared to the previous year, while the company’s exports dropped by 8%, according to a report by Russian investment bank Sberbank CIB.

In July, the company unexpectedly cancelled its contract with Italy’s Saipem for the construction of a pipeline under the Black Sea, raising concerns regarding Gazprom’s commitment to completing the planned Turkish Stream pipeline project on schedule.

There are clear reasons for the company’s difficulties. Gazprom currently faces five major risks and challenges.

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