Gazprom first half profits drop 34% to $16.2 bn

The world's largest gas company Gazprom on Friday announced a 34 percent drop in net profits for the first half of 2012 to $16.2 billion as sales in its core markets dropped and expenses increased. Gazprom said in a statement that its net profit for the first half was 508.7 billion rubles ($16.2 billion) compared with 771.7 billion ($26.6 billion) in the same period last year, with total sales falling five percent to 2.23 trillion rubles ($71.1 billion). Income was squeezed by a 15 percent fall in net sales of gas to 1.24 trillion rubles ($39.7 billion) although a 10 percent drop in sales to European markets was partially compensated by currency factors. Sales of gas to the former Soviet Union region however plunged by a sharp 23 percent, the company said. Operating expenses meanwhile rose eight percent to 1.62 trillion rubles ($51.8 billion) largely due to increased taxes and transit charges, the company said. Founded in 1989, Gazprom grew out of the USSR's Gas Industry Ministry to become the world's largest gas company and a pillar of the modern Russian state under President Vladimir Putin which is still hugely reliant on petrodollars. However analysts have said its long-term domination is at risk as European clients seek to diversify import sources and as alternative gas sources like shale and LNG where Gazprom has failed to make an impact become more significant.