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Business news, 04.12.2008 23:18

Gazprom Could Borrow from State

Gasprom Gazprom will invest 920 billion rubles ($33 billion) next year and may borrow from state banks to cover spending, CEO Alexei Miller said.

“We are fully maintaining our plans for 2009 as far as key projects are concerned ...We may attract some funds from the state,” Alexei Miller told reporters in the Arctic city of Ukhta.

The company may turn to the state for funding because the terms are “more attractive” than those for commercial loans, Miller said. The investment program must be approved by the company’s board by the end of December, he said.

In July, Gazprom increased the budget for 2008 by 16 percent to a record 822 billion rubles. In August, Interfax said the figure could be raised by a further 25 percent, citing deputy chief executive Valery Golubev. The company’s press service declined to confirm or deny the report.

A quarter of Gazprom’s investments will go towards developing the isolated Arctic peninsula of Yamal, and that share will grow to a third of all spending in the next two years, Miller said.

Yamal is the company’s key source of future output as production falls at mature deposits in western Siberia. Yamal and eastern Siberia will account for half of Gaprom’s output by 2020.

By 2030, Yamal will produce 360 billion cubic meters annually, twice what Gazprom currently exports.

The company, which supplies Europe with a quarter of its gas needs, regularly revises both its capital expenditure and financial investment needs, sometimes three times a year. It says projects are getting more expensive because of rising prices for construction materials and services.

Gazprom has also regularly revised its needs for long-term financial investments because of aggressive asset acquisitions. Analysts have criticized the company for prioritizing equity deals over capex, which is much needed to increase gas production.

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