Gazprom Investors Have Reasons for Concern

Gazprom stock has only seen relatively small oscillations throughout 2012, but investors have frequently turned from bullish to bearish. There were a couple of rumors that sent shockwaves through the market, but only a few of them came true and had a significant impact on the stock price. Some of these issues come back to bite Gazprom and present binary options traders with an opportunity to buy put options with medium to long expiry dates.

Russian Gas Export Monopoly in Danger

Most of Europe depends on the gas supplied by Gazprom and in the absence of any real alternative, the Russian company was free to negotiate its terms in a very aggressive manner. The company insists on having oil-linked prices and it looked like despite the constant opposition from the EU, it will have its way indefinitely. Back in 2012, Norwegian state owned company Statoil signed an agreement with Wintershall, and will supply the company with gas under spot terms. It is a significant breakthrough, and a strong blow suffered by Gazprom.

The fact that Statoil agreed to sell a huge quantity of gas under these terms, means that the Russian company will need to take the matter more seriously. There are good reasons for why Gazprom has resisted the change, as the new terms will affect it's profit margin. Another reason for why investors should think twice before purchasing their stock massively, is that the shale gas revolution is underway. As more countries are willing and capable of extracting gas in this manner, the dependency on Russian gas will slowly decrease over time, putting Gazprom in a delicate position.

Taxes Continue To Hurt Gazprom

The company is besieged on all fronts, and the perpetual threats issued by Ukraine to cut purchases of gas have yet to produce concrete results but can't be dismissed easily. In Europe the North Stream and South Stream projects are on their way, and Gazprom’s joint project with China is not showing any progress. There are so many issues to fix that there is no end in sight for the massive venture, which means that a lot of money and time will need to be invested before the first results can be reaped.

Transparency is not the strong suit of the Putin regime and steep increases in taxes are always possible or without notice and there is very little that companies can do about it. Gazprom has been for a long period of time under taxed, but is now feeling the effects of the tide turning. Russia has increased the taxes and this means that the company will not benefit from the hike in gas prices, that was announced in 2012 and will be in effect for five years. Around 80% of the revenue gains will not go to the company but will be collected by the government, so don't count on the stock to rise as a result of increasing gas prices.