Gazprom plans to increase output at Zapolyarnoye, one of its key fields in western Siberia, by 30 percent to 130 billion cubic meters a year. The field has been producing since 2001, now accounting for about one fifth of Gazprom’s total gas output.
We expect to see neutral market reaction to the news until we see further evidence on the issue. Yet, 30% output increase looks a bit ambitious for us. Moreover, it raises important question mark over the extent of necessary capital outlays, thus, return on the project. Higher CapEx necessarily means that the company has to go for additional debt, which will be negatively reflected in its gearing.