Russian Gazprom sees lowest gas output

(MENAFN- The Peninsula) Russian gas producer Gazprom is likely to record its lowest output this year since its creation a quarter of a century ago after cutting supplies to Ukraine and losing market share to domestic rivals.

Gazprom reduced its 2014 production forecast this week, and analysts regard even this figure as overoptimistic due to Moscow's battle with Kiev over gas prices and its role in the conflict in eastern Ukraine.

Falling output could put further pressure on the economy, which relies heavily on oil and gas sales and is already slowing to a crawl partly as Western sanctions start to bite.

Gazprom chief Alexei Miller told President Vladimir Putin on Wednesday that he expected production this year to be 463 billion cubic metres (bcm), a 6.7 percent decrease from the 496.4 bcm announced by Gazprom at a May presentation and down from 487.4 bcm produced last year.

Putin looked sanguine but analysts said the crisis in Ukraine and the Kremlin-controlled company's decision in June to cut gas supplies to its second-largest market after Germany were taking their toll. Miller's forecast is slightly above Gazprom's record low hit in 2009 during the global financial crisis, but the analysts expect actual 2014 production to be significantly lower than this.

The gas row is part of the broader crisis in Ukraine, which erupted earlier this year and persists, even though a ceasefire in the east has given some respite from fighting between pro-Russian rebels and government troops.

Russian gas exports are exempt from the US and European Union sanctions. But Gazprom's ability to boost production in the rest of this year is limited as European customers have already largely filled up their gas storage, fearing that Russian supplies which flow via Ukraine might be disrupted by the crisis.