OAO Gazprom, the world's largest natural-gas producer, may say profit was little changed last year as warmer weather in Europe reduced demand for fuel and inflation drove up costs.

Net income was probably 621 billion rubles ($26.5 billion) in 2007, compared with 613.4 billion rubles the previous year, according to the median estimate of eight analysts surveyed by Bloomberg News. The range was between 676 billion and 569 billion rubles. Sales probably rose 9 percent to 2.36 trillion rubles.

Moscow-based Gazprom makes most of its profit from sales to Europe, where it has a quarter of the market. The state caps domestic prices to help restrain inflation, which reached 11.9 percent last year, driving up the costs of pipes and drilling equipment. Sales to Europe, where gas prices are linked to oil, will probably jump 60 percent this year to a record $71.6 billion as crude trades near all-time highs, Gazprom said June 18.

``The two key drivers of Gazprom's performance, export sales volumes and prices, moved in opposite directions in 2007,'' ING Groep NV analyst Igor Kurinnyy said in a note to investors sent June 27. ``Gas export volumes fell by close to 7 percent due to an unusually warm winter in Gazprom's key market, Europe,'' he said. ``The story will be different in 2008, as prices continue to rise and export volumes recover.''

State-run Gazprom, tied into European markets with its pipeline network, plans to become a global supplier of liquefied natural gas next year. LNG, gas chilled to a liquid for transport by tanker, will allow the company to break into new markets, including Japan, South Korea and North America. The company wants to compensate for falling output at its older Soviet-era fields by opening projects in the Russian Arctic and Far East.

Double Investments

Gazprom plans to double investments to $30 billion this year as development costs increase on rising prices for steel and oil- field services. The company will spend up to 10 trillion rubles ($420 billion) through 2020, Sergei Pankratov, deputy head of strategic development, said June 16.

Last week, Russia's benchmark Micex stock index slipped 3.5 percent, its first weekly drop since June 8, led by OAO OGK-3 as Citigroup Inc. cut its recommendation on the OAO GMK Norilsk Nickel power unit.

OGK-3 slumped 22 percent, the biggest weekly decline since trading started in March 2006. OAO Mosenergo, Moscow's main electricity supplier, slipped 8.1 percent in what Deutsche Bank AG analyst Dmitry Bulgakov said was a ``correction'' after gaining 16 percent the previous week.

Central Bank

The central bank uses a dollar-euro basket to manage the ruble's fluctuations. Traders tested the top end of Bank Rossii's trading band after Deputy Chairman Konstantin Korishchenko said in an interview that the range may be widened to deter speculators. The currency fell 0.7 percent to 23.4102 against the dollar and rose 0.5 percent to 36.9729 versus the euro, leaving it little changed in the week at 29.5134 against the basket.

Russia's 30-year, benchmark government bond fell this week, as its yield rose from 5.48 percent on June 20 to 5.68 percent at the end of trading June 27. The two-year note also dropped, with its yield rising 2 basis points to 5.56 percent.

President Dmitry Medvedev will discuss energy supplies with his Azeri, Turkmen and Kazakh counterparts during a four-day swing through the Caspian Sea region starting July 3.

Medvedev, a former chairman of gas-export monopoly OAO Gazprom, Europe's biggest company by market value, will seek assurances that planned pipeline projects will move ahead and commitments to supply them.

The European Union, which gets a quarter of its gas from Gazprom, wants similar commitments from the Caspian states as the bloc seeks to lessen its reliance on Russian energy.

The following is a list of important events in Russia this week:

Event                                   Date
First-quarter current account           June 30
Customs lawsuit versus BoNY             June 30
Norilsk Nickel AGM                      June 30
Polymetal earnings                      June 30
Gazprom earnings                        June 30 or later
M.video earnings                        June 30 or later
Pharmacy Chain 36.6 earnings            June 30 or later
Rostelecom earnings                     July 1
Monthly oil production                  July 1
Monthly sovereign funds report          July 2
Monthly PMI                             July 2
Weekly CPI                              July 2
Monthly Services PMI                    July 3
Weekly currency reserves report         July 3
Medvedev visits Azerbaijan              July 3-4
Medvedev visits Turkmenistan            July 4-5
Medvedev visits Kazakhstan              July 6
T*