Sberbank analysts have produced another controversial report. This time the bankers report on contracts signed with state-owned Russian natural gas behemoth Gazprom and firms owned by stoligarchs and president Vladimir Putin's close personal friends Gennady Timchenko and Arkardy Rotenburg.

The cost of construction contracts to build gas of exports pipelines such as Power of Siberia (Sila Sibiri), Nord Stream 2 and Turkish Stream comes to a total of $93.4bn, the report by Sberbank CIB analysts Alex Fak and Anna Kotelnika said.

Fak is no stranger to controversy. He raised eyebrows with a report on wasteful spending at state-owned oil company Rosneft that included a highly critical section entitled "Rosneft: We Need to Talk About Igor" that referred to Rosneft’s CEO Igor Sechin. The oil company complained loudly about the report, which was withdrawn and reissued without the offending section.

Now the analysts have embarrassed more top tier oligarchs. Sberbank CIB argues that investing in pipelines does not yield high margins, and notes that "we find the decisions of Gazprom very clear once we assume that the company is managed in the interests of its contractors, and not for extracting commercial profits," as cited by RBC business portal.

Most recent reports unveiled that Gazprom appointed StroyGasNefteGas (STNG) controlled by Volga Group billionaire, Kremlin insider Timchenko to build the mainland part of the Nord Stream 2 pipeline.

Timchenko's company was appointed directly by the head of Gazprom Alexei Miller with no competitive bidding procedure in place. STNG has been Gazprom's largest contractor since 2016, with other contracts including Sila Sibiri and objects at the Chayandinskoye field.

Another large contractor benefiting from Gazprom's massive investment programme is StroyGasMontazh (STGM) of billionaire and Putin’s childhood friend Rotenberg. 

Sberbank CIB analysts remind that Sila Sibiri is much more costly as compared to previously considered Altai pipeline alternative: $55.4bn versus $10bn. The analysts of Russia's leading bank also claim that Chinese gas buyers were ready to sign contracts on Altai already in 2010.

Mainland parts of Turkish Stream and Nord Stream 2 are also highly lucrative for Gazprom's contractors, exceeding $20bn in total cost.

"The bigger the project, the more lucrative are the contracts," the report claims, adding that "unfortunately none of the [contractors] are publicly traded and not available to investors."

Sila Sibiri gas supplies require construction of additional extraction, refining, and transportation capacities costing up to $40bn, which will also be handled by companies affiliated with Timchenko. 

At the same time Sberbank CIB doubts that the price formula on supplies on Sila Sibiri will be profitable, estimating that at an average oil price of $65 per barrel the NPV of the project would be negative at $11bn.

However, other analysts surveyed by RBC remind that there were objective reasons for picking Sila Sibiri over Altai, such as higher demand for gas in the east of China, to where the former is routed. Unnamed sources among Gazprom’s contractors claimed that Altai was abandoned as Chinese buyers could have acquired Turkmenistan gas cheaper. 

RBC reminds that the head of Prosperity Capital Alexander Branis, a minority shareholder in Gazprom, already brought the issue of massive Gazprom spending up with the President Vladimir Putin.

"We are under the impression that the company is not working neither for the shareholder, nor the consumers, nor the state, but de facto for the contractors, that are delivering various projects," he warned at the VTB Capital Forum in October 2016.