Prime Minister Vladimir Putin meets with Gazprom CEO Alexei Miller following the launch of the Nord Stream gas pipeline
6 september 2011
Transcript the meeting:
Vladimir Putin: Mr Miller, let me once again congratulate you on the completion of this stage of the project.
Alexei Miller: Thank you, Mr Prime Minister.
Vladimir Putin: Indeed, this is a major event, both for the Russian and European energy sectors. It will definitely increase energy stability in Europe. Soon we will be able to start the direct supply of our energy resources to consumers in European countries, and this is definitely a sign of trust in Gazprom and in Russia.
The work was financed by tens of European banks, and not only European ones, but Japanese and Brazilian banks also took part in the consortium. This is definitely a sign of trust. I hope that the pipe will be filled soon, within one month, and then the supplies will begin. Over half of the second pipeline – 640 kilometres – has already been laid. And we hope to supply the entire amount, 55 billion cubic metres, to our consumers next year. In this connection, I would like to ask you about Gazprom’s exports in the first half of this year. You should already have the results for the first six months on the overall exports and on exports to the CIS and the Baltic States.
Alexei Miller: The launch of the first Nord Stream pipeline has been more than well-timed, Mr Putin, because we are witnessing an increase in gas demand on the European market today. The proof of this is the result of Gazprom’s gas exports. In the first eight months of this year, our gas supplies to countries outside the CIS grew by 12.7 billion cubic metres compared to the same period in 2010. This is a very good result, a very big amount, and it shows that new gas transportation routes, export routes, will be in demand among European consumers.
We project that demand for Russian gas in Europe may grow by another 200 billion cubic metres in the next 10 years.
Vladimir Putin: Out of these 200 billion, the Nord Stream may supply about 25%.
Alexei Miller: Yes, about 25%. This is indeed a big and significant figure. We expect gas consumption by our foreign consumers in countries outside the CIS to run until late 2011, and Gazprom’s European exports may reach 155-158 billion cubic metres this year. Last year, they were a little more than 138 billion (138.7 billion cubic metres).
Vladimir Putin: What about the CIS and the Baltic States?
Alexei Miller: Speaking of the CIS and the Baltic States, overall exports, including this 12.7 billion, grew by 26 billion cubic metres in the first eight months of the year, so a significant part of the increase came from these countries. We see gas demand growing and because of this, the issue of fully honouring our contracts for gas supplies to these countries is a challenge for us. But we always do it. We always supply gas to our consumers on time and in the contracted amounts.
Vladimir Putin: I have a question in this connection -- how much gas will we supply to Ukraine this year?
Alexei Miller: At least 40 billion cubic metres under the existing contract.
Vladimir Putin: At least 40 billion cubic metres. We gave them a discount of $100 per 1,000 cubic metres for deployment of the Russian fleet in Sevastopol. $100 per 1,000 cubic metres, with 40 billion cubic metres supplied – this means that the subsidy to our Ukrainian partners this year will be about $4 billion. Is this so?
Alexei Miller: Yes, exactly.
Vladimir Putin: And if the amount is the same, this sum of subsidies will be annual?
Alexei Miller: If it is the same, the sum will be annual.
Vladimir Putin: I see. Mr Miller, I would first of all like to talk about how Gazprom works inside Russia today. Nord Stream is a very good project. It is needed by our partners, by Gazprom itself and by the Russian economy. It brings significant export revenues to the state treasury and to Gazprom allowing the latter to increase its production. What are you doing to develop the gas distribution system in Russia’s regions? How are these plans carried out? Are there any discrepancies between Gazprom’s efforts and the regional authorities that should ensure that gas reaches consumers?
Alexei Miller: Mr Putin, speaking of the domestic market, I should say that it has been growing this year, like the European market, and the pace of growth was quite high. Gazprom’s supply to consumers inside Russia grew by 9.5 billion cubic metres in the first eight months of the year compared to the same period in 2010. Remarkably, this amount is higher than in 2008 before the financial crisis, so the level of gas consumption in the Russian industry and in the Russian economy has exceeded the pre-crisis level. This is truly remarkable because the consumption grew in basic industries, notably, power generation, the cement industry, agricultural chemistry and the metal sector.
Of course, the development of the gas distribution network is a relevant topic in this regard. There should be no doubt that the gas distribution development programme is one of Gazprom’s priorities. This year, we have allocated over 26 billion roubles for the programme. We will build over 1,800 kilometres of pipelines within the programme and commission 152 facilities. The programme is being implemented in all Russia’s regions.
Mr Putin, you know very well that when we launched a large-scale gas distribution development programme in mid-2005, we launched it in 25 regions. By now, the number of regions where we are developing the gas distribution system has reached 66. In compliance with the Russian government’s instructions, we are focusing on rural areas. Comparing 2005 and early 2011, it should be noted that the development of the gas distribution system in rural areas went faster. In rural areas, it grew by 11%, while in Russia overall it grew by 9%. Today, the availability of the gas supply in Russia on average is 60%, just above 63%. In terms of the geography, we have already started the implementation of our eastern gas programme and have already carried out large-scale gas distribution projects on Kamchatka and on Sakhalin. Gas is now delivered to the Heat and Power Plant No.2 in Petropavlovsk-Kamchatsky…
Vladimir Putin: What about Vladivostok?
Alexei Miller: We have started gas deliveries to the Yuzhno-Sakhalinsk Heat and Power Station. Mr Putin, I would like to invite you to the Sakhalin-Khabarovsk-Vladivostok gas pipeline commissioning ceremony. On Thursday, Sept. 8, gas will arrive from Vladivostok to the island of Yuzhny. Gas from the Sakhalin-Khabarovsk-Vladivostok pipeline will be delivered to the Russky Island. Thus, the Heat and Power Station No. 2 and the Far Eastern power generation sector will receive Russian gas.
Vladimir Putin: What about the prices? Are the prices and subsidies as they were agreed upon by the consortium participants? Have you reached an agreement with the Finance Ministry?
Alexei Miller: Mr Putin, the present agreement envisages that gas received as royalty from Sakhalin-2 will be delivered to the pipe. This mechanism will be in place until 2014. The amount will suffice for the region’s present consumers. So, we can say that the issue of the government receiving entitlement gas from the Sakhalin-2 project has been resolved until 2014.
Of course, given the growth of gas consumption in the region – and this is something that we will address soon – it will be necessary to work on this issue together with the Finance Ministry because our goal is to have the gas supply in the Primorye Territory and the Khabarovsk Territory by 2020 at the level we currently have in the European part of Russia.
Vladimir Putin: Speaking of the European part of Russia, at the United Russia conference yesterday, there were questions about the gas supply and general energy problems in the Murmansk region. We expect to get gas from the Shtokman field at the end of 2016, right?
Alexei Miller: Yes. Gas to the Murmansk region will be delivered from the Shtokman field. We expect that pipeline gas from Shtokman will reach the Murmansk region in December 2016. We are presently working on the master plan for the region’s gas distribution system. The Shtokman field is really one of the biggest, Mr Putin, its reserves are…
Vladimir Putin: Unique! 3.7 trillion cubic metres of gas.
Alexei Miller: Yes, 3.7 trillion cubic metres. The field will be developed for 50 years and, speaking of the resource base for the north west and Russia, this will be a very important contribution to Gazprom’s production. But the field is also well situated for reaching European markets. Later, after Shtokman goes on stream, we plan for its gas to be exported to our European consumers via Nord Stream.
Vladimir Putin: This means that gas from Yuzhnorusskoye and then from Shtokman will be pumped via this pipeline in the amount of 55 billion cubic metres for 50 years.