3 december 2011

Prime Minister Vladimir Putin meets with Gazprom CEO Alexei Miller

Issues discussed included Gazprom’s preparations for the peak load season and the preliminary results for the outgoing year. The prime minister was also interested in the progress made with partners in the neighbouring countries, primarily Belarus, with whom Gazprom has recently signed a number of contracts.

Transcript of the beginning of the meeting:

Vladimir Putin: Mr Miller, the first question is traditional for this season: preparations for the winter. Is Gazprom ready? What has been done? What is your assessment of the readiness?

Alexei Miller: Gazprom has pumped 63.5 billion cubic metres of gas into underground storage and conducted all the required planned and preventive repairs at gas production and transportation networks. We are ready to supply the necessary amounts of gas to consumers, the communal services and electric power plants for the autumn and winter peak loads.

Vladimir Putin: So, you have done everything as usual, everything that was planned?

Alexei Miller: That’s right.

Vladimir Putin: Good. Now let’s turn to the results for 2011. It is December now, the year is drawing to a close and we can start summing up the results. What would you say about the scale of gas production and its sales at home and abroad?

Alexei Miller: Gazprom will have produced about 520 billion cubic metres of gas by the end of the year. Last year we produced around 508 billion. Exports to non-CIS countries will top 151 billion cubic metres, which is almost 11% more than last year. Sales on the CIS market are 48 billion cubic metres and the rest is domestic consumption.

Prices in Russia are still much lower than in the non-CIS markets. We have recently registered a steady price growth trend in European countries, our traditional customers. This trend does not affect the scale of sales. Today, wholesale gas prices in Russia are five times lower than those under our long-term gas supply contracts with European countries.

Vladimir Putin: Five times?

Alexei Mille: Yes, five times.

Vladimir Putin:  What do you do with the difference or rather the returns you receive as a result? Do you channel the funds into Gazprom’s development or expansion of gas supplies? What is happening in this area?

Alexei Miller: Yes, first of all we are investing the profits in gas transportation projects and new gas transportation capacities. By the middle of next year we will put into operation the Bovanenkovo-Ukhta gas pipeline, which will be the world’s most modern network. It will deliver gas from the Bovanenkovo deposit in the Yamal Peninsular to the integrated gas supply network. It goes without saying that in line with government instructions we are paying particular attention to expanding gas supply areas under Gazprom’s innovation programme. By the end of 2011 more than 25 billion roubles will have been spent on expanding gas supply areas.

Vladimir Putin: We have increased gas supply areas by almost 10% in the past 10 years, haven’t we?

Alexei Miller:  Even less than 10 years. In the past six years, since 2005, we have increased gas supply areas by 10%, primarily in the countryside. Now the national average for gas supplies is more than 63%, which is an increase by about 9%, whereas in the countryside the growth has been almost 11% and the average nationwide has reached 47%.

Vladimir Putin: You must expedite your efforts further. Gas must be supplied to all regions. President Dmitry Medvedev and I discussed this with colleagues and one of them mentioned a specific place: the village of Vilya in the Vyksunsky District of the Nizhny Novgorod Region. Please, think together with the governor what can be done.

Alexei Miller:  Yes, Mr Putin.

Vladimir Putin: I have already talked with the governor about this. Part of the work must be done by Gazprom and part by the region. In general, you must step up the efforts to increase gas supply areas across the country. 

Alexei Miller: Will do, Mr Putin.

Vladimir Putin: What about cooperation with our partners in neighbouring countries? I am referring to CIS countries. Let’s talk about Belarus for starters. We have recently signed a whole package of documents aimed at expanding our cooperation and changing prices in view of the integration of Russia, Belarus and Kazakhstan into the Common Economic Space. We signed documents on the purchase of the second part of the Belarus’ gas transportation system, Beltransgaz. What can you tem me about the implementation of these projects?

Alexei Miller:  Gazprom has paid the remaining 50% for Beltransgaz. We have paid $2.5 billion to our Belarusian friends for these shares. As of today, the documents for the ownership of these remaining 50% have been duly processed. Now Gazprom has full ownership of Beltransgaz.

Today we have started dovetailing the work of Beltransgaz to the operation of the national integrated gas supply system. Norms and standards of technical equipment and service should be the same as in Gazprom. No doubt, this will result in more reliable gas supplies to Belarus and more distant customers in Europe.

Vladimir Putin: Have you already transferred $2.5 billion to Belarus?

Alexei Miller: Yes, we have. We have also fully documented our rights to the shares of Beltransgaz.

Vladimir Putin: Good. I can image the level of wages at Belransgaz today. You should probably think about raising them because now this company is yours. Now that it is part of Gazprom, its wages must be at a higher level. Most likely, you’ll have to double the wages at Beltransgaz.

Alexei Miller:  Are you referring to our Belarusian colleagues who work in Beltransgaz?

Vladimir Putin: Exactly. This is your company now.

Alexei Miller: Will do, Mr Putin.