25 august 2009

Prime Minister Vladimir Putin met with Transneft President Nikolai Tokarev

Participants:
At the meeting, Mr Putin and Mr Tokarev discussed Transneft’s participation in the expansion of pipeline transport capacity with outflow to the east and west, as well as the northwest – BPS-2 and a southern route.

Transcript of the start of the meeting:

Vladimir Putin: Mr Tokarev, as you know, I was recently in Vankor, where a new oil field was commissioned. A meeting with energy, gas and oil company officials was held there, with one of your deputies attending.

First of all, as you know, in the North, in East Siberia, in Yamal, one of the main issues for full-scale, major, broad-ranging operations is the participation of Transneft in increasing the capacity of the pipeline transport for oil deliveries to the east, eventually the Pacific Ocean, and to the west. This is the first issue. In your opinion, what plans and opportunities exist in connection with this endeavour?

Next, the northwest direction - the Baltic Pipeline System (BPS-2). And the southern direction. Please...

Nikolai Tokarev: As far as the construction of the Purpe-Samotlor connecting pipeline, this idea was first brought up at the start of the year by oil company executives themselves. We were interested in this proposal because in our view, this project would improve pipeline infrastructure and would include the resources in the Vankor oil field, as it is now called, for very timely supplies feeding the East Siberia-Pacific Ocean (ESPO) pipeline, both the whole project and the branch to China.

We plan to build a 550-kilometre connecting pipeline from Purpe to Samotlor. As early as the first stage, it will transport 25 million tonnes of oil to the east.

Vladimir Putin: How long did it take Rosneft to build 550 kilometres?

Nikolai Tokarev: Approximately four years, including both design and construction phases. Vankor will take a little bit more time.

Vladimir Putin: But isn't it also 550 kilometres long?

Nikolai Tokarev: The geography is a little bit different there, and the weather conditions are harsher.

We still have 16 million tonnes of reserves that can be supplied through Kholmogorskaya, so we will immediately be able to transport almost 50 million tonnes from this area.

Several oil companies have begun operations here.

Vladimir Putin: All 50 million tonnes, is that right?

Nikolai Tokarev: This would be the final, second stage of Purpe-Samotlor project.

Vladimir Putin: You once said 50 was enough to reach the ocean...

Nikolai Tokarev: Actually, yes. In addition, the capacity of oil supplies from the western direction via ESPO. This already provides and will continue to provide a total volume of 45 million tonnes for the first and second segments of ESPO.

We did not wait for a resolution to the question of financing for this year, and we will finance the project with our own funds. It will be ready before the end of the year.

Simultaneously, arrangements are being made in accordance with your directives. Regarding the meeting in Igarka, new, additional arrangements are being made to provide financing for this project. Today, we are designing and preparing it with our own funds. We intend for the work to be finished by 2011. If there are delays in the financing in connection with the directives currently being implemented, then we will begin financing using the Chinese loan, which has now been secured. The first loan is 5 billion roubles. This is what concerns the Purpe-Samotlor pipeline. Work is proceeding at full speed.

As far as ESPO-1 and ESPO-2, hydrotesting of the pipe at ESPO-1 has been completed. This is the first 2700-kilometre segment to Skovorodino. At present, the remaining third of this pipeline is being filled with oil. Pre-commissioning works are being done at the pumping stations and installation of equipment as well as remote monitoring and communications are in progress. At the oil terminal at Kozmino, we are finishing the installation of technological equipment and means of access. We are confident that by the end of the year, in accordance with the project schedule, all work on ESPO-1 will be completed.

Immediately, without delays and without wasting time, we will begin construction on the second stage, on ESPO-2. We will have detailed plans for this project in November. All inspections are finished, and all important decisions have been made. At present, we are preparing the path of the future pipeline for installation work. We negotiated for the purchase of pipes from pipe suppliers at a fixed price. There will even be a discount.

Vladimir Putin: Look here. Gazprom has begun active operations in the south of the Krasnoyarsk Territory, and they also plan to reach the Pacific Ocean...

Nikolai Tokarev: Along the same corridor as us.

Vladimir Putin: Along the same corridor as you. Therefore, when you begin the second stage, ESPO-2, you will need to coordinate construction with Gazprom. If not coordinate, then at least, keep in mind that this may be used by a second Russian company as well.

Nikolai Tokarev: Mr Putin, such cooperation is maintained in both the design documentation and in practical terms. Gazprom contractors will proceed from Khabarovsk to Nakhodka. We plan to develop this segment together with Gazprom contractors, because it will be along the same corridor.

Vladimir Putin: Fine. Let's move on to the northwest...

Nikolai Tokarev: Now as regards the BPS-2. The construction of its linear section started in mid-June, with 104 kilometers now constructed. The funds required for this project have been allocated in full. Luckily, we managed to resolve this problem promptly by issuing revenue-yielding bonds. The first payment - 35 billion (roubles) - has been earmarked already. The second payment will be completed in September. The BPS-2 project will be financed in full.

We have all the design documentation ready. We maintain regular contacts with the regional and municipal authorities. I can't see any big problems regarding the BPS-2. As regards the Ust-Luga branch, design and research are finished; the engineering documentation has been drafted. We are starting the construction of a terminal at our site in Ust-Luga. I am sure we'll manage to finish this project within the set deadline, maybe even before it.

Vladimir Putin: When?

Nikolai Tokarev: According to the Government executive order, in the third quarter of 2012. But I think we'll manage to commission it in the first quarter of 2012.

Vladimir Putin: Fine.

Nikolai Tokarev: As for the pipeline branch to China, we have practically completed the construction of its linear section. By mid-September all construction and assembly works will be finished: the channel section will be launched, and the line will be prepared for service. By the end of the year we will have prepared our section for the trials planned in the spring. A secure area on the Amur River bank has been prepared. Our Chinese partners began to send equipment and specialists to that area on August 1. They have embarked on their task to prepare an underwater pass across the bottom of the Amur. This work is being carried out in cooperation with Russian companies. We have met all the deadlines specified in your resolutions and directives.

Vladimir Putin: An environmental review has been carried out there, hasn't it?

Nikolai Tokarev: We have coordinated everything and received all authorisations. Everything has been finished.

Vladimir Putin: What about the South?

Nikolai Tokarev: As for the South, we have been discussing the expansion of the Urals-Samara oil pipeline with our Kazakh partners. Following Kazakhstan's request, we have prepared engineering solutions. Today we are studying opportunities and variants of relevant funding. Soon, by the end of this year, we will discuss practical aspects of the project's implementation at a meeting of the Intergovernmental Commission.

All in all, Transneft is fulfilling its export obligations. That's the general outlook.

Vladimir Putin: Good. Thank you.