Transcript:
Meeting on progress in gas infrastructure development in Russian regions
Dmitry Medvedev: I would like to begin with greetings to the Gazprom team and everyone who is involved in the oil and gas business on their upcoming professional holiday. Oil and gas is a super-important industry in Russia. It is due to oil and gas workers’ dedicated efforts, professionalism and responsibility that Russia is holding a leading position in the global energy industry, is able to provide sufficient energy resources for domestic needs and to meet major economic goals.
Dmitry Medvedev: "As the country with the world’s largest natural gas reserves and as a top gas producer and exporter, we must use this advantage for our own benefit – to stimulate development, to improve the quality of life – while evening out the differences across the country – and to create descent living conditions not only in big cities but also in rural areas."
During our meeting at Gazprom today, we will discuss gas infrastructure development in the regions. We have been working on this for the past decade, but the work actually intensified in 2005 and was formatted into a national project. When we started, we motivated ourselves with a simple truth – as the country with the world’s largest natural gas reserves and as a top gas producer and exporter, we must use this advantage for our own benefit – to stimulate development, to improve the quality of life – while evening out the differences across the country – and to create descent living conditions not only in big cities but also in rural areas.
At the beginning of this year, over 83% of households and industrial facilities were connected to gas distribution systems (on average across the regions), including 65% connected to natural gas grids and 18% connected to liquefied gas grids. It is especially gratifying that we have achieved successes in raising the percentage of rural households connected to natural gas to 53%, crossing the 50% level. I know how different things were when we started this project. This is an encouraging result achieved over the last eight years.
Gas infrastructure development was initially seen as a zone of joint responsibility between Gazprom and the regional authorities. We agreed that Gazprom would be responsible for building pipeline links between villages, while the local governments would make sure local grids and boiler rooms are in place in each village and that each house has gas-receiving facilities.
Smooth cooperation has always been the chief condition for successful work here, and one of the criteria to assess results. Some regions had more success than others; some local administrations failed to fully meet their commitments. This had happened before, and also in 2012; we’ll discuss this later. This isn’t good, though, because it means that the newly built infrastructure remains idle and people still have no gas in their homes, and industrial and agricultural facilities have not received a development impulse, and consequently have not received investments. This is why I should say that regional governments need to concentrate better on this issue; otherwise, we will not be able to complete this project any time soon.
Dmitry Medvedev: "This year, Gazprom provided nearly 34 billion roubles to finance the regional infrastructure development programme. The bulk of these funds are spent on building gas distribution systems in the regions. This work is in progress in 68 regions. Special attention is given to Russia’s Far East where a new major gas production centre is emerging."
This year, Gazprom provided nearly 34 billion roubles to finance the regional infrastructure development programme. The bulk of these funds are spent on building gas distribution systems in the regions. This work is in progress in 68 regions. Special attention is given to Russia’s Far East where a new major gas production centre is emerging. At the same time, we need to make every effort for local consumers to finally connect to gas grids. This is especially important because the recent severe flooding in the area is causing additional problems. All of these things influence future work, so I hope that Gazprom and the regional governments will provide additional support to flooded areas where their combined efforts can make a difference. The heating season is ahead of us and it is our duty to do everything to ensure that the people are supplied with electricity and heat, and also gas if possible.
Finally, there is one more issue that I would like to address – the procedure for and the cost of connecting industrial and individual consumers to gas. As usual, there have been a lot of questions and criticism regarding technical issues, as well as charges. People complain to the government, to other agencies, and to Gazprom, too. This is an immensely popular issue.
On June 10, amendments to the gas supply law came into force aimed at improving the regulation of these issues. The Federal Tariff Service was instructed to draft the relevant regulatory acts documenting the rules for charging consumers for technological connections and how the charges should be calculated. Mr Sergei Novikov (FTS head) will inform us today of their progress. In any case, this work needs to be completed.
Now, let’s move to discuss the primary issue for today. Let’s hear from Gazprom first. Mr Kirill Seleznyov, please go ahead.
Kirill Seleznyov (General Director of Gazprom Mezhregiongaz): Mr Medvedev, colleagues, connecting the regions to the gas distribution system is one of Gazprom’s priorities. We have been implementing these programmes since 2001.
We at Gazprom see three priorities in terms of regional gas infrastructure development. In expanding its regional gas supply programmes, Gazprom has three main priorities: attaining maximum economically justified regional gas supply levels, the simultaneous creation of pipeline – user centres for the maximum utilisation of specific facilities and for putting various facilities on stream; and expanded gas supply volumes for Russia’s Far East and southern Russia.
In the past 13 years, we have spent about 223.7 billion roubles for these purposes, including some 213.8 billion roubles in 2005-2013. This total does not include the cost of building pipeline branches or gas distribution stations. For your information, over 100 billion roubles were allocated for these purposes.
Kirill Seleznyov: "This year, over 300 communities, as well as around 39,000 flats and households, are to be connected to new systems. And as many as 162 boiler rooms will also be converted to gas."
Gazprom fulfills its obligations in full. This slide shows the results of our work over the past eight years. Under the gas supply programme, Gazprom is also involved in the construction of infrastructure in Sochi. For instance, 13 medium- and high pressure gas distribution pipelines with a total length of about 94 km were built and opened in 2012 in the direction of the Adler station. Gazprom has completed an additional 29 gas pipelines, and the Administration of the Krasnodar Territory has fulfilled its obligations regarding construction of a low pressure system. Consequently, 15 boiler rooms will be converted to gas, and over 13,000 households and flats will now receive gas.
For the purpose of planning mid-term gas supply projects, regional programmes for expanded regional gas supply and gas provisions in 2012-2015 were drafted for 69 Russian regions. Analyses of the preliminary results of the gas distribution programmes and the regularity of payments for gas supplies allowed us to invest 33.9 billion roubles in the 2013 gas-supply programme. This year, over 300 communities, as well as around 39,000 flats and households, are to be connected to new systems. And as many as 162 boiler rooms will also be converted to gas.
At the same time, partial or complete failure to fulfill the various obligations by the regional administrations remains a considerable problem in implementing the gas supply programme. In 2012, Gazprom completed gas facilities in 40 regions. Of this number, the administrations of only 15 completely fulfilled their obligations. An additional 11 regions, shown on this slide, are lagging behind the schedule, while fulfilling their obligations. For this reason, over 2,500 households did not receive gas last year, and over 30 boiler rooms were not converted. As of late 2012, the administrations of 14 regions virtually failed to fulfill their obligations. Due to the failure to fulfill these obligations in 2012, over 81,500 households did not receive gas, and over 630 boiler rooms were not converted.
The 2012 gas-supply programme was adjusted on the basis of its preliminary-implementation results. Investment volumes were reduced from 37.6 billion roubles to 33.7 billion roubles.
During the creation of the 2013 gas supply programme, we also took into consideration various user preparedness parameters. Now we are getting ready to adjust the 2013 gas-supply programme in accordance with the results of the first six months of the year. Obviously, the adjustment of the 2013 programme and the allocation of funds in the years to come directly depend on the fulfillment of obligations by the regional administrations. This slide shows the regions owing the greatest debt for natural gas deliveries and failing to fulfill their obligations under the 2005-2012 programme.
I would like to talk separately about the overdue debt of end users. In the seven months of 2013, this liability has increased by 22.9 billion roubles, and, as of August 1, it has reached 105.9 billion roubles. To remind you, municipal utility companies and the public account for almost 30% and about 43% of the total debt volume, respectively. These two user categories add up to 15.5 billion roubles’ worth of total debt incrementally and for 68% of the entire debt load.
Apart from failure to fulfill obligations and to pay gas debts, this slide shows some unresolved issues. Nevertheless, this slide reflects specific principles for regulating payments for network connections under the relevant Government resolution. I would also like to note problems with providing preferential property tax rates for newly built gas-supply facilities because specific rates might otherwise soar by up to 100% through property tax and amortisation. We are addressing this issue with the regions, but we would also like to request support from the Federal Tariff Service, the regional administrations and the Government.
And I would like to dwell separately on the issue of registering property rights for ownerless gas pipelines. This slide graphically shows regions with the longest ownerless networks. Although their share continues to decrease all of the time, it remains high, or about 11,850 km.
Dmitry Medvedev: I believe that if this issue were raised in Europe it would baffle most executives and representatives of the business community. An ownerless gas pipeline! Of course, there are ownerless buildings there because their owners are either unknown or have lost property rights, but ownerless gas pipelines are purely a Russian phenomenon. Please.
Kirill Seleznyov: The problem is aggravated by the fact that their maintenance expenses are not included in the rates, and we are virtually forced to shut down these facilities. For obvious reasons, we are not doing this, and we ensure their maintenance. Quite often, we have to patch up holes and to conduct repairs in case of accidents. As we see it, this situation negatively influences the safety and economic efficiency of the gas distribution network. We estimate that over 20 billion roubles are needed to purchase these networks, with due account for their reconstruction. The regions and we too are working on this issue, and I would like to ask the regions to become more actively involved in this work. I would also like to ask the Government for support in encouraging this work in the regions and to assist us in this respect. Thank you for your attention.
Dmitry Medvedev: Thank you. We will yet re-examine the issues outlined in the report of our primary supplier, Gazprom Mezhregiongaz. And I will also say a few words about all of the problems that were named at the end.
Right now, I suggest that some of our colleagues, regional leaders, be allowed to speak. Let’s start with Mr Viktor Nazarov who is taking part in the teleconference. We would also like to congratulate you on the upcoming holiday.
Viktor Nazarov (Governor of the Omsk Region): Thank you. Good afternoon, Mr Medvedev, colleagues. I would also like to congratulate you on the upcoming holiday.
Viktor Nazarov: As of January 1, 6,731 km of gas distribution pipelines were built in the Omsk Region, and that 27 of 32 municipal entities received natural gas. In an effort to expand our fruitful relations, Gazprom and we too approved and started implementing a programme for expanded gas supply and gas provision in the Omsk Region. Under this programme, an additional 2,319 flats will receive gas in 2012-2015. And 44 boiler rooms in 25 communities will also convert to gas.
I would like to note that, as of January 1, 6,731 km of gas distribution pipelines were built in the Omsk Region, and that 27 of 32 municipal entities received natural gas. In 2009-2011, Gazprom continued to implement its gas supply programme in the Omsk Region. During that time, the overall investment volumes reached almost 650 million roubles. In an effort to expand our fruitful relations, Gazprom and we too approved and started implementing a programme for expanded gas supply and gas provision in the Omsk Region. Under this programme, an additional 2,319 flats will receive gas in 2012-2015. And 44 boiler rooms in 25 communities will also convert to gas. Moreover, we plan to launch a pilot project and to build a gas compressor station, which would refuel motor vehicles.
The Omsk Region and Gazprom have signed a “road map” for subsequently expanding the gas supply network in 2013-2018. Consequently, gas supply levels will double. At the same time, we are studying various options for supplying liquefied natural gas to villages and towns located far away from central gas pipelines. This would ensure the cost-effective use of natural gas in the Omsk Region.
I would like to note that – to further our cooperation – we are currently in talks to assess the possibility of establishing a joint gas distribution association with Gazprom and Gazprom Mezhregiongaz. This would make it possible to merge six disunited gas distribution associations with various forms of property and to ensure stable supplies, deliveries and the application of joint transport rates for the population. In effect, work with Gazprom and Gazprom Mezhregiongaz is proceeding in full. We have a clear idea of how to build upon our relations. We have signed the relevant synchronisation plans and timeframes, and the debts have been virtually …
So the work with Gazprom and Mezhregiongaz is in full swing. There is a clear understanding on how to build relations; plans and schedules have been synchronised and signed; and the debt has been reduced almost to zero, because it is obvious that cooperation is a two-way street.
Apart from investment in gas supplies, Gazprom and Mezhregiongaz are carrying out large-scale social projects. Gazprom is paying for the construction of the following facilities in the Omsk Region: a hockey academy, 10 sports grounds, two sports and recreation centres, and a swimming pool for children. I’d like to emphasise this social orientation and express my gratitude to Mr Miller (Alexei Miller) and Mr Seleznyov (Kirill Seleznyov) for their contribution to our work in the Omsk Region. Thank you for your attention.
Dmitry Medvedev: Thank you. Now I’ll give the floor to our other participants. Mr Ignatyev (Mikhail Ignatyev), how are things going?
Mikhail Ignatyev (head of the Chuvash Republic): Thank you. Mr Medvedev, ladies and gentlemen. We have carried out large-scale gas supply projects using budget and non-budget sources. Today practically all villages have been supplied with gas. There are no depressed villages in the countryside.
Mikhail Ignatyev: "Today practically all villages have been supplied with gas. There are no depressed villages in the countryside. We have have laid 15,000 km of gas pipes supplying more than 6,000 customers."
We have have laid 15,000 km of gas pipes supplying more than 6,000 customers. As of January 1 of this year, 84% households are connected to the natural gas supply network in the republic; the relevant figures for cities and urban settlements are 98.8% and 65.3% for rural areas.
We are reducing our debts for gas, and we have no budgetary debt. Overdue consumer debt amounts to 367 million roubles. We will continue paying off our debt.
We were short of gas in certain areas of Cheboksary and Novocheboksarsk. We have agreed on the basis of mutual benefit (thank you, Mr Miller and Mr Seleznyov)… and practically the entire left bank of the Volga River that didn’t have any gas supply network… The current programme provides for supplies of gas via the Mary El Republic. I believe we’ll resolve these problems in two years.
Gazprom is also taking part in the construction of our sports facilities. A wonderful sports complex has been built and we have started the construction of an ice palace because we don’t have any and our people are forced to go to neighbouring regions. So we’ll resolve this problem in the near future as well.
To conclude my speech I’d like to express my gratitude to Mr Medvedev for his support. Gas provides comfort and improves our quality of life. We are resolving all problems that arise today on the go. I’d like to wish success and prosperity to all our people. Thank you.
Dmitry Medvedev: And how are things in Kostroma, Mr Sitnikov (Sergei Sitnikov)?
Sergei Sitnikov (Governor of the Kostroma Region): Mr Medvedev, I’m very pleased to congratulate my colleagues on their achievements. Regrettably, Kostroma has not been very lucky in this respect. In our region, 65% of households are connected to the gas supply network, and this is one of the lowest figures in the country.
Dmitry Medvedev: Is this the average figure, including the city of Kostroma?
Sergei Sitnikov: Exactly. To be honest, 80% of the region’s territory has to manage without gas. We had some complications this year because of the change of the operator. Now it’s Novatek. We know well that such a change doesn’t make it easier to provide gas supplies. We also understand that our Gazprom colleagues derive profits only from letting others to use its pipelines.
I’ve already spoken to you about this. I’m very grateful to you for supporting the region’s position on continued gas infrastructure development. Our most serious question is linked with the Galich-Sharya gas pipeline, which is supposed to be built before 2015 according to the plan. Regrettably, its construction has been suspended. One of the reasons is linked with the region’s gas consumption estimates. We are trying to resolve this problem but we’d like to ask Mr Seleznyov not to forget about us. We’ll do all we can.
The coming of a new operator has created one more serious problem. Our region is poor and depressed, and we spent our special allowance on building gas pipelines for our villages. The change of the operator has deprived us of this opportunity. Meanwhile, we’ll need 0.5 billion roubles for this purpose in the next year and a half but our region’s consolidated budget is 25 billion.
Despite the problems created by the new operator, I’d still like to thank Mr Miller for Gazprom’s commitment to social projects – 12 sports grounds are being built in the region and we appreciate the kind attitude of our colleagues and their desire to help us resolve many problems. Thank you.
Dmitry Medvedev: Two questions, or to be more precise one question and one comment. Do you fulfill your commitments on synchronising the works (I mean “you” in a broad sense, without separating you from the Kostroma Region government and from what was done before you – although this is not your responsibility)?
Sergei Sitnikov: At any rate, in 2012 we made up for the losses of the last few years. Synchronisation has reached 75% in the construction of street gas pipelines. We are a bit behind in building gas boilers (51%) but we are confident that we’ll resolve this problem by the start of the next heating season. Serious investors have already assumed commitments on gas boilers.
The plan provides for connecting 14,921 households to the gas supply network. We have connected 4,153. We have networks in two villages – Parfyonovo and Neya. Please switch on the gas. Everything has been built and people are waiting for gas supplies.
Dmitry Medvedev: Now a few words about the new operator. We (I mean the Government) adopted a decision on new operators to develop the competition and improve, rather than deteriorate, the conditions for our consumers. If a new operator does not do this, do we need it? I’m ready to talk to the top management of your new operator. Apart from thinking about economic benefits, they should realize that we started this project as a national one. This is why part of the burden should be shouldered by the new operator and not just Gazprom if it wants to have strong positions in the region and make money there. I hope our colleagues from Novatek have heard me.
Next we’ll discuss these and some other issues, including relevant documents.
<…>
