Before the meeting, the Prime Minister inspected LUKoil’s Korchagin fixed offshore ice-resistant platform in the Caspian Sea and visited the LUKoil-Nizhnevolzhskneft training centre.
Dmitry Medvedev’s opening remarks
Report by Minister of Natural Resources and Environment Sergei Donskoi
Report by LUKoil President Vagit Alekperov
Signing the agreement between Rosneft and Lundin Petroleum
Alexander Novak and Sergei Donskoi held a briefing for reporters
Meeting on subsurface management and transportation of hydrocarbons on the Caspian Sea
Dmitry Medvedev: Good afternoon. We’ve met here today to discuss subsurface management and transportation of hydrocarbons on the Caspian Sea, but it's clear that these issues concern all companies that are present here. This is why heads of other oil companies are also attending this meeting. Let’s discuss these issues in a package, paying special attention to the need to reproduce raw materials, enhance oil recovery, ensure environmental safety, develop the industry as a whole and resolve the permanent taxation issue.
We took long helicopter flights over the area. Needless to say, our discussions mainly revolved around the unstable taxation system, other mandatory payments and the need to consolidate the foundations of tax regulation in subsurface management and the oil and gas business as a whole. But this is a general issue.
First I’d like to say a few words to start the conversation. Obviously we are the world’s leaders in oil and gas production. In the past year we produced about 520 million tonnes of oil (this is a record since the disintegration of the Soviet Union), and about 655 billion cubic metres of gas. In the estimate of the Ministry of Natural resources and Environment, this year’s figures will be close to those of the past year. However, we should not simply rush after figures. It is more important to ensure stable development of the industry, to make it predictable, as I’ve already said, and to ensure extended reproduction of mineral resources.
Preventing potential damage to the environment is of the utmost importance. This topic attracts much attention now, partly owing to the efforts of different environmental organisations. I said at the meeting on the shelf this year that the geography of hydrocarbon production will change. The role of such traditional centres as the Volga area and Western Siberia will be decreasing for objective reasons, whereas the contribution of deposits in Eastern Siberia, the Far East and the Caspian Sea will be on the rise in the next few years.
Five companies are operating on eight licenses on subsurface management in the Caspian area. Yesterday I signed a Government directive on granting the Caspian Oil Company the right to explore the Caspian-based Zapadno-Rakushechnoye oil deposit for future production. This company is represented by some of those present – Rosneft and LUKoil with equal shares, and Gazprom, which owns a bit of stock.
The risks of developing new provinces will always be high. Companies operating on the ground have to organise transport infrastructure and oil production itself, whereas those working on the shelf or in the Caspian Sea must build and mount sea-based platforms, make intensive use of tanker fleet and lay and maintain intricate underwater pipelines.
Today I saw how the Korchagin ice-resistant platform operates. We are meeting in LUKoil’s Centre, which is located on it. This is a good centre, but such facilities require not only huge money and other resources, but also special caution. We must meticulously analyse safety requirements all along the chain – from geological prospecting for hydrocarbons to their transportation and storage. Normative acts on this score should not have any blank spots or allow for misinterpretation, but this is a task for the Government and different ministries.
This July legislation made it necessary for oil producing companies working on the shelf to prevent spills of oil and oil products by planning and financing relevant measures. In all probability, we should formulate similar requirements for companies working on the ground with relevant changes, of course.
We must carefully study international experience and continuously improve the regulation on reimbursement for environmental damage, in particular, by establishing targeted liquidation funds.
Following the review of a draft law on regulating the formation of such funds by its different commissions, the Ministry of Natural Resources and Environment has instructed them to finish elaborating it. I suggest that all those present should think about the expediency of disseminating this experience and ways of reimbursing the damage to the environment by subsurface management.
I’d like to pay special attention to an issue that has recently evoked special interest for obvious reasons: concern about the environment should not cover up illegal actions, no matter by what high considerations they are explained. This concern should not be expressed in illegal actions that are not safe for people and technological facilities.
In this context we must discuss measures for toughening responsibility for unauthorised entry to oil and gas facilities that present special danger. All those present know this better than anyone else. By the way, I’m referring not just to all kinds of thuggish, provocative and other criminal actions, but also to trivial theft – so-called cutouts in oil pipelines.
I’d like to tell you that before flying here today, I signed a Government resolution endorsing rules for reporting threats or acts of illegal interference at oil and gas facilities by the companies involved. This applies to all of you. The resolution determines a list of threats (seven types) that must be immediately reported by owners of energy facilities to the Ministry of the Interior, the FSB, the Emergencies Ministry and the Energy Ministry. It also established a procedure for actions in the event of threats.
Higher safety requirements are a specific feature of this industry. On the other hand, oil and gas companies must be transparent and conduct open dialogue with civil society. They should explain to the people what they are doing, for what purpose and on the basis of what norms. So, all of you must be ready for constructive dialogue with the public and experts. Let me repeat that everything should be done within the legal framework.
Let’s discuss these and other issues that you consider important at today's meeting.
I would like to give the floor to the Minister of Natural Resources and Environment. Mr Donskoi, please proceed.
Dmitry Medvedev with Minister of Natural Resources and Environment Sergei Donskoi and Governor of Astrakhan Region Alexander Zhilkin
Sergei Donskoi: Mr Medvedev, colleagues. I am going to report on subsurface management and the environmental safety of offshore oil and gas production, namely on the Caspian Sea.
We have discussed this more than once, yet I’d like to say again that the volume of resources on the Russian continental shelf deserves special attention. Initial total in-place hydrocarbon resources have been assessed at around 115 billion tonnes of conventional fuel, while reserves amount to 15.4 billion tonnes. Comparison of the state of geological exploration and resource potential shows that the continental shelf is Russia’s most promising oil and gas province in terms of the possible discovery of new large and even unique oil and gas fields.
The role of offshore production in the country’s energy balance will keep growing as the basic production areas become depleted and new offshore fields are discovered. However, new discoveries will be impossible without intensive geological exploration. Notable events in this respect were the results of the meeting on offshore resources held in Novy Urengoy in January this year. I’d like to remind you that following that meeting, a decision was taken on the exploration and development of offshore areas by state companies. Therefore, offshore licences now include a substantial amount of exploration. For example, the licences that have been issued and are being implemented provide for conducting nearly 30,000 line kilometres of 2D seismic survey and nearly 80,000 kilometres of 3D seismic survey and for drilling 290 offshore wells. The implementation of this work by the approved deadlines will increase the reliability of assessment of our offshore resources several times over, will confirm the oil and gas content of vast areas and will allow discovering new hydrocarbon fields.
Furthermore, we have been issuing a growing number of offshore licences. There are 129 such licences, including those issued within the framework of government contracts and for transit areas, and another 32 licence requests filed by state companies for new areas are being considered.
It is clear that this amount of exploration, to be completed within a short period of time, entails the risk of damaging the fragile marine environment. The consequences of a mistake would be huge, especially since offshore areas are located far away from the shoreline and have inadequate infrastructure, in particular emergency response capability.
Therefore, a federal law On the Protection of the Seas of the Russian Federation from Oil Pollution has been drafted and approved, and went into operation on July 1. This law sets out the mineral users’ commitments to protect the environment and to minimise potential negative impact.
Under the law a subsoil operator is required to have in place a plan to prevent and respond to spills of oil and oil products as well as the financial means to be able to take the action stipulated by the plan, and a system for monitoring the marine environment in the area of operation.
The Natural Resources Ministry and other agencies are currently working on the required regulatory framework. In particular, the ministry is drafting a methodology for estimating the required financial resources for oil spill prevention and relief, which is to be adopted in January 2014. Public consultations on the draft are underway.
I would like to briefly describe the resource potential of the region we are in – the Caspian Sea. The Caspian is one of the most lucrative regions for offshore development, where oil and gas reserves accounted for by the Government exceed one billion metric tonnes of reference fuel. The region has a high level of geological exploration: 2D seismic surveys and 3D exploration drilling have been conducted in most of its waters. It is here that largest recent discovery has been made, the Filanovsky deposit, which holds around 200 million tonnes of oil.
The Caspian is also a classical example of how systematic and thorough geological exploration, conducted in full compliance with the Ministry’s exploration guidelines, ensures further successful discoveries and production. It is LUKoil’s consistent stage-by-stage exploration and prospecting in the area that has turned an unpromising region into a rich oil and gas province with reserves, as I said, exceeding one billion tonnes of reference fuel, after eight hydrocarbon deposits were discovered.
It is obvious that the Caspian has great potential for more discoveries. Geologists have great hopes for the coastal areas around the sea. The new discoveries, along with the ongoing development projects, will enable us to establish a powerful oil and gas production cluster in the area.
The Caspian also opens up great prospects for international cooperation in geological exploration of the Caspian Sea basin within its natural geological boundaries (here it is worth discussing the possibility of regional geotraverse, an integrated research effort to be conducted jointly with Kazakhstan’s and Azerbaijan’s geological services), as well as in joint exploration and production projects with Kazakhstan and Azerbaijan in a number of offshore deposits.
In this regard, it is important to mention a few concerns regarding the Caspian Sea’s legal status. Although technically hydrocarbon exploration and production in the region do not differ much from similar work in other offshore areas, there are some specifics to the management of Caspian offshore resources.
Caspian projects have a distinct international dimension: the legal status of the Caspian Sea bottom as an inland water body without a natural connection with the World Ocean is not regulated by international maritime law, nor by the continental shelf provision of the 1982 United Nations Convention on Law of the Sea (UNCLOS).
Therefore, the Russian laws pertaining to development of offshore areas, such as the restrictions on legal entities allowed to conduct such development, do not apply to the Caspian either. The legal status of the Russian section of the sea is determined by bilateral and trilateral agreements between Russia, Kazakhstan and Azerbaijan signed in 1998-2003, which stipulates Russia’s sovereign rights to conduct exploration, development and resource management within its section.
The international agreements with Kazakhstan and Azerbaijan stipulate exploration and development specifics for several promising areas divided by the boundaries between the three national sections of the sea – Tsentralnaya, Khvalynskaya and Yalama-Samurskaya. In accordance with the agreements, these areas will be developed under a production sharing agreement between companies authorised by their governments, in accordance with Russian law.
The Energy Ministry has set up a special commission for working out the rules for subsoil operation, preparing the PSA projects and conducting talks on the three borderline areas. As for the other areas in the Russian section of the Caspian, we plan to license operators in accordance with Russian law as well as with international accords, within the framework of Russia’s sovereign rights for its section of the Caspian Sea (as I said, a resolution on the West Rakushechnoye field has been already signed).
Another important aspect that needs to be taken into account while developing Caspian Sea projects is the environmental vulnerability of this unique inland water body, which is home to sturgeon and other valuable fish species, the habitat or winter destination for a large number of waterfowl and migratory birds. The northern part of the Caspian is a specially protected nature area, a unique nature reserve, and we must bear in mind that, if an oil spill occurs, its closed biosystem offers limited possibilities of self-recovery. These concerns call for tighter requirements on exploration and production technology. All field facilities should be low-impact, and infrastructure should meet the strongest environmental safety requirements stipulated by the nature conservation laws.
Taking into account the legal status and environmental vulnerability of the Caspian, international regulatory acts also stipulate strict environmental requirements for economic activity within this unique water body. This is only natural given that an emergency in one of the littoral states will inevitably lead to negative consequences in the others. Therefore, the strict environmental protection requirements for the Caspian ecosystem and its components and the ban on activities that impact the environment are documented in bilateral agreements between Russia, Kazakhstan and Azerbaijan as well as in the Tehran Convention on the Protection of Marine Environment, signed by all of the Caspian states.
Allow me to mention one more issue, which is highly important for the Caspian as well as for all Russian water areas. Mr Medvedev, you have mentioned in your opening remarks the plan to set up a Disposal Fund. Intensive natural resource development is impossible without building pipelines, drilling rigs and other infrastructure, all of which have limited service life and need to be dismantled after the work is finished. All traces of development need to be eliminated. Otherwise, these facilities become sources of potential environmental damage.
Therefore, a plan has been worked out, on instructions from the Russian Government, to set up a special fund to finance these commitments. Nearly all countries that develop mineral resources have similar funding arrangements in place. Contributions for post-project disposal of facilities are made regularly throughout the project term rather than during the final stage when the disposal costs may be unsustainable for the project operator.
This funding arrangement was discussed at the latest meeting of the Government Fuel and Energy Commission, and we were instructed to extend the proposed plan by discussing with oil companies and the agencies concerned the rules for setting up the disposal fund, taking into account project operators’ financial conditions and work experience; to analyse the possibility of using other financial instruments to guarantee their license commitments, including bank guarantees and parent company guarantees; and to consider setting a limit on contributions to be paid to the disposal fund. This work is already underway, and we plan to finish it by the end of the year.
I would also like to say a few words on monitoring compliance with license obligations at marine deposits and the provisions of legislation for protecting bodies of water. The Federal Service for Supervision of Natural Resources (Rosprirodnadzor), which is affiliated with the Ministry of Natural Resources and Environment, performs environmental oversight and monitors compliance with legislation for protecting bodies of water. The Service conducts thousands of patrol inspections each year. In addition, Rosprirodnadzor sees to it that the license holders comply with the legislation, license agreements and technical projects. It would be impossible to ensure the large-scale and safe exploitation of offshore deposits without adequate oversight.
Rosprirodnadzor has so far been able to perform these functions on its own. However, we should note that the environmental protection fleet is becoming outdated and it is clear that in a few years’ time it will no longer cope with the growing amount of oversight measures on the continental shelf.
Mr Medvedev, you have instructed participants in the Novy Urengoy meeting to finance the modernisation of the environmental protection fleet. The Ministry of Economic Development has confirmed that it would be appropriate to begin this work already now, so that we are completely prepared for active shelf operations. However, Rosprirodnadzor still lacks any draft budget allocations for technical re-equipment. Therefore we would like to submit our proposals to the draft protocol resolution. I will not read them out now because we can see them on the slide. Thank you for your attention.
Dmitry Medvedev: Thank you. Let’s discuss the reports and possible solutions to a number of issues. Mr Alekperov, since you are hosting this meeting, I’d like to give you the floor, and then everyone else will be free to speak, too.
Vagit Alekperov: Mr Medvedev, colleagues. I’d like to begin with a little history to show you how difficult hydrocarbon exploration and launching offshore fields can be.
LUKoil received its first licence in the North Caspian region in 1994. From 1995 to 2012, we invested around $1 billion and drilled 21 wells. Our exploration efforts yielded positive results: we discovered deposits estimated at more than 1 billion tonnes of conventional fuel. I’d like to point out that by launching exploration in the Caspian Sea at the right time, we helped Russia to protect its national interests. As you can see on this map, following the division of the Caspian Sea into sectors, all large deposits turned out to be located on Russian territory. In other words, exploration is not only a technological process but also an opportunity to resolve political issues.
Our company plans to invest 24 billion roubles in exploration in the next three years, until 2016. Considering inflation expectations and the growing prices of materials and resources, we [have been increasing investment]. In the past 15 years, we invested 28 billion roubles, and our investment plans for the next three years, until 2016, are estimated at 24 billion, which means that the cost of offshore development has increased several times over.
We drafted a comprehensive programme for developing the North Caspian fields, which has been approved and is being implemented. It includes the construction of 23 platforms. All of them will be built on Russian territory, which means the creation of a unique infrastructure and the revival of the Caspian shipbuilding enterprises. All local shipyards, or more than 8,000 people, are working to fulfil our contracts. In addition to the platforms, we will also build 1,500 km of pipelines of different diameters, including 1,000 km underwater. Total investment in the development of two fields, Yuri Korchagin and Vladimir Filanovsky, has been estimated at around 400 billion roubles.
We have designed the transport system so as to avoid crossing the Volga River Delta. Mr Medvedev, you can see from this chart that we abandoned the shorter route and opted instead for a more expensive plan because it allows us to avoid the Volga Delta on our way to Kalmykia. As a result, there will be no damage done to the unique ecosystem of the river delta and the environment of other areas, especially the coastal area.
The output from our North Caspian projects will be supplied to the pipeline network of Gazprom and CPC (Caspian Pipeline Consortium), which are located on Russian territory and hence must be registered and cleared by customs.
Besides, the Caspian projects are designed to be integrated in petrochemical production. LUKoil’s Stavrolen polypropylene (PP) plant will receive light hydrocarbons and will be able to take an investment decision to increase its capacity after determining the ethane content in them.
As I have said, it takes a lot to start commercial production at a field. We began exploration [in the North Caspian] in 1995 and launched commercial production at one of the fields we discovered there in 2010, so the cycle is 15 years. The average field development cycle – after an investment decision on exploration is taken – is 10 to 15-20 years. This is a complex technological process, so stable tax legislation and rules [are very important]. We are grateful for the law which you have adopted to give us an opportunity to work in the Arctic, on the Caspian Sea and on other water bodies. However, a deadline is stipulated in that law. We should probably review it sometime in the future.
As it is, I have provided the figures: we received an exploration licence in 1995 and only launched commercial production in 2010 –15 years later. Setting a deadline for the exploration to production period is dangerous, because no investment decision may be taken at all in these conditions.
What is the northern Caspian like? Its climate… LUKoil operates in the Baltic Sea and the Barents Sea, where we have built a year-round terminal. But the Caspian baffled us with its unique climate, fresh water and temperatures as low as minus 30 Celsius in Astrakhan in winter, in addition to ice hummocks and stranded hummocks deposited on the shore reaching six metres in height. We need to make complex decisions to protect our water-based facilities.
LUKoil specialists have done the modelling together with national research institutes, including the one in St Petersburg; the conclusion is that ice protection will require additional costs. We need to protect our pipelines in the area by burying them at a great depth, and building special protection facilities to prevent hummocks sinking to the bottom from damaging our structures and pipelines. This clearly shows hummocks rising six metres in height building up on our structures or floating away from the shore.
As for nature conservation requirements, we, including myself, have been reiterating over the last few years that LUKoil has adopted a so-called “zero discharge” policy, and we are abiding by that policy at our Baltic and Caspian projects alike. This leads to increased financial costs. What is meant by zero discharge? It means that 100% of all waste, including industrial and domestic waste, is taken to the shore where it is recycled at a special plant. This ups the cost of drilling and production by 15%. It would be good if other Caspian states would adopt similar regulations, so that the Caspian would be managed by a single ecosystem, and the competitive advantage Russia has due to its environmental commitments would be extended to the entire Caspian region, and maybe to other offshore projects in other regions.
We have built a unique and operational (as you have seen during the visit to the rig) multifunctional automated system for environmental control which involves satellite monitoring as well as sea vessels. This system enables us to see what is happening in real time. Fortunately (knock on wood) there have been no spikes in the baseline measurements over the period of development in the area, and we are making every effort to keep our projects low-impact.
We have begun intensive development at Filanovsky. This is a complicated cycle: special vessels have been built, the largest of those operating in the Caspian today, including a barge capable of carrying over 15,000 metric tonnes of cargo on board. The barge is already operating. We have adopted the practice of building so-called supporting blocks to be assembled for the ice-resistant stationary platform. The 25-28-metre supporting blocks are fixed to the seabed (the depth is 18 metres here). Then we deliver prefabricated ice-resistant structures which the new barge mounts on the supporting blocks.
But we have come to face an unexpected problem. The Caspian Sea level is falling. We have had situations in which we could not navigate in the Caspian waters because the level was no more than 3.8 metres deep due to the unfavourable northern winds that blew in the Volga delta. Delivering large rigs to offshore projects requires a channel depth of more than 4.5 metres, which was taken as the norm. However, the sluggish effort to clean the channels over the last few years has led to silting up of the Volga delta. Mr Medvedev, this call for a decision – the one included in the draft – to provide some additional funds or resources to resolve this problem. This concerns not only our company, but also manufacturers building oil rigs. It also directly concerns navigation on the Caspian.
I will not talk long about the investment the company plans to make over the next few years of some 500 billion roubles (for the three current projects only, without new discoveries).
I would now like to discuss a few problems we are facing today. We have been working on the Caspian shelf for years and have found that environmental and industrial safety requirements for the development of offshore deposits are being worked out by several different federal ministries and agencies, and their requirements are very poorly coordinated.
We believe that it would be advisable to work out a common set of technical regulations to ensure the safety of offshore production facilities, to return to the one-stop-shop principle in going through formalities such as obtaining permits and appraisals. As it is, we have to go through several types of appraisals: an environmental appraisal, then a comprehensive project appraisal, then it turns out we get environmental reprimands… We have raised this issue on multiple occasions. Mr Sechin, too, mentioned this at the last meeting. We go over this over and over again, year after year. The one-stop-shop principle would certainly harmonise all requirements from all official agencies. We are ready to finance independent consultants, if necessary, to produce a draft based on international practice which would then be accepted at the ministry.
Next. Working on the Caspian shelf, we have faced a problem involving the crossing of state borders by ships carrying cargo for offshore projects. We have to go through border-crossing formalities for each run of our ships. Special entry and exit rights for individuals need to be introduced and legalised; as of now, all workers travelling to the rig (Russian nationals) have to go through formalities as if they were travelling abroad and for coastal navigation, while they are just going to a stationary platform.
Dmitry Medvedev: We didn’t have to do this when we flew to the platform earlier today.
Vagit Alekperov: Well Mr Medvedev, who would ask anything of people flying with you? But every shift travelling to the rig has to produce passports and lists…
Dmitry Medvedev: Do you really have to present it as coastal navigation?
Vagit Alekperov: We submit official lists as required. This is a problem. It would be good if this issue could be considered and the formalities simplified for delivering workers, cargo and ships to the offshore projects.
As a major investor, LUKoil would certainly like to have a stable tax regime here in the Caspian region. The federal law of 2008 has not made things clearer, especially for projects licensed before April 2008. I understand that this law does not apply retroactively. This is why we have this problem: we cannot change the licenses issued before the law came into force. We believe it is necessary to make amendments to the law to provide the opportunity to change these licenses from exploration to production, because otherwise we are holding back the development of our potential – Russia’s potential.
Finally, I have always called for the cancellation of some provisions of Federal Law No 58. Mr Sechin once said this cannot be done. I understand; however, I would like to stress once again that banning Russian companies from working on the shelf puts a constraint on the national oil and gas industry and this oil and gas province. We are working on a common cause; amending Law No 58 would enable us all to work better.
While we’re at it, I would also like to draw your attention to one more problem: in 2008, our joint venture with Gazprom discovered the Tsentralnoye offshore deposit in the Caspian Sea. The license for this discovery has not been issued to this day. We are in dire need of this license, because we need to conduct some complementary explorations, and to conduct a feasibility study for the project’s development as a PSA regulated by the Russia-Kazakhstan intergovernmental agreement. We have a parity venture with Gazprom. Under the PSA, we will have 25%, Gazprom 25% while Kazakhstan will have 50%, in accordance with the intergovernmental agreement. Please, Mr Medvedev, I am asking you to issue instructions to the agencies concerned to accelerate the license issue.
Dmitry Medvedev: When was the decision taken?
Vagit Alekperov: We received the exploration permit in 2008. Now we have applied for an extension of the license until 2017. I assume the delay also stems from the fact that the license was obtained before Law 58 took effect.
Dmitry Medvedev: We’ll look into it.
Vagit Alekperov: I would like to assure you once again, as I said in my presentation about our work on the Caspian, that we will put every effort into our work. We’ll do it quickly, and will observe environmental requirements and other technical regulations.
Dmitry Medvedev: Thank you.
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Signing the agreement between Rosneft and Lundin Petroleum
In the presence of Dmitry Medvedev, Rosneft President and Chairman of the Management Board Igor Sechin and Chairman of the Board of Lundin Petroleum, Ian Lundin, signed the term sheet for the potential purchase of a 51% stake in the charter capital of Petroresource.
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Following the meeting, Alexander Novak and Sergei Donskoi held a briefing for reporters
Transcript:
Sergei Donskoi: Good afternoon, we addressed a fairly wide range of issues related to the exploration and development of the shelf and marine areas during today’s meeting. In particular, we focused in great detail on the Caspian Sea. It’s a very promising area in terms of reserve replacement and development. Over one billion tonnes of reserves have been discovered here, and chances are good that more will be discovered. Of course, we must be careful with regard to the environment and industrial safety. Today, we focused on specific issues, such as improving the efficiency of reserve replacement and protecting this fragile environment against technological and industrial impact.
We had a very detailed discussion of industrial safety. Of course, we have many questions here, especially in the context of recent events surrounding the Prirazlomnaya platform. We must establish a system in which there are no threats to life or industrial facilities, because these are hazardous operations. Today we toured the platform and could see for ourselves that these facilities are extremely hazardous precisely because the operations are very complicated. Therefore, we should make sure that the entire system is effective.
Of course, we touched upon the international division of the Caspian seabed. This is a complicated issue, and I believe it would be difficult to work out a mutually acceptable solution at this meeting. Anyway, it will affect the way this Caspian Sea project is effectively implemented. Mr Novak will cover this in his remarks.
Alexander Novak: As has already been mentioned, today we discussed in great detail the security of upstream and downstream operations and the oil and gas industry in its entirety. You are aware that the federal law on fuel and energy facility security entered in force on July 1, 2012. In this respect, a great deal of work to create the regulatory framework has been performed, which we also discussed today. Seven Government resolutions have been adopted and, generally speaking, the corresponding regulatory framework has been created.
In general, 12,500 facilities, of which 1,500 are in the oil and gas industry, are eligible for protection against acts of terrorism and qualify as hazardous operations. This work has almost been completed. This creates additional opportunities to improve security arrangements.
Among other things, we discussed unresolved issues related to interactions between federal executive bodies today. Prime Minister Dmitry Medvedev issued an instruction to review this issue and put together proposals designed to coordinate the activities of the Ministry of Transport, the Ministry of Energy, the Ministry of Natural Resources, the Federal Service for Supervision of Environment, Technology and Nuclear Management and the Federal Service for Supervision of Transport that would improve the interaction of federal authorities, including the possibility of creating one-stop shop so that companies can obtain necessary documents and results of expert analyses quicker and more efficiently.
Also today, we spoke about the establishment of liquidation funds to provide relief for environmental damage caused by wells that have been out of use for many years. This is a major issue that requires our undivided attention. These facilities are listed on the balance sheet of the Federal Agency for State Property Management as abandoned, so we should decide on who will deal with them.
In addition, we have discussed amendments to Federal Law No. 58 On the Subsoil regarding the licenses that have been issued prior to the amendments introduced in 2008. The Prime Minister issued an instruction to finally resolve this issue in 2013 and come up with appropriate proposals.
Speaking of other major issues related to the Astrakhan Region where we are today, the development of the Caspian seabed holds great promise. An instruction has been issued to consider dredging the Volga-Caspian Canal in order to improve the transport situation in the Astrakhan Region. This is a really important issue because it affects the financial side of the projects. The Ministry of Transport has been instructed accordingly.
We are ready to answer your questions.
Question: Was it the Prime Minister who issued this instruction?
Alexander Novak: Yes, correct. Everything we talked about today is related to the instructions issued by the Prime Minister.
Question: I have two questions. I’m aware that you are not in charge of the legal side of the issue, but you are still somewhat involved in this. What do you think the proper response to Greenpeace’s actions on Prirazlomnaya should be? The way it was done? Or some other way?
Sergei Donskoi: I would like to answer this question, because the Ministry of Natural Resources and Environment has been in contact with Greenpeace for many years now. Of course, we are familiar with their position regarding the Arctic. However, this kind of activism – and it’s been pointed out on many occasions – can harm not just the engineering facilities and the offshore field infrastructure which are already hazardous operations by virtue of their complexity, but the platform workers as well. Such actions should never be allowed precisely because of their potential consequences. In addition, we must also see things for what they are. It’s more than just an attack on private property. It’s an invasion of private property and a direct action against it. Speaking about offshore facilities... For example, Lukoil has a system in place where no one can get access to their facilities to prevent dangerous incidents. Greenpeace says that these facilities must be outfitted with means of environmental protection, but they themselves jeopardise such facilities which may lead precisely to ... Let's put it this way: if things are left out of control (you never know what can happen on offshore platforms), it could lead to certain consequences, including environmental consequences.
Such actions are carried out not only in Russia. They are fairly populist in nature, but can cause harm to humans and objects. We cannot support them in any way, even though we have Greenpeace members who sit on our ministry’s public board. Of course, we are open to discussions of the Arctic environment with Greenpeace, but certainly not like this. We cannot support such actions either.
Question: Do you think arresting them was the proper response?
Sergei Donskoi: It’s complicated. If someone shows up at an oil or gas field and starts acting aggressively, the local management will respond as necessary. Prirazlomnaya, even the international portion of the company that operates on land, is a very complex facility that is at risk at all times in the sense that things can explode or go awry in many other ways if you don’t follow the safety rules. Of course, everything must be protected accordingly. If someone shows up and acts like Greenpeace did, it creates risks and hazards, including for the people who work on this platform.
As for the response, this is for law enforcement agencies to decide. In any case, they had to stop this action. A fair amount of force has always been used to stop such actions internationally, so our response was quite appropriate. It’s up to the courts now. Anyway, it had to be stopped, and it was stopped in a proper manner, I believe.
