Dmitry Medvedev: Good afternoon, colleagues. Today we are holding a production conference at the production facility of the Sibur-Khimprom petrochemical company, where the majority of those of us present have just taken part in the launch ceremony for the opening of the new polymer production line. As I already said, it is very good that such facilities are being opened. But, today, we will discuss how to make more cost-effective use of new construction materials. Everyone here knows that there are problems in this area, so we need to discuss the introduction of new materials, as well as our achievements and failures of the past few years. It’s clear that some issues to do with regulation still have to be resolved. We must consider how to move more quickly towards other principles of regulation. So, let’s discuss specific ways of doing this.
It is clear that meeting the demands of the country’s construction industry can only be achieved by opening new facilities. In the past few years, these processes have either accelerated or slowed down in some cases. Statistics show that cement production increased by 11% in the first nine months of 2012 compared to the same period in 2011. Production of linoleum increased by 12% and tiles by 8%. This highlights the fact that there is strong market demand for these materials. I would like to remind you that about 400 facilities and production lines have opened in various regions over the past year. However, very few of these enterprises manufacture new generation construction materials. Today, we are in one such facility. Of course, foam polystyrene is used in different economic sectors. In housing construction, it is valued for its impressive energy-saving properties. I hope that its introduction will help solve some problems in the construction industry (or at least influence construction prices) and increase the overall efficiency of heating systems, because polypropylene insulation resolves a number of issues and reduces heat loss by an average of 40%.
Low energy efficiency is a major problem for both residential and industrial buildings. Quite often, we end up heating the air outside and paying for it out of our own pockets. I would like to remind you that Russia spends the equivalent of virtually 20 tonnes of oil per 1,000 square metres. In other countries with a similar climate, including Norway, Denmark, Finland and Sweden, that figure is roughly half of that. This is the level to which we should aspire. We don’t make enough use of modern insulation materials. Mineral wool is primarily used for this purpose, and other technologies are used much less often.
I’d like to remind you that in line with the state programme “Energy Saving and Enhancing Energy Efficiency” we must try to decrease heat energy consumption by 30% by 2016 and by 40% by 2020. To meet these objectives we’ll have to use modern construction materials that will improve energy consumption. This is also important for maintaining the necessary transport infrastructure. We will now open our discussion, but I think we must at least pay attention to two things.
First, we must have a distinct idea of what we should do, what road map we’ll create, the latter indicating the terms as well as how the creation and certification of new construction materials will be provided.
The second thing we should do is hold the contractor and the customer liable for project results and the quality over the entire life cycle of the facility. This we haven’t done yet.
Third: during the implementation of the programmes for energy efficiency in construction and housing and utilities, the regional authorities must use domestic materials as much as possible. The regional heads and company representatives here need to understand this. We are not just talking about traditional materials but also the latest materials.
And a fourth thing: we must understand how to motivate businesses to produce energy efficient construction materials as well as how motivate contractors to use these materials. This is not really happening yet either. Here we are talking about construction standards and regulations and generally encouraging contractors to use the latest technology in state-supported projects.
Let’s discuss the current situation. I would like to hear from the heads of state agencies and companies, those who are here.
Alexander Novak (Energy Minister): Mr Medvedev, ladies and gentlemen. The energy industry also meets the requirements of both the road infrastructure and the housing and utilities sector. Our petrochemical industry is producing modern materials and technology for these things. Let me recall that we’ve endorsed the programme for developing the petrochemical industry up to 2030. Mr Medvedev, I’d like to mention several figures to illustrate the results of our performance. In the last four years we’ve increased the production of polyethylene, polyvinylchloride, polypropylene and polystyrene from 4% to 10%. In other words, we have exceeded pre-crisis figures and reached fairly high rates of economic growth (These are the average annual growth rates in the last four years.
I’d also like to quote several figures to show the potential growth in demand for petrochemicals in housing and utilities and road construction. According to the last year’s figures these sectors used about four million tonnes of plastics. Under the endorsed programme, the demand for our products will have increased more than three times by 2030. For the most part, this applies to new materials for housing construction and major repairs, as well as the use of geogrid and geotextile materials in road construction.
I’d like to say a few words about a polymeric bituminous binder. Mr Medvedev, you saw it during your visit today.
Dmitry Medvedev: Yes, they’ve shown it to me. Yet, I’m not quite sure this new bitumen has already been used for four years. It looks good enough to eat off of…
Alexander Novak: It is a petrochemical made from the mixture of bitumen and polymers.
Dmitry Medvedev: Indeed.
Alexander Novak: Today the quality of bitumen is decreasing because of higher refining and an increase in the output of light petrochemicals. The whole world is already using a binder that upgrades the technical characteristics. It is more elastic and has a lower point of brittleness. Other conditions being equal, this binder enhances the durability of the pavement, making it more resistant to cracking and other dynamic impact. It almost doubles the service life of roads. Roads last for about six years if they are built with conventional materials and technology whereas the binder allows them to last for 12 years.
What’s required for more common use of this material in road construction?
Sorry, I’d like to mention one more figure – in Europe the use of this binder is up to almost 10% from all road construction materials on average, whereas the relevant figure for us is only 1%.
Dmitry Medvedev: Are you referring to these new bitumen materials?
Alexander Novak: Yes we are. The use figure for countries with similar climate conditions is about 50%. To be more precise, it is 48% in Canada and over 20% even in Poland. In Russia we use less than one per cent of this material. All in all, we produce about 60,000 tonnes of it, whereas by our estimates the demand for it (what we could use and produce) is almost one million tonnes. The gap is huge…
Dmitry Medvedev: I see. And what needs to be done?
Alexander Novak: What needs to be done? We discussed three package decisions with the Transport Ministry. Mr Nikitin (Gleb Nikitin, Deputy Minister of Industry and Trade) spoke about it and you focused your attention on this. I’m referring to the mandatory use of life cycle contracts in road construction. They have been officially sealed in this country, but only in the law on concession agreements. In practical terms, this means that concession agreements on road construction allow us to conclude life cycle contracts, but these contracts cannot be signed on the basis of a direct order by municipalities or regions (or the Federal Road Agency Rosavtodor, which funds road construction from the federal budget). We believe this problem must be resolved and relevant amendments made in the federal contract system.
Now the second point. We must create a network of laboratories for monitoring the construction, repair and use of roads. The Transport Ministry has already established a similar network, but neither regions nor municipalities have it. This function must be extended to them.
And the third point – the formation of a technical regulation system that would encourage producers and consumers to use these modern materials in road construction. This refers to the need to adopt the National State Standard, or GOST, on the methods of testing bitumen binders, with a view toward improving their quality. This is already being done and I know that the Transport Ministry has already received the relevant proposals.
Second, it is necessary to update the 2003 GOST, namely, technical characteristics of the road construction polymeric bitumen binders based on styrene-butadiene thermoplastic. These are specific proposals on improving the quality of these binders. We are planning to introduce amendments to these state standards before the year is out.
Third, we must also update the terms for using the bitumen binder under the 2009 GOST on asphalt road and aerodrome compounds and asphalt-concrete. Mr Medvedev, we have prepared specific proposals for the protocol on what normative acts must be amended in the near future in order to get things moving. We have discussed them with producers and the Transport Ministry and are ready to do this as soon as possible, if you issue the relevant instructions.
Dmitry Medvedev: Yes, I will of course issue instructions on the federal contract system, in particular, the proposals on life cycle contracts and a network of laboratories.
As for updating GOSTs and construction norms and rules, this is such a tiresome job. We have been working on this forever, but it seems to me that we are not making any progress. Some time ago I held a meeting on changing technical regulations and options of using the norms and rules of the European Union. Now we are discussing this again, just as we did in 1986 when we updated different GOSTs… But we no longer have a planned economy. Don’t we have any self-protective capacity at all? Do we need to hold a meeting chaired by the Prime Minister in order to update some specific GOST? You’ve mentioned some GOSTs adopted in 2003. If this is so, it will take us a very long time to develop a modern economy. There is something wrong with our regulation. We are not doing what we need to do.
Igor Slyunyayev (Minister of Regional Development): Mr Medvedev, colleagues, I want to remind representatives of the oil industry that the standards for bitumen and tar became stricter after the adoption of the new state standard for bituminous binder in 2003. Work to update existing bitumen producing facilities began at that time.
Two points. Why does Europe, the main consumer of our energy, prefer to import bitumen and tar from Venezuela? The answer is simple – quality. Because the cracking method we use gets it backward: first we extract light high-octane, then tars, and we use bitumen as waste and are trying to sell it to the main recipients of budget funds – road and transport facilities, industrial facilities and so on.
How can this problem be solved? Through modification. We should spend money so that this bitumen and tar meets the rigorous Russian standards. We need a national system of standardisation and certification, because we not only border on the European Union, we also have Siberia and the Far East: there are entirely different standards, rules and specifications there – in China, India, Korea, Japan and so on. Therefore, we need a national system of standards.
How can we improve the situation? Of course, we need a reserve of new technology and new materials, and here the interests of the state, industry and consumers should coincide. I think that under the legislative plan carried out by each federal body under your instruction, Mr Medvedev, it is necessary to form a section, Standards and Technical Regulations for 2013 and the Medium Term, so that new construction norms and regulations, updated state standards and technical regulations are formulated by federal executive bodies: rate fixing, certification, standardisation, testing, use as part of design and research work, and construction and assembly work.
I completely agree with Grigory Elkin that the decisions on using new technology and new materials are taken when an engineering project is being formed. If the project fails to include the use of new technology and new materials, they will not be used at the stage of implementation.
Concerning life-cycle projects: I’m sorry, Mr Medvedev, but this approach, the correct approach, includes an element of deceit. As a rule, the maintenance costs after commissioning are minimal; the standards for a new launch are similar to the standards for a common facility; and the contractor is interested not only in building but also operating the facility in the foreseeable future. It is very important to raise the standards for quality and take into consideration the need for major repairs (not only ongoing maintenance) and repairs of the commissioned facility. So the life cycle… Let’s fix its term. What is it? From commissioning to the full amortisation – that’s one approach. Or a foreseeable period of operation… Because pursuing zero amortisation means it will last forever.
Dmitry Medvedev: This is impossible.
Igor Slyunyayev: Yes. There is yet another important point. In terms of the adopted draft protocol decision, we need to include not only the petrochemical sector but also Russian petrochemical products, and to expand the range for using new technology and materials. This is the first thing. Second, I think it is important to consider engineering design issues and not to stop at state standards. We should also consider construction norms and rules and technical regulations that should be replaced in the same manner. That completes my report. Thank you.
Dmitry Medvedev: Thank you. That is fair.
Dmitry Medvedev's concluding remarks:
Ladies and gentlemen, we had a fairly specific discussion and this is good. That said, I still don't have a general picture in my mind. It seems to me that we are moving in two opposite directions for different reasons, including objective ones. On the one hand, we are enhancing the role of public agencies and self-regulating organisations in this sphere, and, on the other, we are talking ("we" stands not only for representatives of official management bodies but also for business executives) about the need for state regulation. Probably, these two directions can be combined. Mr Elkin (Grigory Elkin, head of the Federal Agency for State Regulation and Metrology) spoke about this. We did not discuss standardisation because it was out of fashion, particularly when we had to destroy the old system of standards and switch to technical regulation. Now we have established this new system but we cannot do without standards altogether. The question is how they will be established and where they will be accepted.
The same applies to a number of branch and inter-branch issues. Several speakers mentioned research institutes. We understand that we won't have the old ones. We won't restore them as they existed in the past when they were funded by the state. If research is required, there should be a package deal between business people and the government on support for fundamental or applied research. It is pointless to restore the old system because – let's put it straight – it was ineffective. Nevertheless, research must go on and this is yet another issue that keeps arising all the time.
Needless to say, I'll make instructions on what we have discussion – the federal contract system, in particular, on life cycle contracts. Mr Slyunyayev (Igor Slyunyayev, Minister of Regional Development) said with good reason that this is an important subject but its role should not be exaggerated. It would be incorrect to consider it a cure-all that will allow us to avoid all trouble and resolve all problems. It should be used sensibly, that is effectively.
I'd like to say a few words about certification. I heard what experts on cement said about its certification. Again, we must understand what place it should occupy. Do we need to restore it in its old format or not? Apparently, we are not going to do that.
A number of questions arise in this context: what this certification should be like and on what scale it should be adopted so as not to tie everyone hand and foot? I agree that we don't need fake, adulterated cement. That said, if we restore this system in the old format, it will prejudice the interests of business, especially in decision-making at the level of interstate relations, the Eurasian Commission, because this is a much more complicated process. Therefore, we must be clear on what we should do in this context.
It was said, with good reason, that if new materials are not envisaged at the planning stage, they won't be used. This is absolutely correct. Thus, we must think about encouraging companies to include them in their planning as much as possible. Our business colleagues have discoursed in a semi-philosophical way on how we should be guided – by demand, supply or rigid regulations. Needless to say, we must be guided by all three of these factors, or else we won't achieve any results. We are not in a dilemma between the world's best practices and economic effectiveness – if the former do not create the latter, they are not the best practices but some kind of rubbish, and vice versa.
In a way we are moving around in circles, but I agree that we are moving forward nonetheless. I don't think we are in the same position as when I started actively encouraging Government agencies to create a more clear-cut and modern system of technical regulation and standardisation. I have given instructions on drafting the law on standardisation. We will draft and promote it. But ultimately, what we have to do should still amount to the agreement between private companies and their associations, on the one hand, and their self-regulating organisations, on the other.
I'd like to emphasise once again that these organisations must be good enough for the Government not to be afraid to transfer these powers to them. This is an issue of internal agreement for you. It is far from always that business executives are ready to assume responsibility. There are some associations (I'm not referring to housing or road construction) that are ready to do this. There are also others that are not prepared to carry this burden, and this is a problem. That said, there is also a state that will create the required conditions.
I suggest that a list of proposals should be seriously improved because all I had on my table was a number of fairly trivial things. It is necessary to elaborate detailed proposals on further steps, taking into account our discussion.
You understand in what directions to move. We are moving ahead on industrial safety and standardisation, and we need to understand the relationship between the Government and commercial components in all of these issues. Thank you.