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President of Russia Vladimir Putin: Good afternoon, colleagues,

We meet here today, on the company’s premises, to review progress in the implementation of a large-scale project to create Zvezda shipyard in Primorye Territory.

Developing civilian shipbuilding and launching new production capacity is among the key strategic aims in terms of strengthening the industrial potential of the Russian Far East. I ask that you remain focused on this objective moving forward.

The creation of Zvezda shipyard is essential for the entire national shipbuilding industry. This new shipyard is expected to produce state-of-the-art medium- and heavy-lift vessels of various kinds that are in great demand right now. I hope that they will remain relevant on the market in the short and mid-term.

Of course, this is a complex project that requires major investment. In this respect it is crucial to calculate the business plan in every detail, including in terms of capacity usage. We have discussed on several occasions progress in placing orders with the enterprise. Leading oil and gas companies and major corporations are all interested in working with Zvezda, and the first contracts to build vessels have been signed. It goes without saying that these efforts should carry on so as to ensure stable demand in the future.

I propose that during today’s meeting we focus on two issues that have huge importance for the shipyard’s future. The first has to do with rolled steel supply to the enterprise. Zvezda is expected to use some 330,000 tonnes of rolled steel per year. It is very important that Russian metals companies cover most of the company’s needs.

At the same time, these supply deals should be economically viable, taking into account shipment distances and other logistical issues. The director general has just mentioned the restrictions related to railway tunnels and other factors. We need to go over all these matters. Relevant ministries have been tasked with reviewing this issue. I hope to hear specific proposals and your perspective during today’s meeting.

On a separate note, I would like to raise the issue of providing Zvezda employees with housing and social infrastructure. As has been already mentioned, the enterprise is expected to employ 7,500 people (which comes to 17,000 if we include their families), who will live and work in Bolshoi Kamen permanently. They must be provided with adequate housing, healthcare, educational, cultural and entertainment infrastructure. This objective should not be put on the back burner and go hand in hand with the creation of the enterprise, with input from regional and federal government bodies.

It is my understanding, and it has already been suggested during the discussion, albeit very prudently, that we need to ensure that efforts by various federal and regional government bodies, as well as the enterprise, are coordinated.

Let’s discuss all these issues. Who will start? Mr Sechin, please go ahead.

Rosneft CEO Igor Sechin: Mr President, as far as the substance of the matters you raised goes, we have a proposal that was approved with the Government, the Industry and Trade Ministry and Deputy Prime Minister Rogozin on supplying metal for the Zvezda shipyard’s facilities.

We are currently selecting a site. We have already found a site in fact. We propose building a metal processing and metal production facility here, in close proximity to the docks. We have found a suitable site 100 kilometres from the shipyard, next to a freight loading facility.

We have written up the request. We will need a little assistance, some help with getting the permits for the land – it’s a site of around 400 hectares.

What we propose is buying a steel rolling facility. We are already looking for a suitable facility and have some possible purchase options. This facility would then produce rolled steel to the required format.

You were right to note that welding small-size sheets pushes up ships’ production costs.

Vladimir Putin: By how much?

Igor Sechin: The hull can end up costing up to 50 percent more and the ship overall can end up costing up to 10 percent more. Ten percent can make a very big difference on the market and would make us less competitive.

Vladimir Putin: Let’s ask Mr Rogozin what proposals he has. Please, go ahead.

Deputy Prime Minister Dmitry Rogozin: Our proposal is to find an existing factory. We have already found one. Then we acquire the facility, send the needed supplies and manufacture the rolled steel here, close to the shipyard. This way, we do away with lengthy logistics routes and we simply start work at a real facility that already exists. Rosneft has already done the preliminary work and the proposal is ready.

Vladimir Putin: And you support it?

Dmitry Rogozin: Yes, we support it.

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