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President of Russia Vladimir Putin: Good afternoon, colleagues, ladies and gentlemen,

It has become a good tradition to hold summit meetings of energy companies – and of all other companies that have to do with energy – within the framework of the St Petersburg International Economic Forum. 

I would like to say a few words about Russia and our developments. I would like to note here that because of its huge energy resources and its good geographic location (this is something I already mentioned at our narrow format meeting), Russia plays a special part in the development of energy in Europe and the Asia-Pacific region, as well as in global energy as a whole. It makes a significant contribution to maintaining a balance between hydrocarbon demand and supply on the global market.

Throughout the past years, our oil and gas production has been steadily growing. We give special attention to increasing oil recovery and high-level processing. We are very active in geological exploration and development of new fields. We have provided significant benefits for oil and gas production on the marine shelf and for the development of hard-to-recover reserves. All this should help develop our resource base for decades.

In the past five years, the production of gas condensate in Russia has gone up by almost 6 percent, of gas – by almost 15 percent, and of coal – by over 17 percent.

We fully uphold the principle of sovereignty over national resources. At the same time, Russia is ready to let our long-term international partners take part in our fuel and energy sector. As you may know, this is what we do, and many years of experience have shown that this is to mutual benefit. This not only helps to develop the Russian fuel and energy sector, but also increase Russia’s presence on international energy markets, which fully meets the interests of both the producing countries and companies and the consumers.

It is not by chance that even when much was said about the need to restrict energy dependence on Russia (which I find silly because there has never been any unilateral dependence: the dependence is always mutual, which leads to greater reliability and stability of the global economy and the energy industry), despite all that the supply of our energy resources to Europe, for instance, has been constantly growing. Thus, last year exports of gas through pipeline systems grew by almost 10 percent compared to 2012. In absolute figures, we have reached a record high for the past years of over 188 billion cubic metres.

I would like to stress that we support good faith performance of contractual obligations. We expect that the consumers and the transit countries have the same responsible approach. Honestly speaking, we are seriously concerned over the statements made by some Ukrainian radicals who are threatening the transit of our gas to Europe. We hope common sense will prevail and this will not happen.

The situation with our neighbour confirms yet again the timeliness of our initiatives to build direct fuel supply routes to the European Union, such as the South Stream, which we are already building. I believe the European Commission should take an active stance on this issue, because protection of the interests of European consumers is one of – if not the main job of this organisation.

Today Europe accounts for over 70 percent of our oil exports and almost all of our pipeline gas. However, we have to admit that energy consumption in Europe is growing slowly due to low economic growth rates, while political and regulatory risks are increasing. Transit is also an issue.

Given these circumstances, our desire to open up new markets is natural and understandable. Primarily we are talking about the dynamically growing Asia-Pacific region. This not only gives us a chance to increase our exports, but also serves as a major impetus for the development of East Siberia and the Far East of Russia.

Yes, we are aware of the fact that our partners are planning to expand the number of gas suppliers to Europe, for instance. However, far from dramatizing the situation, we actually welcome this development. I am certain that they understand quite well in the EU that supplies from Russia help diversify the EU’s energy balance.

The development of the liquefied natural gas market is a good opportunity to consolidate fragmentary regional gas markets. For us this is a priority task.

Thus, apart from the LNG facility already operating within the Sakhalin-2 project, the Yamal LNG plant is being built. Rosneft is planning to build yet another facility on Sakhalin, and Gazprom – in Vladivostok and on the Baltic coast. A large part of these projects is also directed at the Asia-Pacific market.

I would like to speak in some detail about prospects for shale gas production. Ever since such fields were commissioned in the United States, the supply has been growing. Thus, our American friends and partners intend to shortly become net exporters. This is clearly good for the global market, and in the final count, this is good for us as well. However, to organise LNG exports from North America to Europe – the experts present here are well aware of this – there should be a proper infrastructure on both sides of the Atlantic. This will require large capital investment and time. Besides, the price of LNG in the Asia-Pacific region, as you also know, is about 1.6 times higher than in Europe. This is a fact, at least for now.

Obviously, LNG producers in the US would primarily want to compete for the premium Asian market. Nobody will ever operate at a loss – actually all of us, and you first and foremost, are always aiming for maximum profit. This is natural; this is the law of a market economy.

I would like to repeat here that the price of Russian pipeline gas is competitive and – what is more important – predictable, because it is based on tested and efficient pricing methods. Other natural gas exporters, by the way, use these methods, as well.

Colleagues, friends,

Energy is the most important basis for sustainable development of the global economy. Expert assessments show that there are sufficient accessible resources on the globe, and they will last long enough. At the same time, we all know the laws of declining efficiency, and they apply to the situation in the fuel and energy sector.

The largest and most efficient reserves are usually discovered and developed at an early stage of exploration and development of a geological area. This means that ‘easy’ reserves, the ‘cream’ so to speak, have already been removed or are about to run out. Therefore, we have to move to new areas, often hard to access, or increase production at old fields using secondary or even tertiary production methods and develop reserves that were traditionally considered economically less efficient and hard to reach.

However, I would also like to note that today’s prices on the global market do not hamper economic development. Moreover, they are stable, which is of principal importance for the development of long-term projects in the fuel and energy and other sectors of the economy. To reduce costs, we need to increase energy efficiency of our economies, focus on innovative technologies and develop the refining of hydrocarbons, things like petrochemical and gas-chemical production.

It is very important for Russia to resolve these issues. This country intends not only to retain, but also to strengthen its position as one of the leading energy suppliers and to become a leader in the qualitative transformation of the global energy sector as well.

The challenges in the energy sector are clearly of global nature, and we can only meet them together, by means of cooperation. It is important that this is exactly what the major companies are doing.

In the meantime, we do not see the existing regulatory system – I would like to say a few words about this, if I may – and coordination of efforts in the energy sector as sufficient and perfect. Rather frequently, regulation tends to distort even market signals and leads to subsidies being channelled to so-called ‘favourite types of energy’. In Europe, in the energy sector of the European Union these are the so-called renewable sources. This is clearly a distortion of the market that is detrimental to competition; it makes entire industries less competitive.

I hope participants in today’s summit will manage to work out a set of proposals on the most called for priority measures to raise the quality of energy markets’ regulation and take another look at the possible format for comparing tax, regulatory and legislative regimes in various jurisdictions and also give recommendations on international legal support of the operation of competitive, transparent and open energy markets.

Ladies and gentlemen, friends and partners,

We will appreciate any recommendations you may have regarding Russian legislation and established practice of applying the law. I am certain that expanding the formats of our cooperation will help to build a truly effective global economy.

In conclusion, I would like to reiterate that reliable and stable energy supply today determines to a great extent the stable progress of national economies and the global economy as a whole. It is in our common interest to make energy cooperation more efficient and mutually beneficial and to relieve it of the unnecessary excessive political influence that deforms the economic basis and principles of this strategic industry. I am confident that your summit will help resolve this important issue.

I wish you an interesting discussion and promising contracts. I leave you to your work and wish you all the best.

Thank you.