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President of Russia Vladimir Putin: Mr Tokarev, let’s start with a report on the Druzhba oil pipeline.

President of Transneft Nikolai Tokarev: Mr President, recently there was a serious incident linked with a huge, many-fold level increase in chlorinated organics in the oil that is transported through the Druzhba pipeline towards Belarus, and further to Poland and Germany and through Ukraine to Slovakia, the Czech Republic and Hungary via the southern leg.

We conducted a corporate investigation to find the source of these compounds. It transpired they came from a private company in the Samara Region, which is a kind of a collector. In other words, it collects oil from small regional producers – in Ulyanovsk, Orenburg and Samara regions, guarantees the commercial quality of this oil, issues a relevant certificate and transfers it to the system of oil mains.

In this case, in violation of all technological regulations, this company deliberately discharged oil that had not undergone a quality check.

Vladimir Putin: Deliberately?

Nikolai Tokarev: I believe this is a fraudulent scheme. As of today, all materials have been submitted to the FSB department of the Samara Region. The investigation is underway. Everything will become clear soon but for the time being the picture looks like this.

Vladimir Putin: So the company doesn’t have any control mechanism to check the oil as it enters the pipeline system?

Nikolai Tokarev: These collection points – there are about 150 of them around Russia – most of them belong to large oil companies and they themselves prepare the marketable oil and distribute it in the system of main pipelines.

But many collection points belong to private companies that act as collectors in the entire area under contracts with Transneft. They receive the oil, do the certification, conduct quality control and distribute it in the main pipeline system.

Vladimir Putin: So this system failed?

Nikolai Tokarev: In this case, it was pure fraud and violation of all instructions and regulations.

Vladimir Putin: Listen, they cheated, but we have suffered huge economic, material and reputational damage!

Nikolai Tokarev: Yes, I agree, I am not relieving Transneft of the responsibility, but the instructions and regulations were made to comply with them. If there was a criminal intention…

Vladimir Putin: It means that self-control is not enough, this is what I mean. This system needs to be changed.

Nikolai Tokarev: An interdepartmental group, created on the Prime Minister’s instruction, will propose measures that should be included in the regulations to improve control over the reception of oil to the main pipeline system.

Vladimir Putin: Please make sure this is done and report to the Prime Minister.

Nikolai Tokarev: Yes, we have a deadline and we are working on it.

Vladimir Putin: Good.

Nikolai Tokarev: But at the same time, Mr President, together with the Energy Ministry and oil companies we held a series of working meetings with our colleagues from Ukraine, Belarus and Poland, and agreed on the measures to contain the aftermath and find out all the details of the incident.

All these agreements are currently being implemented. High-quality oil was delivered to Belarus today. The Novopolotsk oil refinery receives oil via Surgut, so the situation has been more or less resolved.

All April shipments from Ust-Luga have been completed, so port operations are fully on schedule. Additionally, the railroad helps us transport off-spec oil from Belarus. We will compound it, that is, mix it with good oil in Novorossiysk, and then put it back on the market.

Vladimir Putin: In compliance with quality requirements …

Nikolai Tokarev: Yes, it will be fully on spec. We expect the situation to get back to normal soon, and we will resume our usual schedule.

Vladimir Putin: Good. What else did you want to share?

Nikolai Tokarev: Mr President, as of the end of last year, Transneft met and even exceeded its planned targets; I mean production and financial and economic activities.

The system took in 480 million tonnes of oil, which is 87 percent of the entire production, of which 250 million tonnes went to the domestic market and 230 million tonnes were exported; the capital investment over the past year amounted to 284 billion rubles, of which 60 billion went to new construction and 202 billion to repair, overhaul and upgrade existing networks.

Overall, 17,700 kilometres of oil pipelines were built and renovated over the past 10 years, of which 7,700 km is new construction, and 10,000 km is new oil pipelines replacing old ones.

The commissioning of a joint Russian-Italian enterprise for making electric engines, which we launched in the autumn during your meeting with the Prime Minister of Italy, was the most exciting part of our work.

We will be launching another plant in August, which will allow us to completely replace imports of the anti-turbulence additive which we used to buy from the US company Baker Hughes.

We are now producing it using our own formula at Alabuga in Tatarstan, and we will not just cover our needs, but sell it on international markets as well.

Our subsidiary company, Diaskan, an enterprise that provides diagnostics of oil pipelines’ technical condition, has developed a number of diagnostic devices unmatched anywhere in the world. They are used everywhere from Malaysia to the Middle East to Mexico. That is, these services are in demand.

Also, it may be worth mentioning that we spent almost 9 billion rubles as part of our charity and sponsorship activities last year, which went mostly to schools, children's hospitals and outpatient clinics.

Vladimir Putin: Good.

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