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In particular, the meeting participants considered ways of adapting the Russian fuel and energy complex to new economic conditions, prospects for the implementation of a number of investment projects and measures to reduce the industry’s dependence on imported equipment.

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President of Russia Vladimir Putin: Good afternoon, colleagues.

Today we will consider the current state of the national fuel and energy complex and compare notes with the CEOs of major Russian companies. We are talking about the oil, gas and coal industries. Power supply requires separate consideration at a future Commission meeting.

Before we begin, I would like to focus on a number of important matters. In the past few years, the Russian fuel and energy complex and its base industries have developed a good pace largely thanks to the decisions we made in the previous years. I am referring primarily to incentives for the development of fields in East Siberia and the shelf, as well as the stimulation of deep oil refining and the launch of the production of high quality motor oils.

These measures paved the way to unique discoveries of new reserves, including those on the Russian Arctic shelf, to enhance oil production, increase investment into deep oil refining and generally ensure overall positive dynamics of qualitative change in the fuel and energy complex. I would like to remind you, just by way of information, of the Karskaya oil and gas-bearing province discovered on the Russian Arctic shelf in 2014 with an overall resource base of about 87 billion barrels of oil.

Today Russia is among the world leaders in oil and gas production. In 2014 Russia produced 527 million tonnes of oil. This is slightly less than Saudi Arabia and slightly more than the United States: 12.9 percent for Saudi Arabia and 12.3 percent for the United States.

The production of natural gas in Russia in 2014 amounted to 578 billion cubic metres. We are implementing major projects to enhance the country’s export potential. The Russian fuel and energy complex is actively introducing new energy-saving environmentally friendly technologies. Thus, we have optimised the use of such an important resource as associated petroleum gas.

In the first six months of this year, for instance, we used 86.5 percent of associated gas, which is a 10.3 percent increase against 2012. We may not be moving at the rate we would have liked to, but we are gradually resolving the task we set ourselves a few years ago concerning associated gas.

Currently the fuel and energy complex accounts for 40 percent of all capital investment in the country. Our common goal is to retain the positive investment dynamics in the sector. We must bear in mind that investment into the fuel and energy complex has a positive effect on the entire national economy: it means additional jobs and orders for associated industries.

At the same time, the situation on the world energy markets is unstable, as you know better than anyone else. Thus, compared to mid-2014, oil prices have gone down by more than 50 percent. Gas prices followed with an almost 20 percent drop by the end of the first half of this year. World coal prices continue falling: from a peak in 2011, they have gone down by an average 50 percent. As a result, the crisis in the world energy sector forced international companies to cut investment into complex low-profit projects, which could have been implemented in conditions of higher prices of hydrocarbons.

For your information, though I am sure you know this already, but I would like to remind you that by international expert assessment, the reduction of world investment into the oil and gas sector might reach $300 billion in 2015. Over the past five years, the total losses incurred by producers of hard to extract shale oil in the United States amounted to about $150 billion, while in the first six months of this year they lost $62 billion. Obviously, this is not the first or the last crisis on the world market.

The key issue today is funding the fuel and energy complex investment programmes so it can continue acting as the driver of the national economy as a whole. We need to keep our eyes on the development horizon and ensure there are no pauses in investment. We must ensure the implementation of the long-term strategic goals facing the industry and, if necessary, adjust the draft national energy strategy along with the general development plans for the oil and gas sector and the coal industry development programme. By the way, the draft energy strategy envisages a significant growth in investment into the fuel and energy complex.

I would like to ask that you approach this issue with the utmost responsibility, indicating the sources of financing for investment programmes and determining measures for ensuring their success. As you know, investment cycles in the fuel and energy sector are fairly lengthy. The decisions made today will provide initial results in 5–7 years at the earliest.

Here is where I want to draw attention first and foremost. It is imperative to ensure that infrastructure projects with participation by the state are linked with energy companies’ investment programmes, focusing personnel and financial resources there.

Second, the fuel and energy sector traditionally plays a leading role in the federal budget’s revenues. With this in mind, we need to very carefully assess the efficacy of decisions we make concerning the industry’s tax burden and the impact they will have on the nation’s economy overall. We must strive to ensure that additional withdrawals from the industry do not lead to cuts in energy companies’ investment programmes and do not have a negative multiplier effect on related industries.

I know the discussions that were held in the industry, and indeed, I agree to an extent with the Finance Ministry, but we certainly need to constantly monitor the situation developing in the sector. Let’s return to this issue at an upcoming meeting of the Commission, after monitoring the situation, to see what is happening in the industry.

Third, we must increase the level of localisation for technologies and equipment that are needed by Russian companies and are in demand among domestic consumers. Naturally, it is important to also abide by the price-quality parameter and, moreover, we need to increase transparency of these orders by all mineral developers, regardless of the structure of their share capital. I ask that you report today about what has been done in this area.

Corresponding financial mechanisms should play an important role in developing import substitution of equipment for the fuel and energy sector, including relevant loans, leasing, and interest subsidies for equipment manufacturers. I ask participants in this meeting to share their thoughts on the efficiency of these instruments.

Fourth, it is imperative to continue our work to diversify exports of Russian energy resources. It is important to not only maintain our position in the traditional regions where we have a presence, but also enter new markets and know how to respond flexibly to changes in trends. In recent years, the growth points have been moving to nations in the Asia-Pacific Region. In spite of the fluctuations we are all aware of, this is a stable trend. The states in this region are becoming key hydrocarbon consumers. This is true of the liquefied natural gas market as well. Russia has the opportunity to increase its share of the LNG market and the planned large-scale projects in the LNG field should certainly be implemented.

Furthermore, it is imperative to continue work to improve stock exchange mechanisms in trading oil, oil products and natural gas. A year ago, we launched trade of natural gas on the St Petersburg International Mercantile Exchange, in fulfilling the decisions of our Commission. Over that period of time, the volume of trade came to 6.8 billion cubic metres. In developing exchange trade, it is imperative to create independent national price indicators for main types of fuel and energy products.

And in this respect, I would like to touch on another fundamentally important issue for developing the fuel and energy sector as well as the economy overall. I am talking about finally stopping the practice of using foreign currencies in domestic settlements. Mr Siluanov [Finance Minister], our law prohibits such payments, but what really happens? The prices for transhipment of crude oil and oil products in Russian ports of Novorossiysk, Taman, Ust-Luga, Kozmino, Primorsk and others are either set directly in US dollars or are denominated in US dollars in the online system practically in real-time mode. And this, of course, is unacceptable, it is in direct contradiction to current legislation. I do not understand, what are the monitoring agencies doing in this case?

We need to start serious work on the complex issue of strengthening the role of the ruble in payments, including for Russian fuel and energy sector products. National currencies should be used more widely in transactions with nations that we have active trade with. We are constantly discussing this with colleagues at an interstate level and we certainly need to strive to ensure a transition to this type of payment. Of course, I am fully aware of what our companies’ interests are. We need to do this carefully, so that the economic actors do not suffer – on the contrary, it should be beneficial to them.

And finally, we must systematically improve the competitive environment in our domestic market, first and foremost the oil products market. We need to stop the production and trade in counterfeit goods. Their circulation harms not only the companies that have made serious investments in modernisation and production of high-quality fuel, but overall, it is defrauding the population, directly deceiving consumers. In this respect, today we will consider applying common requirements to all oil producers.

And in conclusion, I suggest that at our next meeting we take a detailed look at the issue of monitoring the execution of previous decisions and instructions.

Let’s discuss today’s agenda.

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