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President of Russia Vladimir Putin: Mr Alekperov, how is your company doing? We meet regularly, and I know that you are quite active internationally. How are you doing in Russia and other markets?

President of Lukoil Vagit Alekperov: Mr President, we were able to stabilise oil production in the Russian Federation, even as it is decreasing in Western Siberia, something that is a natural process. But we were able to take innovative measures and use new technologies to stabilise oil production, and we hope that in the next few years our production in Russia will increase.

Vladimir Putin: How are you organising your innovative work, using new technologies?

Vagit Alekperov: We founded LUKOIL-Engineering, our largest research and engineering centre with 3,500 researchers and branches in Moscow, Tyumen, Perm, the Timan-Pechora region and Volgograd.

Vladimir Putin: There are four branches?

Vagit Alekperov: Yes, four major ones with about 600 people each. Each specialises in its own area: the Timan-Pechora [oil field basin] produces highly viscous oil, and there we extract oil in mines 300 metres deep, oil that we cannot get through conventional methods. Tyumen has more traditional types of oil commonly found in the Western Siberian oil-producing region. Volgograd is near the Caspian Sea, and our centre for offshore activities. The best technologies on the market, everything the best engineering companies use is being adapted to specific fields and then integrated into the company’s operations.

Vladimir Putin: Where do you get your personnel?

Vagit Alekperov: We draw on our own human resources potential. Naturally, its main base is located in traditional regions: Western Siberia and Perm Region. We organise internships and training, we have created our own departments in all oil institutes, and the training and retraining of personnel is underway.

Thanks to this programme, all the managers of our overseas projects, the backbone of our operations, are specialists who have worked in Russia and are citizens of the Russian Federation.

Vladimir Putin: You recruit students before they get their degrees?

Vagit Alekperov: As of their second year of university. Plus we have a lot of scholarship students in Gubkin Russian State University of Oil and Gas, Ufa State Petroleum Technological University, Tyumen State Oil and Gas University and Ukhta State Technical University. We concluded agreements with these universities decades ago, and are constantly helping them create the material and technological base – laboratories, departments – which allows us to maintain very close contacts.

Therefore we consider that today our company’s human resource potential is stable. We have no staff turnover; on the contrary, we are even training people to work abroad. In our centre in Astrakhan, employees undergo three to four month language training for the country to which they will travel, and study that country’s distinctive features and customs. We provide people with special training and today all managers – in West Africa, the Arab world – are from LUKOIL.

Vladimir Putin: You mentioned Astrakhan; I’ve been there too, including at your facilities. How is the situation developing there?

Vagit Alekperov: We have started developing our second major field – the Vladimir Filanovsky field [in the Caspian Sea], named after a great oilman.

Here is a diagram: these facilities are already being transported, this unit – which is almost 28 metres high – will be installed on the seafloor. All these offshore facilities are being manufactured in Astrakhan Region; the United Shipbuilding Corporation and Red Barricades shipyard are also involved in this work. We have built a unique barge, which is hammering down the piles into the seabed today, each of which weighs 160 tonnes.

Vladimir Putin: Around how many people are working on LUKOIL orders?

Vagit Alekperov: Today there are about 3,500 to 4,000 in shipbuilding and shipyards, but if you take subcontractors too, then nearly 170 Russian companies are currently supplying equipment to Volgograd Region.

Vladimir Putin: Where do you purchase major technical equipment?

Vagit Alekperov: 95% to 97% is produced in Russia, because so many international companies have opened branches and subsidiaries here, and started producing. For example, [oilfield services company] Schlumberger started producing submersible pumps in Tyumen. We buy all this in Russia.

We mainly buy communications systems and automated devices needed for monitoring, and ultra-precise sensors for fire protection services. Unfortunately, this equipment is not produced in Russia yet, especially for offshore fields, but we are currently working with domestic producers on this. That is, equipment that operates in hostile environments, where there is increased salinity and metal corrodes quite quickly. These pumps and electrical equipment must be produced here. I met with Schroeder, a company that has established a joint venture in Samara, and it will begin producing such equipment there, in enterprises with our manufacturers.

Vladimir Putin: So with local content?

Vagit Alekperov: Yes, almost 96% is of Russian production.

Vladimir Putin: Mr Alekperov, I know that your company is diversifying geographically, as well as in terms of its activities.

Vagit Alekperov: You believed in us when you took the decision to entrust us with building a facility to extract diamonds. The construction of such a facility on a kimberlite pipe is in its initial stages at the Vladimir Grib diamond mine.

Together with the best international experts, we have reached a point where a new complex has been fully established. I want to invite you to visit in November, to open the processing plant and to receive the first diamonds that are mined.

Here everything is based on the highest standards, the best practices throughout the world (we visited sites in South Africa and Canada). The best technologies and best principles are being used.

Vladimir Putin: How much has been invested?

Vagit Alekperov: About $1.05 billion. This will be one of the largest [volcanic] pipes currently being mined in the world. We have agreed on all issues with the Ministry of Finance and the [State Precious Metals and Gems Repository] Gokhran. In other words we have a new business, so for that reason we took absolutely all steps necessary to exploit the diamond field.

We work closely with the diamond company ALROSA, which is beginning production nearby, eight kilometres away. We would both like to invite you to visit Arkhangelsk Region and to take part in launching this unique project.

More than 3,500 people will work there. We will not only sort at the field, but also in Arkhangelsk; all this has been agreed with all the regulatory authorities of the Russian Federation.

Vladimir Putin: Good, thank you very much. I know that your employees are paid more than the national average, but despite that you have your own social programme.

Vagit Alekperov: Yes, I promised you that we would build daycare centres, including at the expense of my own private foundation. This year we are opening them. I want to say that in Astrakhan we are opening a daycare for 30 children – everything has already been built. We will open one in Perm at the end of the year, as well as big kindergartens in Western Siberia. Here’s what they look like: these kindergartens really improve the appearance of the cities, and are wonderful to look at.

Intelligent, so-called smart kindergartens represent a completely new project. I’m not talking about teaching facilities, but rather about how their heating system and services are built according to the most up-to-date and best models.

These will be gifts from our company, from my foundation to cities, and we ask for nothing in return. Our only request and condition is that 30% of the children in these kindergartens must come from our employees’ families.

Vladimir Putin: Very good.

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