Official website of the President of Russia

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President Vladimir Putin: Ladies and gentlemen, distinguished colleagues,

I am happy to welcome you to the Kremlin. Your companies have an international reputation and are well known in Russia. We have always maintained good and businesslike relations with you.

The Russian energy sector has been liberalized. All of the world’s largest companies are benefiting from their work in Russia. I cannot think of a single world-class company that is not doing business in Russia. Investment is estimated at tens of billions of dollars. Understandably, there are bound to be problems in such large-scale and mutually beneficial efforts, but they don’t worry us, because all of us have the desire and willingness to look for compromises and acceptable solutions.

I know that Shell invited Gazprom to cooperate on the Sakhalin-2 project several years ago. They discussed joint work long before disputes arose. It was a corporate decision for Gazprom to participate in Sakhalin-2. The Russian government was notified of this decision, and it did not present any arguments against it. In fact, it welcomed it.

Now for environmental problems. I am glad that the environmental authorities of Russia and the investors have agreed on a procedure for settling these issues. I know that your agenda includes meetings at the Ministry of Natural Resources, but I have been told that the issue can be regarded as almost settled in principle, and that approaches to the problems have been coordinated.

I am also glad that a solution has been found for the problem of risks associated with the increase in spending on the project. Russia is satisfied with the serious, substantial and businesslike approach of its partners, who have decided to shoulder these risks. I can assure you that Russia will objectively address such problems and will provide all possible assistance to you.

Just like the investors, the Russian government wants this project to be completed. I thank you, ladies and gentlemen, for the flexibility you have shown during the negotiations. I want to stress that we will do everything possible to conclude the project.

[Addressing Industry and Energy Minister Viktor Khristenko] Please, Viktor Borisovich.

Viktor Khristenko: Mr President, distinguished colleagues,

We have discussed at length ways to solve the problem of the increase in the project costs. We have employed the services of experts, including independent ones, to assess all factors that influence project costs.

As the president has said here, Sakhalin-2 is the biggest offshore project in Russia and its first project involving the establishment of facilities for liquefying natural gas. It provides for building the world’s second-largest LNG plant in Russia. In fact, we have contractual and supply obligations for the delivery of all gas [from the project] until 2035. Therefore, Russia as a party to the project wants it to be completed.

While looking for a solution to these problems, we have determined that the increase in project costs will not affect Russia’s revenues. As the president has said, the investors will shoulder the risk. However, it is our common belief that the project will remain attractive and highly successful.

As for environmental issues, I want to say that the investors, acting at the request of the Natural Resources Ministry, have prepared a large-scale program of environmental protection measures. This program is aimed at solving problems related to the reasonable complaints of the Russian environmental supervision bodies and at preventing a repetition of such situations.

Mr Putin: Thank you. Mr. Jeroen van der Veer, please.

Mr Van Der Veer: Thank you for supporting this truly historic event. We sincerely welcome Gazprom as one of our partners in the project. Since Gazprom will be the majority shareholder, I hope Mr. Miller will answer some questions and resolve any problems that may arise.

I believe it is important that we have attained stability, which allows all partners in the project to work jointly to implement the project.

In my view, this is a beneficial situation for all sides, including Russia and clients in Japan, Korea and other countries in the eastern region, as well as for investors. I believe that all of us shareholders will find an opportunity to further promote the LNG project after the first phase of the project is completed.

Mr President, I am aware of all the concerns over environmental issues. In our work, we apply the highest standards of global practice to the development and production of mineral resources. All of us participants in this process are grateful to the minister [of natural resources] for assisting us in our search for the right ways to solve problems and move past concerns and complaints to practical work.

[Addressing Mr Putin] I am grateful to you for your assistance, and I believe that the fact that we will continue to discuss these issues with the minister of natural resources points to a new dimension in our work and a new foundation for our operation.

Mr Putin: Mr Van der Veer, you know that Shell is working at Salym, in Siberia, as well as on Sakhalin, and you remember that we have run into some problems there as well. We did our best to consider the investors’ needs, and doing so allowed us to solve all the problems. Here, I am also very pleased to see that all parties have agreed on a satisfactory solution, and I would like to thank you for your flexible and businesslike approach to this work.

Mr Kojima: We are a shareholder in Sakhalin Energy. I thank you for the opportunity to talk with you, Mr. President. We are certainly happy to have settled all the issues, and we sincerely welcome Gazprom’s entry into the project. We are sure that the union of its four powerful shareholders will not only give Sakhalin Energy the capability to produce liquefied natural gas, but will also make it a major oil supplier in the Asia-Pacific region.

We also think that we are creating new opportunities to develop joint work with our partners. We are happy to have reached an agreement with the Industry and Energy Ministry on all the remaining issues concerning the project. We are sure that this agreement will strengthen our project and ensure its robust, reliable operation. It will also reiterate our commitment to it and to fulfilling our obligations to supply LNG to our customers in Japan and other Asia-Pacific nations. Ensuring timely LNG supplies according to the schedule is very important to us.

MR PUTIN [to S.Utsuda]: Please.

Mr Utsuda: Mr President, thank you for this opportunity to meet with you. We think that this agreement on Gazprom’s involvement in the project is an important milestone for Sakhalin-2. Mitsui thinks that Gazprom's participation will considerably strengthen the project and Russian-Japanese ties. We think that this cooperation will evolve into a broader energy production effort on Sakhalin in the future. Thank you.

Mr Putin: Sakhalin is not the only place. We run many joint projects with Japanese partners.

Mr Utsuda: Of course. Nonetheless, Sakhalin offers excellent underutilized opportunities for more intensive energy production, and, given its geographical proximity to Japan, we are interested in broader activities on Sakhalin to ensure the energy security of Japan and its people.

We also think that our activity will help develop the Sakhalin region and improve the lives of people living on Sakhalin, because we will introduce innovative technology and develop industry not only in the extraction of fossil fuels but also in related sectors.

Mr Putin: I fully agree with you. Nonetheless, our joint plans could be much broader. We know that the Japanese business community is interested in cooperation – and further cooperation – in the energy sector, and we are ready for the broadest and closest cooperation.

Mr Miller: Mr President, Gazprom has been negotiating with Shell on its entry into Sakhalin-2 and on setting up a joint liquefied natural gas business for two years. The Japanese shareholders have supported the idea of letting Gazprom in since the beginning of the talks. Earlier today, we signed a protocol between Gazprom, Shell, Mitsui and Mitsubishi. Under the protocol, Gazprom will receive 50% plus one share [of Sakhalin-2], for which it will pay $7,45 billion. This makes Gazprom the majority shareholder in the project. Gazprom, together with other shareholders, will work to get Sakhalin-2 on the road as soon as possible.

Mr Putin: Gentlemen, I would like to congratulate you once again on starting a new stage of our work. It is beyond any doubt that the implementation of this project will contribute significantly to improving the global energy market. Energy consumers in Japan, the Republic of [South] Korea, and North America will certainly notice these improvements. This project will certainly also benefit Russians living in the region and the Russian government.

I would also like to highlight that we will do everything we can to assist and support you. I am sure that, whatever difficulties might arise in the course of such a large project, the goodwill we share with all our shareholders will help us settle any issues and solve any problems. I wish you success.