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Dmitry Medvedev: Igor Ivanovich, there are events that we can do nothing about, the arrival of winter for example. How are preparations for the winter season going, I mean the preparedness of our energy networks, our heating networks, in short, all the processes that we have a duty to regulate?

Igor Sechin: As far as concerns the fuel provisions for the generating companies for preparations for the 2008–2009 autumn-winter period, coal reserves were at 122 percent in September, and we had reserves of 131 percent of the needed amount of coal as at October 1. As the situation stood on October 14, reserve supply norms have been met at all the coal-powered generating stations, including the Tomsk branch. DMITRY MEDVEDEV: I know that coal is always a subtle issue, and the reserves can be 130 or 150 percent, and they have to be in different territories too, including in regions where supplies are brought in for the winter, isn’t that so?

Igor Sechin: That is indeed the case. There were a certain number of problems, Dmitry Anatolyevich. We took steps to address these problems in August and reached agreements with the railways on approving timetables for supplies of rolling stock to transport the coal, and now all the coal supply issues for generating stations have been resolved.

There was a drop of 10 percent in coal supplies during the first ten days of October at the Kyzym Thermal Electricity Power Station, but there it was simply selection of coal already delivered that began, and this process is under control. We will ensure the needed supplies are there.

The norms for heavy fuel oil had been met as at October 1 at the Yaroslavl branch of TGK-2, the Chuvashia branch of TGK-5, and the branches in Chelyabinsk and Ulan-Ude. As far as the situation stood on October 14, the monitoring system now in place made it possible to eliminate all the shortfalls. There is a shortfall in heavy fuel oil only at the Yaroslavl branch of TGK-2. This is due to repair work on the heavy fuel oil reservoir. This work is near completion now and the full amount of fuel will be supplied in December and there will be no problems with ensuring the maximum for the autumn-winter period.

Overall, we think the situation is satisfactory as far as building up reserves of heavy fuel oil is concerned. Coal reserves decreased as at September 1 compared to the previous three years, but the needed supplies were delivered by October.

Regarding your additional instruction on Kamchatka issued during your visit to the region, measures have been taken to get the supplies delivered (the norm is for 40,000 tons of heavy fuel oil) and 47,500 tons have been delivered now. The tanker Vysotsky has just been unloaded and the reserves are now a little above the norm.

Regarding the housing and utilities sector, the Regional Development Ministry has prepared a report and it was presented to Vladimir Putin on October 14. We have no concerns in this area either. We think the electricity facilities are fully prepared for the winter in terms of fuel reserves and maintenance work.

Dmitry Medvedev: Good.

There is another subject I have to come back to. I heard a report yesterday from your colleague Sergei Borisovich Ivanov on the situation in air transport, and I drew his attention to the situation with aircraft fuel. After this, I spoke with the Prosecutor General and the director of the Federal Anti-Monopoly Service about taking this issue under their control. Do you have any information on this subject?

Igor Sechin: Dmitry Anatolyevich, we are ready to join this work and we are already working together with our colleagues. We propose a transition to long-term contracts between airlines and oil companies that would exclude intermediaries. We have received information that there have even been cases of some airlines refusing to buy aircraft fuel directly from the oil companies.

Dmitry Medvedev: But this means that someone has a scheme going for making money out of this situation, 100 percent.

Igor Sechin: This cannot be ruled out.

It is surprising of course when the goods are offered at a price 10 percent lower than the market price (we know of such a concrete case) and the company refuses to conclude a long-term contract. This proposal to move over to long-term contracts is therefore one area for work.

A second area is to move fuelling stations at airports away from selling fuel and into storing fuel, for a fee of course, so that they do not operate at a loss, but not selling fuel, not changing the price situation, and have them do what this business is supposed to do – provide quality storage of fuel.

Dmitry Medvedev: How is this organised in other countries? Are we studying other countries’ experience? In this case, are we dealing with storage or sales, with all the ensuing tax consequences?

Igor Sechin: There are various schemes, but what we want to propose is the creation of alternative fuelling stations. This possibility exists. Transnefteprodukt provides a base in terms of a ring of oil product pipelines around Moscow, and this enables us to set up additional fuelling stations to supply Moscow. This same kind of work can be carried out as a pilot project in St Petersburg. The establishment of alternative fuelling stations will ensure the market functions more evenly.

Dmitry Medvedev: Don’t forget that this is a land of miracles at times: we could have alternative fuelling stations and alternative suppliers appear and not see prices change at all. What you said about making a transition to long-term contracts is therefore very important. But if we do this I think we need to do it now. Oil prices are relatively low at the moment, and this is not very good for our country overall, but it is a plus when it comes to concluding these kinds of contracts.

Igor Sechin: Such contracts would need to have a price formula and be mutually binding and mutually beneficial for the oil companies too.

Dmitry Medvedev: Yes, the base has to be more or less acceptable. You will need to work on this.

Igor Sechin: Yes, I will do so, Dmitry Anatolyevich.