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President of Russia Vladimir Putin: Mr Shulginov, let us talk about the industry’s performance in the first six months of the year. We are currently actively preparing for the autumn and winter season, so the second question is: how is this work proceeding in terms of the sector’s readiness?

Go ahead, please.

Energy Minister Nikolai Shulginov: Mr President, I would like to begin by thanking you, on behalf of all sectors of the fuel and energy complex, for your constant attention and support, for all the decisions and instructions that have facilitated the development of the right energy policy and adaptation of the energy sector to new challenges.

As for the industry’s performance in the first six months of the year as compared to the previous six months, I must say that, despite the current economic reality and given the need to adjust to new challenges, it has overall shown good results.

Oil production in the past six months has exceed last year’s result by 3.4 percent; the production of energy grew by 1.9 percent, which means that energy consumption has been respectively higher.

Coal production remains at last year’s level. The production of petrol and diesel fuel is 4.5 percent higher than last year. For obvious reasons, gas production has fallen by 5 percent.

The domestic market is stable and consumers are provided with all types of energy resources. There have been no problems with supplying energy resources in full.

Several months ago, we began preparations for the winter, which is one of our current priorities. We are getting ready for this difficult period knowing that our partners in unfriendly countries are nervously anticipating especially rough times. We continue working in accordance with our plans and schedules as normal.

The plans and schedules have been created on the basis of the past autumn and winter season and the instructions you issued in December when evaluating the sector’s readiness for the winter. It is a serious document with instructions that outlined the tasks both related to consolidating territorial grid organisations and ownerless grids, increasing the reliability of heat supply, and financing programmes related to improving the reliability of the distribution grid complex because there are still certain problems with it.

I would like to make some important points regarding our preparations for the winter.

First, we do not face any challenges in accumulating any type of fuel – reserve, main, or emergency fuel reserves. We will have no problem pumping gas into underground reservoirs. Today, the level of gas injection stands at 81 percent of the target figure set for November.

As for repairs, we are using a more flexible repair planning system. We make repairs on the basis of technical condition rather than in accordance with the preventive maintenance schedule. This is quicker and the quality is of a fairly high standard.

We are paying special attention to the work of imported gas turbines. This is a widely discussed issue. Overall, they amount to 22 gigawatts. What must be understood is that our de facto reserve exceeds the norm in the uniform power energy grid by 35–40 gigawatts. Yet, we have nevertheless devised an algorithm for managing the resources of these turbines. One option is to transfer them from energy units where they are optional to units where they are necessary.

At the same time, we have been working with the Ministry of Industry on implementing a sectoral order on spare parts, equipment, and, most importantly, servicing organisation. As for servicing, the companies that produce innovative gas turbines will also be in charge of servicing them. There are also other companies that want to arrange servicing, including in the hot part of the gas turbine, so I do not see any risks here for the time being.

Just like last year, by winter we must ensure the restoration of the lines affected by fires and floods. Today, about 700 supports are still in waterlogged areas and there is monsoon flooding ahead in the Far East. More areas may be flooded and our task is to check their condition by winter.

Of course, we have hydrological problems. This year, there is a very low inflow at the Sayano-Shushenskaya HPP. Its water supply level is about 61 percent of the figure we have had for many years. The inflow is half of what it used to be.

There is the same situation in Vilyui, Lena’s tributary, and at the Krasnoyarskaya HPP.

What will we do? Today, we have calculated the amount of additional fuel we need at thermal power stations in order to reduce the energy output of hydropower stations.

Another issue under our special control is gas and electricity supply to Crimea and Kaliningrad. Regarding Kaliningrad, we are ready to supply electricity in island mode, and the issue of fuel supply will involve the use of the underground storage facility and the FSRU Marshal Vasilevsky [floating storage and re-gasification unit], as well as the purchase of two more gas carriers.

As for Crimea, we need to replenish the gas supply following the reduction of production by Chernomorneftegaz. We have decided that additional gas will be stored in the Glebovskoye storage facility for use during peak periods and that the Krasnodar system will be used to supply gas to Crimea. Now we need to resolve the issue of funding. We are discussing options with the Finance Ministry and the Republic of Crimea.

The preparation for the winter season in the Donetsk and Lugansk people’s republics and the territories that have been liberated or are being liberated is a serious matter. We are working both to prepare them for winter and to rebuild electricity lines and backbone networks. There is a great deal to do, and there is more work ahead.

Our special focus is on preparing the Kursk, Bryansk and Belgorod border regions, where the grid infrastructure has been damaged, for the winter. We are working to repair it and to complete all the projects by winter.

There are no problems with goods deliveries to the northern territories. All the contracts have been signed, and deliveries are underway. We will start checking the areas’ readiness in August, as usual. By November, we will complete the assessment and report the results to the Government.

Vladimir Putin: Good. Mr Shulginov, the production of petrochemicals has decreased in the first four months of the year. But as far as I know, the situation has…

Nikolai Shulginov: The output is growing.

Vladimir Putin: By about 5 percent, correct?

Nikolai Shulginov: By nearly 5 percent.

Vladimir Putin: And the production of oil for export has increased as well?

Nikolai Shulginov: Yes, it has increased.

Vladimir Putin: What about electricity production? Are production and consumption growing throughout the country?

Nikolai Shulginov: Yes, they are growing, although the pace of growth has dwindled in the past few months. The growth was 0.4 percent in the past month and 2 percent since the beginning of the year. I believe the year-end figure will be around 1.5 percent if the trend keeps up.

We expect to see growth under any conditions.

Vladimir Putin: Both in production and consumption?

Nikolai Shulginov: Yes, consumption is growing, which means that we must increase production to meet growing consumption demand.

Vladimir Putin: Good.

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