January 21, 2021

News from our co-founders. Working meeting between Vladimir Putin and Alexey Miller

A working meeting took place between Vladimir Putin, President of the Russian Federation, and Alexey Miller, Chairman of the Gazprom Management Committee.

Alexey Miller briefed Vladimir Putin on Gazprom's efforts for the expansion of gas supply and gas infrastructure in Russian regions. Also discussed were the main results of the Company's activities in 2020, as well as the Power of Siberia 2 project.

Shorthand record

Vladimir Putin: Good afternoon, Mr. Miller!

Although we meet and work together on a regular basis, I would nevertheless like to hear your perspective on the Company's performance in the last year, which was challenging for the energy industry at large. This is my first question.

My second question is about the ongoing work in the winter peak.

The third question concerns gas infrastructure expansion within the country. It is probably the most pertinent question of all, so I would rather you start with that. I know that the Company has big plans in that area. It has always been the focus of your attention, and yet the pace slowed down at some point.

Our citizens have many questions in this regard. Naturally, people want to know about the plans for gas infrastructure expansion in Russia. Of course, Gazprom is working on that with the regions of the Russian Federation. We are well aware that the plans for expanding the trunkline infrastructure should involve bringing resources to the end consumer.

Let us start with that. Please.

Alexey Miller: Dear Mr. President,

Your instruction on signing medium-term five-year programs for gas supply and gas infrastructure expansion with the regions of the Russian Federation has been carried out: all of the 67 programs have been signed, and the goals and objectives through 2025 have been outlined.

Gazprom is almost tripling the funding for gas pipeline construction. The Company's investments for the five-year period will total RUB 526.1 billion. In that timeframe, we will build some 24,400 kilometers of gas pipelines and bring gas to 3,632 localities. By the end of 2025, gas grid expansion will be completed to the maximum extent technically possible in 35 regions of the Russian Federation. This will be 90.1 per cent of technically possible gas grid expansion nationwide.

Mr. President, we have also set the goals for 2030 in accordance with your instruction. By 2030, all 100 per cent of technically possible connections to the gas grid in Russia will be completed.

We have also signed synchronization plans with the regions for 2021. From January 1 onward, Gazprom and the regions are speeding up dramatically, setting a new pace in our activities.

At the moment, we have two priorities in our work: firstly, the social focus of the gas supply and gas infrastructure expansion program in general, and secondly, further extension of the gas grid in rural areas.

Vladimir Putin: Good.

Mr. Miller, what about the tariff policy and pricing? What about the domestic tariffs and the prices in the international markets that you use to sell gas to our foreign consumers?

Alexey Miller: Mr. President, I will focus on 2020. As you have noted, 2020 was a challenging year for the global energy industry. Especially difficult was the first half of 2020, when the demand for gas in the foreign markets declined along with the gas prices. However, the markets stabilized in the second half of the year, and today we see that the volumes in the second half-year were good and, most importantly, the prices started to recover.

Even back in October 2020, we set an all-time record for gas supplies to Europe. We delivered 17.4 billion cubic meters of gas in October, and it definitively proves that the demand for Russian gas in the European markets is stable and growing.

The Company's gas output – some 452 billion cubic meters – allows us to fully meet the demand in both the domestic and foreign markets. It should be noted that our production capacities exceed the production volumes by almost 100 billion cubic meters of gas.

As for domestic tariff regulation, the decision is made by the FTS [Federal Tariff Service], and we know that the current tariff level makes it possible to keep our gas industry socially-oriented as regards the domestic market, all the while providing the required feedstock to both the gas processing and gas chemical sectors.

And you know that a very extensive groundwork was laid in 2020 to create new large-scale gas processing and gas chemical production facilities in the Russian Federation in the nearest future. First of all, of course, I mean our activities for the development of the Yamal gas production center and the northern gas transmission corridor. Two compressor stations and over 850 kilometers of the linear part have been built. This will make it possible to supply gas to one of the world's largest gas processing and chemical complexes, which is located near Ust-Luga. The project is going on schedule.

As for the Amur Gas Processing Plant, the construction is 70 per cent complete. The first start-up complex and two production trains will come onstream in 2021. The products of the Amur Gas Processing Plant will be supplied to the Amur Gas Chemical Complex.

There is no doubt that in the very near future we will make a very big step forward in gas processing and gas chemistry, and cutting-edge production technologies will be introduced into these sectors. Today, we intend to build capacities both in the west and in the east in order to be able to cater to the needs of both the European and Asian markets.

Speaking about the outcomes of 2020, it is of course worth noting that December marked exactly one year since the start of gas supplies via Power of Siberia. Mr. President, I would like to report that gas is being supplied to the Chinese market in excess of the planned amounts, above the annual contractual volumes, and on some days in the second half of 2020, our daily supplies were 25 per cent higher than our daily contractual supply obligations. That is why it is obvious that the Chinese market is developing in a dynamic fashion. Today, the demand exceeds even the supply volumes that are specified in our 30-year contract.

Vladimir Putin: How is the work on the other route going?

Alexey Miller: Mr. President, as for the Power of Siberia 2 gas pipeline, we have commenced the design-and-survey works pursuant to your instruction; the works are being carried out in the territory of the Russian Federation.

We also maintain direct communication via video conference calls with our partners from China, and stay in contact with our partners from Mongolia. A feasibility study is currently being prepared for the Mongolian route, and a special-purpose company is being set up for the construction of a gas pipeline across Mongolia.

As early in the first quarter of 2021, the feasibility study will be ready. But even now preliminary feasibility analysis definitely shows that the project is feasible from the technical point of view and efficient from the economic point of view.

Vladimir Putin: Good. Thank you.

Alexey Miller: Thank you, Mr. President.

Source: gazprom.com