The National Oil and Gas Forum is the first national-level business event in the modern history of Russia, organised by the Russian Ministry of Energy in cooperation with leading entrepreneurial and industrial groups: the Russian Union of Industrialists and Entrepreneurs (RSPP), the Chamber of Commerce and Industry of the Russian Federation (TPP RF), the Union of Oil & Gas Producers of Russia and the Russian Gas Society.
The mission of the forum is the formation of a comprehensive and authoritative evaluation of the internal and external challenges for the Russian oil and gas industry through open discussion by leading experts, an increase in the quality of projection and modelling of scenario conditions for the development of the fuel and energy industry over the medium and long term.
Among the questions traditionally discussed at the Forum are: the long-term goals and challenges of the oil and gas sector; developing a market infrastructure for the energy industry; innovations and energy efficiency in the industry; analysing economic policy; creating a viable market environment; refining projection of the world price of hydrocarbons; international co-operation and foreign trade policy; increasing efficiency in the processing of raw materials; marketplace trading of energy resources and creating transparent indicators on the internal oil and oil product market; ecological best practices, standards, and industrial security in the energy industry; petroleum services; and mechanical engineering in oil and gas.
“The Russian oil and gas sector today stands on the threshold of new challenges and changes. We must discuss the questions linked to attracting investments in the country’s oil and gas industry, the fiscal policy in this sphere, replacing our mineral and raw materials reserves, developing of a market infrastructure, and introducing innovative technologies and new engineering solutions.” Arkady Dvorkovich, Deputy Prime Minister of the Russian Federation
“The oil and gas sector continues to play a heavy role in the Russian economy. “The share of income from oil and gas in the 2012 Russian Federation budget amounted to nearly 50%. Over 12 years, the extraction of oil in Russia has increased by more than 1,5 times, which corresponds to a level of extraction of roughly 4 million barrels of oil a day. Today, Russia has become a world leader in the extraction of oil and currently ranks sixth in reserves, extracting one of every eight barrels of oil in the world.” Alexander Novak Minister of Energy of the Russian Federation
“I hope that not only this annual forum, but also our continual work in the period between forums will be a guarantee of good results, the successful development of the oil and gas network, and a sustainable positioning of the fuel and energy network in the global economy.” Alexander Shokhin President RSPP
“Today, we are confronted with a range of serious tasks: developing the gas industry in Eastern Russia, opening up the Arctic shelf, strengthening collaboration with the countries of the Asia-Pacific region – exceptionally advanced markets. But the strategic goal of the country’s oil and gas sector remains, undoubtedly, maintaining leadership on global energy markets.” Viktor Zubkov Chairman of the Gazprom Board of Directors
“I believe that conducting the National Oil and Gas Forum will assist in strengthening collaboration between governmental authorities and business, and will allow for clarifying perspectives on the innovative development of the domestic fuel and energy network.” Sergey Katyrin President of the Chamber of Commerce and Industry of the Russian Federation
“Manipulating the prices of energy-producing materials, and even the forecasts for their changes, has long been an instrument of geopolitics. Over the last decade, a great deal of laws have been passed and international agreements have been concluded in Europe and the United States that have affected the policies of countries that extracthydrocarbons” Valery Yazev First Deputy Chair of the Russian Federation State Duma Committee on Natural Resources, Natural Resource Management and Ecology
“Main challenges are the effective use of natural resources and effectiveness of work of the oil and gas network itself. Structural reforms implemented in the oil and gas sector in the 1990s in Mr Shafranik’s words, bore fruit in the early 2000s.The network knows what competition is, and now oil and gas workers are facing the problems of re-equipment.” Yuri Shafranik Chairman of the Council of the Union of Oil and Gas Industrialists
For an oil and gas industry that has properly performed a stabilizing role and has assured the sustainable formation of budgets at all levels in a period of recessionary economic events, the current phase of development poses a range of high-priority questions and challenges, many of which you will have to discuss as part of the Forum. Vagit Alekperov Chairman of the Russian Union of Industrialists and Entrepreneurs Committee on Energy Policy and Energy Efficiency
“In the near future, the oil and gas industry will define to a considerable degree not the current level of extraction, but the innovative technologies that will be employed. “The situation has now become more complicated; there is a lot of oil on the world market, but it is selling cheaply. Enough oil is being extracted on the shelves, which increases expenses. Therefore what happens in the future will depend on the development of the world economy and which countries turn out to be world leaders in extraction.” Gennady Shmal President of the Union of Oil & Gas Producers of Russia
Programm and Organizing Committee: key persons
Minister of Energy of the Russian Federation
President of the Russian Union of Industrialists and Entrepreneurs (RSPP)
President of OAO «LUKOIL»
Deputy Chairman of theDuma’s Committee on budget and taxes
CEO, President of Chamber of Commerce and Industry of the Russian Federation
First Vice-Chairman of the State Duma Committee for Natural Resources, the Environment and Ecology, and the President of the Russian Gas Society
President of Union of Oil & Gas Producers of Russia
Key Speakers 2013
Minister of Energy of the Russian Federation
Alexander Zhukov First Deputy Chairman of the State Duma,
Member of the State Duma Committee
on Budget and Taxes.
President of the Russian Union of Industrialists
and Entrepreneurs (RSPP).
President of OAO «LUKOIL»
President & Chairman of the Management Board JSOC Bashneft
President of the Russian Gas Society
Maria van der Hoeven
Executive Director of the IE
General Director of the Institute of Energy Strategy
President of Union of Oil & Gas Producers of Russia
Member of the Management Board of SIBUR Holding
Director of the Energy Center SKOLKOVO
Chairman of the Expert Council of the Russian Gas Society, Deputy Chairman of the State Duma Committee on Energy
CEO of SPIMEX
President of Chamber of Commerce and Industry of the Russian Federation
President of the Russian Union of Chemists
Partner, Head of Tax & Legal Energy & Resources Group of Deloitte & Touche CIS
Chairman of the Board of JSC “Interstate Oil “SoyuzNefteGaz”,
Chairman of the Committee on Energy Strategy and Development of Chamber of Commerce and Industry of the Russian Federation
Partner of McKinsey & Company
Deputy Chairman of the State Duma on Resources,
environment and ecology
Forum Key Facts 2013
On March 19-21, 2013, the National Oil and Gas Forum – the first national-level business event in the modern history of Russia – was held in the World Trade Center, organised by the Russian Ministry of Energy in cooperation with leading entrepreneurial (RSPP, TPP RF) and industrial groups (the Union of Oil & Gas Producers of Russia, the Russian Gas Society).
On the first day of the Forum, during the discussion on State energy policy (“National Energy Policy: Challenges of the Coming Period”), the Minister of Energy of the Russian Federation, Alexander Novak, presented a report.
“The role of the oil and gas sector in the Russian economy continues to remain a heavy one,” Mr. Novak said. “The share of income from oil and gas in the 2012 Russian Federation budget amounted to nearly 50%.Over 12 years, the extraction of oil in Russia has increased by more than 150%, which corresponds to a level of extraction of roughly 4 million barrels of oil a day.Today, Russia has become a world leader in the extraction of oil and currently ranks sixth in reserves, extracting one of every eight barrels of oil in the world.”
The floor was then given to our guest – Jorge Montepeque, director of World Markets and Market Information at Platts. He spoke about the gas shale revolution in the United States.
Viktor Zubkov, Сhairman of the Gazprom Board of Directors, continued on the theme of gas. In his opinion, the most massive challenges now facing the gas industry are: developing the extraction of gas in eastern Russia, strengthening collaboration in the Asia-Pacific region, and opening up the Arctic shelf.
Arkady Dvorkovich, Deputy Chair of the Government of the Russian Federation, noted: “The government of Russia has a difficult task in relation to the oil and gas network: defining and advancing Russian interests.The main thing is assuring the country’s economic growth, both through extracting and refining fundamental natural resources and through assuring the economic growth of other sectors.”
Alexander Korsik,President of Bashneft, made an unusual proposal to the government in his speech: the company is ready to become the first player in the oil industry prepared to pay the Excess Profits Tax (NDD).
Vladimir Vladimirov, First Deputy Governor of the Yamal-Nenets Autonomous District, began his speech with a brief introduction to the potential of Yamal’s raw materials for the participants of the Forum, calling attention to the growing role of the Arctic: “The fundamental reason for the escalation of interest lies in the fact that the Arctic is rich in natural minerals.The problems of ecology and the management of natural resources, the Northern Sea Route, the unique social environment, all this makes the Arctic a special region requiring a balanced approach and constructive dialogue,” Mr. Vladimirov pointed out.
The First Deputy Chief of the region spoke at length on the theme of implementing far-reaching economic infrastructural projects in Yamal aimed at strengthening Russia as a world leader in opening up the Arctic.
Glenn Waller, President of Exxon Mobil Russia Inc., spoke to Forum participants about the unique collaboration with Rosneft on the Sakhalin Peninsula and in other regions.
This is a unique partnership between two leaders in the oil and gas industry – Exxon with capitalisation, Rosneft with inventory. A potent conjunction of interests has arisen between us. And our relationship is strengthening. Together we will achieve success,”Mr. Waller said.
Valery Yazev, President of the Russian Gas Society, presented a report on “Russia and Future Configurations of the World Gas Markets”. In his speech, he voiced the expert opinion that by 2035 the world demand for gas will grow by almost 50%.
95% of that growth will be furnished by India and China. The share of gas in the generation of electricity will increase. The availability of resources in the gas sector is good, even without including the shale gas and gas hydrates.
In the European Union, he noted, spot trading of natural gas is growing rapidly. Compared with 2011, the volume of natural gas trading on all the European hubs grew by11% and covers more than 80% of the demand for gas in Italy, Great Britain, France, Germany, Belgium, the Netherlands, and Austria. In this regard, Gazprom does not have enough flexibility.
“We must learn to use the opportunities of the organised marketing of energy products in our interests and obtain additional income during seasonal and annual price peaks,”Mr. Yazev argued.
The President of the Russian Division of the Norwegian company Statoil, Jan Helge Skogen, shared Norwegian experience in the extraction of hydrocarbons.
From April 1, Lukoil could lose its concessions in the Yuri Korchagin field on the Caspian Sea shelf, company Vice President Gennady Fedotov believes. A decreased export duty is today in effect for oil from the Korchagin field (at the level of the reduced duties in Eastern Siberia, approximately 50% of the industry-wide price) and zero tax on extraction.
“This concession underwent a detailed expert examination two years ago, but now they’re telling us that it cannot be extended; starting on 1 April it will cease functioning,” Mr Fedotov announced. In his words, this is connected with the elaboration of a complex programme for working the shelf.
“In adopting new tax concessions, we are not planning to abolish the ‘old’ concessions,” Mr Novak told Mr Fedotov.
With this, the first plenary session of the Forum concluded. Minister of Energy Alexander Novak noted that the basic theme of the work of the Forum for the entire three days had been set at this session.“I suggest that Russian companies discuss the issues of creating long-term rules of the game, and opportunities for change in the taxation system. Our foreign colleagues are excited about the issues of integration and partnership.” Mr Novak also noted that until 2020 or 2025, the oil and gas network must receive approximately 1 trillion dollars in investments. We must operate this way, the Minister believes, because they have given us the chance to use new technology and to develop closely related industries so that we have not only borrowed, but developed our own technology using global experience.
The second plenary session was called “Increasing the industry’s productive and economic efficiency: Areas of growth and developing competitiveness”.
Yury Shafranik, Chairman of the Council of the Union of Oil and Gas Industrialists, opened the session, noting that the main challenges were the effective use of natural resources and the effectiveness of the work of the oil and gas network itself. Structural reforms implemented in the oil and gas sector in the 1990s, in Mr Shafranik’s words, bore fruit in the early 2000s. The network knows what competition is, and now oil and gas workers are facing the problems of re-equipment.
Anatoly Golomolzin, Deputy Director of the Federal Anti-Monopoly Service, reported that there will not be a surge in domestic fuel prices in the spring of this year. As he noted, the joint work of the FAS and the Ministry of Energy has been directed at prohibiting the increase in fuel prices. In his words, oil companies on the whole are keeping to the modernisation schedule for their oil refineries.
Mr Golomolzin also believes that the experience of the Government in creating infrastructure for the open trade of oil products has been successful. More than 10 million tonnes are now being traded through the stock market, while off-exchange oil product contracts for more than 40 million tonnes are being registered, the Deputy Director reports.
Andrey Gaidamaka, Lukoil’s Director of Investment Projects believes that Russian pension funds are a powerful investment resource, including for companies in the oil and gas sector.
SIBUR Executive Vice President Kirill Shamalov noted that the Russian petrochemical industry is facing external challenges. Within the country, large-scale production plants must be constructed near the sources of raw materials, costs among Russian producers must be kept low owing to the scale, and competition on the export markets must be won. On the external markets themselves, a fortuitous combination of several factors is necessary in order to develop production. For example, our projects in India and China. In these countries, in connection with the active development of consumer industries, primarily automobile construction, the flow of demand for synthetic rubber is in many aspects very positive. Our partners have production sites raw materials and access to the end market, but do not have the corresponding technology. The joint ventures created here with our participation, therefore, presuppose the construction of new facilities on the basis of the technology we have provided.
Vitaly Bushuyev, Director of the Institute of Energy Strategy, called upon us “not to break our oil dependency” but to use the technological possibilities of the oil and gas network for the good of the country.
Vasily Belov, Executive Director of the Skolkovo Foundation, acquainted those present with the first experiences in creating research and development facilities (NIOKR) here. Among the first participants in the fund were Tatneft, Rosneft, Transneft, and Gazprom.
According to the claim of Alexey Rybnikov, president of the St. Petersburg International Mercantile Exchange, “all the necessary links have been created on the oil products market”.
Rosgeo Director Andrey Tretyakov noted that creating a subsoil management project exchange is necessary for replenishing the country’s raw-material base, as is setting up junior companies in the field of geological exploration.
Nikolay Levitsky, President of GEOTEK Holding, believes that Soviet methods of geological exploration are not working in the Far East. In this region, the cost of exploration wells could reach 20 million dollars. Nonetheless, Eastern Siberia is a key region for increasing the extraction of oil in the Russian Federation. The Eastern Siberian problems can be resolved, but only thanks to stimulating geological survey works on the part of the State.
Alexander Sitnikov, Managing Partner of the Legal Firm VEGASLEX, noted that the Russian oil products market could be characterised as marketable. But price regulation affects market development and the quality of the product least of all. In the first place, measures for stimulating and creating a favourable investment climate must be tended to in developing this segment of the economy.
The third plenary session was called “Analysis of the tax system: Seeking compromise between fiscal and incentive functions”.
Deputy Minister of Finance Sergey Shatalov reported that the Government is discussing legislation on profit tax relief for investment projects in the Far East. The transition to a new system will not happen until the results of introducing the “60-66-90-100” taxes have become clear; he noted that introducing the Excess Profits Tax was not a near-term prospect. This having been said, the transition to a new system had been supported in the Ministry of Finance as far back as 2010; he noted that the Excess Profits Tax could be introduced as soon as 2012. In either event, the decision on transferring the industry to a new tax will depend on the success of the Bashneft experiment. At the same time, up to now there have been no comments from the Federal Tax Service, which will have to administrate the Excess Profits Tax. Nor have the customs officials, who are currently collecting export duties on oil, spoken out. If the duties and Mineral Extraction Taxes are replaced by the Excess Profits Tax, then the role of the Federal Customs Service in the Russian economy will decrease significantly. The new conditions should start in 2014 and be in effect for 10 years, Mr Shatalov said.
Deputy Minister for Natural Resources Denis Khramov reported that the interests of
Rosneft and Gazprom in the Arctic shelf intersect in three areas: “There are 8 claims from Rosneft, including the Kara and the East Siberian Seas. There is an intersection in these eight areas with areas that Gazprom lays claim to. We will separate these; this is ordinary work that does not require a referral to the Government committee on the fuel and energy industry,” Mr Khramov explained.
Valentin Mezhevich, First Deputy Chairman of the Council of Federation Committee on Economic Policy, noted that the upper house of Parliament is paying serious attention both to the development of the oil and gas industry and to its taxation system. The Senator reminded the Forum that in October of last year, parliamentary hearings were conducted in the Federation Council, at which the taxation of the gas industry in 2013 and the 2014-2015 planning period were discussed.“We understand that taxes are a basic factor influencing the price levels of fuel,” he said.
Mr Mezhevich settled on the situation in this field in Eastern Siberia and in the Far East. In his words, these regions constitute approximately 60% of the territory of the Russian Federation. The total primary gas resources of the Eastern Russian landmass is appraised at around 52 trillion m3, and the Far Easter sea shelf - at 15 trillion. At the same time, the degree of exploration for these territories totals 8.1% for the landmass and 6.5%for the shelf. There is no infrastructure there; it must be set up and, he believes, the taxation model for this region in particular must accordingly be changed. Mr Mezhevich said that for the Eastern Siberian fields, a “holiday” for taxes on the extraction of useful natural minerals has been introduced. Measures like this allow for stimulating the opening up of new regions and the enhanced development of reserves already being exploited.
During the session, Russian Federation Minister for Economic Development Sergey Belyakov reported that the position of key government agencies on what needs to be done to develop the industry coincides with this in many respects. In particular, stimulating hard-to-extract oil reserves and a systematic approach that would allow for stimulating the opening up of new fields are necessary. A transition to a new tax regime is absolutely necessary. Correcting tax policy towards the stimulation of investments in the industry is necessary as well.
In turn, Union of Oil & Gas Producers of Russia President Gennady Shmal believes that equitable taxes are needed in Russia, however “not such as they are” now. We have a continual funding gap in the petroleum industry as well.
The speech of Grigory Vygon, Director of the Skolkovo Business School Energy Centre, was the keynote of this session. In his report “Preliminary results and potential areas of growth for the taxation of the oil industry in Russia” at the National Oil and Gas Forum, he noted in particular that despite the “60-66-90-100” system being directed at the stimulation of advanced refining, the initial refining of oil in the country still remains profitable. “It is a surprising fact, but many companies still want to construct simple factories; moreover, many of these factories are located quite far away from the primary markets,” Mr Vygon believes. In his words, if all the investment plans that have been announced are realised, the volume of initial refining will increase by 25%, which Russia absolutely does not need in the current situation. Alongside this, the oil expert noted the introduction of a 100% duty on residual oil beginning in 2015 as a positive step, which would stimulate investments in the process of increasing the conversion depth.
In his report, he also touched on questions of the possible development of the “60-66-90-100” system. For the most part, variants in which the duties on oil and oil products need to converge are currently being examined. The induction of Russia into the WTO complicated the configuration of the tax system even further and limited the opportunities for drawing the duty rates on oil and oil products together: it is now possible only by means of lowering the duties on oil; compensating for falling budget revenues, however, only allows for increasing duties and mineral extraction taxes.
At the “The Russian shelf: A hard-to-extract future” conference, the participants discussed positions for and against opening up the Russian portion of the Arctic shelf.
Gennady Shmal, President of the Union of Oil & Gas Producers of Russia, could not rule out the possibility that if the level of oil extraction in 2012 totalled 518 million tonnes, then in five to seven years this indicator can decrease to 420-450 million tonnes. And this is much lower than the official prediction. In the assessment of the Ministry of Economic Development, the extraction of oil must total 513.6 million tonnes by 2020.
In Mr Shmal’s opinion, we must even now think of developing the technology of extraction and the search for new fields if we are not to allow extraction to decrease. And the price of oil, he believes, will increase by 2020 to 200 dollars per barrel: “Formulating the price of any fuel depends on a number of factors,”he continued. “Recently, you see, nobody was thinking about shale gas, and now its extraction in the United States has decreased the world prices of ‘natural gas’ .Who knows – perhaps something similar will happen to oil?”
“The situation has now become more complicated; there is a lot of oil on the world market, but it is not cheap,”Mr Shmal said. “Enough oil is being extracted on the shelves, which increases expenses. Therefore what happens in the future will depend on the development of the world economy and which countries turn out to be world leaders in extraction.”
The Ministry of Economic Development predicts that by 2020, Russia’s share in oil production will decrease to 10.9%, down from 11.6% in 2012. After 2020, the Ministry expects a slowdown in extraction in the main oil-extracting regions of the world. This tendency will last until 2030, they believe.
At the “Hard-to-extract and non-traditional hydrocarbons: the challenges of the perspective” conference, the report of BP Russia Vice President Vladimir Drebentsov enjoyed a great deal of interest.
“We expect an increase in the extraction of gas from shale fields. Primarily in the United States, but not only there,”he said. “In our assessment, the extraction of shale gas will exceed 16% of the total global extraction of gas by 2030.For shale oil, the same indicator totals approximately 9%.”
In the BP forecasts, the extraction of shale gas in the United States will grow to 550 billion m3 per year by 2030. But the shale will be sold around the planet, beyond the borders of North America. “In Europe, shale gas will yield 24 billion m3 per year by 2030, which is not a large quantity. But in China, the extraction of shale gas will grow to 60 billion m3 per year by 2030.This is an appreciable amount; this will need to be taken into account by everyone who looks to China as a potential market for the export of gas,”Mr Drebentsov warned.
Vice-Chairman Pavel Zavalny of the State Duma Energy Committee believes the “shale revolution” will not disrupt Russia’s plans for expansion into the Asia-Pacific market. Despite the growth of extraction in every region of the world, Russian gas has no competitor in prices, he noted: “There will not be cheap gas.”According to his information, the actual cost of extracting shale gas totals on average 210 to 220 dollars per 1,000 cubic meters and requires further resources for shipment; Gazprom’s lowest actual cost of extraction totals approximately 80 dollars.
Viktor Antoshin, Deputy Director of the Department of Oil Extraction and Transport with the Ministry of Energy, moderated the discussion on “The Eastern gas programme: A new course for the Asia-Pacific region”.
Pavel Zavalny, Vice Chairman of the State Duma Committee on Energy and President of the Russian Gas Society’s Council of Experts, spoke at the round table discussion. In his opinion, the European gas market – traditionally considered a priority for Russian exports – is going through a period of significant transformation. The situation is being aggravated by the significant changes to European energy legislation, which is complicating the conditions for gas producers and suppliers and making them worse.
Under these conditions, the questions of developing a domestic gas market and diversifying the external market outlets for Russian gas have become more acute. The Asia-Pacific region is becoming one of the more attractive directions in gas exports. However, we must compete hard not only with other producers and suppliers, but with new and rapidly developing extraction technology here. China is ready to extract shale gas. Japan recently announced its success in extracting gas from oceanic gas-hydrates and is planning to begin industrial extraction of this kind of gas in the same year, 2018, as Russia intends to begin extracting gas in Eastern Siberia.
“Only the implementation of direct and indirect measures of Government support for projects in opening up gas fields in Eastern Siberia and the Far East can raise the economic profitability of the projects in the competition for gas prices on the Asia-Pacific market and allow us to achieve the main goal more quickly – qualitatively new socio-economic development of the region and of the country as a whole,”Mr Zavalny emphasized.
At the professional gas and oil conference “Investment in human capital: Savings – education – increasing workforce productivity”, attendees discussed not only the problems of hiring new employees but also the problems of staff involvement in company activities and career opportunities for Generation Y.
Valery Oskin, President of the National Conference “Developing human capital”, noted, “It’s a bad thing when we think about the litres of oil, the kilometres of pipelines, and the cubic metres of gas.Generation Y – these are different people. How do we govern them? And do they need to be governed? The image of a bureaucratic company repulses young people. But what can we offer them? That’s what we discussed at the professional conference.”
Alexey Kulanin, Acting Director of the Department of Oil and Gas Energy Efficiency and Modernisation, spoke at the round table discussion “Energy efficient technology and innovations in the gas and oil industry: Developing market infrastructure” and Viktor Antoshin, Deputy Director of the Department of Oil Extraction and Transport with the Ministry of Energy, moderated the discussion on “The Eastern gas programme: A new course for the Asia-Pacific region”. The representatives from the Ministry of Energy were also present at other areas of the Forum.
That same day, the round table on the “Preliminary closing remarks on the work of the Forum. Preparation of the Forum Resolutions project. Gathering and analysing expert recommendations.” was held, at which the principal results of the work of the Forum were defined. It was decided that the concluding resolution of the Forum would be presented to the public within 10-14 days, after the organisers had worked up all the proposals from Forum participants.
The conference “The energy resource exchange market: Stable development instead ofstagnation” was given to understand that there is no alternative to the stock market. This conference was chaired by Valery Yazev, President of the Russian Gas Society and Anton Karpov, Managing Director of the St. Petersburg International Mercantile Exchange.
Participants devoted particular attention to the theme of establishing stock trading in natural gas on the internal market. “At the conclusion of the National Oil and Gas Forum, we are discussing perhaps the most delicate, complicated question for the Russian gas industry: the question of developing open trade in natural gas. This question reminds me of an iceberg. The hidden part is very large; it ploughs up the very bottom of the structure of our gas supply system. And this question needs to be resolved quite thoroughly, especially under the conditions of unfavourable competition on external markets,” Mr Yazev noted in opening the conference.
In the opinion of the president of the Russian Gas Society, using open trading of gas for the fight against legislatively established monopolism is nothing more than an experiment, a simulation that has political goals. Therefore, the principal mass of the iceberg named “open trading of gas” is an order for significant changes in the model of the internal gas market.
Viktor Baranov, General Director of the Moscow International Energy Commodity Exchange (MMTB) stressed that one of the key elements of this market is organizing the trading of gas not only on the stock markets, but also on the electronic markets. World experience shows that stock markets traditionally specialise in the circulation of financial derivatives (futures and options). The physical amounts of gas (spot) are sold on the electronic markets. Apart from the stock market and electronic markets, the market infrastructure includes goods supply operators – clearing houses that insure the supplier and the clearing banks.
Mr Baranov said that the Ministry of Energy has developed a “road map” project for developing open trading in natural gas, which makes provisions for roughly 30 events. It is an accurate, balanced algorithm for the establishment of trading in gas. The head of MMTB named liquidating the cross subsidization and annulling Government Resolution No. 311 as immediate measures. If the previously selected fuel from above the contractual limit is paid for at a higher penalty rate, then as a result of enactment the given measure entered into force only after increasing the contractual volumes by more than 10%. As a result, the situation with an excess of gas in the amount of10% from the internal market volume – around 30 billion m3 – repeats itself year after year. Boris Cherny, Gazprom Mezhraiongaz deputy director-general for the organisation of electronic forms of gas trading, noted that this 10% could be sold entirely on an organised market.
“Of course, it’s difficult to foresee all situations at once – we’re just starting out. But on the whole the stock market technology has been worked out, and I do not doubt that it is suitable for the trading of natural gas in Russia,”Mr Baranov concluded.
Representatives from the Ministry of Energy of the Russian Federation, the Russian Exchanges Union, the St. Petersburg International Mercantile Exchange, Gazprom Mezhraiongaz, Rosneft and Novotek Trading also spoke at the conference. Valery Yazev promised the participants that all the proposals would be documented and conveyed in the form of recommendations to specialist institutions.
Mikhail Gryaznov, Director of the Department of Oil and Gas Refining at the Ministry of Energy, presented a report here.
This conference was conducted by Vladimir Kapustin, Director of OAO VNIPIneft, and Viktor Ryabov, General Director of the Association of Petroleum Refiners and Petrochemists.
Mr Gryaznov presented information on the results of modernising Russia’s oil refining network, planned for 2011 through 2020. Lately, there has been major preparatory work directed towards creating the conditions under which oil companies would be interested in investing in their own refining capacity. Among the more significant conditions for stimulating investments, the four-way agreement between the oil companies, the Federal Anti-Monopoly Service, the Federal Service for Environmental, Technological, and Nuclear Supervision (Rostekhnadzor) and the Federal Agency on Technical Regulating and Metrology (Rosstandart), the current “60-66-90” tax regime, and the entry into effect of the Customs Union technical regulations on 1 January 2013 can all be noted.
“Modernising oil refining companies will lead to fundamental changes in the industry,”Mr Gryaznov asserted.“As a result of modernisation, 125 plants for the re-refining of oil are expected to be put into service. The start-up of these plants will allow us to increase the secondary capacity of refining to 120 million tonnes, and raise the conversion rate to 85%. Apart from the investment portion, there are other successes. The production of fuels has increased by a factor of 2.5, corresponding to the Technical Regulations, the requirements of which will only become more stringent, and by 2016 we expect a full transition to the circulation of Class 5 motor fuels.”
The dynamics of the production and structure of motor fuels for 2011-2020 also merit attention. In particular, the structure of oil product production willfundamentally change as a result of modernisation. Production of petrol and diesel fuel will increaseby 40%. It should be noted that apart from the obvious achievements, there are other important effects assisting the modernisation of the industry. Among them the effect of production cooperatives and the social, budgetary, and ecological effects must be singled out. Among the others, the effect of production cooperatives is most clearly represented. In the assessment of the specialists from the Ministry of Energy, domestic enterprises will be provided with 67% of all their oil refining facilities. The budgetary and social effects follow from the effect of the production cooperatives. The ecological effect is also important: the transition to Class 5 fuel will allow pollutant emissions to be significantly decreased.
Implementing the oil companies’ plans as part of fulfilling the four-way agreement will thus lead to fundamental change in the industry and allow a synergistic effect to be obtained in related industries and areas of the Russian economy. At the present moment, according to the 2011-2012 results, the modernisation plans for the oil companies have been fully implemented. However, as Mr Gryaznov noted: “Preserving such a high tempo in renovating the oil refining industry will be possible only under the condition of obtaining a stable, predictable state policy in the area of customs tariff and tax stimulation of the industry.”
Mr Kapustin noted that the conversion rate in Russian oil refining enterprises has not grown for 8 years, as the struggle for the quality of oil products has come first. The reconstruction of refining capacity, however, works only with the use of foreign technologies and facilities. “The proportion of domestic facilities is very low. This must be resisted as far as possible I would like it if the use of domestic facilities and technologies in reconstructing oil refining enterprises totalled 67-70%,”Mr Kapustin said.
Mr Ryabov noted that a new stage in the development of oil refining and petrochemistry is beginning. He concluded by saying that the transition programme for the roll-out of fuels according to European norms will be accomplished by 2015.
The current customs duties system stimulates superfluous refinement of oil due to subsidies owing to the differences in customs rates on oil and oil products. Anton Rubtsov, head of strategy and business development at the Skolkovo Business School Energy Centre, made this statement when he spoke at the conference.
He presented a report on “Oil refinery development scenarios in Russia: Is surplus value being created?” Mr Rubtsov called attention to the fact that the opportunities for manoeuvring in the area of lowering refinement subsidies are limited owing to the danger of a petrol deficit rising, and to the obligations Russia took upon itself in its entrance into the WTO. “Currently there is a skew towards stimulating the construction of hydrocracking facilities, aimed at the production of diesel fuel,” he said. “In implementing the current modernisation plans, a non-optimal configuration of the industry is arising; the ‘destruction’ of value is continuing and the space for manoeuvre in reducing state subsidies is limited.” The country will continue, however, to teeter on the edge of a petrol deficit in the presence of a substantial surplus of primary capacity. In Mr Rubtsov’s opinion, until oil refiners have clear long-term signals in relation to operating earnings in refining, they will not be able to make optimal investment decisions. Moreover, while the margins for refining are higher than European levels even in the simpler oil refinery configurations (owing to state subsidies), we cannot expectthe explosive development of the new technologies discussed at the Forum. Finally, the speaker drew the conclusion that a systemic reform of customs duties was necessary over the medium term. Providing an optimal direction for modernising and developing the transport infrastructure as part of strategic documents for the industry is necessary for building long-term state policy for the development of oil refining.
Alexander Noskov, Deputy Director of the Boreskov Institute of Catalysis in Novosibirsk, spoke on modern catalysators for oil refinement and petrochemical processes. In the sphere of oil refining, these are catalysators for hydrogenisation processes, including hydrotreatment of diesel fuels and vacuum gas oil, and hydrocracking. In petrochemistry, they are the production of biodegradable plastics, ethylene with a selective oxidation of ethane, and so on.
Reports were also heard from Alexander Shakun, General Director of JSC SIE Neftehim; Sergey Kozlov, Regional Manager of the Moscow offices of Haldor Topsoe; Igor Solyaev, President of the Petrochemical Holding Company SamaraNefteOrgSintez (SANORS); Mikhail Levinbuk, Professor from the Department of Oil Refining Technology at Gubkin Russian State University of Oil and Gas; and Vsevolod Khavkin, Assistant General Director of the All-Russian Scientific-Research Institute for Petroleum Processing (VNII NP).
The professional conference “Gas-engine fuel: The ‘three E’ principle - energy efficiency, ecology, and economy” was also held on the last day of the Forum.
In the first plenary session of the proceedings Viktor Zubkov, Chairman of the Gazprom Board of Directors, pointed out that the transition of automobiles to gas not only significantly saves energy resources, but it also has a beneficial impact on the ecology and is currently the most energy-efficient type of fuel. “The programme for transitioning automotive transport to gas-engine fuel existed even back in the Soviet Union,” he reminded the audience. “Then it was practically forgotten. Now, new regulations for the distribution of gas-engine fuel in the country are being developed. We must get this work on the right track as quickly as possible.” Over the course of the day, specialists from the micromarket research centre conducted a seminar for Forum participants, in which they shared the rules for developing modern filling station networks. The seminar also examined questions of price formation in the area of retail sales of oil products and the technology of competition between filling station networks.
As Kirill Lyats, General Director of OAO Metaprocess reported: “The participants of the “Petrochemistry and gas chemistry: Independent industry segments”expressed interest in the industry’s market development, creating a free raw materials market, and activating construction of the chemical refining of oil and gas on Russian territory. Beyond this, they expressed concern with the serious lagging of the industry behind foreign competitors, which could be exacerbated over the coming years in connection with opening up the reserves of alternative crude hydrocarbons. The industry is undoubtedly interested in state support – and the Ministry of Energy directly – with regard to overcoming the monopolization of raw material supplies and optimising the flows of goods, and creating small enterprises in the secondary and tertiary processing of the products of petrochemistry and gas chemistry.”
An unscheduled round table, “Problems of geology”, took place at the conclusion of the Forum. Gennady Shmal, Viktor Orlov and Andrey Tretyakov attempted to answer essential questions on the development of geological exploration in the interests of the oil and gas network.
In particular, the opening of new oil and gas provinces in East Taimyr is expected, as is the revelation of potentially productive oil extraction zones in the Russian part of the Caspian Sea oil and gas province (Peri-Caspian Lowland). As it turned out, much still lays ahead: a detailed field appraisal of unallocated and abandoned fields, drilling a lateral well up to 7 km long in the Caspian basin, and much more besides.
At the same time, as Andrey Tretyakov, Head of Rosgeo noted, “The number of crude hydrocarbon fields being opened remains stable, but their dimensions are getting smaller and smaller. The average size of an oil field todaytotals 1.5 to 3 million tonnes. This says that the ground mass of prospecting surveys aimed at opening fields is being carried out in regions that have already been proved, and not in new territories.”
The Ministry of Energy estimates that, under the conditions of the tax system in effect, the extraction of 90% of the reserves of new oil fields and almost one-third of the reserves of developed fields is unprofitable. Under such conditions, speaking not only of more extensive, but also simple replenishment of the reserves is problematic.