Speaking to the main shareholders and managers of Russian oil companies, the prime minister said, “You work in the Russian Federation. You obtain licenses to use the mineral resources, but these resources are owned by the Russian people,” adding that “the state will exercise its right to regulate these activities, and the companies should be responsible for making high-quality petroleum products available on the domestic market.”
Prime Minister Vladimir Putin’s opening remarks:
Good afternoon, colleagues. Today we will speak about the situation in the oil industry...
Speaking to the main shareholders and managers of Russian oil companies, the prime minister said, “You work in the Russian Federation. You obtain licenses to use the mineral resources, but these resources are owned by the Russian people,” adding that “the state will exercise its right to regulate these activities, and the companies should be responsible for making high-quality petroleum products available on the domestic market.”
Prime Minister Vladimir Putin’s opening remarks:
Good afternoon, colleagues. Today we will speak about the situation in the oil industry.
The diversification of the Russian economy is a prerequisite for its further development. Modernisation, diversification and innovation, as well as decreasing Russia’s dependence on the export of raw materials are all priorities. At the same time, the oil industry and all industries engaged in power engineering are the goose that lays golden eggs for Russia. Power engineering itself must be in the focus of our modernisation and innovation efforts, since it holds a huge promise for future development. The vast resources that the oil companies are investing in upgrading their enterprises, or should invest – we will address this shortly – provide a foundation that can contribute greatly to our modernisation plans.
I have already mentioned how proud we are of what you are doing and what you have achieved. That’s a fact, and there’s nothing to be shy about. Our country is proud of the oil industry’s accomplishments, and I will say more about this later. However, we are here today not to praise each other, but to discuss our numerous problems.
First of all, I suggest that we focus on the supply of petroleum product to Russia’s domestic market. I am talking about high-quality products sold at reasonable and economically justified prices. Two and a half years ago, in February 2009, we discussed support for oil production in this auditorium . We developed and approved specific measures to promote the development of new fields, including in East Siberia.
As you know, Russia became the world’s largest oil producer last year, producing a total of 505 million tonnes. This volume of production is capable of fully covering our domestic needs and fulfilling our obligations under export contracts. I have already said that this is the production level that we should maintain. This is exactly the level that helps us solve all our problems. You no doubt know the numbers, but I will repeat for those who are not involved in the oil industry: in 2009, Russia produced 493.3 million tonnes of oil; in 2010, 505.2 million tonnes; after the first six months of 2011, total output stands at 252.4 million tonnes. What does this mean? It means that this year output may be even higher than last year, around 508-509 million tonnes in total.
However, we’ve been routinely running into domestic supply issues of late, which is absurd for a country that is the world’s largest oil producer. That tells me that we have some systemic problems. Overall, we understand the nature of these problems. Russia refines less than half of the 500 million tonnes that it produces. And even this amount undergoes only primary processing to make fuel oil and other basically raw products. As for secondary processing, including making high-quality petrol, diesel fuel or jet fuel, we can say there is a shortage of such production facilities in Russia.
Keep in mind also that the production and consumption patterns of petroleum products have changed significantly over the past five years. The production of petrol was up 12.8%, but consumption increased by 22.6%. The production of diesel fuel rose by 17.4% (obvious growth), but consumption grew even more, by 20%.
I would like to say a few words about fuel oil, or fuel oils, as you say in the industry. What’s going on with fuel oils? Domestic production rose by 28.7%, which is almost a third, but domestic consumption fell by 20%. Where are you sending it? You are sending it abroad for further processing. We are obviously seeing a disparity between production, refining and the supply of petroleum products on the domestic market.
Production facilities at most refineries are growing outdated. We have seen the facilities here in Kirishi (I’ve also been to other production sites and enterprises) and, indeed, there’s good progress. The depth of conversion is good and a lot has been invested in the industry. Mr Bogdanov, how much has been invested? Up to three billion dollars in all, correct?
Vladimir Bogdanov (CEO of Surgutneftegaz): Three billion in secondary processing and another three billion into the primary processing. In all, six billion dollars in investment.
Vladimir Putin: That’s big money, and this is just one company. I know that other companies are working on it, too, but they don’t do enough. Primary processing is clearly outpacing secondary processing. In terms of the output structure, our refining industry has fallen back to the 1950s levels. It’s a shame. In 2010, Russia produced almost 145 million tonnes of diesel fuels and fuel oil as compared with only 45.2 million tonnes of petrol and jet fuel.
This has led to a very low market stability margin. Any accident at a given refinery or an unscheduled stoppage, any repair work or seasonal maintenance result in volatility in supplies, destabilising the situation and causing shortages and surges in price, as was the case in late April – early May when the TNK-BP-owned Ryazan refinery began unscheduled repairs of its facilities. I hope that it wasn’t done specifically to aggravate the situation, but it did happen and it did aggravate the situation.
Russia’s demand for petroleum products has already increased to almost 90 million tonnes, and it will keep growing. I would like to emphasise that the shortages of petroleum products and unstable prices should not stand in the way of economic growth or cause problems for the Russian people. We need a clearly understandable material balance of production and consumption for the main types of fuels and petroleum products. I would like the Ministry of Economic Development , the Ministry of Industry and Trade , and the Ministry of Energy to prepare appropriate estimates. I know that this may be a difficult task, but we should quantify the situation.
I would like to make an important point. The economic profitability of the production of petroleum products and their sale on the Russian market is equal to that of exports. This fact entitles the government to develop measures that would preclude any possibility of shortages on the Russian market.
Colleagues, I would like to remind all of you, including the main shareholders of our oil companies and the management, that you work in the Russian Federation. You obtain licenses to use the mineral resources, but these resources are owned by the Russian people. This is our national inheritance under the law. Even when you obtain a license for mineral use, the mineral resources remain the property of the Russian people and the Russian state. Certainly, we need to organise this work based on modern market principles, so that it remains profitable for the companies. However, the state will exercise its right to regulate these activities, and the companies should be responsible for making high-quality petroleum products available on the domestic market. Colleagues, please take this as an absolute priority. Remember, we all work in Russia.
We need to improve the conversion depth so as to be able to cover domestic needs. Some companies export crude oil in huge quantities, earning good and occasionally even windfall profits, whereas others have to fill the gaps in the domestic markets. This isn’t fair, either.
I believe that companies’ obligations to provide domestic supplies should be proportional to crude production volumes, which, in my opinion, is fair and justified. Please, think about how we can incorporate such a requirement in the mineral use licenses for fields that produce 5 million tonnes of crude and up. We can leave small operators out of the picture, as they say.
We should seriously think about increasing refining volumes, specifically secondary processing, including such processes as isomerisation, reforming and cracking. We have taken a careful look into the latter here in Kirishi. All these processes make it possible to produce high-quality products that enjoy market demand. They ensure deep conversion levels and the world-class quality of our petroleum products. We will not put up with certain colleagues who are trying to pass off the construction of so-called samovars or kerosene stoves for genuine modernisation.
more to be posted soon...
источник новости: http://premier.gov.ru/eng/events/news/15842/
