OREANDA-NEWS. May 04, 2010. Minutes of the beginning of the meeting:  Vladimir Putin: Mr Tokarev, how were the company's first quarter results and what is the status of the investment programme? What is the progress of the major projects?

Nikolai Tokarev: Mr Prime Minister, Transneft is working on four extremely ambitious projects under its investment programme. This includes the second stage of the East Siberia-Pacific Ocean oil pipeline. Instead of waiting for the completion of all proceedings, we sent our builders and equipment there in January and got down to work. Over 160 km of pipeline have been welded, and other pipeline facilities have also been prepared. On-site work using well-equipped and well financed general contractors has begun. The work is proceeding on schedule. We had some problems with pipe deliveries. Although the pipe suppliers let us down somewhat, this actually highlights current pipe demand and the fact that similar projects are being implemented by others.

At the same time, we are expanding the first stage of the East Siberia-Pacific Ocean oil pipeline and boosting its capacity to 50 million tonnes. Several new pumping stations are currently under construction. All these construction projects are financed from borrowings and also from Chinese issued loans. At the same time, a specialised oil terminal is being built in Kozmino. We are expanding our holding reservoirs to prepare to transport additional volumes via that terminal. 

Vladimir Putin: How much does the entire project cost?

Nikolai Tokarev: The budget for the first stage is 381 billion roubles. This is a bit less than the state expert check's project-cost estimate. The second stage will cost an estimated 323 billion roubles. The funding is available. We are confident in the East Siberia-Pacific Ocean oil pipeline.

Vladimir Putin: What do you think about specific project deadlines?

Nikolai Tokarev: We plan to commission the second stage in 2014 and to build 650-680 km of the pipeline annually. Consequently, we will be able to complete the project in three years as planned. Moreover, we managed to save about 25 billion roubles last year and to use the sum to finance another ambitious project, namely, the Purpe-Samotlor oil pipeline. This new route was established a year ago.  The oil companies and the entire sector demanded this route because the Vankor oil and gas province will boost nationwide oil production by 50 million tonnes.

Naturally, regional development has been hindered by the lack of a pipeline infrastructure. Construction is already underway. We have built 40 km of pipeline. The route is fully funded and the necessary contractors have been signed. Work is now in full swing. We are confident that this junction will allow us to move westwards and eastwards by late 2012.

We have also finished building Russia's section of the oil pipeline into China. A section beneath the Amur River is being completed now. Wells have been built using the directional-drilling method, and pipes have also been laid. Under the contract, we are to start transporting 15 million tonnes of oil into China by late 2010. We are also completing pipeline sections for the second stage of the Baltic Pipeline System. Seventy percent of this pipeline's sections have been built to date. The planned a startup is now in late 2011, or six months ahead of schedule. We do not see any major difficulties at this point. The project is also fully funded and is proceeding ahead of schedule.

Vladimir Putin: Tell me about its capacity?

Nikolai Tokarev: We plan to pump 30 million metric tonnes during the first stage, and it will be possible to increase that volume. Work has also been launched at the Ust-Luga site, and we will synchronise our operations with our neighbours building their petroleum-products terminals nearby. So, we hope everything will run smoothly on this route.

Vladimir Putin: What are the overall first-quarter results?

Nikolai Tokarev: I think we have posted very good and encouraging indices. Virtually all of our large-scale and ambitious construction projects are implemented ahead of schedule or as planned.

Vladimir Putin: And what about transportation volumes?
Nikolai Tokarev: We completely fulfill our commitments as regards oil exports and the delivery of oil to Russian refineries. There are no major setbacks or shortfalls. Certainly, there are still some problems regarding oil transit via Ukraine. I think our partners, namely, UkrTransNafta, introduced economically unjustified tariffs last year raising them 30%. This year, oil-transit volume and delivery to Ukrainian refineries dropped by exactly 30%.