OREANDA-NEWS. October 08, 2010. Mr Putin and Mr Miller discussed Gazprom’s preparations for the autumn and winter season and relations with post-Soviet countries and West European partners, as well as the implementation of the South Stream gas pipeline project.

Transcript of the beginning of the meeting:

Vladimir Putin: Mr Miller, how is Gazprom preparing for the autumn and winter season?

Alexei Miller: In the first nine months of 2010, Gazprom produced 365.5 billion cubic meters of gas, or 15% more than in the same period of last year. Gas consumption has grown in the basic industries - in power generation, steel and cement production, and the gas chemical sector - and by the public, which is fresh evidence of the importance of Gazprom's programme of connecting more users to its gas supply network. We invested about 19 billion roubles in that programme in 2009 and investment in 2010 will exceed 25 billion. We plan to continue the programme to connect new users to the supply network at the same rate next year.

As for preparations for the autumn and winter season, Gazprom has completed the necessary maintenance and repair work at its gas production and transportation facilities. We will complete the pumping of gas into underground storage depots by October 15. The volume of the stored gas will be 64 billion cu m, which is sufficient for comfortable operation in autumn and winter and for satisfying our clients' requirements in peak periods. We are ready to work at the time of the peak demand in the autumn and winter.

Vladimir Putin: How is your relationship with post-Soviet countries and West European partners developing? How much gas do they receive?

Alexei Miller: Our gas exports have grown only slightly higher than planned. In other words, our expectations of early 2010 did not materialise because a new trend has appeared in Europe in April and May. Some European countries, in particular Germany, France and in general northern and central European countries, are receiving growing volumes of gas. The market is growing well compared to 2009, but unfortunately, the trend in the southern, south-eastern and eastern Europe is quite different.

Vladimir Putin: The likely reason is economic revival.

Alexei Miller: Yes, the reason is different economic revival rates in Europe. There are two opposing trends, with the demand growing faster in some countries. Therefore, we expect gas supply volumes this year at about 145 billion cu m, which is slightly more, by 5 billion cu m, than in 2009. At the same time, gas production has increased primarily because of increasing domestic demand, which is a positive development.

Demand in the cement and metallurgy sectors has been growing fast. As these are basic industries, this means that the Russian economy is reviving and the rate of revival is very high.

Vladimir Putin: But our closest neighbours sometimes ask us to increase the volume of contracted gas. For example, in the past few years Turkey asked us to increase gas supplies in winter. Is Gazprom ready to tackle these problems if additional supplies are not stipulated in contracts?

Alexei Miller: Of course, we are ready to resolve such problems. Turkey is one of the largest buyers of Russian natural gas and has asked us several times in the last few years to increase supplies. For example, in late August it had problems with gas supplies through the Iran-Turkey pipeline. Acting at the request of our Turkish colleagues, we doubled gas deliveries to them through the Blue Stream pipeline. We supplied additional volumes of gas for ten days, helping Turkey to deal with the emergency. We have sufficient capability to help our partners if this happens again, and this concerns not only Turkey but also other countries.

Vladimir Putin: This brings me to my next question, which is about South Stream. We seem to be proceeding according to schedule. I have recently inspected progress of the Nord Stream project, which is also proceeding as planned. Can you say the same about South Stream? As far as I know, some large European companies, which previously did not consider joining the project, are now showing considerable interest in it. If they change their view and decide to join the project, South Stream will become a truly international, European project. We already have Italian and French partners, and now German companies have shown interest in it. What are you doing to formalise relevant documents and prepare for practical launching of the project?

Alexei Miller: Gazprom has completed the engineering and preliminary surveys and the feasibility study for the offshore part of the project. The national feasibility studies in the transit countries will be completed within the next few months. We see that both new and traditional partners, in particular in Germany, are interested in the project. Without a doubt, if new partners from other countries join it, South Stream will become a pan-European project. For example, Romania has shown interest in it. A Gazprom delegation has recently visited that country to study additional pipeline routes across it. Overall, work under the projects is proceeding strictly to schedule. We are ready to start building the pipeline in 2013 and start pumping gas to our consumers in late 2015.

Vladimir Putin: Excellent.