OREANDA-NEWS. November 30, 2011. “Generally, I must note that this is the first sizable increase in military salaries and pensions in contemporary Russia. Moreover, salaries will be adjusted for inflation. You know that one of our priorities is ensuring a decent quality of life for Russian citizens, and this includes military personnel and their families. The necessary funds for the increase in military salaries and pensions are planned for in the federal budget.”

Vladimir Putin: Mr Shmatko (addressing Sergei Shmatko, Energy Minister), I have discussed with our Ukrainian colleagues our future energy cooperation. Please join me at my office after the meeting to report on the latest contacts and our current progress status in dealing with the problems we discussed earlier.

Let us begin by sharing updates. Please, Mr Shmatko, would you report on the preparations for the winter? How is the work progressing? I have asked you to focus your attention on winter readiness certificates. Go ahead, please.

Sergei Shmatko: Mr Putin, colleagues. Yesterday I chaired a nationwide videoconference with energy companies on the results of inspections of their readiness for the heating season. I have to report that we have inspected 536 utility companies – nearly all of them, in fact. Following the inspection, we decided to issue readiness certificates to 533 energy companies including 58 utility companies.

We especially concentrated on grid companies such as IDGC, the Federal Grid Company and the Far Eastern Distribution Grid Company. The main goals have been achieved. The improvements we required following last year's inspection have been made and higher standards have been met. I am referring to such assignments as making clearances in the woods, installing additional diesel generators and buying special equipment. Mr Putin, all of our grid companies (I mean state companies) have been certified without any exceptions or issues.

Three power generation companies failed to obtain their winter readiness certificates on time (before November 15): TGK-14, the Ulan-Ude Heat and Power Station No. 1 (part of TGK-14) and the South Kuzbass Regional Power Station.

The main problem with TGK-14 is the Ulan-Ude power station's not being ready to supply heat. We already reported the problem in October. I must say that, although the company has resolved most of them, we refrained from issuing the readiness certificate until the company completes the overhaul of its Boiler No. 7, which is not going to happen until December 25...

They are monitoring this work on a daily basis. Just one week ago, we reported this situation to Mr Sechin at a meeting of the Government Commission on the Development of the Electric Power Industry, and invited the general director and share holders to the commission. In general, we view this situation as an emergency. Mr Putin, in February of 2008 there was a big fire at this station, as a result of which seven turbines switched off and two turbo- generators were destroyed. For three days, local residents remained without any heat in -40 degree weather. We think this case is very telling, and it is simply unacceptable to allow a repeat of this, or even a threat of it at this station. Therefore, I’d like to emphasise once again that the daily monitoring of this situation is the responsibility of both the owners and the management – they swore that everything would be okay. Nevertheless, we made the relevant conclusions.

We believe that in general, responsibility in such cases should rest not only with the management but also with the owners. In any event, the owners have to provide sufficient financial resources, despite the current problems with regulating electricity and heat tariffs in Buryatia. They must allocate enough funds for the winter preparations. We will visit this station, and will regularly analyse its performance. We hope that all work will be completed by December 25.

Mr Putin, I’d like to report to you that the winter preparations and the issue of readiness certificates proceeded smoothly. You told us to make sure that these certificates are not simply pieces of paper to be placed on a shelf. In our opinion they are credentials that represent the right to run and own generation facilities. If companies and their owners fail to cope with this task, we must consider restricting their management rights and introducing external control. We are preparing proposals to enhance this responsibility.

Feedback is an important element of the winter preparations. All companies of the grid complex have hot lines. The Energy Ministry has had a hot line since October. We pay a lot of attention to our work with the people, our energy consumers.

I am finished with my report, Mr Putin.
Vladimir Putin: Who are the owners? TGK 14?
Sergei Shmatko: Russian Railways and the ECN Group.
Vladimir Putin: What group?
Sergei Shmatko: ECN.
Vladimir Putin: ECN?
Sergei Shmatko: Yes.
Vladimir Putin: What is that?
Sergei Shmatko: It’s run by Mr Beryozkin.
Vladimir Putin: Beryozkin?
Sergei Shmatko: Yes.
Vladimir Putin: Send for him and have him work with you right here. Let the ministry come here.
Sergei Shmatko: We...
Vladimir Putin: What else needs to be done there?

Sergei Shmatko: Mr Putin, the facility is very old and has been neglected for a long time. They told us that the boilers are worn out. I should say that they did more this year than last year. But we still believe that it’s not enough. Tough requirements regarding the preparation of the facility for the winter are not a matter of relative improvements as compared with last year, they are about providing an absolute level of reliability and preparedness for the winter.

Vladimir Putin: How much time do they need to bring it up to standard?

Sergei Shmatko: The ultimate deadline for the completion of this work is set for December 25. We have this work under control.

Vladimir Putin: Are they working?
Sergei Shmatko: Yes, they are.
Vladimir Putin: All right then, report to me later.
Sergei Shmatko: I will.
Vladimir Putin: Thank you.

Mr Trutnev (addressing Yury Trutnev, Minister of Natural Resources and Environment), tell us about the mineral resource renewal efforts in 2011.

Yury Trutnev: Mr Putin, colleagues, the reports are still coming in, and they will keep coming in until the end of the year. However, I am already able to report today that we are witnessing an expanded renewal of essential mineral resources for the sixth straight year, after adopting the government programme on the renewal of mineral resources in 2005. We will have over 600 million metric tonnes of liquid hydrocarbons and over 1 trillion cubic metres of gas. Forty-four new fields have been discovered, of which two are large ones (consisting of about 50 million metric tonnes), and the rest are medium and small fields.

Vladimir Putin: How many oil …
Yury Trutnev: 44.
Vladimir Putin: Oil fields?
Yury Trutnev: 44.
Vladimir Putin: Since when has the mineral resource base started growing?

Yury Trutnev: Mr Putin, we reported a mineral resources reproduction programme to you in 2005. Since 2006, we have had expanded the production of oil, gas, coal, iron, nickel, gold and a number of other mineral resources. It was updated in 2008, and has been implemented steadily since then. Each year we discover more than we produce.

Vladimir Putin: You raised the question about increased financing of geological prospecting and exploration on several occasions. How are things today?

Yury Trutnev: Mr Putin, unfortunately, today’s numbers are below the ones laid out in the reproduction programme. That’s why we reported this to you earlier, and we hope that the amount of financing will be restored in 2012 (based on your instructions) in accordance with the programme – 43 billion roubles – as compared with today’s 20 billion. We are paying about 50 billion roubles to the budget in user’s fees alone. Of course, revenue from field development and sales is much higher.

Vladimir Putin: We will need to see how things work out for us in the first quarter and evaluate the situation, keeping other priorities in mind.

Yury Trutnev: This is extremely important, Mr Putin.

Vladimir Putin: You have mentioned selling production licenses. I looked at the materials recently, and I’m sure you’ve seen them as well. After a license has been sold, companies significantly increase their volume of production. If we did this ourselves in a timely manner, we could see even more money flowing into the budget from the sale of production licenses.

Yury Trutnev: Mr Putin, we can conduct additional explorations until we attain the desired results. We have submitted proposals for full exploration at the expense of the federal budget, but to do so we will need to increase financing for geological exploration 20 times over. In fact, all countries are heading down the same path that we currently are. Of course, we can increase the amount of fees by conducting extra exploration at the expense of the state and the price of a field. But if we sell user rights, and companies carry out exploration at their expense, we will receive much more after a field becomes operational.

Vladimir Putin: What if we strike an optimal balance between the selling price and future taxes? They don’t start producing hydrocarbons right away on many fields, so saying that we should give fields out cheaply in order to collect more money later on just doesn’t always work in this case. Please take a closer look at exploration and the money allocated for it next year together with the Finance Ministry.

Mr Shchegolev (addressing Igor Shchegolev, Minister of Communications and Mass Media), did you open a postal office in Krasnaya Polyana? How do you plan to go about organising work there? Please, say a few words about broadband Internet access as well.

Igor Shchyologev: Krasnaya Polyana may not be a major facility, as it occupies just 500 square metres. However, this is the first Olympic facility that was commissioned as part of our programme. We obtained a permit in November, and we built it in place of the old postal office.