Igor Sechin: more than 7500 individuals took part in the Forum (Saint-Petersburg International Economic Forum), of them, 248 are the heads of the largest foreign and 445 – Russian companies. In the course of the Forum, 175 agreements were signed, 15 of which consider implementation of Investorsment projects more than 400 bln rub worth. These are the preliminary results of development of business contacts between Russian companies and partners from Europe, USA, countries of the Asia-Pacific region.

The analysis of a current cooperation with the foreign partners gives reason to speak about growing risks of implementation of our international projects.

By your order, Vladimir Vladimirovich, we have analyzed our current position as to mention the most important moments of fuel and energy industry development and make necessary amendments due to the situation in the worldwide markets. Such priorities must be the development of the domestic market, primarily in the Eastern Siberia and Far East, and also diversification of our export supplies to developing markets of the Asia-Pacific region.

Oil companies already make efforts to develop their own competencies, which should lead to decrease of dependence on services of foreign partners regarding oil field services as well. It’s also important to notice possible financial risks, limitations of access to the capital markets, we also do not leave out a possibility of manipulation and also other coordinated actions aimed at oil price decrease in the long and medium terms. However, as we see it, these actions will not be long-term also due to a high dependence of the budgets of oil producing countries on the worldwide oil prices. For example, the budget of Saudi Arabia considering oil supplies which are can partly substitute Russian oil supplies to Europe is calculated on the basis of oil prices – $98 per barrel. However, based on the real and new possibilities, we proceed from the premises that to increase the resistance of the Russian economy to external actions, we need to diversify it focusing on discovering the possibilities of the domestic consumption, developing the related industries and getting to the new, perspective selling markets. We mainly need to develop the fuel and energy industry on the country’s East, create a new large center for oil and gas production in this region, form a reliable resource base for decades ahead. In this connection, to make a decision about a quick distribution of subsoil areas is an obvious move for developing the economics of the Eastern Siberia and Far East. In the framework of deoffshorization of our economics, a possibility of distribution of new subsoil areas only between organizations which major shareholders are Russian individuals and legal bodies can be considered. The development of the resource base in the Eastern Siberia and Far East will let our country and companies to substantially increase a share in new developing markets, primarily in the markets of Asia-Pacific region where accelerated growth of demand in imported oil and gas and their products is continuing. In addition to domestic demand, it will create an important impulse for the country’s eastern regions to develop, allow selling oil from East Siberian and offshore fields effectively. According to predictions, by 2030 Russia can increase a volume of supplies to Asia-Pacific region by more than two times in comparison to the current level. 

One of the main constraining factors to accelerate the activity in the eastern direction is a level of rates of natural monopolies. Since 2010, the rates for transportation have increased by 27%. In this connection, an issue of exploring economic feasibility of transport fares for the Eastern Siberia and Far East is important to take these measures. An important question to implement plants for accelerated development of oil production in the Eastern Siberia is extension and development of ESPO. Implementation of this new infrastructure project could be made on conditions of both project financing including financial deposits of state and non-State pension funds, and also oil companies themselves which are interested in the development of East Siberian fields. The Eastern Siberia and Far East have not only significant oil, but also gas potential, except for Chayadinsky and Kovykta gas fields in the area of Gazprom, oil companies have serious plans to grow gas production. According to experts’ estimation, a potential of gas production in existing and perspective oilfields of this region can amount to 200 bln cubic meters a year. It is obvious that we should sell this gas at the market. And if oil and gas companies have an opportunity to enter gas transport system which is being created by Gazprom on economically justified conditions, it will optimize Investorsments.

We also ask to consider a possibility to give independent gas producers an opportunity to export gas from new fields in the Eastern Siberia and Far East. Of course, that is a debating point, but this measure will be an additional impulse to develop the whole region. At the moment, state bodies, sector and expert communities actively discuss proposals of the Ministry of Finance to hold a co-called great tax maneuver.

A seeming simplification of the tax system of the sector should preserve a break-even point of the oil sector and meet current needs by consumers of all countries of the customs union. Moreover, it is not taken into account that these proposals will make a discouraging effect of production, directly contradict the tasks for development of the Eastern Siberia and Far East.

For instance, the proposed changes will significantly worsen the economy of a number of new major projects, such as Yurubcheno-Tokhomskoye field, Kuyumbinskoe field, field named after Filanovsky, field named after Lisowski with a total annual production up to 20 million tons after 2020. The consequence of the tax maneuver will be also a freezing of a number of new projects regarding petrochemical processing in the Far East, the implementation of Far East Petrochemical Company (FEPCO) and the modernization of Angarsk Polymer Plant will face serious risks, the overall decline in the Investorsment attractiveness of the industry and the overall Investorsment climate for Russian and foreign Investorsors will take place due to the changes in the rules of the game.

I would like to pay special attention to the fundamental contradiction of the proposed situational tax solutions with the Investorsment profile of our industry. Projects in the oil and gas sectors are implemented during 30-50 years, as a rule. To make Investorsment decisions for this period and attract financing on a long–term basis, the stability, mainly, and predictability of the tax system especially, is needed. It is necessary to consider that a long-term nature of activity of the oil and gas sector, presence of Investorsment plans and long-term contracts allow both budgetary receipts to be predictable and multiplicative effect to be guaranteed for the economics. Here are a few examples in this regard. During your recent visit to China, dear Vladimir Vladimirovich , "Gazprom" has signed a contract for 30 years of gas supplies, which in the medium term will provide over $ 50 billion of Investorsments. The total amount of Rosneft’s Investorsments in Eastern Siberia and the Far East considering the new long-term contracts for supplies to Asia-Pacific countries will be 3 trillion rubles. The planned Investorsment into Arctic shelf exploration will be about $400 billion only for the first 20 years. In general, Investorsments in the oil sector including oil production, refining and transportation for 2010-2014 have already made up more than 5 trillion rub. To guarantee these Investorsments and achieve corresponding multiplicative effect, of course, a stable fiscal regime is needed. Here is a recent example. The new regulations on offshore projects’ taxation seem to create a unique impetus for development. However, the participants of Sakhalin-1 prefer the existing product sharing agreement, because it is secured by the law, it guarantees the stable economy of projects and it is not a subject for constant changes as the suggested maneuver is.

It is suggested to work out more balanced criteria for tax system modification, to provide the unification of taxation in oil and gas sector and in other sectors of economy, where the level of budget payments in relation to income is several times less.

The existing imbalance with negative impact on budget situation is presented on this slide. Moreover, it is necessary to provide an assessment of non-system benefits, in our opinion, provided for some projects and in case of necessity to legalize it. These measures will help not only to solve the current budgetary problems, but also provide stability of tax regime necessary for continuous development of oil and gas sector for implementation of major projects in the country.

Dear Vladimir Vladimirovich! Dear colleagues! In our opinion, comprehensive Investorsigation and further promotion of those measures, the most important of which is providing the tax stability and developing an infrastructure of the Eastern Siberia and Far East, will let us to move from reaction to immediate calls to create a long-term strategy in the fuel and energy sector aimed at diversification of the economics in general. This will allow us to increase Investorsment attractiveness of the country in general and resistance to negative consequences, instability of the global economy and other external actions. Thank you very much for your attention.