Organization of petrolium exporting countries (OPEC)

Austria, Vienna, 11 September 2007

Andrey Reus, Deputy Minister of Industry and Energy, Russian Federation

Ladies and gentlemen,

I am glad to greet you at this 145th Ordinary Meeting of the OPEC Conference.

Since 1998 the Russian Federation has been taking part in the OPEC Conference as observer. It reflects Russia’s strong stand in favour of strengthening constructive cooperation with your Organization and our high respect to the basic principles and rules adopted by the OPEC. We believe that one of the most promising areas of such cooperation could be coordination of our respective strategy papers.

We are convinced that a continuous exchange of views between the key players of the global energy market on their energy strategies could contribute to sustainable development of the world energy markets. We have already accumulated some positive experience in this regard. I have in mind the comparative analysis of the Russia’s and EU energy strategies. The issue might be of interest for the OPEC member-states. As to us, we are opened for such consultations. On regular basis we inform the OPEC member-states on the key results of our efforts aimed at implementation of the Russia’s energy strategy till 2020 which is now in process of being reviewed till 2030. Without changing its basic premises we are building it taking into account among others the new situations and challenges the world is facing today. This is a completely transparent process as we intend to use the results of consultations with our partners as an input to this work.

Further I would like to dwell on important outcomes of the Russia’s energy sector development as well as the steps we are taking to enhance the global energy security.

Russia is contributing to great extent into enhancement of energy security and stability of supply. The Russia’s annual oil production growth rate is above the world average. As you know, Russia’s oil production in 2006 was 480,02 m.t. (growth by 2.1 per cent compared to 2005) and we became the first oil producing country in the world. During the period from January to July 2007 our oil production grew by 2,9 per cent but, to tell the truth, we are not aiming at maximizing the production.

Russia has achieved substantial progress in implementing a number of infrastructure development projects aimed at diversification of hydrocarbons export routes. I’d like to mention just some of them.

Last year we completed a major project in order to increase supplies to Western Europe. We enhance the capacity of the Baltic Pipeline System up to 75 m.t. pet year.

Russia, Bulgaria and Greece ratified an intergovernmental cooperation agreement on construction and operation of Burgas-Alexandropulos pipeline, which will alleviate the load on the Black Sea straits and enhance the overall security of the regional oil transport infrastructure. The initial capacity of this pipeline will amount to 35 m.t. per year with a future extension up to 50 m.t. per year. The three-party agreement provides the creation of an international company that will be the owner of the pipeline system.

Let me mention the Eastward Avenue that is construction of an Eastern Siberia-Pacific trunk pipeline of 4.5 thousand km. In less that one year time more than one thousand kilometers of pipe has been laid. We can say that this project will complete the Eurasian East-West energy infrastructure. The first line of this project of 2,4 thousand kilometers with a capacity of 30 m.t. per year will be completed by the end of 2008. The extension of the East Siberia-Pacific project will provide for a pipeline construction from Skovorodino to a specialized oil terminal in Kozmino Pacific sea port. A link with a capacity of 30 m.t. per year will connect the city of Datsin in China to the pipe nearby Skovorodino. Upon completion of the second phase of the East Siberia-Pacific project in 2015-2017 the overall capacity of the pipeline will reach 80 m.t. per year. The oil for the Eastern Siberia-Pacific pipeline will be exported to the APR countries and used for refining in Russia.

Along with oil production and transport infrastructure development we are making efforts to strongly increase oil refining both in terms of quantity and quality.

The primary refining of crude oil during the period from January to July of 2007 reached 131,46 m.t. thus showing a 5.4 per cent growth compared to the same period of the last year. Domestic refining amounted to 46.2 per cent of all the oil and natural gas condensate produced in the Russian Federation (45.1 per cent during the same period of the year 2006). This trend will be developed in accordance with the presidential order on refining capacity expansion with the special stress of petroleum products.

We welcome foreign investors to oil and gas sector and create for them the most favorable conditions. Foreign companies participate in major energy projects implemented in Russia. The oil and gas sector accounts for about 20 per cent of investments into the national economy.

Strict respect of contractual obligations, exception of double taxation, development of solid and understandable legal framework are the basic principles providing this project.

In conclusion I would like to say that Russia reconfirms its readiness to respect the principles of informational openness data transparency developing the energy dialogue with all countries. This is a way to ensure stable functioning of the energy market, secure transport routes, mitigate fuel price fluctuations and ultimately to achieve stable development of national and world economy.

Thank you for kind attention.