Vladimir Putin has held a meeting with Board Chairman and President of Transneft Nikolay Tokarev. In particular, they discussed the Company’s performance in the past year as well as the situation with low-quality oil transported over the Druzhba oil pipeline.
V. Putin: Mr Tokarev, let’s start with reporting on the Druzhba oil pipeline.
N. Tokarev: Mr President, a short time ago there was a serious incident: the content of organochlorine compounds in the oil transported over the Druzhba pipeline to Belarus and further to Poland and Germany as well as over the southern line to Slovakia, the Czech Republic and Hungary, many-fold exceeded the limits.
We conducted an in-house investigation in the hope to find a source of these substances being injected into the pipeline. It turned out to be a private venture in Samara Region, which serves as a sort of collector picking oil from small producers in Ulyanovsk, Orenburg and Samara Regions. This company ensures the saleable quality of this crude, its certification and feeding to the system of oil trunk pipelines.
In this particular instance, the said private business, in violation of all technological regulations, deliberately discharged the crude that was not duly prepared for commercial delivery.
V. Putin: Deliberately?
N. Tokarev: I believe this was a fraud scheme. As of today, all materials have been handed over to Samara Region’s Federal Security Service Directorate, and now an investigation is being conducted. In the near future a spade will be called a spade. But for now things look the way I described them.
V. Putin: So when crude is accepted into the pipeline system, the Company’s representatives do not check its quality, do they?
N. Tokarev: The problem is that these acceptance points, and there are about 150 of these across the country, are mainly owned by large oil companies which prepare crude oil for sale by themselves, monitoring its delivery to the system of oil trunk pipelines.
However, there are also quite a few private businesses which serve as collectors all over Russia. They have signed contracts with Transneft to accept this crude, certify it, perform quality control and feed it to the system of oil trunk pipelines.
V. Putin: It means this system failed, correct?
N. Tokarev: In this case we deal with sheer fraud in violation of all instructions and regulations.
V. Putin: Look, they swindled, but we suffered very serious economic, material and image-related losses!
N. Tokarev: This is true, I agree, Transneft is not going to shirk responsibility for this incident, but all instructions and regulations are meant to be honestly observed. If we are dealing with a criminal intent in this case...
V. Putin: I mean self-checking is not enough, so this system needs to be changed.
N. Tokarev: Now an interdepartmental group formed on the instructions of the Chairman of the Government is going to put forward an initiative to complement the regulatory framework and industry regulations with measures amplifying the control of the crude fed to the system of oil trunk pipelines.
V. Putin: Make sure this is done and report to the Chairman of the Government.
N. Tokarev: Yes, we’ve set a strict deadline and we are doing this work now.
V. Putin: Good.
N. Tokarev: In parallel, Mr President, jointly with the Energy Ministry and our partners from oil companies we held a number of business meetings with foreign colleagues from Ukraine, Belarus and Poland and agreed on measures aimed at mitigating all consequences and circumstances of this incident.
The implementation of all the measures agreed upon has already begun. Standard-compliant crude oil has already been delivered to Belarus today. Novopolotsk Refinery in Belarus gets supplies via the Surgut line, which means the situation has more or less improved.
All April shipments were carried out from Ust-Luga where the port working schedule is strictly observed. The railways also lend a helping hand in removing off-spec crude from Belarus; we’ll then compound it, i.e. mix it up with standard crude already in Novorossiysk, to sell it later.
V. Putin: Meeting the quality standards...
N. Tokarev: Exactly, providing standard-compliant, commercial crude. We expect the situation to get back to normal in the months to come so that we could keep within our regular schedule.
V. Putin: Good. What else did you want to tell?
N. Tokarev: On the whole, Mr President, if we review the performance of Transneft in the past year, all planned targets were reached and exceeded – I mean production, financial and business indicators.
We accepted 480 million tonnes of crude oil or 87% of the entire production into our system. Of this amount, 250 million tonnes were delivered to the domestic market; 230 million tonnes were exported and refined; capital investments in the past year reached RUB 284 billion, of which RUB 60 billion were invested in newly built facilities and RUB 202 billion – in the revamping, upgrading and overhaul of existing pipelines.
Overall 17,700 km of oil pipelines were built and revamped in the past 10 years, including 7,700 km of newly built pipelines and 10,000 km of the old lines replaced by new oil pipelines.
Among the most remarkable events resulting from our effort was commissioning of the joint Russian-Italian venture manufacturing electric motors. Last autumn we launched the production line during your meeting with the Prime Minister of Italy.
This August we’ll launch another plant that will allow to fully substitute domestic products for imported drag-reducing agents earlier procured from US-based Baker Hughes.
Now we are using our own developments to produce such agents in Alabuga, Tatarstan, so that we’ll both meet our needs and bring out this product to the world market.
Our subsidiary Diascan, which is in charge of in-line inspection of our oil pipelines, has developed a number of absolutely unique inspection tools having no counterparts in the world. These tools successfully operate from Malaysia and the Middle East to Mexico, which shows that these services are in high demand.
In addition, I should probably mention that during the past year we provided charitable aid worth almost RUB 9 billion, mainly to schools, children’s hospitals and outpatient clinics.
V. Putin: Good.