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Chairman of the Russian Government Mikhail Mishustin Meets with President of Transneft Nikolay Tokarev

Date of publication: 29 December 2021

Photographed by the Press Service of the Russian Government

Mikhail Mishustin has held a working meeting with Board Chairman and President of Transneft Nikolay Tokarev. They discussed the Company’s performance in 2021 and promising business areas.

M.Mishustin: Mr Tokarev, I would like to take this opportunity to wish you a Happy New Year and Merry Christmas! All the very best to you personally, to your loved ones and to the Company you head.

Transneft today is the key company in the fuel and energy sector. I’d say this is a natural monopoly in charge of transportation of oil and petroleum products over trunk pipelines. You also address numerous challenges within our intergovernmental agreements.

Today we are witnessing positive changes in different sectors of national economy, including pipeline transport. The volume keeps growing, largely due to mounting supplies to the domestic market, which is very important for the country. The Company is also actively involved in a number of projects including those contributing to the national development goals set by the President of Russia. Now we are yet to address many more challenges, including the ones faced by your Company. They must be responded to with dignity, remembering that the pandemic environment unfortunately means certain adjustments in the operations of all companies, including yours. And we should do everything possible to ensure the health and safety of our people.

Mr Tokarev, please tell us about your Company’s achievements this year and the plans for the future.

N. Tokarev: To begin with, Mr Mishustin, I'd like to wish you a Happy New Year as well, to wish you success in the arduous effort in your responsible position for the benefit of our nation and to thank you for the support and attention we always feel from the Government and from you personally. We seek help when we need it. I can’t recall a single case of our requests being turned down. All the best to you in the coming year!  

As for the performance results,  overall, this has been a challenging year, just like the previous one, because the epidemiological situation and the well-known OPEC+ decisions to limit oil production have of course been fraught with certain problems. Nevertheless, the Company's operations were stable and smooth, and we fulfilled all our contractual obligations to transport oil from the oil companies on time without any major incidents.

Ca. 445 million tonnes of crude were transported in the outgoing year, which is slightly more than in the previous year, with 240 mln tonnes supplied to the domestic market and about 200 mln tonnes exported. The reduction as compared to 2019 was due to the fact that in 2020, during the first five months before the OPEC+ decision the planned volumes were exported. And in 2021, unfortunately, we were not able to reach those figures because the turnover has understandably decreased.

As for the difficulties, perhaps, it is worth mentioning that the decline of turnover caused the sagging of the Company's revenues, so we had to adjust our overhaul and revamping programme as well as Transneft's long-term development programme, but without any serious consequences for our production activities. Where it was possible, we pushed back the overhaul of certain facilities and will tackle it in the coming year.

We transport about 30% of all petroleum products over our petroleum product pipeline systems. This is roughly 30 million tonnes of which ca. 10 million tonnes are for the home market and 28 million tonnes – for export.

The technical upgrading, revamping and overhaul programme was successfully completed for RUB 167 billion. This is a solid amount. Although the drop in turnover also entailed a drop in revenue by RUB 45 billion. A tangible amount. None the less, all the planned targets set have practically been achieved. We paid RUB 142 billion in taxes and all types of deductions, including the insurance premium, the revenue standing at RUB 175 billion. We have to transfer RUB 88 billion to the budget for 2021. And it has been decided to pay twice a year for the convenience of both our shareholders and the budget: it seems to be an optimal schedule.

M.M.: What do you mean by paying twice a year? Are you talking about the dividends?

N.T.: Paying out the dividends. As to our plans for the upcoming year, the figures will certainly grow a bit, since production volumes have increased. And all of our production activities are fully aligned with the oil and gas segment of the fuel and energy sector. If they have growth we have it too. If their situation improves, ours also gets better. This won’t be a strong growth, though, about 2-4% in various categories.

We are also beefing up our technical upgrading, revamping and overhaul programme to RUB 175 billion.

Among the major projects, we are now revamping some sections of the Kuibyshev – Tikhoretsk pipeline to increase the export capacity for crude oil of higher grades. We are stepping up the construction of a tank farm with the capacity of 1 million m3. We should replace about 1,000 km of the line part, 900 km to be more exact. This means large-scale, ambitious programmes. But they are quite feasible and will be completed.

Social aspects. We are budgeting ca. RUB 17 billion to support families with children, healthy lifestyle, and pay retirement allowances. We have 31,000 retirees receiving our corporate pension in the Transneft non-state pension fund. The average corporate pension is ca. RUB 10,000.

Charitable activities are highly prioritised.

We do not forget about the publishing activities and sports either. In other words, an entire range of activities to be carried out by a company of this scale.

Digitisation is a separate topic.

M.M.: I just wanted to ask how you work with digitals, as it is very important today, especially for a company like Transneft. I know you are very active in this area.

N.T.: We now have 53 initiatives and 10 digital development programmes.

There will be end-to-end digitisation. Full control of all operations. In fact, we already have a fairly advanced version of the system in place today, but we will be introducing more advanced versions.

All control, financial, HR functions, procurement activities, reliability of oil trunk pipelines. All transport-related issues. In other words, this whole block of functions is subject to digitisation.

M.M.: One of the figures is definitely to my liking, Mr Tokarev. At least 70% is the share of your Company’s outlay on homemade software and related services. This means doubling the needed budget, Company’s IT budget. A very important stat, since this matter is to be taken seriously. And these are the tasks that the President has set for us. This is surely good news.

N.T.: There is a lot of controversy around this topic today. Meaning what is best: possible hardware-software interface. But we have found, I think, the right form of relationship with partners, agencies and the Ministry. Today it’s clear for us what to do, where to go and what we need in the first place. And in the four years to come we plan to spend RUB 30 billion on all of these priorities.

M.M.: Thank you, Mr Tokarev. Good luck to you.

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