Today Alexey Miller Chairman of the Gazprom Management Committee updated Russian President Vladimir Putin on the progress with the Nord Stream and South Stream gas transmission projects.

The President tasked Gazprom CEO to get back to developing the Yamal – Europe-2 and gas branch to the Kaliningrad Region projects.

Transcript of the meeting start

Vladimir Putin:Mr. Miller, I suggest that today we address the gas transmission system development issue. We have already discussed the evolution of this system within Russia, namely the integration of our pipeline networks in the European part of the country and the construction process launched in its Eastern part.

You reported to me about the plans to unite the European and the emerging Eastern gas transmission systems in order to meet the demand of domestic consumers. Today I would like you to tell me about the progress with the development of the gas export transmission potential.

We have actually completed Nord Stream. I know that now you are negotiating with our British partners the construction of another string intended for the UK. By the way, in this respect I'd like you to get back to the gas branch to Kaliningrad as well.

Because of Nord Stream and South Stream we practically abandoned Yamal – Europe-2. South Stream: we have almost started construction and it is spinning up. At the same time, I asked you to get back to the Yamal – Europe-2 project. I know that you are intensely working up this issue with the partners. It is the case of improving the reliability of gas supply to Poland, Slovakia and Hungary.

But we do understand that due to the Nord Stream commissioning, it can't be a complete replication of Yamal – Europe-1. So, my question is – what option of extending our opportunities in this direction are you most inclined to and what have you arrived at with the partners?

Alexey Miller: As for the execution of our Nord Stream and South Stream megaprojects, Nord Stream was completed in strict compliance with the schedule. Last October we brought the gas pipeline to its design capacity of 55 billion cubic meters of gas by constructing two strings.

Pursuant to your instructions, we started building South Stream last December. There is no doubt that in December 2015 the first string will be completed and our gas will arrive in the European Union, namely Bulgaria. All four strings will be finished by December 2017, and the design capacity of the South Stream gas pipeline will total 63 billion cubic meters.

However, as you have said, the reliability and stability of supplies to Central and Eastern Europe, particularly Poland, Slovakia and Hungary remain an open question. Therefore, following your assignment, we have worked through the option of building a gas pipeline from Belarus with full awareness that gas transit through Belarus via the Yamal – Europe-1 gas pipeline is the most cost efficient for us today.

Nowadays, the gas transmission system is owned by Gazprom. And it is this gas supply route to our European consumers that is the most efficient (efficient in terms of logistics) for us.

The market research showed that we could go with 15 billion cubic meters of gas. Talks were held with our colleagues from Hungary, Slovakia and Poland on the corporate level. And we are ready to start a pre-feasibility study, i.e. to launch a pre-investment stage.

We understand that the project could be initiated after the completion of South Stream, and this project could be an addition to all the efforts we take to secure more stable and reliable transit to the European Union.

As for the timeframe, it could be 2018–2019. And if a relevant order is given, we'll specify the timeframe as well as the route and, of course, the capital investments. What is absolutely clear right now is that the efficiency of such a project will be extremely high. On the corporate level our partners display a keen interest in cooperation.

Vladimir Putin:I suppose, the project will resolve all concerns of our Polish friends and increase the reliability of supplies to Hungary and Slovakia.

Alexey Miller: That's right, Mr. Putin, the reliability will increase and, what's most important, it will be a hundred-per-cent reliability, because, speaking of gas supplies to Poland, we'll be actually supplying gas from Gazprom's own pipeline on the border to Poland: in fact, this is a non-transit option.

Vladimir Putin:Now let's go back to Kaliningrad.

Alexey Miller: You tasked us to address the possibility of building a gas branch to Kaliningrad. We carried out research and got a positive answer on the technical feasibility of a gas branch from Nord Stream's existing first or second lines.

Talks were held with the Kaliningrad Region Administration, there were meetings with the Governor. The maximum volume of gas, which Kaliningrad might need, was defined in the amount of 4.6 billion cubic meters.

Today gas is supplied to Kaliningrad via Lithuania, and its annual amount reaches 2.5 billion cubic meters. This means that supplies through one of Nord Stream's strings would actually have to be 2 billion cubic meters.

We held meetings with the Nord Stream management. The Nord Stream management confirmed this technical feasibility. The next step is to discuss it with the Nord Stream shareholders and obtain their consent to such activities. Therefore, we will keep in touch with our foreign partners within Nord Stream and we'll be reporting the results, Mr. Putin.

Vladimir Putin:If any complications occur there, you may use this option while constructing the third string to the UK.

Alexey Miller: Yes, certainly.

Vladimir Putin:There are no restrictions at all. Work it up. I will formulate a relevant order for the Energy Ministry as well, bearing in mind the plans on the commissioning of the Baltic Nuclear Power Plant capacities. We should have the picture of energy supplies to the Kaliningrad Region in full view, and have the entire power sector of Kaliningrad established and all the options cleared out, explained and foreseeable, I mean the prospects for economic growth in the Kaliningrad Region itself.