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Could you tell us about the Primorye Oil and
Gas Complex, and your plans to build oil platforms
for the Sakhalin projects, as well as a gas terminal
and gas-to-steam power station?
First of all, let me put everything into context,
in 2004 Russia will become the member of the WTO
(World Trade Organization). If we analyze the
energy cycle of Primorsky Krai, our last energy
crisis was in between 1996 and 1998. The price
of fuel in Primorsky Krai was twice as high than
the average world prices, even though Russia is
a producing country and exporter of energy resources.
For example: in 1997-1998 the price of oil fuel
here was $200 per ton, while the world price was
$100 per ton and the price of diesel oil was 400$,
while the world price was $240 per ton.
Since then global prices have changed insignificantly,
equalization occurred here due to the 1998 currency
default and a growth in oil prices worldwide.
Nevertheless, in Vladivostok the prices of oil
products are still 30% higher than global figures,
the price of diesel oil in the world market is
$240 per ton, while in Vladivostok it costs $310
per ton the world price for fuel oil varies between
$120 and $150 per ton, but in Vladivostok it is
up to $180 per ton.
During 20 years experience in this profession
I have been occupied with the modernization and
reconstruction of stations, so I am well aware
of the structural capacities of Far Eastern Stations.
There is such a notion as a secure prognosis regarding
the time with which equipment can be used yet
our heating stations are not as effective as they
were in the past. For example, the Vladivostok
Heat Station-2 began to work with parameters of
575 degrees, yet now its parameter has decreased
to 545 degrees, so the temperature is 30 degrees
lower than it was originally. As a consequence
this leads to an increase of fuel used to maintain
temperatures. Moreover, the prices of fuel are
higher in Primorsky Krai than globally as there
is a higher cost of supplying power because of
the remoteness of fuel producers to Primorye,
this situation however cannot last infinitely.
I was born in Primorye and the fate of my region
is of great importance for me. There is an important
necessity to build an efficient energy complex
in Primorsky Krai. As Russia enters the WTO we
will have to reduce non-productive grants, which
also includes grants for fuel transportation.
Fuel may be delivered here from Siberia over 3,500
kilometers at the price of $50 per ton, but we
can deliver fuel from Sakhalin and pay only $4
per ton instead of $50. We are trying to integrate
ourselves into the world economy.
Can you tell us about these oil projects in
details?
There is a production site for the "Sakhalin
1" and "Sakhalin 2" projects. The
volume of oil and gas in Sakhalin is comparable
to the oil and gas available in the North Sea,
where 70 permanent platforms are set. Only one
platform is situated in Sakhalin that is why our
site will be of demand in Sakhalin. But we hope
to use it ourselves for constructing our own platform.
In accordance with the law of production all costs
for everything that is constructed will be reimbursed
by means of Russian oil and gas produce, this
means that Russians will pay less.
You plan to finish building your gas terminal
by 2006. Is this timeframe realistic?
We count on the money that we have been given.
At present I have 100 million dollars for constructing
the first block of the oil refinery plant and
600 million for the gas terminal and electric
power station.
What is your source of financing?
The first 100 million dollars is a bank guarantee
and a further 600 million dollars is from syndicated
credit.
It is estimated that your project will cost
an estimated 650 millions dollars, out of which
supposedly 618 millions will come from foreign
investors, is this correct?
That is not quite true. We are negotiating with
a Belgian company called " Tractebel"
and a representative company of the Canadian "Falingok
Commodity" has also arrived in Moscow and
we are working with this company because our equipment
will be delivered from abroad and we are trying
to get a lease. In any case with both these companies
and with our domestic equipment suppliers we are
trying to negotiate the leasing terms, in order
to save capital. There has never been such a terminal
and steam-to-gas station in Russia so for us a
general contractor with experience in such kind
of constructions is very important.
Any oil distillery plant could work here, as there
is a market here, but in order to be able to transform
liquefied gas there is need for high-tech equipment.
The production cycle must be more than 56% this
means that from one kilowatt we must obtain 0.56
kilowatts of electric energy as minimum.
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What about competition? As far as we know
liquefied gas plants have already been built in
Tomsk and Sakhalin.
There is a plan for building a natural gas liquefaction
plant with a capacity of 10 million tons in Prigorodn,
but no contract has been signed yet. Mr. Hasimota
the chief manager for gas sales was here and we
are still in touch as we are establishing a contractual
relation in purchasing gas. We have shown Mr.
Hasimota our construction site and we also work
closely with "Sakhalin 2" as well.
What are the advantages of your complex and
your projects, as the same construction sites
could theoretically be built in China and Philippines?
Firstly a production agreement exists stating
that 70% of our oil and gas must be produced on
our territory. Secondly there are only a few construction
sites such as ours that exist in Russia with a
non-frozen bay. The construction site was built
over 20 years and it is equal in size to that
of a football stadium. All infrastructures are
provided, such as water, roads, railroads and
electrical supplies. The 21st century is the century
for oil and gas and all highly economical cars
are produced on hydrocarbon fuel that is why there
will be a rapid development hydrocarbon technology
will be rapid.
Is this project actually being realized?
This project is already in process, it is within
the federal program, and the money has already
been allocated. For our steam-to-gas station we
are working with a Moscow company "Gasenergo,"
as for oil distillery plant we considering three
variants: whether this be the shipment of an oil
distillery plant divided into blocks by steamship
from Saint Petersburg or the delivery of blocks
by railway from Perm or Dzerginsk. We are also
looking at a long term leasing agreement with
Americans for such block deliveries. The questions
are being answered, we now have to decide from
where this block will be delivered, for example
South China or perhaps directly from the USA.
Once all coordination is completed we may start
the construction.
Most investors for the "Sakhalin 2"
project are representatives of South Eastern Asia,
and Mr. Fharhudinov, The Governor of Sakhalin,
believes that it will promote the interaction
of the Sakhalin with the economy of Asia. Taking
into account the fact that APEC has been held
it is interesting to know about your further strategic
steps, in order to become closer to your potential
investors from India, China, Japan and Korea.
The circumstances turn out to be rather favorable
for us: in 2006 an oil-pipe line will be constructed
from Angarsk for export, it will be situated 70
kilometers away from us. From this pipe we will
have deliveries. And our enterprise will be the
only one situated on the coast. All plants are
deeply continental, and we are protected from
all potential conditions within the market, for
example if oil and raw materials are not favorable
in the World market we can take oil from our main
land through the pipeline. As soon world prices
on oil fall, we will begin to take oil from abroad.
These two opportunities eliminate all risks. The
main risk is the raw material risk. Today in China
there is a 100% hydrocarbon deficit, in Korea,
30%, Japan, 15-20%. There is simply an immense
market.
That is why for us our main task was to find
a partner. I have already had the proposal from
China, Taiwan for concluding a long-term contract
for 2.5 millions of tons, and the first order
is for 2 million of oil.
The electric energy deficit in Primorye for the
present day is 300 megawatts. The central power
grid project institute shows that in 2005 the
deficit of electric energy in Primorie will be
500 megawatts. Non-covered peak demands are of
primary importance. But this entire deficit was
calculated without taking into account the construction
of oil pipeline and new platforms in Primorsky
Krai. Our complex itself will consume 150 megawatts.
We understand that by having such a deficit the
steam-to-gas station is a real necessity. With
this we are counting upon those basic branches
that will pay in accordance with exportation.
Whose idea was it to renovate an old dock
that recently suffered from radiation exposure
into a successful business venture?
When we bought off this dock in 1998 it was my
idea. It is said that the person who does not
want to think about problems far in future, may
have problems in the near future. All you need
to do is to look into the future!
What motivates you, what inspires you to complete
this project that is of great strategic and regional
importance?
I have worked for 20 years in this sphere and
for 20 years I have been watching these dynamics
develop.
Thank you very much, best wishes.
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