INTERVIEW: Russia expects constructive decisions in EU's gas antitrust investigation - Yanovsky
MOSCOW. Aug 31 (Interfax) - The state of the coal industry, Russian imports of energy coal from Ukraine and the outlook for cooperation with Western partners in the energy sector were the main topics of conversation during an Interfax interview with Deputy Energy Ministry Anatoly Yanovsky on Saturday, Coalminer's Day.
What is the Energy Ministry's near-term forecast for energy coal prices? Will imports from Kazakhstan and other countries increase or decrease?
Speaking of prices to acquire energy coal on the domestic market, they have a multiyear trend toward growth with seasonal fluctuations. This trend is very likely to continue.
According to forecasts from the international energy agencies, as well as Russia's CJSC Rosinformugol, prices on energy coal may begin rising in 2016-2018.
Coal imports from Kazakhstan and other countries (the U.S., Ukraine, Mongolia) totaled 28 milllion-30 million tonnes, of which 26.5 million-28 million tonnes in energy coal and 1.5 million-2 million tonnes in coking coal. Coal imports from the U.S. halted in 2014.
Coal imports from Ukraine total about 500,000 tonnes a year; from Mongolia - very little. Kazakhstan accounts for the bulk of energy coal imports. Kazakh energy coal can only be replaced if the equipment at Russian coal-burning power plants (primarily in the Urals) is modernized to burn coal from the Kuzbas. According to forecasts from Russian generating companies, imports of Kazakh energy coal may decline to 19 million tonnes a year in 2020 from 22 million-23 million tonnes currently.
What is the situation with energy coal supplies from Ukraine to Russia? It is still not being delivered?
Russian coal producers are currently in condition to fully supply the need for solid fuel at power generation facilities. At the same time, based on economics, the gencos periodically use Ukrainian coal. In 2013 and 2014, Russian enterprises imported 737,400 and 471,520 tonnes of energy coal from Ukraine.
The coal and power companies decide the issue of coal imports independently, as businesses. For example, Grade "A" energy coal was supplied by Ukraine's DTEK under the contract with Gazprom Energoholding's OGK-2 for the biggest thermal power plant in southern Russia: the Novocherkasskaya GRES district power plant.
Gazprom Energoholding stopped buying coal from DTEK and switched to Russian suppliers. However, it was reported that the companies are not happy with the quality of Russian coal. Is the ministry aware of this?
As was noted previously, supplies of anthracite from the Donbas to Novocherkasskaya GRES are made by Ukrainian and Russian coal companies. After contract relations ended between Gazprom Energoholding and DTEK, Ukrainian coal was mainly replaced by coal from Rostov. The Donugol company won the contract to deliver 5 million tonnes of coal in the August 2014-June 2016 period.
As for the quality of the fuel, questions did indeed arise. The management of OGK-2 detected a serious problem with the substantial increase in low-quality coal arriving at the station. A working group of coalminers and power generation people has been set up in Rostov region to examine the issue of raising the quality of coal supplied to Novocherkasskaya GRES.
The ministry is aware of the situation and expects that all the economic entities and the parties to contract agreements will succeed in jointly drawing up and implementing the needed organizational and technical measures, on market terms that will make it possible to eliminate the negative aspects that have emerged.
Is the issue of the potential purchase by Evraz or its main shareholders of a controlling stake in coal holding company Sibuglemet being discussed? If so, on what terms?
Yes, the Federal Anti-Monopoly Service (FAS) has received an application from Evraz's Raspadskaya on "receipt of rights making it possible to define the terms of entrepreneurial activity of three companies - Sibuglemet Holding LLC, OJSC Sibuglemet and CJSC Sibuglemet - belonging to a group of Russian investors."
As far as I know, Evraz representatives plan to provide consultative and information services to Sibuglemet on a wide range of issues connected with operations. So far, there has been no talk of purchasing a stake in Sibuglemet.
By the way, that is the only application from Raspadskaya concerning Sibuglemet. No other inquiries on acquisition of Sibuglemet stakes or entire companies have been registered.
Has Russia received an official refusal from Ukraine on the project to build the N3 and N4 power units of the Khmelnitsky nuclear power plant and construction of a plant for production of nuclear fuel? Ukrainian Prime Minister Arseniy Yatsenyuk and Energy and Coal Industry Minister Volodymyr Demchyshyn said previously that the agreement might be annulled.
The Rosatom state corporation has not received any official refusals from Ukraine on construction of the N3 and N4 power units at the Khmelnitsky nuclear plant. So far, no practical steps have followed the statement from Prime Minister Yatsenyuk, who proposed to the Verkhovna Rada that the agreement on construction of the two Khmelnitsky power units by renounced.
A day before our delegation heads to China, the topic of our cooperation with that neighboring country ought to be touched on. For example, Mechel does not rule out sale of a minority stake in the Elga deposit to various investors, including Chinese investors, to pay down debt. How does the ministry appraise the company's plans? Won't it be against the entry of foreign investors into the project?
The Energy Ministry has a favorable assessment of the efforts Mechel is undertaking to settle its difficult relations with creditors. We are hopeful that this leading Russian steel company will be able to find and implement various - including unorthodox - solutions on this front, including ownership relations concerning specific divisions of the steel and coal holding.
As for potential Chinese investment in coal projects, including Mechel's, the ministry welcomes them as part of existing and developing Russian-Chinese energy partnership in accordance with the road map for development of Russian-Chinese cooperation in the coal area.
At what stage are talks on investment by Chinese companies in the Vankor project? What difficulties have arisen? Are the corresponding international agreements being drafted?
In November 2014 at the APEC CEO summit in Beijing, Rosneft and China National Oil & Gas Exploration and Development Corporation, part of the CNPC group, signed a framework agreement on acquisition of a 10% stake in CJSC Vankorneft. At present the companies continue to hold talks on this issue. Their substance, I think, is a commercial secret. For my part, I can note that for now there is no need to sign an intergovernmental agreement on this score.
How are the talks on the western gas route proceeding?
Consultations on gas are underway between Gazprom and CNPC. The Russian Energy Ministry is not discussing price with the Chinese colleagues. The ministry is discussing topics connected with infrastructure, creation of capacity to transport one or another volume of gas. So, if Gazprom gets a commercial agreement on the western route and if there is a need to create the corresponding pipeline infrastructure, we will engage in this topic just as we did on the eastern route.
Are talks on participation of Japanese companies in development of Gazprom Neft's Chonsky project still underway or are they suspended due to sanctions?
Talks with Japanese companies are not being conducted, according to my information. Gazprom Neft has completed the first stage, jointly with Japanese JOGMEC, of geological study of the oil reserves at the Ignyalinsky block of the Chonsky group of fields.
Does Russia remain interested in the oil refinery in Vietnam in the current economic conditions or have the talks been suspended? What tax breaks are needed in order to ensure the profitability of this project?
As for the Dung Quat oil refinery project, as far as I know, Gazprom Neft remains interested in it. At present the company is continuing negotiations whose goal is to determine the commercial value of the project, given that according to expert evaluations, the project to modernize the Vietnamese oil refinery without an additional package of tax breaks is not economically viable.
As for the tax regime itself, the Russian side is proceeding on the assumption that it should be analogously provided by the Vietnamese government to foreign investors on projects to modernize other oil refineries, such as Nghi Son.
When will talks with the European Commission concerning the antitrust gas investigation be held? Is an amicable settlement of the problem possible? If so, in what format?
At present, interaction with the EC concerning the antitrust investigation take the form of informal consultations. The sides are also exploring the possibility of finding a mutually acceptable resolution.
In accordance with Article 102 of the 1994 agreement on partnership and cooperation signed by Russia on one side and by the European Union and its member states on the other, written agreement to hold consultations on the issue was reached between Russian Prime Minister Dmitry Medvedev and EC Chairman Jose Manual Barroso.
A meeting held in Brussels on December 4, 2013 between representatives of the EU and Russia featured an exchange of views concerning the substance of the antitrust investigation and reached agreement to begin discussing the issue of addressing the EC's concerns. The discussion was continued at a meeting in Brussels on January 23, 2014. The EC unilaterally suspended the process.
The next round of consultations between Gazprom and EC representatives, in which Gazprom Deputy CEO Alexander Medvedev took part, was held on July 23, 2015 in Brussels. The sides agreed to continue seeking mutually acceptable solutions.
The Russian Energy Ministry assumes that a mutually acceptable, constructive solution to the issue will be found, without politicization, in the course of further consultations between the Russian and EU sides, including the situation of the Russia-EU agreement (Articles 34(1) and 102), which obligate the EU to take measures to solve the issue under examination through negotiations.
At what stage are the talks on OPAL gas pipeline? Will Gazprom be able to use 100% of capacity? Are there still demands to make capacity available? In what volumes?
Over the course of 2012-2014, significant work has been performed to settle the problem of using 100% of transit capacity on the OPAL gas pipeline, including a specially created working group under my leadership for the Russian side and that of EC Director-General for Energy Philip Lowe for the European side.
Russia and the EU signed the agreement on a settlement in 2013, which set out the mutually acceptable formula for resolving the issue. However, over the course of 2014-2015, the EC under various pretexts (from the need to refine additional technical questions to references to the political situation in Ukraine) consistently delayed enactment of the agreement resulting in postponement of its effect a number of times.
Due to the issue's high degree of politicization and foot-dragging on the part of the Europeans, the decision was made not to prolong the effective dates of the agreement. At present this issue remains unresolved.
What proposals can Russia make to resolve the issue of third-party access? Does the EU option, under which the third parties might be Russian companies, suit?
The demand for third-party access is EU law, while under Russian law, the owner of the gas transportation system and its wholly owned subsidiaries have exclusive rights to export natural gas in gaseous form. We are proceeding based on existing legislation.