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Transcript of conversation today between President Putin and his Natural Resources Minister, Yury Trutnev

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OF THE RUSSIAN FEDERATION

27 September 2006

EXTRACT: VLADIMIR PUTIN: This information is essential for taking decisions. I hope that the ministry and the government will take these decisions, including with regard to those who are not working honestly or not fulfilling the licence agreement conditions.

YURY TRUTNEV: This is precisely why we have created this system. Over the last 18 months we have cancelled user rights for 200 licensed sites and will continue this work with regard to companies that commit gross violations of the licence agreements. 

TRANSCRIPT OBTAINED FROM RUSSIAN GOVERNMENT

YURY TRUTNEV: First of all, I would like to report on the execution of your instruction. You called a meeting six months ago and issued the instruction to carry out a stock-taking of all the oil wells in the Russian Federation. This work is ninety-percent complete now.

VLADIMIR PUTIN: How many have not been counted?

YURY TRUTNEV: We have not yet finished collecting information on 35,000 wells, but these are old oil wells drilled fifty or more years ago, mostly in old oil producing areas such as in the Caucasus. 

VLADIMIR PUTIN: How many uncounted wells did the stock-taking reveal?

YURY TRUTNEV: In all, there were 248,000, of which 64,000 are in operation. Problems arise from the fact that some of these wells have not been transferred to the natural resource users. In other words, they are located in areas where resources have already been distributed, but we do not have the asset registration and property transfer documents for them. 

Now we need to work together with the Economic Development and Trade Ministry to settle the issue of just how to carry out these transfers, because these are state assets and payment needs to be made for them and all of this has to be put in order. Then we also need to include these wells on the Russian Property Fund’s balance sheet, because they also need to take them into account. But we have now identified all the oil wells, all the location details, and have divided them into groups according to ownership and the category they currently belong to.

Another problem that has come to light is that the number of oil wells currently inactive is twice higher than the legal limit. The law sets a limit of 10 percent of the total stock, but at the moment we have more like 20 percent of the total stock inactive. If we put this additional 10 percent into operation, this would increase the country’s oil production by more than 10 million tons.

We have examined this situation company by company and can say today how each company is managing the stock. We have all the data in this regard.

We can fully complete this work within half a year, but to do so we need the support of the Finance Ministry, the Economic Development and Trade Ministry and the Federal Property Management Agency. 

VLADIMIR PUTIN: Alright, we will look at this matter in more detail.

YURY TRUTNEV: Second, I wanted to say that the Natural Resources Ministry has put in place a somewhat different system for the monitoring and control of how licence agreements are being implemented.  

All of this used to be on paper but now we have created an electronic data base with all the information on the 13,000 licences currently issued in Russia, and we have created software that enables us to analyse all the main licence agreement implementation criteria. In other words, we can now say in real time where exactly, at which fields and deposits, operations are not beginning according to schedule, at which deposits geophysical work is not being carried out, and where exactly extraction rates are being exceeded by more than, say, the 20 percent limit set by the law. This system gives us an objective base that enables us to monitor the situation systematically, and not selectively, and thus know exactly what this situation is in the country.

As far as beginning operations at deposits on time is concerned, the situation is close to satisfactory in our view, with 96 percent of licence agreements meeting their commitments in this regard and 4 percent failing to do so.

The situation regarding geophysical work and drilling is not as good and we will continue to work in this area.

VLADIMIR PUTIN: This information is essential for taking decisions. I hope that the ministry and the government will take these decisions, including with regard to those who are not working honestly or not fulfilling the licence agreement conditions.

YURY TRUTNEV: This is precisely why we have created this system. Over the last 18 months we have cancelled user rights for 200 licensed sites and will continue this work with regard to companies that commit gross violations of the licence agreements. 

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