Grigory Vygon held a plenary meeting of the 21st international conference Sakhalin Oil & Gas 2017

Sep 29, 2017

Participants in the key session of the 21st international conference Oil and Gas of Sakhalin 2017 held in Yuzhno-Sakhalinsk on September 27-29 discussed Russia's new Energy Strategy and its impact on the development of oil and gas projects in Sakhalin and the Russian Far East. Managing director of VYGON Consulting Grigory Vygon moderated the discussion. The conference was held by the Government of the Sakhalin Oblast and the Adam Smith Institute.

Governor of the Sakhalin Oblast Oleg Kozhemyako, Deputy Minister of Energy of the RF Kirill Molodtsov, Deputy Minister of Finance of the RF Ilya Trunin, Chairman of the Energy Committee of the State Duma of the RF and President of the Russian Gas Society Pavel Zavalny, Director of the Department of State Policy and Regulation in Geology and Subsoil Use of the Ministry of Natural Resources of Russia Alexey Orel, Deputy Chairman of the Board of PJSC Gazprom Alexander Medvedev, Chairman of Shell in Russia Sederik Kremers, CEO of Sakhalin Energy Roman Dashkov, Vice President of the Chamber of Commerce and Industry of Russia Dmitry Kurochkin attended the plenary session.

In opening the meeting, Grigory Vygon outlined major focus areas of the discussion. "We will talk about the new Energy Strategy of the Russian Federation until 2035, as well as general schemes for the development of Russian oil and gas industry and their impact on the oil and gas industry of Sakhalin and the Russian Far East. We will discuss the plans of the largest Russian and international companies that operate in the region. We will debate the taxation system and ways to stimulate Sakhalin projects. We will touch upon import substitution issues and specifics of technological upgrading of oil and gas equipment in the conditions of sanctions," the moderator said.
The first speaker Oleg Kozhemyako read out a greeting from the President of the Russian Federation Vladimir Putin for the conference participants. In his message, the Head of state noted that the Sakhalin region is rightfully considered one of the leading oil and gas bearing areas of the country, its territory holds state-of-the-art drilling platforms, the first liquefied natural gas plant, and a unique transport infrastructure for exports of hydrocarbons. "I am convinced that the Forum will be held in an effective manner, and its conclusions and recommendations will contribute to improving the efficiency of developing Far Eastern fields," the Head of the Sakhalin Region expressed the words of the President of the Russian Federation.

In his speech, Oleg Kozhemyako illustrated the significance of Sakhalin to the fuel and energy sector of the country. According to him, 3.3% of Russian oil and 4.6% of gas are produced in the Sakhalin Oblast, 4.5% of the world's liquefied natural gas (LNG) is produced. At the same time, the share of Sakhalin LNG in the Asia-Pacific region amounts to about 6%. Offshore projects Sakhalin-1 and Sakhalin-2 played an important role in this. "Due to their input, the island became a global energy center in the Russian Far East," the governor concluded.

As Deputy Chairman of PJSC Gazprom Management Committee Alexander Medvedev noted, the critical advantage of the Sakhalin-2 LNG plant project is its proximity to the key markets of Northeast Asia in comparison with its main competitors. In addition, the LNG production technology successfully functioning at the Sakhalin-based plant has proved its effectiveness over the years. He stressed that large-scale Gazprom projects in the East of Russia, including Sakhalin, serve as a basis for further development of the region, attracting investment and expanding mutually beneficial cooperation with Asian countries.

Deputy Energy Minister of the Russian Federation Kirill Molodtsov spoke about Russia's new Energy Strategy and its impact on the development of oil and gas projects in Sakhalin and the Russian Far East. "The main goal of the Energy Strategy is the transition of the country's energy sector to a qualitatively higher new level through structural transformation, maximizing the dynamic social and economic development of the Russian Federation," Deputy Minister explained.

In his report, Deputy Minister also outlined the main indicators of the target state of the Russian oil and gas industry by 2035. "The Energy Strategy assumes the maintenance of annual oil production at the volume of 490-555 mt, enough to fully provide for domestic needs and fulfillment of export contracts, increasing gas production to 760-875 bcm with a projected 3-8 times LNG production growth. The depth of oil refining should amount to at least 90%, and the share of petrochemical raw materials allocated to the domestic petrochemical industry is to exceed 55%," Kirill Molodtsov said.

In his speech at the plenary session, Chairman of the State Duma Energy Committee Pavel Zavalny stated that, in general, the legislative framework required for the development of Russian offshore hydrocarbons was established by laws enacted in 2013-2014. According to experts, the tax incentives provided by them helped in the implementation of projects against the background of an overall intensification of fiscal pressure on the industry in the context of the price crisis. At the same time, Pavel Zavalny announced a number of proposals for adjusting tax legislation.

He referred to the removal of restrictions on the terms of applying preferential taxation regime and increasing the categories of complexity of offshore projects (in terms of "transferring" the Pechora Sea and the southern part of the Sea of Okhotsk from the 2nd to the 3rd category of complexity); the establishment of MET and export customs duty exemptions for the output of the oil fields of the Far East and Eastern Siberia; exemption of liquefied hydrocarbon gases produced from hydrocarbon raw materials of Eastern Siberia and the Far East from the export customs duty for the projects’ payback period.

Managing Director