WTC Moscow held the II National Oil and Gas Forum

Moscow, October 23. The World Trade Center Moscow hosted the Second National Oil and Gas Forum. During the second day of the Forum a series of thematic round tables took place, the highest attention was drawn to the round table on “The future of the oil and gas Manufacturing, Engineering and Related Services Sector in face of sanctions: localization and implementation of an integrated program of import substitution”, where the WTC Moscow CEO Vladimir Salamatov presented the results of the WTC studies on import of the equipment for the oil and gas production, that fell under the EU and the US sanctions, to Russia. 

In particular, he noted that on 31 July 2014 the European Union adopted Council Decision concerning restrictive measures on exports to Russia for a large range of equipment for the oil and gas production. “The US, Australia, Norway and Canada - countries that actively supply this equipment to us – endorsed the initiative. We analyzed the scale of products that fell under the sanctions; these are rather important equipment for drillers, for representatives of the oil and gas industry. In 2013 total import volumes of the equipment was not that great of an amount for the industry - $ 2 billion. But it was very important equipment and technology”, - said Vladimir Salamatov.

 Main oil and gas equipment supplying countries in the European Union are Germany and Italy. Large share of products is supplied by the United States and Canada. We have purchased 1 billion 171 million dollars equipment that fell under the sanctions on an annual basis, now these deliveries stopped. 

“I would like to especially draw your attention to the following factors. The first is that about $ 100 million count for deliveries from Ukraine. Given the current situation, these volumes are at a risk. The second factor concerns deliveries from Belarus. Starting from 2012 was recorded fast growth of the supplies - nearly from the ground up to 174 in 2012 and to 242 million dollars in 2013. This figures stand for the equipment used for drilling. But then again, Vladimir Vladimirovich said that looking only at the label saying that the equipment was manufactured in Belarus is incorrect”, - said Director General of the WTC Moscow. “In fact, it contains a large number of components produced in Italy and the US. In any case, it would be wonderful if these supplies continue. In addition, it is a good example of production organization, first in the form of industrial assembly, as it was implemented in automobile industry, and then gradually gaining necessary competence, incensement of the localization degree”, - he explained.

 What types of the equipment fell under sanctions? Parts of the drill sinking machines are mostly supplied from the US - 100 million dollars; same amount comes from Canada. However, about the same products range comes from China. “Yes, we know that this equipment may be less reliable and has shorter operating life, but, at least until we localize these productions, we can buy equipment in other countries, including China”, - marked Vladimir Salamatov. 

“It has already been said today that Russia has traditionally imported pumping equipment from Ukraine, and rather wide scale of these products as a matter of fact. It is clear enough that today these supplies are at a risk... Hence, I would like to give a positive example. Maybe not concerning that great range of products, but two years ago, the Shell Company held a contest for the global procurement of pumping equipment, and one of the Russian companies won this competition and now fully supplies Shell representatives in all countries around the world with this equipment. It will be quite difficult to immediately come to a substantial localization or to complete replacement of some types of equipment. It was also said yesterday by Alexander Novak, Minister of Energy”, - said Vladimir Salamatov. 

RBC has published the data, stating that nowadays 57% of the equipment for the oil and gas engineering is bought abroad; ministry’s goal is to reduce this dependence to 43% by 2020. The situation is serious and requires a lot of effort. 

The express-analysis amidst the oil industry representatives showed that the most critical for the industry are rotary steerable systems, which we, unfortunately, purchased mostly abroad. Same stands for remote measuring systems that are especially necessary for modern methods of drilling. 

“I believe in Russia, just as everyone present here, and I would like to refer to the experience of the Russian railways. There are engineering services, which have been operating for many years, and planned technical policy and programs of the company. For example, they have adopted long-term contracts with various companies – as a result we have “Lastochki”, electric locomotives, and diesel locomotives that are not purchased abroad because this policy has been steadily carried out for many years. I think that the oil industry representatives working together with the Ministry of Industry and Energy will also be able to implement import substitution confidently, without overcharging”, - summed up the WTC Moscow Director General. 

Other speakers supported Vladimir Salamatov’s point of view. “Production localization is the main criteria of success in import substitution program. China took the same path and as we can see it was a success. We realize that it is a large market we are talking about. This capacity of our market allows us to pose the question of localization in our territory before the foreign suppliers. Our main task is to find a reasonable balance between international cooperation and import substitution policy, critical overbalance towards one of the sides is unacceptable”, - said Vladimir Gutenev, First Deputy Chairman of the Industry Committee of the State Duma.

 First president of OJSC “AK Transneft” Yury Lisin added that it is necessary to understand means of measuring localization – is it money, tones, cubic meters, meters? “The term “localization” in any case must have some sort of assessment, either it would be evaluation metric system, mathematical, physical, or in economic terms”, - he explained. In his opinion, industrial engineering and oilfield services have to create a certification system similar to the one operating in OJSC “AK Transneft”: “We have been creating this certification system for 10 years too. Every company working with us must confirm its quality, they must prove their production capacity, pass all tests required, and there must be tested and inspected production. Only after that company is included in the registry of major products. We have a supporting program for Russian producers. It is called “Program to set up alternative producers within the Russian Federation”. Our registry of major products for each item should include at least two or three manufacturers with products of the same quality, but at a different cost”. “All I can say for sure is that we have to trust Russian producers, to support them and cherish, to work with them,” - concluded Lisin. 

Major of the participants concurred that for the development of the mechanical engineering industry and oil and gas services in face of sanctions policy it is crucial not only to place the foreign production facilities in the territory of the Russian Federation, but also to support and “grow” Russian producers, to improve the quality and safety of the products.

Additional information:
The National Oil and Gas Forum is the first national-level business event in the modern history of Russia, organized by the Russian Ministry of Energy in cooperation with leading entrepreneurial and industrial groups: the Russian Union of Industrialists and Entrepreneurs (RSPP), the Chamber of Commerce and Industry of the Russian Federation (CCI RF), the Union of Oil & Gas Producers of Russia and the Russian Gas Society.
This year the World Trade Center Moscow acted as a partner of the Second National Oil and Gas Forum.