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Aleksandr Novak: Forecasting is unrewarding business

Russia’s energy minister in TASS special project Top Officials
Andrey Vandenko 
Andrey Vandenko

Andrey Vandenko was born on November 8, 1959 in Lugansk, Ukrainian SSR. In 1982, he graduated from the Taras Shevchenko National University of Kiev with a degree in journalism. Since 1989, he has been living and working in Moscow. For over 20 years, he has built his career as a journalist specializing in interviews. His work is published predominantly in Russia’s leading mass media outlets, and he is the recipient of numerous professional awards.

Part 1
On oil production freezes, shale reserves, freeloaders and bonuses


—  Are congratulations still pouring in for the extension of the OPEC agreement on output cuts?

The second try to clinch a deal was far easier, because we already had a record of previous joint work with our foreign partners to rely on. Besides, the market remains off balance, so the decision in favor of the extension that was adopted in Vienna on May 25 was a well expected one. The talks revolved mostly around the prolongation period and the volumes. Various options were considered: six, nine or twelve months. In the end, we managed to achieve unanimity.

— The joint statement you made together with your Saudi counterpart Khalid Al-Falih in Beijing on May 14 was a great surprise to many. As a result, Brent Crude prices instantly climbed 1.5%.

We had plans in advance for a meeting on the sidelines of the One Belt and One Road forum. We agreed to hold talks there on ways of stabilizing the oil market. Before Vienna, we were to get in touch with representatives of other countries and to persuade them to support our initiative.

Russia’s energy minister Alexander Novak, OPEC Secretary General Mohamed Barkindo and Saudi Arabia's Energy Minister Khalid Al-Falih in Vienna, Austria, May 25, 2017 AP Photo/Ronald Zak
Russia’s energy minister Alexander Novak, OPEC Secretary General Mohamed Barkindo and Saudi Arabia's Energy Minister Khalid Al-Falih in Vienna, Austria, May 25, 2017
© AP Photo/Ronald Zak

We had maintained contact with Mr. Al-Falih and his team before Beijing. We held a meeting during the holidays in early May…

— In whose territory was that?

Let us put it this way, it was a neutral venue in the Middle East. A reasonable, appropriate and well-coordinated decision was to be proposed to the market. Had we gathered in Vienna each sticking to one’s own stance, we would’ve been hopelessly bogged down in a prolonged debate, ending up empty-handed. So we had been gearing up for the Beijing meeting beforehand, and of course our president provided great support.

But first a consensus was to be achieved at home and positions adjusted and verified. Consultations with the heads of the country’s largest companies were conducted.

A variety of possibilities was looked at. At the first stage, it was stipulated that an agreement to cut output might be prolonged for six months. That’s what was agreed on in Vienna in December 2016. Given the current realities, though, it would’ve suited nobody, because the agreement would have to have been abandoned during the winter, when demand usually suffers the worst slump. During this time of the year, demand usually stands at one and a half to two million barrels below that of the summer season. Had a large amount of crude emerged on the market at that particular moment, a collapse would have been imminent, with the risk of oil prices plummeting below $30 per barrel.

There was unity that the deal should be prolonged at least for nine months. Everybody, including our Saudi partners, agreed. We managed to persuade them that it would make no sense at all to prolong the deal for a shorter period. Otherwise, we would begin to be asked in a month’s time what would happen next, right after New Year’s. Such uncertainty is no good for the market.

The strategic task is to cause world oil stocks to shrink to a five-year average. That’s approximately three billion barrels.

During the crisis, stocks of crude oil climbed to 3.3 billion barrels. This surplus is to be cut by all means. Demand is already above supply today. During the time that the agreement has been in effect, oil stockpiles dwindled by about 70 million barrels. With that in mind, we should keep moving on in this direction.

According to our estimates, crude stocks will be down by a hundred million barrels by July 1. In the second half of 2017 and the first quarter of 2018, oil stocks will fall by another 200 million.

— What about the shale oil factor?

This risk is not so great as it might seem to many. The situation is to be looked at in the long term and comprehensively. We operate in a market environment, aren’t we, and shale oil is just one of the many sources of meeting the demand. The demand for oil keeps growing. This year it ups approximately 1.3 million barrels a day, and a 1.2-million-barrel growth is expected next year. Analysts say the growth in demand in the next 10-15 years will be no smaller than a million barrels a year.

It is obvious that shale oil will be unable to satisfy the increasing demand. Take a look at a sprinter running the 100-meter dash.
First, there is a rapid acceleration, then, a stable speed has to be maintained during the better part of the distance so as to not fall behind.  Shale oil production got off to a quick start. By now it has almost achieved the cruise speed phase, if you wish. To maintain production at the current level considerable efforts will have to be exerted – more investment, more reserves, more fields… I believe that shale oil production will remain in the acceleration phase this year and next year, while by 2019-2020 it will be very hard to keep up maintaining the original pace.
Shale oil today accounts for 6.5 million barrels of the total 95 million barrels produced daily around the world. Even if its production rose to nine million or even 10 million barrels a day, nothing tragic for the market would happen.

 Russia's Energy Minister Alexander Novak at the 2016 Sochi International Investment Forum Kirill Kukhmar/TASS
Russia's Energy Minister Alexander Novak at the 2016 Sochi International Investment Forum
© Kirill Kukhmar/TASS

In the meantime, there are far greater problems to tackle. Production at traditional deposits has been declining by four percent on the average year in year out. Last year’s surplus of newly-explored reserves was the lowest in 70 years – just 2.4 billion barrels. Earlier, in 2001-2015 the annual growth averaged 9 billion barrels. Investment into the industry slumped by half a trillion dollars over the past three years and the number of final investment decisions on oil projects is also at a several decades’ record-low. This poses considerable risks to the stability of energy supply in the future. In fact, this explains why we sought to achieve joint concerted action in Qatar back last spring.

— That first attempt was aborted. In April 2016, the agreement to cut outputs remained unsigned, although the odds had looked quite favorable. You set off for Doha in a rather cheerful mood, but then…

Quite right. First, we made rapid headway in the right direction. A minister-level meeting in February showed that four countries, including the two largest world exporters of crude – Saudi Arabia and Russia - and also Qatar and Venezuela, were close to concluding an agreement to freeze production growth. The issue on the agenda was only a freeze, nothing more than that. At that time, such a step would have been enough for crude surplus to leave the market and the situation to regain stability.


Let me say once again, our task is not to mechanically raise prices

Let me say once again, our task is not to mechanically raise prices. We are to keep the market in balance. Prices are a derivative. In the autumn of 2016, oil was trading at $27 per barrel, but it may well have slumped to $15. This is not exactly what one would call a fair price, though. Oil market profiteers deliberately went bearish and opened many short positions. Far more than usual, as their aim was to push prices down as low as possible with the goal of eventually skimming off the cream. Naturally, this could not go on indefinitely. Prices would surely bounce back sooner or later, but still not significantly enough from the standpoint of the investment process and future supply. At least, in the context of existing production costs and the need for satisfying current requirements and future supply.

What was the meaning of the proposed freeze deal? It provided guarantees for certain stability and clarity as to what market participants might expect in the future. This type of understanding is extremely important for making decisions in the long term. When prices fluctuate (today they may soar and tomorrow plummet), uncertainty breeds chaos and leaves no opportunities for strategic planning.

In Qatar, in February the four countries agreed to everything in principle and decided to conduct a preparatory meeting with the other participants within six weeks’ time. Delegates from 18 countries – 11 OPEC members and seven non-affiliates - gathered in Doha in April. A memorandum slated for adoption had been drafted beforehand. On April 16, literally on the eve of the meeting, the experts finalized its wording.

Everybody was certain that the memo would be signed the next day - a sheer formality. Regrettably, one of our partners changed his mind at the very last minute, which came as an utter surprise to many others.

The lack of consensus played a bad role and no agreement was concluded


— Then it looked like another try would never follow. That the declared goal was unachievable.

We realized that the issue would have to be tackled sooner or later. There was no escaping it. Prices remained volatile and investment was dwindling. A dialogue was resumed with the newly appointed Saudi minister, Al-Falih. We began discussing a future deal and its framework in detail.

— When did you meet for the first time?

First, we held some informal meetings, off the record. The government ministers concerned were to arrive in Algeria for an annual energy forum at the end of September 2016. We agreed to discuss further steps in a broad format, for which a large amount of homework had to be done. In early September, Mr. Al-Falih and I met on the sidelines of the G20 summit. We inked a joint statement on cooperation between the two ministries and on coordinating market policies. It was a crucial sign for everybody else: Russia and Saudi Arabia had returned to the negotiating table. Our countries are the market’s key players. It sent a clear message to everybody else. Russia was then in talks with those oil producing countries it had been on friendly terms historically: Azerbaijan, Kazakhstan, Mexico and Iran… Disagreements between certain countries remained. We were very keen to help them narrow their differences. We met each other very often during that period, literally every week.

We realized that the issue would have to be tackled sooner or later. There was no escaping it. Prices remained volatile and investment was dwindling. A dialogue was resumed with the newly appointed Saudi minister, Al-Falih. We began discussing a future deal and its framework in detail.

Russian Energy Minister Alexander Novak at the 15th International Energy Forum Ministerial meeting in Algeria, 2016 AP Photo/Sidali Djarboub
Russian Energy Minister Alexander Novak at the 15th International Energy Forum Ministerial meeting in Algeria, 2016
© AP Photo/Sidali Djarboub

— Khalid Al-Falih said he was going to accept your invitation to visit the Arctic and Siberia. Where will you take your guest?

To begin with we decided to show him around the newly-built LNG plant in the north of the Yamal Peninsula. This is a unique project being implemented in the harsh Arctic climate.

Last October, we traveled to Saudi Arabia, where we had a tour of various facilities, including offshore rigs in the Persian Gulf. Now it is our turn to welcome guests. I do hope that this summer Al-Falih will be able to see for himself some places where oil is produced in Western and Eastern Siberia: Talakan, Vankor, and Surgut…

— Will it be just a sightseeing trip or do you hope to make the Saudis interested in some specific projects?

We are hoping to cooperate in the future. A joint working group has been created for that. Saudi Arabia runs several full-fledged research centers focused on oil refining.

— It goes without saying that Russia’s decision to cut outputs was a political one. But in what way were the 300,000 barrels distributed inside the country? There were hardly any volunteers ready to make such sacrifices.


Rosneft oil rig drilling the first exploration well in the Khatanga Bay  Vladimir Smirnov/TASS
Rosneft oil rig drilling the first exploration well in the Khatanga Bay
© Vladimir Smirnov/TASS

The approach was simple. Naturally, no oil producer was eager to assume any extra burden that the production cuts would entail. At a meeting with the heads of 12 oil majors it was agreed that each of them would their adjust production plans starting from October 2016 by an amount proportionate to their share in the overall national production. In other words, the companies agreed to assume proportional obligations. The pattern was fair and transparent. Of course, everybody keeps an eye on one another to be sure the voluntary pledges are complied with and there are no cheaters or freeloaders.


— And who was the hardest-hit in real terms?

I would avoid using the verb “hit”, because all of our companies have felt the positive effects of this deal. Lower outputs and compensation obtained as a result of price hikes unequivocally work for the government budget, the economy, and, consequently, for the companies themselves. Let me say once again: stabilization benefits all.

— Will quotas inside the country undergo any change now that the agreement has been prolonged?

No, the burden’s distribution will remain at the previous level. It is proportionate to outputs. This formula is the fairest of all. True, each company has certain nuances. Some had been building up production and now had to make more significant cuts. Others, on the contrary, had had the intention to keep production unchanged or even reduce outputs. The latter found it easier to join the process.

As far as specific statistics is concerned, it is common knowledge that Russia’s largest oil company is Rosneft. It accounts for about 40% of the country’s oil production. Other companies’ parameters are lower, but all of them stick to their reduction pledges. We monitor this. The Energy Ministry holds daily meetings with the oil companies’ representatives. It is noteworthy that the pattern works without any special instructions issued. We, a government ministry, support this measure, but it was a voluntary choice of the companies concerned.

— What if somebody breaks the rules? Do you have any leverage at hand to call the abusers to order?

There can be no such leverage. It is not a cartel deal, but an independent decision by individual market participants.

— Have you gauged the economic effects of the decision to prolong the output cuts deal?

We entered into negotiations last year. The barrel’s price jumped to $50-$60 on expectations.

But for the agreement signed late last year and prolonged this year, the price would have certainly sunk to below 40 dpb. The gain our joint measures earned us is approximately 15-20 dpb on one barrel of crude. My arithmetic tells me this: Russia produces 11 million barrels a day. That’s an extra revenue of no less than $110 million. Clearly, the amount is distributed among the federal budget and the companies, but the bulk of these incomes goes to the treasury, because we have progressive taxation: the higher the price, the greater the deductions.

The prices as they are, Russia’s budget this year is to receive a surplus of one trillion rubles in contrast to the expected target. The monthly surplus from January to May is one hundred billion. As you may know, the budget is undergoing an upward adjustment.

Part 2
On forecasts, 2018 World Football Cup, waste heaps and favorite game


— Are you often asked to make a forecast?

At least once a day. Sometimes more.

— And what do you say in reply?

I say what’s on my mind. Mind you, any forecast is a very unrewarding business. Forecasts seldom come true. Even such reliable foreign services as the International Energy Agency, with its many years of experience and a colossal data base, often makes mistakes.

The probability of error ranges 30% to 75%.

It may be a tiresome task to answer the same question again and again, but I have to. That’s part of my job. So I keep explaining patiently and politely.

— Since we are on the subject of forecasts, a question to you as a great sports devotee. And an athlete. Would you dare predict who will grab the 2018 World Football Cup?

I can confess nobody has ever asked me questions like that… It is true that I love sports, but I am no specialist as far as football is concerned to make competent and well-reasoned judgements. I am an amateur. There are several top level teams in the world that traditionally contest the world title. Such as Germany, Brazil, Italy, Spain, France and Argentina…

Guessing a future World Football Cup winner is far easier than to predict the price of oil

That’s for certain. Surprises are possible, of course, but very unlikely.

I do hope the Russian national squad will make a miracle happen, but our fans will stand to win in any case, because they will be able to see the best footballers in action, and not on television, but in real life.

— What team do you support? Apart from Russia, of course?

I’ve long had a liking to Brazil, Spain, Germany and Argentina. Just as many millions of other fans around the world. I’m very predictable in this respect.

I started watching football when I was in my first years in school. I remember very well the 1982 World Cup in Italy, the brilliant Brazilian squad and such stars as Zico and Socrates… Then there was the 1986 World Football Cup in Mexico, where the Soviet team knocked out strong Hungary only to suffer a controversial and resentful defeat to Belgium.

I watched those games in the company of my friends. At that time I already started playing basketball. Each year I spent three months in a summer sports camp. In our room we kept a World Cup schedule on the wall. We marked the results of the games played and the scores.

And in the Soviet Union’s national championship I always kept my fingers crossed for the coalminers’ team Shakhtyor, of Donetsk. Donbass is my birthplace after all.

— To be more precise, your birthplace is Avdeyevka, which these days is often mentioned in news reports from the area of hostilities. For how long did you live there?

My parents moved to Norilsk when I was seven. But we kept visiting the Donetsk Region often. Up to my fifth year in school I spent each summer in Avdeyevka. I can say that I know that part of southeastern Ukraine well enough.

— So the first mountains you saw in your life were the coal pit heaps, weren’t they?

I did see the pit heaps there often. Not in Avdeyevka, though. There are no coalmines in the area. Avdeyevka is the site of a large coke plant, where my father was a power engineer and my mother, an accountant…

— Do you have any relatives there?

On my mother’s side. She is from a large family where there were four sisters. Two of them still live in the Donetsk Region. I guess I haven’t been to Donbass since the early 2000s, when my grandmas passed away.

The parents’ original intention was to stay in Norilsk for no more than three years. In the end they spent two decades there. At that moment one of the Soviet Union’s largest copper and nickel deposits – Talnakh – was discover there.

The local mining and metallurgical combine – an employer of 150,000 – got a second wind. Tens of thousands of young men and women responded to the Young Communist League’s recruitment campaign. My parents were among them. It was so natural in those days! They kept working there till retirement. They did not return to Ukraine, though, but preferred to settle down in southern Russia. They’ve lived in Sochi ever since.

My sister and I finished school in Norilsk. There was a choice: to go to Moscow or to stay at home to apply for a local industrial institute, which trained specialists for the Norilsk Combine. My first intention was to apply for the economics department of the Moscow State University. I even wrote letters to the University’s admission board, received replies from them and took some distance tests. In a word, the Moscow State University was my first goal, but in 1988, when I graduated from school, the local industrial institute opened an economics department of its own. That moment decided it all.

I believe I made the right choice, because already in my student years I was able to undergo on-the-job training, to gain in-depth knowledge of how an industrial giant’s economy works and to obtain hands-on experience. The emergence of an economics department at the Norilsk institute played a major role in my life.

— You can easily say things like that now, as you look back on the years gone by. But I reckon the decision against going to Moscow was not so easy to make then, right?

No, I had no doubts or regrets in those days. First, it was education that I sought, and not a career in Moscow. Second, there was another major circumstance. I wished to go on playing basketball, which had been a hobby of mine since boyhood. At the institute we had a great team.

Throughout my student years I not so much studied as played basketball

We managed to find enough time for everything – to study, to go to work, and to play in different competitions across the nation. It was a three-in-one lifestyle.

— When did you develop addiction to basketball?

In my fifth year in school I managed to get into Norilsk’s sports school for teenagers and youth. We then moved from one district of the city to another. I had to change schools. It so happened that a coach there was selecting boys for his basketball group. That man, Yuri Yurchenko, trained many good athletes who would play at a very decent level, including the national team. For instance, Aleksandr Meleshkin and Maksim Kropachyov played for Vladimir Gomelsky’s CSKA. One can still see them in the basketball court from time to time in veteran teams’ encounters.

Russia’s Energy Minister Alexander Novak takes part in a charity basketball match at Dynamo Sports Palace, 2017 Valery Sharifulin/TASS
Russia’s Energy Minister Alexander Novak takes part in a charity basketball match at Dynamo Sports Palace, 2017
© Valery Sharifulin/TASS

In a word, my sports career was firmly placed in the hands of an excellent professional. On the basis of the school class Yurchenko would eventually form the city’s own team of our age group. We toured the whole country – Moscow, Kiev, the Baltic republics, Cherepovets, Omsk and Novosibirsk. First, I was the playmaker. Later, in the student team, I played as a forward.

— How tall are you?

Six feet two. A very moderate height for a basketball player, to say the least. Yet at a certain moment I even fancied myself a professional basketballer. I still love the game and I play in various amateur competitions whenever the opportunity offers itself.

— And the games you play are not amateurish give-away affairs, aren’t they?

By no means. On the basketball pitch all is always very serious, even between amateurs. There is no place for ranks or titles. All are equal.

— What’s your favorite club?

The CSKA. Since I was a little kid. For the past ten years the team has regularly qualified for the EuroLeague’s Final Four. I try not to miss the decisive matches.

— I’m told that you did not miss a chance to go to an NBA match in Houston last March.

For everyone who plays basketball and loves this sport a chance to see an NBA match at the stadium live is almost a lifetime occasion. In my younger days I could not have even dreamed about that.

Part 3
On CERAWeek, refusal to accept OPEC chief’s invitation, relations with oil industry captains and alternatives


— Ok, the fitness break is over, let’s get back to business. After all, you made that trip to Houston not for a basketball match, but for the CERAWeek.

Right, it is the world’s largest oil and gas conference. We had been absent from it for a long time. We hoped to be there in 2014, but the trip was disrupted for the well-known reasons… This year the need emerged for presenting Russia, for showing the investment attractiveness of our fuel and energy sector, and for giving our companies a chance to display their potential at a high level.

There were some fifty Russian delegates, including Zarubezhneft chief Sergey Kudryashov, Sibur’s Dmitry Konov, Rosgeologiya’s Roman Panov, Irkutsk Oil Company’s Nikolai Buinov, Transneft’s Mikhail Margelov, Gazprom Neft’s Vadim Yakovlev and the heads of other large companies. The way I see it, we managed to attain our aims. There was great interest. The IHS’s Dan Yergin, who in fact established the conference back in 1982, and yours truly opened the CERAWeek.

There were meetings with representatives of major international investment funds. We answered a lot of questions about what was happening in terms of the development of the economy and energy. There was a special Russian breakfast, where in cooperation with the heads of our companies we presented potentially lucrative projects.

— What was on the breakfast’s menu? Pancakes and black caviar?

It is up to the organizers to make all technical arrangements for such an event. We were responsible for the content. The task was to select speakers and gather guests. Russia enjoyed great attention at the forum. We were very pleased to see there were no abstract questions. All discussions concerned specific business matters.

As for sanctions, most participants in the discussion agreed that they do not benefit anybody

— Why, there must be some who derive benefits from them. Otherwise the sanctions would’ve been long gone.

Artificial restrictions are obviously not in the interests of many of those who gathered in Houston. Both US and European companies are barred from the process and remain in an inferior position to their Asian and Middle Eastern counterparts, which have retained an opportunity to operate in Russia as usual, to participate in projects and to make profits. We heard quite a few statements to that effect made at CERAWeek.

And why did you deny reciprocity to OPEC Secretary-General Mohammed Barkindo, when he said that Russia deserved the right to automatic admission to OPEC as a full-fledged member? Your answer to that invitation was a polite “No, thank you.”

You should’ve heard and seen the way that proposal was made. Mr. Barkindo was looking at me and smiling.

— Are you trying to tell me he was speaking tongue in cheek?

The reporters took that too seriously, regardless of the context. Such news travels fast… In reality we had established a very good relationship with the OPEC chief and I reacted to his statement precisely the way that I had been expected to: with a hefty pinch of humor.

If you look at the facts and their sequence, it was Mr. Yergin, who ran the show. At the opening of the CERAWeek he asked me if Russia had any intention of applying for OPEC membership. I replied we had never considered this possibility in practical terms, because we see no reason why we should participate in any cartel. Russia does not need that. The mode of doing business that exists at the forum of gas exporting countries, to which we are affiliated is far closer to us. It is rather a site for discussing the current state of affairs, evaluating the market’s outlook and drafting analytical surveys on the basis of the information the participants provide. The way I see it, it is possible to agree on lowering or raising oil outputs, but sometimes action has to be taken to return the market to a sound condition. In the long-term perspective, though, the market should remain a self-sustaining machinery.

 — In the past we refused to discuss output cuts because controlling production is a technically tricky business. Now we’ve easily agreed to reduce production. How would you explain that?

I remain certain that it is very hard for us to control production artificially. We began to cut outputs not on January 1, 2017, but much later. Sometime was to be spent on preparations.

A large share of Russian oil is produced in the Arctic or in sub-Arctic regions. The technological conditions as they are, a freeze on production would require the existing oil wells will have to be shut down or new ones stop to be drilled. Once you do that, production will be impossible to restore in some places.

The companies are free to decide: some shut down low flowrate wells, while others reduce operation drilling and in this way gradually achieve the agreed parameters. We are not Saudi Arabia, we are unable to turn the oil taps to instantly reduce oil production by ten percent and then turn them back again the next day. We have to operate within far stricter limits. In January, we cut production by 117,000 barrels a day, in February, by 123,000 barrels, in March, by 200,000, and in April by 300,000 barrels. It was a step-by-step downgrade that lasted for four months. We achieved the target level in April and have stuck to it starting from May.

— How do you go about the business of relations with the oil industry captains?

We work together in an ordinary mode. Our cooperation has been quite constructive, I believe. We hold general conference meetings several times a year to discuss outstanding issues and decide what is to be done to keep the industry moving onwards.

— Where do you hold such meetings?

Russia’s energy minister Aleksandr Novak and journalist Andrei Vandenko Stoyan Vasev/TASS
Russia’s energy minister Aleksandr Novak and journalist Andrei Vandenko
© Stoyan Vasev/TASS

Here, at this office where we are at the moment. Also, there are special board meetings at the ministry to which representatives from the leading players on the Russian market, not the oil market only, but the electric power market, too, are invited.

— You’ve now spent five years in office, but before that the energy industry was not exactly your cup of tea.

It depends on how you look at it. I led the government of a large territory of Russia. The Krasnoyarsk Territory has everything – electric power, oil production, coal mining and what not. Before that I was Norilsk’s first deputy mayor. The city is the largest inside the Arctic Circle. At Russia’s Ministry of Finance I oversaw the financing of the real sector of the economy. Energy, industry, agriculture and transport were within the range of my competences. We invariably got into the details. I attended Cabinet meetings. So the energy industry was not totally unfamiliar to me.

— And what made you abandon your industrial career and enter the civil service?

Honestly, I’d always thought that my professional activity would be linked with the Norilsk Combine somehow. At a certain point the city’s authorities underwent change and a new team of managers began to take shape. The Norilsk Combine had been the nearby city’s backbone all along, so it shared personnel for developing Norilsk as a municipality. In 2002, Aleksandr Khloponin invited me to Krasnoyarsk to take the deputy governor’s post. Saying good-bye to Norilsk was not easy. The city seemed reluctant to let me go, too. It took me no less than a year to settle down “on the mainland.” No words can explain it. However harsh the Arctic climate may look, in Norilsk I felt myself at home and quite comfortable. True, the weather and the climate may not look quite friendly, to say the least.

But for the northerners it’s just normal – the harsher, the better

No snowfalls or blizzards were able to scare us.

— Why do you call it “black”?

It might get so strong you could not see a thing just five yards away. Literally. I’m not exaggerating. A couple of times I had to stay at my office at the Combine for the night, because they was no way of getting back home.

— And what caused you to become a Moscow University student already when you were over 30 years of age and had a deputy governor’s post on your work record?

Let me disappoint you, I’m not romantic at all to indulge in this sort of dreams. The Moscow State University opened a Higher School of Public Administration.

— You say you found it hard to get used to life in Krasnoyarsk. How about your transfer to Moscow then?

Professionally I settled down relatively easily and quickly. It so happened that I was appointed deputy minister in the middle of September 2008. The economic crisis followed later in the same month. It’s easy to guess that the Russian Ministry of Finance was working under tremendous pressures. An anti-crisis program had to be developed and implemented virtually in no time. We kept working round-the-clock with no days off.

— Have you ever stopped to think how much time you spend on business trips?

That’s part of my job. The industry is a high-profile one. It takes a key place on the international agenda.

— How do you distribute your time at work among the fuel and energy industries?

I believe that international issues take up thirty percent of my schedule.

As far as the oil and gas and the electric power concerned, they require approximately equal attention. They are mammoth sectors of the economy that need unflagging care. But oil and gas are a free market sector to a greater extent, while electric power production is largely government-controlled. And it is the ministry’s job to set the rules.

The coal industry is entirely a free market one. There is not a single government-run enterprise. It operates entirely on its own. Our job is to reorganize old enterprises, develop infrastructures and export products.

— And do you have the stamina for overseeing alternative power sources as well?

Why, naturally. We do support this line of business. True, for now its share in the overall power production is not as significant as in some other countries. We hope to have an estimated 8-9 GW of renewable power capacity by 2024.

— Aren’t we way behind the rest of the world?

We are quite competitive. Our know-hows, in particular, those for the production of solar cell panels, take the leading place in the world from the standpoint of efficiency.

— Is there life after oil and gas? What do you think?

It is a well-established fact that the fuel and energy balance has been changing in an evolutionary way, and not a revolutionary one. The share of hydrocarbons will remain steady on the descent. Currently it stands at 80%.

According to our estimates it will be down to 75% by 2050. Yet, this is a very large share. In 30-35 years from now the world’s power consumption will soar at least by a third. This will require a colossal additional amount of energy, which no alternative sources of power will ever be able to provide.

Planet Earth is home to about 7.5 billion, including two billion deprived of full-fledged access to electricity and other sources of energy, such as gas or coal. In thirty years’ time the world’s population will be up to ten billion. All these people will have to be provided with at least basic essentials.

I believe that there can be no life without oil and gas at least for another several decades

The more so, since already now both are considered not just as sources of energy, but as raw materials for the production of a great variety of goods. Already now eight in ten manufactured items are made from hydrocarbons. Petrochemistry and gas chemistry are the industries of the future.

True, progress in science and engineering will go on. Advanced power sources, including renewable ones, will be expanding their niche. Possibly, some fundamentally new ones that humanity is still unable to guess will emerge. We work hard to keep abreast of the latest achievements.

Andrey Vandenko