СПГ РУССКОЙ АРКТИКИ

GAZPROM - Alexey Miller briefs Dmitry Medvedev on Gazprom's efforts in import substitution and digital technologies

April 3, 2019 a working meeting took place between Dmitry Medvedev, Prime Minister of the Russian Federation, and Alexey Miller, Chairman of the Gazprom Management Committee.

Alexey Miller briefed Dmitry Medvedev on the Company's efforts in the field of import substitution and the implementation of digital technologies.

Shorthand record

Dmitry Medvedev: Mr. Miller, we usually discuss matters that are within the traditional purview of Gazprom, such as the fulfillment of obligations for gas supplies and the consumer debt that eventually accumulates. I suggest that we discuss something different today, namely issues related to import substitution. As Prime Minister, I head the Russian Commission on Import Substitution. As you know, we do extensive work on all fronts. Gazprom is a very big Russian company that has imported, which is to say purchased, large amounts of various industrial products. I would like to know about the way this work is organized at Gazprom right now, including its digital component.

Alexey Miller: Gazprom has been systematically working towards import substitution for many years. In 2018, domestic equipment and materials accounted for 99.7 per cent of our total procurements. As for pipes, we have been purchasing 100 per cent of those items from Russian manufacturers for several years now.

Our import substitution efforts have several dimensions. First of all, we conclude long-term contracts and futures contracts whereby domestic enterprises assume an obligation to organize batch production as part of the import substitution program, while Gazprom guarantees demand for the resulting products and is ready to buy them in the medium and long term.

These long-term arrangements involving the Government are made in the form of SPICs (special investment contracts) wherein the Ministry of Industry and Trade generates 100 per cent of demand for a specific product in the industry, namely in the oil and gas complex, and provides subsidies for industrial enterprises to manufacture such product under the import substitution program.

The regional dimension of our work is based on roadmaps we have signed with 22 constituent entities of the Russian Federation. Regional administrations undertake an obligation to present collective offers from local enterprises. Gazprom analyzes those offers. Recently, we reviewed 376 offers from enterprises under those 22 roadmaps. We also conducted comprehensive audits at 165 enterprises. As a result, over 500 types of products have been accepted for use by Gazprom. In order to advance our regional cooperation, we have signed trilateral agreements involving the Ministry of Industry and Trade under 5 out of 22 roadmaps. The Ministry has the same role and functions as in SPICs: to jointly support the enterprises designated as potential suppliers and to provide them with governmental assistance, to subsidize them.

An essential aspect of our work is the localization of equipment that has never been produced in Russia and has no domestic counterparts. For Gazprom, it is first and foremost the equipment used in the sectors that we are currently entering. Until recently, we were not very active in such areas as liquefied natural gas, gas processing, and shelf exploration. But with the passage of time, we have come to realize that Gazprom will pursue major projects in those areas in the medium and long term. Together with our domestic producers, especially the military-industrial complex, we are initiating timely work to localize the production of equipment for these sectors.

I would like to draw your attention to the separate efforts under the agreements with the military-industrial complex, including the state-owned Rostec Corporation. Of particular note is the enormous sci-tech potential of these domestic enterprises. Thanks to the agreements, this sci-tech potential contributes to the technological development of the gas sector.

During the annual St. Petersburg International Gas Forums, we traditionally host exhibitions showcasing new equipment the production of which has been launched by domestic manufacturers under the import substitution program. We have hosted such exhibitions in each of the past three years. In October 2018, we presented over 1,500 new prototypes of equipment delivered by Russian producers as part of the import substitution program. The overwhelming majority of those items fully meets the global technological standards and is one or even two generations ahead of them in many respects. So, we are witnessing not just import substitution but also technological development of the gas sector and our industry at large.

As for digitalization, we are working towards it, specifically towards the digitalization of the gas supply process and the implementation of the distributed ledger technology in our operations. Together with Gazprombank, we have developed a prototype of a technological platform to automate the process of concluding, monitoring and executing contracts. This system also provides for automated arbitrage and calculation of payments for gas. The system is completely open to all members of the contracting process. It is fully protected from tampering and unauthorized changes. Gazprom is currently ready to start implementing the process for automated support of contracting procedures regarding gas supplies. At the initial stage, this work will only concern major industrial consumers.

Dmitry Medvedev: The efforts you have mentioned are undoubtedly crucial to the development of the Russian industry, whether it is the creation of domestic equivalents or prototypes that surpass their foreign counterparts, or the use of modern digital technologies. I'm also referring to the Internet of things and the so-called distributed ledger technology, or blockchain. We're talking about completely specific applications of an advanced and cutting-edge technology that has been heavily discussed but often misunderstood in terms of its practical applicability and use. In this case, your example could be followed by other companies that are approaching this technology in one way or another. Especially when it comes to a large pool of consumers and standardized services with quality control, mutual obligations and, if necessary, accountability measures. I believe that this technology has a promising future in our industry and in the activities of companies like Gazprom.

-----