Yury Neyelov, Yamal-Nenets Autonomous Region - Ямало-Ненецкий Автономный Округ
Release Date: 2009-06-11
You have been the Governor of the Yamalo-Nenetsk Autonomous Region (YaNAO) since 1996. Despite the crisis, Standard & Poor has ranked the region ВВ + long-term issuer and AА+ and ruАА+ according on the national rating scale, with a stable outlook. How has the region changed over the last decade?There have been quite a lot of changes and they are quite visible indeed. I am Yamal by origin; I was born in Salekhard, capital of Yamal, the only city in the world on the North Pole. I have always been acquainted with the problems and worries that my fellow citizens had during the past crisis. Enterprises were closing down, salaries were being delayed, and people started to flee from the region…Add here an extremely hard situation with housing, kindergartens and hospitals. There weren’t enough schools, and children had to study in shifts, in an Arctic region with polar nights. The situation required immediate action, and my team defined our two main priorities as: “Oil and gas should work for people” and “Yamal should be comfortable for living”.
We have achieved several breakthroughs in many directions: we developed contacts with energy companies which helped to improve the life standards of the local population; now people want to come here instead of fleeing from here. The social networks have been completely revamped: there are new schools and hospitals, and modern housing. In terms of the region’s demography, the total mortality rate in the region is 2.7 times lower than the Russian average, while our birth rate is the fourth highest in Russia; last year 7,772 children were born here; this is an absolute record for the last 10 years! This development has been backed by the local budget, as 80% of it is dedicated to social services. Many people visiting us, guests, have noted the comfortable living conditions here, in polar latitudes, and this speaks highly of the effort we have made. It means that we have achieved some results although there are still many issues to resolve. We know about all the remaining issues and we are tackling them systematically.
What distinguishes Yamalo-Nenetsk Autonomous Region from other Russian regions?
Yamal is an Arctic region, with all the consequences. What differentiate us here are not the severe frosts – as this is normal for the Far North - but the remoteness and inaccessibility of our territory. For this reason, transport is one of our priorities. Cities of the region have airports, train stations and motorways but it is much harder to connect settlements on the Yamal and Gydan peninsulas with Salekhard and Moscow. Airports suffer frequent blizzards and heavy fogs; there are no roads with solid covering; and river navigation, in some cases, lasts only 10-20 days per year. We can’t change the harsh Arctic climate but I’m sure that we can solve this issue if we join our forces.
What have the times of prosperity and high oil prices brought to the region in terms of modernization of its economy, and what has the current crisis affected most?
The “times of prosperity”, as you call them, have given us more confidence. We revived the social infrastructure and gave massive support for geological exploration that used to be virtually cut adrift. Thanks to state support, new fields of chromites, barites, gold and platinum were discovered in the Polar Ural, now the basis of a powerful Russian investment project – “Industrial Ural - Polar Ural”. This project is about creating a new mining base for Russia and integrating the southern industrial Ural regions with the massive northern mineral stock. We have also provided huge support for Yamal’s agribusiness - the core economic activity of the numerous native peoples of the Far North. Following the experience of Scandinavian countries, we developed venison and fish processing facilities. After complicated certification procedures we arranged the first foreign exports of Yamal products, and now Yamal venison is exported to Germany and Sweden. I believe that this is a brilliant example of how ancient northern livelihood can be integrated into modern market relations.
As for the consequences of the crisis, we had to turn down some long-term projects to try and keep all our social responsibilities. YaNAO is one of the few regions where projects like the industrial development of oil and gas fields of Yamal and the Industrial Ural - Polar Ural will drive the Russian economy as a whole, while at the same time providing real support of our industry and people.
YaNAO has abundant natural resources: 92% of the gas and 18% of the oil produced in Russia comes from here. What is the role of YaNAO on the Russian energy strategy and market? And how does the regional administration plan to use the rich resources to diversify the economy?
YaNAO was and remains the main gas production region of Russia and its importance in the long term will surely increase. Energy resources concentrated in YaNAO will remain irreplaceable for the next 10 years, as there are no other important oil and gas regions like Yamal, with developed resources of minerals and raw materials and a high industrial potential. Today there are 229 discovered oil and gas fields in Yamal, with 18 unique fields, whereas the whole country has only 25. We can also say that Yamal is also the richest region of the world in terms of hydrocarbons: its share in proved Russian reserves of hydrocarbons is 70% for gas and 18% for oil and condensate. Initial total resources of natural gas in the region (including the Kara Sea) are estimated as 125.3 trillion cu. m, with only 14 trillion cu. m produced today. It is just slightly more than 11% of the total resource base and about 30% of the industrial gas reserves of the region.
Apart from that, a powerful industrial base, combined with a developed gas transport system and highly-skilled human resources make YaNAO the key element of the Energy Strategy of Russia that envisages 680-730 billion cu. m of gas production by 2020; according to the most humble estimations, Yamal reserves allow a production of 630-650 billion cu. m of gas per year. The yearly capacity of our region in gas production can exceed 700 billion cu. m given full use of the reserves, implementation of advanced scientific technologies, mass-scale geological exploration and sufficient capacity of the gas pipeline.
Yamal gas is exported to Europe and CIS countries and accounts for the major share of Russian exports too. About 200 billion cu. m were exported in 2008. Besides, I would like to note that Yamal is the second region in Russia, after Khanty-Mansiysk Autonomous Region, for production of liquid hydrocarbons. This means that YaNAO will remain Russia’s power safeguard for many decades.
Gazprom plans to boost the sales of YNAO’s gas after the launch of Nord Stream pipeline in 2010, with a reported increase of its turnover by USD 9 mln per year. The benefit for Gazprom and the federal budget is evident, but what share of this amount will remain in the region? How can YaNAO add value to its natural resources before they leave the region?
The activity of the energy sector is of great social importance for YaNAO. Large oil and gas production companies are at the core of social and economic programs aimed at improving the local life standards with long-term projects of developing health, culture, education, employment and environment.
YaNAO is one of the major taxpayers among the Russian federal subjects. Most importantly, tax proceeds grew more than eight-fold over 2007 as compared to 2000, and the energy sector provides the major share of tax proceeds in the budget.
In brief, the main advantage of developing natural reserves is the systematic development of the local transport and industry, and the improvement of the local standards of living.
Novatek, second largest Russian gas producer, an independent leader in YaNAO, is headquartered in Salekhard. Are the conditions favorable in the region for the activity of other independent or foreign companies? What other companies would you like to see in YaNAO?
Yamal is open to all the interested energy companies, including small businesses. Any energy company, including independent companies, can operate on the local fields, if it complies with the federal and regional Law on Subsoil.
Today, Russian companies in Yamal operate on an equal basis with foreign companies: subsidiaries of ТNK-ВР, Enineftegaz, Eurotek Ltd., SeverEnergia. Companies with foreign investments account for about 25% of all the local subsoil users (producers).
Some of the better-known foreign service companies that cooperate with the local producers are Schlumberger and Achimgaz (a joint venture of Wintershall AG and Gazprom). Foreign companies use hi-tech equipment and innovative technologies, and we would like to see more independent hi-tech companies that ensure a comprehensive and rational approach to the development of Yamal-Nenetsk fields.
As most gas exports to Europe come from YaNAO, and Europe strives to reduce its dependence on Russian gas… What role does the region want to play in the European energy security and what steps have been taken in this direction? Is Europe’s stance something that worries you?
There is no other state that produces the amount of gas that is extracted every year in Yamal. As I have said, YaNAO was and remains at the heart of Russia’s Energy Strategy. The future development of the Russian power sector is directly connected with commissioning of deep drilling, as well as the development of the Yamal and Gydan peninsulas and the insufficiently explored Western and Eastern territories. One thing is certain: the massive hydrocarbon reserves of the region will suffice for many decades to guarantee stable gas supplies to Russia and abroad even if the consumption increases. That makes Yamal one of the core global and Russian centres of oil, gas and condensate production for the next 50 years. In this respect, Europe should have no concerns about Russia’s gas export.
Paradoxically, Yamal-Nenets, despite being the N1 O&G region of Russia is fully dependent on imports of energy resources… What is the reason for this? What is being done to deal with this situation? And how much is the financial crisis affecting investments in this sphere?
Firstly, I would like to note that the region is not tied to supplies of Russian power resources. There are seven oil and gas refining enterprises in Yamal: Gazprom Pererabotka Urengoy, Gubkin refinery, Noyabrsk refinery, Novatek-Yurkharovneftegaz (methanol production unit), Novatek-Purovsky refinery, Tarasovsky refinery, Purnefteprodukt refinery. Over 4 billion cu. m of associated oil gas, about 10 million t of gas condensate and about 57,000 t of oil have been produced in the region over 2008. The end products are sold both in the region and beyond. We plan to construct a few other refineries in the short term.
Besides, gas-powered power plants operate in Yamal for the local power industry and the local settlements, providing about 20% of total electricity consumption; the rest is purchased from the neighboring regions. The project of YaNAO energy development till 2020 envisages massive construction of new power generation facilities, transmission lines and substations. Thus, the energy strategy of Yamal is also aimed at reducing the dependence on external energy resources.
What would be your final message to strategic investors and companies interested in the future prospects of the region?
We, the Yamal people, want our region to flourish with a diversified and hi-tech economy, developed infrastructure, developed cities and healthy environment. And we’ll apply all the necessary efforts to achieve this. I’m happy to invite you to our wonderful region, the ‘gas Mecca’, the land of deer, and a spot of virgin nature and unique traditions. Yamal is open for honest partnerships and ready to consider all, even the most original, ideas and suggestions, and to implement new interesting projects.
| Company: | Yamal-Nenets Autonomous Region - Ямало-Ненецкий Автономный Округ |
| Position: | former Governor |
| Country: | Russian Federation |