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G8 Energy Ministers

Ministerial and Other Meetings

Vladimir Putin's speech at Meeting with the G8 Energy Ministers
March 16, 2006, Moscow

• See Chair's Statement, March 16, 2006

Good afternoon, dear colleagues,

It gives me great pleasure to have this opportunity to meet with you. I hope that you have had substantial and professional discussions here in Moscow. 

There is no doubt today that energy is a crucial resource for socio-economic development and progress and that it has a direct impact on the well being of everyone living on this planet. This is why it gives us such great pleasure to receive you here in Moscow, you, the people who are responsible for energy policy in the G8 countries. This is a key sector in the world economy.

But we also see that development in this sector is very uneven and is subject to serious risks – political, economic and environmental risks. The issue of global energy security proposed by Russia is clearly not a choice dictated simply by the situation of the moment. It is clear that the situation in the world energy sector is a real challenge for us all, a challenge that we must respond to. It is by combining our efforts that we can respond most effectively. 

Our country, as you know, is the world's biggest gas exporter and the second-biggest exporter of oil and oil products, and we make a considerable contribution to ensuring global and regional energy security. We value our deserved reputation as a serious and responsible partner on the energy resources markets. 

Our production rate fell slightly last year but overall growth continues. In 2005, we produced 470,196 million tons of oil – a record since 1991. We also had a record gas production figure, exporting 152.4 billion cubic metres in 2005. This represented an 8-percent increase on 2004, and in oil production we had a 2.4-percent increase on 2004. 

Russia is steadily increasing production of oil, gas, coal and electricity. Russian energy companies are planning active expansion of their activities in the fast-growing liquefied gas sector. Our plans include not only raising production and increasing Russia's energy resource exports – our country is also ready to and wants to make its contribution to introducing new energy technology, new energy and resource conservation technology.

The State Duma is due in the coming months to examine and, I hope, pass important draft laws on natural resource extraction taxes and on new rules for mineral resource use, including the conditions for the participation of foreign capital. These draft laws aim at making doing business in the energy sector in Russia as comfortable, transparent and predictable as possible.

Russian companies are already carrying out projects of strategic importance for genuinely strengthening the global energy security system. We are looking at development of the major Shtokman gas field. Intensive work on the construction of the North European Gas Pipeline is now underway. We are working on the project to lay a pipeline from Eastern Siberia through to the Pacific coast, with a branch to the People's Republic of China.

This is just the first stage of projects that, I am absolutely certain, will make their benefits felt on the world energy markets very soon.

As I have said, it is of vital importance that we develop a common vision of the global energy security challenges we face and use this as a basis for defining the most effective solutions to the existing problems. Russia supports the entire international community uniting efforts in order to work together to resolve the whole range of tasks that we have before us.

Above all, these tasks are to guarantee supplies of traditional energy sources for the world economy on conditions that are acceptable for both producer and consumer countries, and to combat energy poverty.

These tasks also include diversifying and ensuring the security of energy supplies, including by taking measures to prevent the threat of terrorist attack, and also developing nuclear energy, energy conservation, and searching for new breakthrough technology and promising, environmentally friendly energy resources. 

We will propose concrete initiatives and proposals on all these issues at the G8 summit in St Petersburg. And we are ready to take full part in their practical implementation, including through our companies' financial participation, through state participation of our companies and, if needed, through the participation of the state itself.  

Gentlemen,

One of the keys to global energy security is a fair distribution of the risks among energy resource producers, transit service providers and consumers.

The energy market must be insured against unpredictability and its level of investment risk must be reduced. In other words, measures taken to ensure reliable supplies must be backed up by measures taken to ensure stable demand.

In our view this is the optimum way to harmonise the interests of all the players on the energy market.

To achieve this we must develop the corresponding instruments, in particular, long-term contracts between producers and consumers. First, this practice adequately takes into account the specific nature of investment in energy projects and the lengthy time frame before projects start to pay themselves off. Second, this practice puts in place the conditions for coordinating efforts to explore and develop new deposits, introduce new technology and means of delivering energy supplies to the consumers, and gives the consumers the confidence that they will receive the necessary quantity at the required time.

I think that mutually beneficial exchanges of assets between energy companies could play an important part in distributing the risks more evenly. This is one of the instruments that can help us ensure sustained optimisation of global energy supplies. We are already taking the first steps in this direction and are working in this area with our German partners. We are open to similar projects with energy companies from other countries. 

It is important to achieve compatibility of the standards of work for foreign companies on the markets of countries linked by energy flows in order to improve the investment climate. We need to ensure equal access to information on consumers and energy consumption and on plans and forecasts in this area. Open and predictable supply of energy resources should be matched by open and predictable energy resource demand. This formula creates a responsible interdependence that is in everyone's interests.

This position also fits with our basic argument that energy security is founded above all on effectively functioning global and regional energy markets. The market itself sets the balance between the different forms of contracts. The state can intervene only if the dominance of one form of contract is upsetting the market's ability to function effectively.

Of course, the state's role does not end here. The state is obliged to react to emergency circumstances on the energy market and, in our view, should also participate actively in creating the technological foundations for future energy sources, thermonuclear energy, for example. These tasks cannot be resolved effectively without the appropriate regulation at national level and in the international organisations.

In this context, I would like to say a few words separately about nuclear energy. The majority of the world's leading countries have recently announced very ambitious plans in the nuclear energy sector, and our country is among them. We plan to raise the share of nuclear energy in our electricity production to at least 20 percent during the initial phase. I know that the nuclear energy sector accounts for more than 80 percent of electricity production in France – 85 percent, I think the figure is. Even in Germany, where our colleagues had announced that they were going to wind up the country's nuclear energy programme, nuclear power plants currently produce around 28 percent of Germany's electricity – not a bad figure at all. The nuclear energy alternative must be accessible to other countries too, and this includes, of course, the developing countries.

We believe that our initiative to create a network of international uranium enrichment centres has good prospects ahead. Realising this initiative would not only help us to make progress in addressing the problem of energy poverty, but would also strengthen the nuclear technology non-proliferation regime, which we see as being of immense importance for international security. But in this respect it is just as important to also establish a system that would provide equal and non-discriminatory access to nuclear technology. 

The next issue is that specialists estimate that by 2030, up to 80 percent of global energy demand will nonetheless be met by hydrocarbon fuels. I draw your attention to this point and I know that you are just as aware of it as I am. The matter is not just to increase production and transport of these energy resources but also to develop environmentally friendly ways of producing this energy from non-traditional hydrocarbon sources. This requires us to make hydrocarbon energy effective, innovative and environmentally responsible. Increasing the share of refined hydrocarbon products in the international energy trade would also be a promising move and would bring added flexibility and thus greater stability to the global energy supply system.

We must also take steps to develop the production of energy using alternative and renewable resources, above all based on the use of new technology.

Our task is not just to ensure the necessary production volumes, however, but also to take needed measures to improve the demand structure. Making energy use more effective would reduce the risk of a gap between energy supply and demand. 

The environment is an important aspect of energy security. As we know and have said on many occasions, the extensive and consumerist approach to nature is a dead-end road. Ensuring that developing countries have reliable and affordable access to energy services should be an important part of our work together. The G8 is constantly addressing the problems of the developing countries and in this respect we must also address development problems regarding energy security and energy policy. Of course, energy alone is not enough to solve the poverty problem, but at the same time, insufficient energy resources are a serious obstacle to economic growth and their non-rational use can lead to environmental disasters that go far beyond the local scale and have consequences for the entire world.

We are able to provide the developing countries with real assistance in introducing effective and affordable energy technology, including technology based on renewable energy sources. 

In conclusion I would like to stress that we have today a unique opportunity to open a new chapter in global energy, a chapter that would see us move from one-off projects and bilateral dialogue to relations based on a global energy partnership. The G8 summit in St Petersburg will give us a good opportunity to begin this work and to define together a common approach to building an effective energy foundation for our civilisation in the long term.

Thank you for your attention.

Source: Official G8 Website of the Russian Federation


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