We solve local tasks

– Mr. Makarov, tell us about ITERA’s activity in the Sverdlovsk region, please.

– We have been supplying the region for seven years already. It was for the first time in Russia when a private company undertook to provide the entire region with natural gas. No other company has yet dared to do so. When ITERA turned up, the Sverdlovsk Region consumed 13 BCM of gas per year. Currently, we supply annually 18 billion cubic meters of gas. In aggregate, we have supplied more than 100 BCM of natural gas, and no consumer in the region is short of gas.

Insolvency is in the past

– In my opinion, the experiment succeeded. In the beginning of our activity, the level of solvency in Sverdlovsk Region was 27%, however, by the end of 2004 it exceeded 100% due repayment of debts. Generally, the situation is similar throughout Russia, and we are not the exception.

– Do state financed organizations pay for gas in full?

– All insolvency problems are in the past. We supply gas to the budget organizations in compliance with the Federal Tariff Service’s prices. Unfortunately, it does not always go smoothly. There are situations when ITERA has to take a burden of somebody else’s liabilities, seek payment for gas supplied, virtually, crediting our consumers. Anyway, the company is prepared to do so, because ITERA is interested in the market stability and realizes its social responsibility.

– Do  you deal with gasification projects on your own?

– Yes, we have a dedicated company for gasification of Sverdlovsk region. We have laid 225 kilometers of gas pipelines to many settlements. In some projects ITERA owns the constructed gas pipelines, in some we act as a contractor.  I believe gasification is a profitable business at the moment. This leads to the growing number of ITERA consumers. As a result of our activity 265 new customers turned up in the Region. This number will grow, and we plan to supply 20-25 BCM of gas in 2 or 3 years. The price of gas grows progressively. Some of our clients already pay USD 50 for 1000 CM of gas. Although the current gas price is 2-3 times cheaper than that of coal and fuel oil. It is not fair. The gas price will obviously grow and our business profitability will rise as well.

– You buy part of gas for Sverdlovsk region from Gazprom.  Are there any governmental restrictions on the prices of gas sales?

– Indeed we used to buy some volume of Gazprom’s gas a while ago. But now we supply our own gas to the region or buy it from independent companies. Only Gazprom has restrictions to sell gas in the country at FTS’s prices. We can sell it with no limits. Nevertheless, the prices at which ITERA supplies gas to state-financed companies, population and public utilities sector are as low as the state regulated prices. Industrial consumers pay the market prices, which however do not considerably differ from the FTS’s level. It is more profitable for ITERA to sell its own gas than to buy it from other independent companies. Yet, we go for it to get the market ready. Our negotiations with Gazprom on Beregovoye field are approaching to the final stage.  Together with its satellites (Pireynoye and Zapadno-Zapolyarnoye), Beregovoye field’s annual gas capacity is 18-20 BCM. As soon as they are commissioned, we can cease buying gas from others.

Moral restrictions

– Why don’t other independent gas producers sell gas in the Sverdlovsk region themselves?

– Legally there are no restrictions. But, as I see it, there is moral factor. ITERA has built the market. When we worked with Turkmenian gas, we often paid for it by Sverdlovsk region enterprise production. Many companies in Sverdlovsk region avoided bankruptcy thanks to such payment model. I believe there must be some justice.  Throughout all these years we have been doing only positive things for the local consumers and no one had any claims.
I can tell, there were some negotiations between independent gas producers and Sverdlovsk region companies but, still, Sverdlovsk Region consumers prefer Uralsevergaz, whose shareholders being Sverdlovsk Region government and ITERA.

– In what other regions do you supply gas?

– ITERA supplies gas to several companies in the Moscow Region. We also supply gas to Georgia, Latvia and Estonia. In all these countries ITERA has interest in the local gas distribution companies.
Lately, ITERA, as well as Gazprom, paid close attention to heat and power generation, which is absolutely logical. About 60% of electricity in our country is generated from gas. Producers of raw material are eager to increase their profit by selling a more expensive product.  Of course, we cannot be compared to Gazprom, who acquires assets from RAO UES. Our ambition is to construct small power plants in Sverdlovsk and Moscow Region to satisfy local needs. Recently, ITERA has revamped several fuel boiler-houses in Sverdlovsk Region. We realized the importance of the matter and decided to create new capacities generating heat and electric energy. After the recent Moscow energy crisis many regional governors and industrial enterprises understood that safe energy supply could be achieved by small power plant construction.

– What price will trigger competition between fuels and make consumers save gas?

– Today, there is no gas deficit, but it does not mean that there is no need to save: sooner or later it will exhaust. In my opinion, when gas price is USD 80 dollars per 1000 CM, people would start saving. They would start upgrading outdated equipment and introducing energy saving technology. Ultimately it would considerably reduce the energy/output ratio in Russian industry. ITERA operates not only in Russia, but also in the USA. American consumers pay USD 400 dollars for 1000 CM of gas. Still they compete successfully with Russian producers both in price and quality of their products.  The energy/output ration in America is 4-5 times as low as in Russia. It may sound paradoxical, but gas price grow will bring positive effect for the Russian industry.

We agree with Gazprom

– What should be done to establish a premium gas market in Russia?

– As gas producers, we are interested in selling our gas to consumers based on the long-term contracts.  Besides, ITERA has a wide experience in working with “someone else’s” fuel, so our company could play an active role in the stock exchange. I share the opinion of Gazprom officials that in future an essential amount of gas will be sold through long-term contracts.  Small quantities trade through the exchange would indicate prices for long-term contracts.

– Are you ready to participate in the expansion of gas transportation system?

– We pay for the transportation based on the FTS’s tariffs that cover the maintenance costs. As for creation of new gas pipelines from our fields, ITERA is ready to construct it by itself. Afterwards, they will be transferred to Gazprom. The main issue is that the transportation tariff should let us return our investments. This model should be approved by the state and the problem will be solved.
Frankly, I am very glad that our relations with Gazprom are getting better. I hope, we will continue to work together for the country’s welfare. Gazprom will be solving global aims, whereas ITERA will tackle local tasks.

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