ANATOLY YANOVSKYDEPUTY MINISTER OF ENERGY OF THE RUSSIAN FEDERATION

Brussels, March 2012

1994 – Signing of the Agreement on Russia-EU Partnership and Cooperation and its entry into force in 1997 (for the initial period of 10 years and to be prolonged by default)

2000 – The decision of Russia-EU summit on creating of Russia-EU Energy Dialogue2001 – Creation of Thematic groups of Russia-EU Energy Dialogue2001 – Approval of the Nord Stream projects, Shtockman field development, and the system of

Yamal-Europe gas pipeline within the scope of Russia-EU Energy Dialogue at the Russia-EU summit.

2001 – Identification of the projects of Nord Stream, Shtockman field, Yamal-Europe as the “common interest” projects and support of the construction project for Burgas-Alexandroupolis oil pipeline (First joint Synthesis Report on Russia-EU-Energy Dialogue, 2001)

2005 – Adoption of the Road Map for the Russia-EU Common Economic Space2005 – First Meeting of the Energy Permanent Partnership Council (PPC) at the ministerial level2007 – Assigning the TEN-E status to the Nord Stream project, beginning of construction of the first

line in 2009, completion in 20112009 – Decision on the beginning of discussions on the New Framework Agreement2009 – Signing of the Memorandum on the Early Warning Mechanism2010 – Anniversary Conference “Russia-EU Energy Dialogue”2010 – Adoption of a Joint Statement on initiative “Partnership for Modernization”2011 – Meeting of the Government of the Russian Federation with European Commission, signing of

the Memorandum on the Early Warning Mechanism and Overcoming Emergency Situations in the Energy Sector, the Joint Statement on Information Exchange, the Joint Statement on Creating a Mechanism to assess future Trends in the Gas Markets, Common Understanding on the Preparation of the Road Map of the EU- Russia Energy Cooperation until 2050.

Chronology of EU-Russia Cooperation and the Energy Dialogue

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Evolution of EU Energy Policy

1994 – Signing of the Corfu Declaration – distribution of market shares (quotes) between internal and external suppliers of uranium products

1998 – Adoption of Directive 1998/30/ЕС concerning common rules for the internal market in natural gas

2003 – Adoption of Directives 2003/54/ЕС , 2003/55/ЕС concerning common rules for the internal market in natural gas and electricity market (second energy package)

2005 – signing of the Treaty establishing the Energy Community

2009 – Adoption of Directives 2009/72/ЕС , 2009/73/ЕС concerning common rules for the internal market in natural gas and electricity (third energy package)

2009   – Official startup of the Eastern Partnership initiative in the development of the European Neighborhood Policy (Ukraine , Moldova, Azerbaijan, Armenia, Georgia and Belarus)

2010 – Communication 'Energy infrastructure priorities for 2020 and beyond’

2010 – Adoption of EU Energy Strategy until 2020 (20/20/20)

2011– Creation of the Agency for the Cooperation of Energy Regulators

2011– Adoption of the Road map for EU development until 2050 3

Evolution of Russian Energy Policy

1993-1997 – Privatization of oil industry

1993-1997 – Privatization of coal industry

1994 – Signing the Energy Charter Treaty (termination 2009)

1995 – Law on PSA (amendments 1999-2011)

2001-2011 – Russian electricity reform (incl. VICs unbundling, facilities privatization)

2003 – Energy strategy until 2020

2008 – Law On Foreign Investments In Strategic Areas (Legal framework, establishment of Government

commission and Business Consulting Council, new law amendments – 1st and 2nd packages, 2011)

2009 – Energy strategy until 2030

2010-2011 – System of strategic and program documents (General scheme of development of the gas

industry up to 2030; General scheme of electric energy objects placement until 2020 – 2030; General

scheme of development of the oil industry until 2020; Long-term program of the development of the

coal industry until 2030; State energy efficiency and energy saving program until 2020)

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CoordinatorsS. Shmatko – Minister of Energy of the Russian

Federation

G.H. Oettinger – Commissioner for Energy

CoordinatorsS. Shmatko – Minister of Energy of the Russian

Federation

G.H. Oettinger – Commissioner for Energy

Delegated CoordinatorsA.Yanovsky - Deputy Minister of Energy of the Russian Federation

P.Lowe – Director General, DG Energy

Delegated CoordinatorsA.Yanovsky - Deputy Minister of Energy of the Russian Federation

P.Lowe – Director General, DG Energy

Thematic group on energy markets and strategies

Thematic group on energy markets and strategies

Subgroup on scenarios and

forecasts

Subgroup on scenarios and

forecasts

Thematic group on energy efficiency and innovationsThematic group on energy efficiency and innovations

Thematic group on electricity

Thematic group on electricity

Thematic group on nuclear energyThematic group

on nuclear energyGas Advisory

Council

Informal EU-Russia Consultations on Gas Issues

Partnership for modernization

Subgroup on the Roadmap of the EU-Russia Energy Cooperation until 2050

Subgroup on the Roadmap of the EU-Russia Energy Cooperation until 2050

Advisory bodies and mechanisms of partnership

Structure of the EU-Russia Energy Dialogue

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COOPERATION:

Phases Results Mechanisms Institutions

2011-2020

2021-2030

2031-2050

FORMAT PROBLEMS

How to construct the mutual part of our energy future?

Which part of uncertainty could and should be thus diminished?

How to create the pathway to this future?

How efficient may be results of our cooperation along this pathway?

How to prevent this pathway from being destroyed by our policies?

How to combine the flexibility and definiteness of the pathway?

Aim - to make visible and facilitate the realization of the potential for long-term cooperation in energy sphere •The EU and Russian energy policies are different, but there do exist such areas where these policies converge and thereby mutually explored and mutually beneficial synergies may arise• The Roadmap should include necessary milestones and consider its practical realization issues• The adopted Roadmap should provide for some kind of generalized work plan of the EU-Russia Energy Dialog activities

EU-Russia Energy Cooperation Roadmap

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APPROACH

European Companies’ Assets in Russia

Electric power industry• E. ON – 78.3% in OGK-4, OJSC• Enel – 56.43% in OGK-5, OJSC, including the

share of the European Bank for Reconstruction and Development - 17.14%

• Fortum – 92.9% in Fortum OJSC, formerly TGK-10

• Fortum Power and Heat Oy – 25.66% in TGK-1, OJSC

• Siemens – 100% of the plant in Voronezh (production of high voltage equipment)

• Siemens – 25% in Power Machines, OJSC• Siemens – 44.88% in Interturbo, LLC

Oil and gas industry• TOTAL – 49% in Total Thermokarst BV (gas-

condensate field)• TOTAL – 20,5% in Yamal SPG, OJSC• TOTAL – 25% in Shtockman Development AG• TOTAL – 40% in Total Exploration and

Development in Russia (Kharyaga oil field)• BP – 50% in TNK-BP• SHELL – 27.5% minus 1 share in Sakhalin-2• SHELL – a joint venture with NK Evikhon (Salym

group of oil fields - in Khanty-Mansiysk Autonomous District)

• SHELL – 5.5% in the Caspian Pipeline Consortium• MOL – 50% in Zapadno-Malobalykskoye, LLC

100% in BayTex LLC, Matjushkinskaya vertical LLC, MOL - Western Siberia LLC

• BASF – 25% in Severneftegazprom, OJSC (South-Russian oil and gas field)

• E. ON AG – 25% in Severneftegazprom, OJSC (South-Russian oil and gas field)

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Risks associated with the implementation of the EU’s Third Energy Package provisions

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Joint Projects of Russian and European Companies in Gas Sector:NORD STREAM

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Joint Projects of Russian and European Companies in Gas Sector:SOUTH STREAM

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Possible measures for the establishment of joint system to ensure secure gas supply

• Collaborative design of the unified system of reliable gas supply to Europe

• Lifting restrictions and obstacles to the development of gas storage facilities in the EU

by gas suppliers

• Prompt cooperation between the parties as early as the nearest winterization season, with gradual accumulation of experience and, simultaneously, raising public awareness on the importance of the planned activities

• Application in the EU of experience gained by Gazprom’s dispatch and control centers and making arrangements for their cooperation with the existing EU structures and structures being created

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Russia & EU Power Systems Synchronous Operation

BRELL: Augstsprieguma Tikls (Latvia)Elering (Estonia)Litgrid (Lithuania)SO UPS, JSC (Russia)FGC UES, JSC (Russia)Belenergo (Belarus)

BRELL mechanisms deficiency:•electric modes planning (transfer capacity, reserves)•electric modes control (congestion management) •lack of the economical mechanisms of market procedures & interaction coordination•lack of responsibilities and obligations of the parties to maintain operational characteristics•coordination of the network development plans

Power flows in BRELL synchronous zone:

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Problem solutions

Fundamental approaches of the Russian side

Implementation mechanisms Expected results

• Compliance by the parties with the previously

signed bilateral international agreements and

acknowledgement of their supremacy over

national legislation.

• Defining the status of “cross-border projects”

to supply gas/oil and electricity to the EU

Member States.

• Safeguarding the existing and new export-

import energy systems

• Recognizing that long-term contracts are the

key mechanism for natural gas supplies

• Preventing unilateral changes to the existing

conditions of joint operation of the power

systems

• Joint elaboration of uniform criteria and

principles to insure reliability and stability in

the operation of the power systems

• Availability of mandatory arbitration

mechanism to settle disputes between different

parties and between a party and investors on

the other side

• Agreement between the

Russian Federation and the

European Union on cooperation

in the implementation of

infrastructure projects for

natural gas exports from the

Russian Federation to the

European Union and joint

operation of the power systems

• Agreement between the

Russian Federation and the

European Union on joint

synchronous operation of the

United Power System of the

Russian Federation and the

power systems of the Republic

of Latvia, Republic of Lithuania

and Republic of Estonia

• Cooperation between national

regulators

• In goals and

guidelines for long-

term energy

cooperation

• In stages and

conditions for the

development and

stable operation of the

energy infrastructure

• In predictable

regulatory system

that fosters

cooperation

• In the development of

scientific and

technological

cooperation in the

energy sphere,

including technologies

and human resource

potential

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