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Deputy economics minister shares views on the structure of Russian energy exports

At the end of 2007, Deputy Economic Development and Trade Minister Kirill Androsov expressed satisfaction with the course of the year. In an interview with Rossiiskaya Gazeta, he outlines the main developments.

How is the structure of Russian petrocarbon exports currently changing? Is there any move away from crude?

Producers will export crude as long as it is more profitable to do so, and the profitability of the domestic petrochemicals market in Russia remains lower than crude export revenues. In this situation there is little reason to build refineries in Russia.

But this reasoning holds only so long as there are enough petrochemicals on the domestic market. As far as I know, some 230 million metric tons of oil out of the 492 million metric tons produced in Russia are refined in this country. Of the total, 50% is used in the domestic market, with the rest exported.

That situation is gradually changing. The profitability of the export market is becoming less than that of the local Russian market. This is encouraging companies to invest in refining activities.

Indeed, the state has several tools for regulating this process. For example, it can limit the consumption of low-quality fuel by enforcing the Euro-2 and Euro-3 standards for oil. It can also grant excise privileges for higher-quality fuel, which would provide a further incentive for deeper conversion. A recent significant step was the decision to cancel duties on imported high-tech refinery equipment.

Which companies in particular are chosing to do this?

Both TNK-BP and Rosneft have plans to considerably increase capital investment for the modernization of oil refineries.

But the government has to make oil refining and the production of high-quality fuels profitable. As far as I'm concerned, I think we'll come to a point of no return in the next two or three years, when you will see a substantial increase in investment in Russian refineries.

Is the cancellation of import duties on equipment temporary?

No. Duties have been cancelled on a permanent basis for any equipment that is not produced in Russia.

What effect do you believe this will have?

Principally, that the export of high value hydrocarbon products will now increase.

How strong is political influence on your work at the Ministry?

The year 2007 was different from the previous three years. The elections to the State Duma, the lower house of the Russian parliament, in early December greatly influenced the dynamics of the government's work, especially its adoption of the three-year budget before autumn. It also encouraged the introduction of fundamental laws, which we tried to pass in the first half of the year, so that parliamentary hearings would not be influenced by politics.

What, in your opinion, are Russia's main economic achievements over the past year?

First I would say, the initial public offerings of Sberbank and VTB bank. Then there is the merger of Sovkomflot and Novoship into the United Shipbuilding Corporation; the creation of the AirUnion airline alliance; and the successful sale of Elgaugol Coal. These may appear to be localized achievements, but each one will, I believe, have lasting benefits in terms of developing competition in all sectors.

If we are to speak about legislation, then we should mention the bill we passed to establish the Development Bank, and indeed the establishment of the bank itself. We have also launched an investment fund which will provide similar long-term benefits to the country.

Here we have already made agreements to fund four projects and work is underway in two of them. Then we have held four concession tenders. And, by the end of the year, we also expect to begin operating the Petrochemicals exchange. These are real, important and substantive milestones.

The interview was conducted by Evgeny Arsyukhin.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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