Statement by Alexey Miller, Gazprom Management Committee Chairman at a meeting of the Presidium of the Presidential Council for Economic Modernization and Innovative Development of Russia

Esteemed Mr. Medvedev! Esteemed meeting participants!

At present, Gazprom runs a large-scale Innovative Development Program adopted by the Company in 2011. The two key indicators of the Program efficiency are related to the introduction of innovative technologies for efficient nature management and environmental safety assurance. These are the general energy efficiency indicators manifesting themselves through the reduction of specific energy consumption for process needs and the decrease of specific greenhouse gas emissions as an overall environmental indicator of production technologies and equipment.

We pay special attention to eliminating all kinds of the Company’s negative impacts in regions where we operate.

Hereafter I would like to dwell on implemented and potential innovative technologies aimed at mitigating the adverse effects of the Company’s operations. I will give four examples from our primary business areas: hydrogen sulfide fields, Arctic shelf operations, conventional production regions with multi-zone reservoir developments and environmental impacts of Gazprom’s gas transmission system.

The first example is a technology of sulfur use in road construction. Mr. Medvedev, you are aware that the main deterrent of the production build up at the Astrakhanskoye and Orenburgskoye fields is a considerable amount of sulfur contained in natural gas and unsalable in the national and international markets. Our institutes have developed a sulfur-modified asphalt technology that increases the asphalt toughness and plasticity, extends the time intervals between overhauls to 5–7 years and creates a significant cost advantage in road construction.

We have already made pilot road sections in Moscow and Orenburg. These sections conform to all specifications. We think this technology could produce a triple effect: firstly, reduce the environmental pressure in Astrakhan and Orenburg where huge amounts of sulfur are contained. Secondly, enhance the profitability of gas production from these fields. And thirdly, materially improve the quality of roads especially in regions with rapid temperature swings and reduce the cost of road building as compared to other technologies. But we, of course, need a good will of road builders here.

Another technology relates to the Arctic shelf development. Considering the oil and condensate production prospects in the Arctic shelf, we have initiated R&D activities in respect of innovative technologies and responses to potential oil and condensate spills in ice conditions.

In cooperation with Rosatom research center we will test special laser facilities for eliminating oil pollutions in real operating conditions. This technology is unique worldwide in terms of environmental safety and efficiency in ice conditions. No doubt, it could be fundamental for conserving the marine environment as part of an internationally accepted system, the creation of which is under discussion within the G20 at your, Mr. Medvedev, initiative.

It is worth mentioning that the use of a powerful laser for accident elimination at wells in minimum fire extinguishing time and with minimum environmental damage has been a standard technology in Gazprom since 2011. Such means, developed jointly with Rosatom research center, have no world analogues.

The next technology is also unique worldwide. In gas transmission through the Unified Gas Supply System over 34 billion cubic meters of gas is combusted – these volumes are used for fuelling compressor stations and gas compressor units. At that, combustion products (nitric oxide and carbon monoxide) contaminate the atmosphere. Combusting 34 billion cubic meters of gas is really much and the existing gas turbine units are still inefficient and, correspondingly, highly polluting.

Gazprom is starting to test a fundamentally new technology of methane utilization as a fuel for gas compressor units. It is a technology for adiabatic methane conversion permitting to create a methane-hydrogen mixture from natural gas and water for combusting in standard units with environmental properties exceeding those of the most expensive imported units.

One thousand cubic meters of gas can be converted into 1.5 thousand cubic meters of methane-hydrogen mixture that reduces the overall methane consumption for gas transmission purposes. Here, a considerable environmental and resource conservation effect is achieved – this technology, as I have already mentioned, is unrivalled worldwide. This process is the most efficient way to produce hydrogen and, to my mind, could lay the foundation for hydrogen-fired power generation based on natural gas.

The final example is an efficient nature management technology used on the Yamal Peninsula – our conventional production region. We apply the multi-zone reservoir development technique which helps both reduce capital and operating expenses in hydrocarbon production and minimize adverse impacts on fragile peninsula ecosystems and traditional activity areas of the Yamal indigenous population.

The Gazprom Innovative Development Program is a large and multi-component system. We have been consistently implementing this Program for two years. I can say that all basic indicators, including the two mentioned ones relating to efficient nature management and environmental safety, are met. Gazprom gives a high priority to the environmental aspect today. In addition to the Program implementation, we declared 2013 to be the Year of Ecology in Gazprom and planned a lot of events in various spheres of our business.

In conclusion, I would like to make two specific proposals. The first one is what has been generally agreed on: an assignment to the Federal Highway Agency and Gazprom regarding a number of pilot sulfurous asphaltconcrete projects.

And my second proposal is that I would like to place a focus on the issues concerning tender procedures in companies with state shareholding, particularly on the decision making in respect of proprietary developments and technologies. There is no doubt that sometimes such proprietary developments should be purchased without a tender procedure provided they are approved by science and technology councils of the relevant technology platforms. I believe that such an approach could be considered and state-owned companies would be permitted to buy proprietary technologies on a non-competitive basis if the science and technology councils consider these technologies unique.