Marcel Kramer: I am absolutely confident in South Stream's future

October 15, 2010

Marcel Kramer

Why did you accept the offer to lead South Stream?

What are your tasks for the first hundred days of your work in a new position?

As a Head of South Stream where do you plan to spend most part of your working time?

Gasunie, the company which you chaired before, is a national company though it participates in international projects. South Stream is an international company with certain big national players. Are you ready for the challenge to inevitably compound interests of different countries-participants of the project?

In South Stream, will you represent interests of a specified shareholder or you are going to be non-executive member?

What are the approaches to creating a management team? Which positions are to be filled from shareholders side, and which from the market? Is preliminary work on this issue started?

Are you going to supervise only the offshore gas pipeline or the whole transport system South Stream?

How do you see the process of cooperation between your company and the project management division of Gazprom?

There have been many talks recently in Europe on necessity to diversify not only the routes but also the sources of gas supply. Obviously, South Stream does not suit this strategy unlike as they say about Nabucco. What are your arguments in favor of South Stream? Why does it also have to be high-priority for Europe and can you convince European energy officials of that?

Do you think that South Stream and Nabucco can both be realized?

As a Head of South Stream company you will also be responsible for receiving permits on construction of gas pipeline in the countries-members of EU. Do you find this task difficult? If South Stream does not succeed in receiving an exception from European regulations will implementation of the project still make sense?

Interview by Marcel Kramer, Chief Executive Officer of South Stream to Gazprom website Editorial Board:

I have had the opportunity to do many interesting jobs in oil and gas sphere for over 35 years. And this offer turned out to be the most interesting one I have ever had. Why? Because I think its really important that we can continue to work on energy supply and diversity not only for the Europeans who, of course, should have a very strong interest in this project from a supply point of view, but also for the partner companies and for the main source of gas Russia.

South Stream will create not only additional source of energy supply, but also additional commercial links and benefits. Having grown up as a West European, living in the European Union I have often seen the great benefit of those increased commercial links for countries involved in it. So, I feel honored to join this project.

First of all the project is new for me. The company I used to work for was not involved in it. So there are many things I have to learn. And my first priority is to understand what has been done so far – which is quite a lot already – and then to see where are we now and what might be the most important next steps. This is what I’m spending my first days and weeks on.

The other important point in this kind of project is to make sure that I meet as many people as possible who are involved in South Stream in one way or another. Such meetings can take place in Moscow or in any other location all over Europe.

Finally, the third element concerning my main task for the first hundred days is to explain to all interested people what are the main aspects of South Stream, why it is beneficial, then listen carefully to their observations and figure out how we would help to move the project forward.

I think that being involved in this kind of project one has to be prepared to travel a lot. Moscow is definitely a very important city for South Stream and I’m going to visit it regularly. But there are other places too. There are partners who want to see me. And, of course, since the project is being established in Switzerland I moved there.

I’m ready for it. Of course, I thought about it when I got this offer. And I arrived at the following conclusion: for many years I have been involved in a lot of joint ventures in various parts of the world. In Gasunie we participated in such important projects as BBL gas pipeline or Nord Stream. So, though Gasunie is a national company in terms of ownership it is tremendously diversified and has many international partners. And I have always enjoyed the challenge and valued the opportunities it gave me I could help bring together the best from different companies.

In this world there is a tremendous diversity of talents and in skills and if you can get the best out of this and put it into one important project like South Stream that’s really good. That’s part of the attraction of my new job as well.

The structure of a new company is coming up now and indeed we have many partners in it. Just as in Nord Stream it’s important that all of them feel duly represented by the manager of the project. That is what I consider to be an important task.

I think what typically happens could also be logical for South Stream. Certain positions are likely to be filled in by the shareholders themselves there is great expertise in the companies which are now moving the project forward, so we can and should benefit from that. At the same time there may be other positions where it’ll be more useful and practical to hire people from outside. So, in South Stream there will probably be a mix.

My task is to lead the entire project. Of course, its offshore part is important as well as the onshore part. One needs the other. South Stream has to be a good commercial and efficient project. It has to function properly and be an integrated system. So, I have been asked to be involved in both parts of South Stream and support the efforts of everybody along the whole chain.

Obviously we wouldn’t be here today if they hadn’t already done a lot of good work. Now my first step is to become more acquainted with its results, to meet the managers. Certainly as South Stream progresses their work will play a significant role in making the whole project come true and delivering the gas to the customers in time.

One has to listen very carefully to the observations of other people on the project. I’ve tried to do that in the recent time and will continue to do so. And what I have to say now is that first of all we really need a short and long term security of supply. This is very important to the European customers. These projects too often tend to be looked at in a very short term perspective whereas we all know that they are being built for 30, 40 or 50 years. These are the figures and timeframes one should consider with regard to the gas market. If we do this it becomes totally clear that the gas reserves in Russia will continue to play a crucial role for the security of energy supply to Europe. That’s the first point.

Second point is that Europe requires high quality, sophisticated, well managed and efficient infrastructure. South Stream represents such infrastructure – high quality in all aspects. South Stream is sophisticated – it’s not just a standard pipeline system. South Stream is certainly going to be efficient. This is a must for planning because we need to make sure we can attract co-financing. All in all I feel very positive about this project and I’m sure that it will give additional economic and commercial benefits to the transit countries as well to the diversity of routes.

My third observation on this is that there have been statements made about the so-called increased dependence on Russian gas. But I have myself done some analysis on that subject and I don’t see where do the numbers come from. I don’t understand why a project like South Stream could lead to significant changes in what is called dependence. This word suggests something negative and I dont support it at all. Moreover, I object to the word dependence because there is a mutual relationship between Europe and Russia which is crucial to both parties. South Stream will definitely become a win-win solution for both sides.

This additional supply route will also provide more options for flexibility in the European gas market. South Stream will satisfy the growing import need and at the same time it will give other suppliers to Europe, other commercial parties more opportunities to swap, to exchange, to optimize their portfolio. I think that this not only contributes to the security of supply but also to the better functioning of the market which is so much being promoted as an objective in the European directives. So overall South Stream is a healthy project, a solid one, and it benefits many different parties.

If the companies see opportunities to develop a strategically important project they go ahead and do it. The market will decide if they succeed. But one has to remember that the market is quite sharp and selective. We know that we have a good project, others should do what they think is right.

It is a fact of life that European countries require a permitting process. They have developed special rules for that. Those rules may not always be mature yet they are developing, they are growing, they are changing. What I trust is these rules will be objective and respect the needs of consumers. Secondly it is clear to everybody involved in these processes that they have a great responsibility because they can influence the economic viability of any project.

I trust that the European authorities will look at the situation this way and will have a positive attitude to South Stream as it is. It will require good and open discussion as well as a good explanation on the part of all the partners of the project. We will have to make clear why South Stream is beneficial for Europe. I’m confident that we will be able to move forward in these discussions with EU on the regulatory issues. I personally will be supportive in building a stronger international relationship.