By: Modern Russia and Mario Mehran on June 27, 2012
In part two of his interview with Modern Russia, Mario Mehren, member of the Board of Executive Directors of Wintershall, discussed his work as head of the company’s Russia division, which is responsible for the construction of the South Stream project. Mehren also discusses his view on the potential for European business development in Russia.
How do you respond to criticisms that projects such as Nord Stream and South Stream increase European dependence on Russia’s gas supplies?
A considerable gas shortage faced by European countries in times of unprecedented cold snaps is yet more proof that projects such as Nord Stream and South Stream are the only solution to reducing gas transit risks and enhancing our flexibility in adapting to changes in demand for energy. If it were not for Nord Stream, the consequences of this year’s cold snap would have been much worse. Nord Stream proved to be an efficient mechanism for controlling and responding to such situations. But clearly it is not enough to fully solve the problems of growing gas demand during peak seasons or transit disputes. The whole situation is further confirmation of Europe’s need for alternative direct gas transport routes. Southeast Europe in particular needs South Stream more than ever. Indeed it was first and foremost the countries of Southeast Europe that felt the effects of the interruption of the transit flows in the Ukraine. Intensifying our efforts in the South Stream project seems the right answer to ensuring energy security in Europe amidst growing demand for energy supplies.
What is Wintershall’s take on the future of energy projects in Russia, and is it planning on getting involved in any major energy development projects there in the near future?
For many years Russia has been a stable pillar in Europe’s energy policy. With the world’s largest natural gas reserves, Russia is an energy giant and a major supplier to Europe. Given the significant increase in the amount of energy the European Union will have to import in the near future to meet growing demand, the EU’s relationship with Russia, one of its closest neighbors and one of the world’s key producers of oil and gas, is becoming considerably more prominent. Wintershall foresees closer integration with our Russian partners through the exchange of assets and the development of joint projects at all stages of the production chain. Last fall Gazprom and Wintershall signed a framework agreement, which sets out terms for a planned asset swap. According to the agreement, two further blocks (IV and V) of the Achimov formation will be developed with the participation of Wintershall. Gazprom, in turn, will receive interests of equal value in exploration and production projects by Wintershall in the North Sea. At the moment we are finalizing the terms and conditions of the deal.
To conclude on recent political developments in Russia: What do you expect from Vladimir Putin’s return to the Kremlin for business opportunities for energy companies like yours?
We have worked with our Russian partners for more than 20 years, and over this time the political and social climate in both Russia and Germany has seen considerable change. However, this has not affected our partnership. This goes to show once again that the key to long-term collaboration is the mutual benefit that each side reaps from working jointly. Regulatory risks exist everywhere, of course, and Russia is no exception. Therefore, it needs to be attractive for investors. Particularly important are reliable framework conditions and stable prospects in order to be able to plan 10 to 20 years in advance. That is sufficient.
In all the regions where we operate, we adhere to a strategy of integrated cooperation throughout the energy chain. This cooperation is based on a partnership in which both sides share the profits and the risks. In this regard, the relationship between Gazprom and Wintershall is exemplary: together we produce gas, together we transport it, and together we sell it. Our partnership of over 20 years is also unique because it stems from personal trust at the very top of both organizations and countries. At a memorable meeting with foreign oil and gas executives, President Vladimir Putin spoke of the energy opportunities in Russia for foreign investors. We value such openness and are ready to cooperate.
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