Questions are answered by the former Deputy CEO of JSC Gazexport Yury Zaytsev

- Yury Alekseevich please tell us how you ended up in the gas industry.

- In 1959 I graduated from MVTU named after N.E. Bauman where defended the thesis about the use of the 25 MW gas-turbine plant on main gas pipelines. I was assigned to the Moscow Department of Main Gas Pipelines of Glavgaz USSR. Nowadays it is JSC Gazprom Transgaz Mosсow. In 2015 I retired from the post of Adviser to the Head of Gazprom Export. Long time worked as Deputy Chief of Gas Transportation Department and Deputy CEO of Gazexport. Thus, I worked 56 years in system of Gazprom.


- Supply of gas to capitalist Austria began in 1968 and Gazexport was created in 1973. Who was engaged in the organization of gas export?

- There was Soyuznefteeksport office in the Ministry of Foreign Trade which was engaged in export of oil and gas. Oil dominated on volumes.

- Why did Austria become the first capitalist country to which the Soviet gas came?

- The cause was that gas pipelines were laid in a uniform corridor with operating oil pipelines that allowed accelerating and reducing the price of construction. In 1964 Druzhba oil pipeline started working which southern thread ended in Czechoslovakia. In 1966 the Head of Glavgaz Alexey Kortunov suggested Council of Ministers of the USSR to organize gas export both in socialist and to the capitalist countries. The Head of the government Alexey Kosygin supported the idea. In 1967 the USSR started delivering natural gas to Czechoslovakia. Austria was near and its heads expressed interest in purchase of the Soviet gas. They had already cared of purity of air therefore became interested in our natural gas. The Austrian company OMV signed a contract with us and in 1968 Soviet gas came to the Austrian consumers. The content of methane in our natural gas exceeded 98%, not a single European field could even come close to such a high figure.

- Did suppression of «the Prague spring» in 1968 affect the gas negotiations?

- No. The Austrians did not raise this topic.


- Why did almost all export gas pipelines pass through the territory of Ukraine, although it is closer to Germany through Belarus?

- As I have already told, gas pipelines were under construction along the shortest technically feasible route to consumers.

- But Druzhba has also a northern thread which goes through Belarus and Poland to Germany, and then it was socialist GDR. There is a version that the authorities of capitalist Germany did not want that the gas pipeline passed to them through the territory of GDR.

- It is the first time I hear about it. Large industrial consumers were located in the south of Germany. It was there that they needed gas. Therefore the Soviet gas came to the southern Germany where there was a necessary infrastructure, then deliveries to Italy, France and other countries began. As a result the Austrian gas-measuring Baumgarten point turned into the largest gas hub of Europe. I lived in Austria for about 10 years and worked in Baumgarten. In 1973, when the volume of gas supplies abroad became significant, a specialized association Soyuzgazexport appeared as part of the Ministry of Foreign Trade.

By the way, we started supplying gas to the socialist GDR earlier than to the capitalist FRG.

- Why did the gas pipeline Urengoy — Pomary — Uzhgorod passed in a corridor of already operating gas mains through Ukraine? Have you thought about route diversification?

- The multi-line system of gas pipelines is much more reliable. You can anytime disconnect one thread for repair and to increase deliveries on the other. For us, as well as for consumers, the factor of reliability of deliveries was very important. It is much simpler and cheaper to build the gas pipeline in the established corridor. And the most important is that near border of Ukraine and Czechoslovakia we created a network of underground gas storages with an active power of 27 billion cubic meters on the basis of the exhausted gas fields. It is a huge airbag which allowed us to increase quickly deliveries in case of increase in demand in Europe.

Joint ventures

- What was the role of joint ventures for sale of gas in the European countries?

- Thanks to joint ventures we got access to the most advanced technologies in the sphere of production and transportation of gas. There was excellent drilling equipment in Austria. They not only sold it to us but also shared production technologies and trained our experts. In the Austrian Baumgarten the system of measurement of gas, best in the world was created (it was carefully fixed not only the volume but also gas composition). They were the first to computerize gas accounting and scheduling. Not only we, but also experts from all over Europe learned from the Austrians.
In Germany we took manufacturing techniques of high-quality pipes, shutoff valves and spherical cranes, and so on. French shared with us technologies of gas production, containing hydrogen sulfide, as well as automation equipment for systems of measurement of gas and control of gas-distributing units. Finland borrowed technologies of shelters of the gas-distributing equipment for different climatic zones. It is very important for work in extreme environment.
Most of all I am proud of that we managed to arrange production of spare parts for the import equipment (especially cast blades for gas turbines). Foreign corporations are often ready to sell the equipment for reasonable prices then to earn on deliveries of spare parts and the organization of repairs. Our experts mastered the most advanced technologies and created a network of repair bases throughout Uniform System of Gas Supply. As a result we avoided dependence on service of foreign firms.

- What was the difference between negotiations with socialist and capitalist countries?

- Practically did not differ. We worked out the rules for negotiating and signing contracts. Payment usually was in US dollars. It was more difficult for socialist countries to collect dollars therefore they regularly addressed to the management of the USSR with the offer to pay for gas with the goods and services. The Soviet leaders often met them half way in this matter. That is why builders from the socialist countries took part in creation of export gas pipelines. They built well, there were practically no complains.
It is necessary to understand that the decision on supply of gas to this or that country was made at the state level. Only after the positive decision of Council of Ministers of the USSR we signed contracts with the companies-buyers.

- Yugoslavia was included into the Non-Aligned Movement, why did it turn out to be so poorly gasified (there is still no natural gas in Montenegro)?

- We delivered them as much gas, as they requested. We could deliver more, but they did not ask any more. I remember, in the mid-nineties, when there was a civil war in Yugoslavia, I had to participate in negotiations with the leadership of Bosnia and Herzegovina.


- And why did you decide not to expand Ukrainian gas transmission system anymore?

- As soon as the USSR collapsed and Ukraine became independent, they started being engaged in unauthorized gas extraction. With it they were helped well by underground storages about which I had already spoken. The main consumers of gas were traditionally concentrated in the east of Ukraine. Exactly there gas from a transit pipe was taken, and for export it rose from storages on the western border. Gas dispersed on a pipe and storages, the provision of transit services was stretched over time. Ukraine, using position of the largest transit country, demanded price discounts for the consumers. But they did not want to pay for gas at low prices either. Debt to Gazprom accumulated, which had to be regularly restructured. The Ukrainian site turned into a continuous headache for us.

- Disputes regularly arise about how much transit gas the Ukrainian GTS can actually pump. What is your assessment?

- No more than 50 billion cubic meters of gas a year. The system is very strongly worn-out, both pipes and gas-distributing units. The Ukrainian compressor stations burn 1.5-2 times more gas for ensuring their work than it is necessary according to the standards. Naftogaz of Ukraine employed the British company Mott McDonald for an assessment of capacity of the export gas transmission system. British drew a conclusion that for ensuring transit of 70 billion cubic meters of gas a year it is necessary to invest about $7 billion in modernization of the system. And for ensuring delivery to the western border of Ukraine 110 billion cubic meters it is necessary to invest about $12 billion. It means that it is easier to construct a new gas transmission system than to restore the old one.

- Which negotiations were the most difficult?

- With Poles concerning construction of the gas pipeline Yamal — Europe. They proceeded eight months. As soon as we found mutually advantageous solutions, our Polish colleagues went to confer with the «political consultants» and came back with the words: «We changed our mind». Discussions of other options began. By the end of the negotiations the change almost had a heart attack. As a result the gas pipeline Yamal — Europe was constructed after all, however, in a single-strand version, although Poles wanted two threads.

Sea gas pipelines

- Why was the first underwater gas pipeline constructed through the Black Sea and not through the Baltic?

- Turkey quickly increased consumption of gas and constantly demanded from us accumulation of volume of deliveries. They mostly paid regularly, there were no debts. At first the Russian gas came to Turkey through Ukraine, Romania and Bulgaria to the district of Istanbul. The Turkish authorities declared that they would like to provide gas to their capital, Ankara. As a result there was a construction project of the gas pipeline on the bottom of the Black Sea — Blue Stream. We realized it together with our partners from the Italian company Eni, who had an experience of construction of the sea main gas pipelines. Blue Stream was constructed by huge pipe-laying vessel Saipem 7000. The Russian company Stroytransgaz constructed an overland site Samsun — Ankara in the territory of Turkey, having set a world record on the speed of construction of the gas pipeline with a diameter of 1420 mm.

- What were the reasons of construction of Nord Stream?

- This story began at the time of the USSR. In the mid-1980s, the Americans approached us with a proposal to implement a major project to supply gas to the US market. It provided the beginning of gas production in the territory of the Yamal Peninsula. It was supposed to construct the gas pipeline to the district of Murmansk and to create there gas liquefaction plant. 11 methane carriers which Americans planned to produce had to carry the received LNG in the USA. We started studying in details this project, analyzed options of technologies and the list of potential corporate partners. Together with Americans Norwegians and the French company Total wanted to work. However the congress of the USA blocked implementation of this project. The American politicians were afraid that the USSR in case of growth of international tension can refuse to deliver gas to the USA.

After collapse of the USSR there was a request for gas supply to the north of their country already from our partners from the unified Germany. Interest was shown also by the Netherlands, where own production decreased, and also by Great Britain. As a result there was a construction project of the trans-Baltic gas pipeline Nord Stream. Gazprom just had a new source of gas — huge Bovanenkovo gas field on the Yamal Peninsula. The technologies for building offshore gas pipelines have already been worked out in the world. The Nord Stream project was successfully realized.

As a result we managed to create reliable system of supply of Europe and Turkey with gas. We had three routes of deliveries: northern, central and southern. Their work was coordinated by: Central operations and dispatch department of Gazprom and our dispatching centers in Berlin, Vienna and Sofia, which worked round the clock. It allowed us to create absolutely reliable system of providing consumers with gas. Uninterrupted deliveries are very important for the hi-tech industrial enterprises as any failure threatens them with huge losses and breakages of the equipment.

- Did you fill pressure of Americans during negotiations with the European partners?

- Of course, we felt. The followed us all the time, tried to listen to our negotiations with the European companies. When billions of dollars are at stake, it is usual practice. After all, the American firms also fought for our contracts. And there were 150 applicants from around the world. I want to emphasize that we chose the equipment proceeding from its technical characteristics and did not pay attention to pressure.

- How did the entry of Gazexport into the structure of Gazprom affect conditions of negotiations?

- Exclusively positively. We constantly said to representatives of the management of the USSR that it is expedient to unite production, transportation and sale of gas. Gas workers took part in all negotiations on gas supply. However the Ministry of Foreign Trade was engaged in performance of contacts. In 1989 the Chairman of the Board of Ministers of the USSR Nikolay Ryzhkov approved creation of Gazprom state concern led by Victor Chernomyrdin. In 1991 by Nikolay Ryzhkov’s order the structure of Gazprom included association Gazexport. We chose the best experts from Vneshtorg employees. After all we worked side by side for a long time and knew who was worth what. The founder of Gazprom Victor Chernomyrdin told us to make such a structure which would allow to organize most effectively work on reliable providing foreign consumers with gas. We have managed it.