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Russian Grids

October 4, 2019

The prospects for cooperation between the fuel and energy complex and the defense industry complex in terms of import substitution and technological development were discussed at the Russian Energy Week

The prospects for cooperation between the fuel and energy complex and the defense industry complex in terms of import substitution and technological development were discussed on October 4 at the Russian Energy Week. Denis Manturov, Minister of Industry and Trade of the Russian Federation, Andrei Cherezov, Deputy Minister of Energy of the Russian Federation, Pavel Livinskiy, Director General of Rosseti, representatives of the management personnel of leading Russian enterprises in the military and industrial and fuel and energy complexes took part in the discussion. 

Opening the session, Denis Manturov, the Head of the Ministry of Industry and Trade, noted that until 2014 Russian companies in the fuel and energy complex focused mainly on purchase from foreign manufacturers, so there was practically no demand on the domestic market, and promising developments of domestic companies “were on the shelves”. The situation changed after the import substitution strategy was adopted at the state level. “Enterprises got the chance to produce goods for the oil and gas sector. At the end of 2014, together with the Ministry of Energy, we created a working group and since 2015 we have formed 12 technological development directions identified by representatives of oil and gas companies. Representatives of the fuel and energy companies were also among the moderators that worked in each direction. This is a tool that has already proven its effectiveness. During this time, budget allocated more than 7 billion RUB to support diversification, primarily in the form of subsidies that provided preferential interest on loans. 57% of recipients of this support are defense industry enterprises. These measures are effective. The total volume of the oil and gas equipment market in the past year amounted to 450 billion RUB, and more than half of this volume came from Russian segment enterprises,” said Denis Manturov. 

The Minister also spoke about the main promising areas of cooperation between the fuel and energy complex and the defense industry complex, such as production of equipment for the Arctic offshore development and shipbuilding, production of navigation systems, seismic and geological exploration systems, and helicopters. A separate area of ​​cooperation is the development of technologies and the production of equipment for hydraulic fracturing. Now this need is completely covered by purchases from foreign companies. “The government is allocating 1.5 billion RUB until 2021 to develop this direction,” emphasized the Minister of Industry and Trade. In his opinion, defense industry enterprises will be able to take an active part in creating the hydraulic fracturing fleet. Also, according to Denis Manturov, enterprises of the military-industrial complex should be actively involved in the creation of electrical engineering products. “In order to engage the defense industry enterprises in the production of products for the fuel and energy complex, it is necessary to form a clear and stable demand for such products,” said the Minister.

Andrei Cherezov, Deputy Minister of Energy of the Russian Federation, drew the attention of the session participants to the fact that our country does not produce the whole range of products needed for the electric power industry. “We don't produce even circuit breakers of all voltage classes. This is the energy security of the country. If the supply of these switches stops, we will face problems. An important issue is the development of digital content in the electric power industry. There are certain difficulties regarding digitalization development, including those related to cyber security. And this is a product that should be produced in Russia,” he stressed. “The range of solutions to these problems is quite wide. Due to Rosseti work we have a clear understanding of where we are moving and what we should receive. And the defense industry enterprises have great potential for solving these problems. They still have design bureaus, research institutes and a base of materials, including composite, requested in the electric power industry,” said Andrey Cherezov.

Pavel Livinskiy, Director General of Rosseti, spoke about the experience of cooperation with defense industry enterprises, which showed that the technologists of the defense industry enterprises should be clearly integrated with the work of energy companies’ chief engineers. “The potential order volume for the defense industry enterprises in our country is 1 trillion RUB. They can offer their products, but it is difficult for defense industry enterprises to work in procurement system. since the defense industry complex was originally focused on other tasks, such as state defense orders. They are not familiar to work at market. Therefore, that is where great change should be made,” he stressed.

“Our company began active cooperation with defense industry enterprises at the end of 2017. Today, defense industry enterprises clearly understand what we want from them, and we understand their capabilities. In 2018 our total contracting with defense industry enterprises amounted 5.7 billion RUB. And this year we have contracts for 7 billion RUB, and by the end of the year this figure is planned to change to 12 billion RUB,” said Pavel Livinskiy. He also referred to the problems that the company faces within the cooperation with the defense industry complex, such as lack of working capital and a high level of regulation at the defense industry enterprises (it is more difficult for them to adapt to customer needs).
According to Pavel Livinskiy, legislative changes are needed in order to increase the efficiency of interaction between the fuel and energy companies and the defense industry complex. “This is a process complicated industry. And in the situation where the price is the only prevailing criterion, we often see auction participants that offer a low price, but are not able to fulfill the quality requirements. And if the terms of reference are prescribed in detail, the antitrust authorities interfere. Therefore, legislative amendments, at least regarding public ownership and defense industry enterprises, are needed,” he said.

The practical result of the session was the signing of two cooperation agreements between the State Space Corporation Roscosmos and the Rosseti, and between Rosñosmos Group of Companies and Tatneft.




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