EUROPEAN PARLIAMENTDelegation to the EU-Russia PCC

EU-RUSSIA PCC WORKING GROUP

26-28 April 2011Astrakhan

REPORT

DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION

___________6 May 2011MC/cs

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Preparatory meeting

The Working Group delegation has been prepared by two preparatory meeting of the European Parliament’s Delegation, which took place on 13 and 18 April 2011 in Brussels.

At the meeting of 13 April, Mr WIEGAND, Director responsible for Eastern Europe, the Southern Caucasus and Central Asia, European External Action Service, informed the MEPs of the current state of play of the EU-Russia relations. He stated that Baroness Ashton will meet Minister Lavrov the same week in Berlin on the verge of the NATO Summit. The EU-Russia Summit, planned for 9 and 10 June 2011 in Russia (precise place was not known during the preparatory meeting) will discuss the last steps towards the WTO accession of Russia, the Partnership for Modernisation, the new agreement to be concluded between the EU and Russia in replacement of the Partnership and Cooperation Agreement, the electoral standards in Russia in the light of the upcoming parliamentary and presidential elections, and common neighbourhood issues. On 11 May, several meetings with the chairs of twenty sectoral negotiation tables are planned. The Russians informed the EEAS that the Hague convention on the protection of children has been finally sent to the Duma for ratification, as requested several times by the EU side. The EEAS will insist that the Russian side invites the OSCE/ODIHR long- and short-term observers in due time in order to allow them to be deployed in Russia ahead of the elections. Mr WIEGAND informed as well that the following week negotiations on common steps on visa dialogue would take place in Moscow. He added that, following the Fukushima incident, nuclear safety has become one of the topics of discussion between the EU and Russia.Referring to the topics of the Working Group, Mr WIEGAND said that science and technology cooperation is a success story of the EU-Russia cooperation. Russia is a very active participant in the 7th Framework Programme. On rural development, the cooperation is limited or even non-existent. On the contrary, environmental protection is a very important topic of discussion between the EU and Russia. Mr WIEGAND underlined the need of greening the Russian economy, which has been admitted by President Medvedev in one of his recent speeches. He informed that the EU offered expertise in fighting illegal logging and in cross-border environment protection needs assessment projects. He noted big potential in cooperation with the Russian Federation on energy efficiency and energy savings. Mr WIEGAND underlined the good cooperation in the Baltic Sea and the Nordic Dimension with Russia, howeverhe underlined the need to cooperate better in the Black Sea.

After the presentation of Mr WIEGAND a discussion followed with the participation of Mr GIEREK, Mr POC, Mr SCHULZ and Ms KREHL, in which Mr WIEGAND gave more precisions on the issues mentioned above and informed about the cooperation in the Arctic region, the 8th Framework Programme and the EU-Russia Civil Forum in Prague.

Moving to the next point of the agenda, Mr FLECKENSTEIN presented the programme of the meeting of the Second Working Group in Astrakhan, scheduled for 26 - 28 April 2011. He informed about a special briefing organised for the participants to the Working Group on Monday 18 April and about the upcoming meetings of the

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Delegation: on 2 May 2011, the preparatory meeting for the Third Working Group in Sochi and, on 11 May1 a meeting on the follow up of the EP resolutions on the case of Mr Magnitsky. The Chair reiterated his invitation that as many MEPs as possible participate in the upcoming PCC in Warsaw on 1 and 2 September 2011.

On 18 April the participants of the Second Working Group had the opportunity to take part in an exchange of views with Mr Vagit ALEKPEROV, President and founder of OAO Lukoil Company. Mr ALEKPEROV briefed the Members about the activities of his company in the EU and in Russia. He informed that Lukoil had invested over 5 billion euro in oil business in the EU. The company owns over 2000 filling stations in the EU, 60 percent share of a refinery in Sicily and shares in the port of Rotterdam. Lukoil is the only oil company present in all the countries of the Caspian Sea (with the exception of Iran). The company has invested over 2 billion euro in the North Caspian Region and it has 16 years of experience in extracting oil in the Caspian. Mr ALEKPEROV proposed to Members a visit to the Korchagin oil field, which has been then added to the program following an on-the-spot agreement with the Russian counterparts (see separate section on Korchagin oil field). He stated that the visitwould allow the Members of the Working Group to see the environmental standards used when extracting oil. Mr ALEKPEROV underlined that the environmental standards used by Lukoil surpass the legal requirements of the Russian Federation. On energy distribution, the President of Lukoil informed the Members that his company provides 100 percent of the electric power and heating needs of the Astrakhan region.

Development of the mission

The final composition of the Working Group was the following: Mr Knut FLECKENSTEIN (Chair), Mr Slawomir NITRAS, Mr Adam GIEREK, Mr Marek MIGALSKI, Mr Vladimir REMEK, Ms Constanze KREHL and Ms Tatjana ZDANOKA. Mr Pavel POC, who was supposed to participate as well, had to cancel last minute due to personal problems.

The day of the arrival, the Chair of the Delegation of the Russian Federation Council, Mr Gennady GORBUNOV, who represents the Astrakhan Region in the Federation Council and who was the main organiser of the visit from the Russian side, had to leave Astrakhan urgently due to serious family problems.

In the evening of 26 April, an official dinner was organised for the Delegation. The following day a visit to the Korchagin oil field was organised in the morning, to monitor environmental protection of closed water basins. In the afternoon, the Working Group held two working sessions: one on "science and research cooperation between the EU and the Russian Federation" and the other one on "rural development". On 28 April the Working Group had the opportunity to see the city of Astrakhan and to continue the debates on the topic of environmental protection with a visit to a sturgeon farm in the Volga delta. On 29 April the EP Delegation travelled back.

1 Currently postponed to 26 May 2011.

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Wednesday, 27 April 2011

Visit of the Korchagin oil field: environmental protection of closed water basins

This visit has been added to the programme on the spot at the invitation of the Lukoil Company, which was accepted by the Chair of the Delegation. The Delegation left the Astrakhan airport by helicopter (owned by OAO Lukoil) and flew over the delta of the Volga River to the international waters of the Caspian Sea. The Korchagin oil field is situated around 90 km from the shore at the sea depth of 11-13 meters. The field is owned and operated by Lukoil–Nizhnevolzhskneft, a subsidiary of Lukoil. The contractor for drilling operations is the Moscow-based company BKE Shelf (Eurasia Drilling Company). The field is named after the former secretary of the company's board of directors (Yuri Korchagin).The field was discovered in 2000. Its development started in 2004. The first oil was extracted on 28 April 2010. The gross reserves are estimated to be 570 million barrels of oil equivalent. The expected peak production rate is 2.5 million tons of crude oil and 1.2 billion cubic meters of natural gas per year. The Yury Korchagin oil platform is one of the most modern and most environmentally friendly platforms in the world.The platform, which is still partly in construction, will have 30 wells, including 26 production wells, one gas-injection well and three water-injection wells. The wells have been drilled horizontally and their radial placement enables simultaneous drilling. The control of drilling operations on the platform and on the field has been performed since 2009 by Eurasia Drilling Company. A total of 34.4 billion rubles (ca. 900 million euro) has been spent for the field development between 2004 and 2009. Extracted oil is transported to the floating storage unit 58 km away via a 300-millimetre subsea pipeline. The floating storage unit, built by Keppel Corporation at the shipyard in Baku, is moored to a single-buoy mooring. Oil is transported by shuttle tankers to Makhachkala where it feeds the Transneft's pipeline system.More details on the oil field and the oil platform can be found in the annex.

The Delegation had the opportunity to be presented in details the platform including the drilling facilities, management offices and living quarters. During the visit many of the Members asked detailed questions on the production, extraction and quality of the oil. The living standards and the social benefits of workers were also discussed. As the oil platform aims at maintaining the highest environmental standards possible, gas is not burned on spot, as it is the case of many other platforms, but it is stocked and will be transported to the shore once the necessary infrastructure will have been completed. The Members of the Delegation had numerous questions concerning the environmental standards of the platform as well.After the visit, the Delegation flew back to Astrakhan by helicopter.

First session: Science and research cooperation between the EU and the Russian Federation

Both working sessions took place in the premises of the Governor of Astrakhan.The EP Co-Chair Mr Fleckenstein opened the meeting by welcoming all members present. He informed about the works of the Parliamentary Cooperation Committees and the purpose of the Working Groups, especially concentrating on the activities of the Second Working Group.

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Mr Alexander ZHILKIN, Governor of the Astrakhan Region, welcomed the Members of the European Parliament and those from the two chambers of the Russian parliament. He presented the region of Astrakhan, which is 44 000 square km large and has only 1 million inhabitants, thus representing one of the smallest regions of Russia in terms of territory. Nevertheless it is a very complex area, which has numerous ethnic minorities (around 30% of the population, the biggest of them being the Kazakh) and significant challenges, as it is situated in the delta of the Volga, which is a major transport route in the Russian Federation.Mr Andrei KLIMOV, Co-Chair of the PCC from the Russian side, presented the activities of the Duma towards various regions, with a strong emphasis on the current legislation being passed which also has an impact on the Astrakhan region. He underlined the need for good cooperation to facilitate economic recovery of Russia.Mr Askar KABIKEEV, Deputy Head of Government and Minister of Economy of the Astrakhan Region, spoke about the economic development and the tendencies in the regional development of the Astrakhan region. The Minister informed that the region is in a quite good economic shape, as it went very mildly through the world economic crisis and, contrary to many other Russian regions, it did not register negative economic growth in the previous years. The main pillars of the regional economy are extraction of oil and gas, shipbuilding and agriculture, including aquaculture and fisheries. The region has also a big tourism potential, but it needs to develop the necessary infrastructure.Mr Alexander ZHIGIN, Deputy Head of Government of the Astrakhan region,presented the regional ecological policy and the scientific research on environmental protection. Mr ZHIGIN informed the Members about the monitoring of the quality of water in the lower Volga and its impact on the development of the region of Astrakhan. He also presented scientific projects being implemented in the region and the state of the natural environment of the oblast.Mr Adam GIEREK, MEP, highlighted the state of play of science and research cooperation between the EU and Russia in the light of the Europe 2020 agenda and Partnership for Modernisation.

Second session: Rural development

Mr Ivan NESTERENKO, Deputy Head of Government and Minister of Agriculture of the Astrakhan Region, presented the developments in the agricultural sector and the agricultural policy in the Astrakhan region. Mr NESTERENKO underlined the importance of fisheries and aquaculture in the regional economy (the region is famous for producing the world's best black caviar, as well as it is home to the famous beluga sturgeon). The Minister highlighted the role of cattle, onions, tomatoes, potatoes and rice in the local and regional economy. He also informed about the significance of watermelons for the Astrakhan region, as they have their unique brand in Russia and are widely well-known and preferred by customers in other Russian regions. Ms Constanze KREHL, MEP, presented the state of play of the rural development policy in the EU. She showed the distinctive difference between rural development and the agricultural policy. She highlighted the benefits of supporting rural regions and the impact of these policies on the development of the EU in general. She underlined the huge differences between the EU countries in this sphere, with some of the Member States having a very small percentage of population working in the agricultural sector, like Great Britain, while others, like Romania, have a very large

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farming sector, where many people are employed. Therefore a "one size fits all" policy will not work in this sector. She emphasized that as the rural development policy was created only in 2004 and since 2007 it has started to be fully implemented, the first tangible results will be, possibly, measured only by 2013 the earliest.Following both presentations, a lively discussion took place with various Members of both the Russian and the EP Delegations debating on agricultural policies, rural development of the EU and lessons to be learned by the Astrakhan region, mistakes made by the EU in the past, which should be avoided, and the agricultural potential of the Astrakhan region, which should be developed.

Reception on behalf of the Government of the Astrakhan Region

In the evening a reception was hosted for the MEPs by the Government of the Astrakhan Region in the restaurant "White Royal". During the reception the Members of the Working Group had the opportunity to exchange views with the representatives of the local and regional administration.

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Thursday, 28 April 2011

Cultural programme: visit of the city of Astrakhan

On the second day, as the Chairman of the EP Delegation had to leave Astrakhan due to other commitments and no Vice-Chairman was present, the EP Delegation was led by Mr Adam GIEREK, who was the doyen d'age among the Members present. Thishad been agreed between Mr FLECKENSTEIN and Mr GIEREK during the preparatory stage of the Working Group.

In the morning the local and regional administration proposed a cultural programme, during which the Members of the Delegation could see the city of Astrakhan. During the visit, the old town of Astrakhan was presented. A highlight of the old town is the Kremlin of Astrakhan which is a baroque structure dating back to 16th century. It is the third largest Kremlin in Russia (after Moscow and Kazan). A number of other prominent and historic buildings were shown to the Delegation.

Visit of the sturgeon farm - environmental protection of closed sweet water basins

As one of the topics of the Working Group was environmental protection, the EP suggested visiting a sturgeon farm in order to observe the ongoing Russian programme of preservation and replenishing of the sturgeon population in the Volga River. The Russian counterparts organised a visit to the Narimanov Sturgeon Fishery Farm. It is a state owned farm which breeds sturgeon in order to replenish the Volga delta. The farm does sell neither the fish nor the caviar. It is therefore fully financially dependent on state aid. Its existence is regulated by a special state decree; therefore it is not dependent on regional or local funding.The Members had the opportunity to see separate pools with adult male and female fish, pools with young fish as well as special machines used to inseminate female sturgeons and machines to collect caviar from the female sturgeons. They were impressed by the professionalism and the good organisation of the fishing farm and asked a number of specific questions concerning breeding of the fish.

Conclusions

The visit of the EU-Russia PCC Working Group to Astrakhan can be assessed asconstructive and useful, as it allowed the European Parliament Delegation to acquire better knowledge of one of the not-so-well-known regions of Russia, which is,however, an extremely vital area for the Caspian Sea region. The topics proposed by the Russian side allowed discussion on issues which appear rarely on the top of the EU-Russian agenda.

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ANNEXES

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EU-RUSSIA PARLIAMENTARY COOPERATION

COMMITTEE

WORKING GROUP26-28 April 2011ASTRAKHAN

FINAL PROGRAMME

Programme Coordination and Contacts:

European Parliament

Michal CZAPLICKI +32-2 284 4886

michal.czaplicki@europarl.europa.eu

Claudia SIEGISMUND +32-2 284 22 93

claudia.siegismund@europarl.europa.euFax : +32-2 284 68 30

Mobile during mission: +32-498 981369

Federation Council

Kirill S. MANGUSH +7 495-697 7114

KSMangush@council.gov.ru

Nikolay V. DANKOV +7 495-986 6898

Hotel chosen by the Federation Council:

VICTORIA PALAS HOTEL 3, Krasnaya naberegnaya

Astrakhan, Russia, 414 056Tel : 7- 8512 394801, 390560

www.vp-hotel.com

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Tuesday, 26 April 2011

Individual Departure of Members and staff of the European Parliament delegation

16.45 Direct flight from Moscow Domodedovo (S71175)

19.00 Arrival in Astrakhan Airport

19.30 Accommodation at hotel

20.00 Dinner on behalf of Mr. GORBUNOV (by invitation only) venue: Restaurant “At Hamlet place”

Wednesday, 27 April 2011

07.30 Depart to Astrakhan Airport

09.00 Departure by helicopter to oil platform "Yury Jorchagin"

10.00 Arrival on the platform and guided tour

11.30 Lunch

12.00 Departure from the oil platform

13.00 Arrival in Astrakhan Airport

14.00 Opening addresses by - Mr Alexander ZHILKIN, Governor of the Astrakhan Region

- Mr Andrey KLIMOV, Co-Chair of the EU-Russia PCC

- Mr Knut FLECKENSTEIN, Co-Chair of the EU-Russia PCC

First Session : Science & Research Cooperation between the EU and the Russian Federation venue: Administration of Governor of the Astrakhan Region

15, Sovetskaya street Astrakhan, Russia, 414 056

14.20 Presentations by- Mr Askar KABIKEEV, Deputy Head of the Government of the

Astrakhan Region, Minister of economy of the Astrakhan Region: “Economic development and tendency in regional development of the Astrakhan region”

- Mr Alexander ZHIGIN, Deputy Head of the Government of the Astrakhan Region: “Regional ecological policy and scientific research

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in environmental protection”

- Mr Adam GIEREK, Member of European Parliament

- Exchange of views

15.20 Coffee Break

15.30 Second Session : Rural development

Presentations by - Mr. Ivan NESTERENKO, Deputy Head of the Government of the Astrakhan Region, Minister of agriculture of the Astrakhan Region: “Development in agrarian sector and agrarian policy in Astrakhan Region”

- Mrs Constanze KREHL, Member of European Parliament

- Exchange of views

19.00 Reception on behalf of the Government of Astrakhan Regionvenue: Restaurant White Royal

Thursday, 28 April 2011

10.50 Departure from Hotel 11.00 Cultural programme: - excursion to Astrakhan city - visiting the Astrakhan Kremlin - visiting the Astrakhan musical theatre

13.30 Lunch venue: Administration of Governor of the Astrakhan Region

15, Sovetskaya street Astrakhan, Russia, 414 056

Third Session : Environmental protection of closed water basins 15.00 Departure to Narimanov

- visiting the Volga delta and Fishery Sturgeon Farms

18.30 Return to hotel Victoria Palas in Astrakhan

(Individual departures for other participants)

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Friday, 29 April 2011

Departure of EP Delegation

05.15 Transfer to Astrakhan airport

07.00 SU 712 to Moscow Sherementyevo

The EP Security duty officer's number in case of emergencyduring the mission is

+ 32 2 284 35 05

____________02.05.2011/fin.

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EUROPEAN PARLIAMENTEU-RUSSIA PCC WORKING GROUP

26 - 28 APRIL 2011

ASTRAKHAN

List of Participants

Members :

Mr Knut FLECKENSTEIN Chairman

S&D, Germany

Mr Adam GIEREK S&D, Poland Ms Constanze KREHL S&D, GermanyMr Marek MIGALSKY ECR, PolandMr Sławomir NITRAS EPP, PolandMr Pavel POC S&D, Czech RepublicMr Vladimir REMEK GUE/NGL, Czech RepublicMs Tatjana ZDANOKA Greens/EFA, Latvia

ABBREVIATIONS USED FOR POLITICAL GROUPS

EPP Group of the European People’s Party (Christian Democrats)S&D Group of the Progressive Alliance of Socialists and Democrats in the European

ParliamentALDE Group of the Alliance of Liberals and Democrats for EuropeGREENS Group of the Greens/European Free AllianceECR European Conservatives and Reformists GroupGUE/NGL Confederal Group of the European United Left – Nordic Green LeftEFD Europe of Freedom and Democracy GroupNI Non-attached Members

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Secretariat of the Delegation :

Mr Michal CZAPLICKI Administrator, Responsible for the Delegation

Ms Claudia SIEGISMUND Assistant

Secretariat of the Political Groups :

Mr Robert VAN DE WATER Political Advisor, S&DMr Maciej PREIDL Political Advisor, ECR

Delegation of the European Union

Mr Kevin TAIT Political Officer, EU Delegation Moscow

Accompanying Mr Fleckenstein, Chairman :

Ms Julia WANNINGER Assistant to Mr Fleckenstein, MEP

Interpreters (EN-RU/RU-EN):

Mr Vadim NIKITIN (team leader)Mr Vladimir BURDENKOVMr Konstantin KORZH

______________02.05.2011/fin.

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WORKING GROUP OF THE PARLIAMENTARY COOPERATION COMMITTEE MEETING IN ASTRAKHAN APRIL, 26-29 April 2011

List of the Russian Delegation

State Duma Delegation:

Name Position1. Mr Andrey KLIMOV

PCC CO-CHAIR Deputy Head of Committee on Foreign Affairs

3. Mr Valery DRAGANOV First Deputy Head of Committee on Industry

4. Mr Valery PROZOROVSKY First Deputy Head of Committee on Environmental Protection, Ecology

5. Mr Alexander ISHENKO Member of Committee on Environmental Protection, Ecology

6. Mr Vladimir STAVITSKY Consultant International Cooperation Department

7. Mr Evgeny MIKHEEV Assistant to Mr. PROZOROVSKY

Federation Council Delegation:

Name Position8. Mr Gennady GORBUNOV Head of Committee on Agrarian Policy and Fisheries

9. Mr Kirill MANGUSH Counselor of Foreign Affairs Department

10. Mr Nikolay DANKOV Senior Expert of Foreign Affairs Department

Administration of the Astrakhan Region:

11.Mr.Alexander ZHILKIN Governor of the Astrakhan Region

12. Mr. Alexander ZHIGIN Deputy Head of the Government of the Astrakhan Region

13. Mr. Askar KABIKEEV Deputy Head of the Government of the Astrakhan Region - Minister of Economy of the Astrakhan Region

14. Mr Ivan NESTERENKO Deputy Head of the Government of the Astrakhan Region - Minister of Agriculture of the Astrakhan Region

15. Mr. Denis AFANASYEV Minister of Foreign and External Trade Affaires of the Astrakhan Region

16. Mr. Evgeny TORBIN Representative of the MFA of Russia in the Astrakhan Region

Mission of Russia to the European Union:17. Mr. Alexander

KHLOPIYANOVFirst Secretary, Permanent Mission of the Russian Federation to the European Union

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CASPIAN PROJECTYURI KORCHAGIN FIELDBACKGROUNDLUKOIL started to carry out geological andgeophysical survey in the North and CentralCaspian in November 1995, under a stateprogram to study the Caspian shelf.In 1999, LUKOIL started exploratory drillingusing an Astra semi-submersible jack-up rig,which had been modernized at the KrasniyeBarrikady shipyard in Astrakhan. The platformhas three 66-meter supports and is capable ofdrilling wells up to 5,000 meters deep at seadepth of up to 45 meters.The then Russian President, Vladimir Putin,visited the Astra rig on April 26, 2002.LUKOIL discovered six large oil and gasfields in the North Caspian between 1999 and2005: Khvalynskoye, 170 km, Yuri Korchagin,Rakushechnoye, Sarmatskoye and Filanovsky. Atthis stage, the fields are thought to contain 4.7bln boe of 3P (proven, probable and possible)reserves. The Vladimir Filanovsky oil-gas fieldis particularly noteworthy – this is the biggestby oil reserves discovered in Russia in the last20 years. Another ten perspective oil and gasstructures have been identified in the North andCentral Caspian.The Company's exploration drilling successrate in the Caspian Sea is now close to 100%.Some of managers of the Company andits subsidiaries received a 2006 GovernmentPrize for Science and Technology in 2007 fordeveloping and commercially implementingrational geophysical research models andenvironmentally efficient off-shore welltechnology, which led to the discovery ofthe major oil and gas province in the Russiansector of the Caspian Sea and accelerated thepreparation of the resource-base for oil and gasproduction.

THE YURI KORCHAGIN FIELDThe field is named after Yuri Korchagin, aformer Secretary to LUKOIL's Board of Directors.It will be the first of the North Caspian fields tobe brought commercially on-stream, scheduledfor December 2009. The field is 180 kilometersfrom the City of Astrakhan and 240 km fromMakhachkala at sea depth of 11-13 meters.3P reserves are 570 million boe. Oil and gascondensate production will peak at 2.3 milliontonnes oil and 1.2 bcm gas per year.

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Y. KORCHAGIN FIELDPRODUCTION FACILITIESThe project of the Y. Korchagin fieldconstruction for production and transporthydrocarbons incorporates a number of majoroff-shore facilities.One of them is an ice-resistant fixed platform(LSP-1), built at the Astrakhansky Korabelshipyard, and intended to drill and operate wellsand collect and pre-treat reservoir content. TheLSP-1 has a 560-tonne rig capable of drillingup to 7,400 meters wells. Field constructionwill include 26 production wells, three waterinjectorsand one gas-injector. The platform alsohas two 70-tonne cranes. LSP-1 is 95.5 meterslong, 72.2 meters wide, 86,6 m height froma sea level and weighs 25,655 tonnes whenembedded and filled with liquid ballast.The LSP-1 will be complemented by a livingquarters for up to 105 employees, the LSP-2,built at the LUKOIL-Kaliningradmorneft works,and the two will be joined by a 74.2-meterbridge. The LSP-2 is ice-resistant platformwith health care area, service quarters, galley,foodstuff larder and a helipad on the fifth deck.The LSP-2 measures 41.5x40.2 meters and 38m height from a sea level.The marine transportation complex consistsof a floating storage offloading system (FSO)and tower mooring system for shuttle tankers,which will ship the oil to onshore facilities closeto the port of Makhachkala, where it will be fedinto the Transneft pipeline system.The oil is fed from the LSP-1 to the marinetransportation complex using 58 km of nonembeddedpipeline, 300 millimeters in diameterwith walls 16 mm thick.A conductor-platform with a cluster of 7production wells and 9 km of 300-mm pipelineto feed product to the LPS-1, and a 9-km 150-mm gas pipeline to feed gaslift gas from theLSP-1 to the conductor-platform should be builtduring the second phase of field construction.

ENVIRONMENTALMONITORING AND THE ZERODISCHARGE PRINCIPLEEnvironmental protection is the watchwordof LUKOIL’s environmental policy.Since 1997 LUKOIL has organized 48comprehensive offshore expeditions coveringvirtually the entire western part of the NorthCaspian and 23 expeditions directly in the regionwhere exploration drilling is being conducted.The monitoring produced an evaluation ofthe condition of the offshore environment basedon three hundred hydrological, hydrochemical,hydrobiological, ichthyological and toxicological

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indications. The data shows that the level ofwater contamination in the areas analyzed waslower than 15-20 years ago.Another important result of theenvironmental monitoring was the effect ofexploration drilling on the offshore environment.It demonstrated that the drilling platforms thecompany uses for exploration are not sources ofcontamination thanks to strict compliance withthe zero discharge principle, which LUKOIL wasthe first oil company to apply in the Caspian.The principle means that no waste isdischarged to the sea. All waste is collected inclosed containers and transported to shore fordisposal.The zero discharge principle was appliedduring exploration drilling and will be adheredto during production drilling and commercialhydrocarbon production.The company conducted 25 public hearingsduring preparations for the development of theCaspian fields. All the recommendations fromstate environmental control representatives,academics and the public were incorporated intothe final version of the project documentation.Overall spending under the environmentalsafety program in the northern Caspianexceeded 40 million rubles in 2004-2008.Spending under the new environmental safetyprogram in this region for 2009-2013 will top120 million rubles.The FSO has double bottom and doublesides, habitable deckhouse, machinery spaceand helipad in the aft of the vessel. She hasdeadweight of 28,000 tonnes. It measures132x32 m and with hull-height 15.7 m, and ismanned by a crew of 25. The oil is fed to theFSO via the mooring after travelling through asubmarine pipeline.