Marina Sedykh: To develop new production sectors, state support needed in modernization of Ust-Kut airport and Viluy federal road

The Forum started with a plenary session dedicated to the recently adopted strategy of socio-economic development of the Siberian federal district until 2035. Speakers have discussed such challenges faced by the macro-region as traffic convenience, demography and human capital, preservation of the cultural sovereignty and languages of indigenous small-numbered peoples, development of new domestic production sectors. INK-Capital General Director Marina Sedykh talked on how business handles the latter task now and which state support measures could help.

Providing an overview of the company’s history, Ms. Sedykh said: “Over 23 years INK grew fr om a small start-up into the largest private oil and gas company in Russia. Starting operations when the ESPO pipeline did not exist yet, we are now producing 9 million t of oil annually, with the OPEC+ limitations, and developing new high-tech production all on our own. Our biggest-scale project is a one-of-the-kind plant that will produce polyethylene out of ethane. Workers who will operate the facility should live in Ust-Kut town, near the production site. Fly-in fly-out work is not applicable in this case. However, regrettably, the town is virtually unfit for a comfortable living.

Among major issues, Ms. Sedykh mentioned a lack of modern comfortable housing. To address this, the company is undertaking a housing development project including the associated infrastructure (a boiler house, substation and effluents treatment facility) for 3 thousand future employees. Other problems are a lack of public amenities, recreation and leisure areas, a severe shortage of education and healthcare professionals. The company mitigates this by financing regular trips of doctors from Irkutsk-based Ivano-Matryoninskaya children’s hospital to Ust-Kut, one such “expedition” providing health check-ups for up to 700 children. The most critical infrastructure limitations are the runway of the Ust-Kut airport and the section of the federal road between Ust-Kut and Verkhnemarkovo village that are both in an unsatisfactory condition.  

“The local airport can only handle small overaged turboprop aircraft like An-24 that literally fly on a wing and a prayer. Let alone the air terminal building, wh ere there is barely room to move while waiting for your flight. We have contacted federal authorities on that issue on numerous occasions, but things aren’t moving – discussions are ongoing, intention documents get signed, but there are no palpable improvements. I fear for the employees who have to travel like that,” Ms. Sedykh said. “As for the federal road, it has not become any better in the past 20 years. In the mud season, KAMAZ truck still get stuck. This complicates a lot the delivery of cargo to the fields and transportation of ready products, especially helium that needs to be handled with extreme care – vibration limits are even specified in the contracts with buyers. At the same time, we do not have the right to conduct any works on the federal road.”

In addition to assistance with major infrastructure obstacles, the state could stimulate the business with tax relief measures that would significantly expedite the implementation of advanced gas processing and inorganic chemistry projects. According to Ms. Sedykh, had the company not been granted the 10-year mineral extraction tax holidays for oil production in new and undepleted subsoil blocks in the Republic of Sakha (Yakutia), Irkutsk Region and Krasnoyarsk Region, East Siberia would be unlikely to have a reputation of an oil-and-gas producing region.

“The regional profit tax relief measures applied from 2012 through 2022 also played an important role. Thanks to them, INK was able to invest funds not subject to taxation in its development and considerably increase its tax contributions,” said Ms. Sedykh. “Payments to the budgets of all levels made by the INK Group increased 14-fold – from 14 billion RUB in 2011 before the tax relief to a record of 200 billion for the past year. Out of that amount, 20 billion was paid to the consolidated budget of the Irkutsk Region, the company thus accounting for every tenth rouble of the region’s income. Now the impactful tax relief measure has been discontinued due to a limitation of the regions’ powers to have their own tax policy.”

Attendees of the plenary session thanked Ms. Sedykh for the speech that once again highlighted the importance of cooperation between the authorities, business and academia, as well as a systemic approach to the development of northern areas. There is everything it takes there – mineral resources, amazing nature, vast expanses of land, people strong in spirit and responsible businesses who are ready to invest in the development of industries and technologies. This was proven by the examples provided by the business representatives speaking at the plenary session. And each of them is willing to do more. Due support of significant investment projects would allow, in the near future, to make the rugged northern areas attractive for young highly qualified professionals who want an interesting job and a nice place to live.

All ideas forwarded by representatives of the regions at the meeting will be summarized into a resolution drawn up at the closure of the forum.

Background:

The business forum dedicated to northern regions was first held in 2022 at the initiative of Artur Chilingarov, Special Presidential Envoy, member of the VIII State Duma of the Russian Federation. It is becoming the main platform to discuss topical issues of the socio-economic development of the country’s remote regions.