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. Last Updated: 07/27/2016

Tatneft Opens Cost-Saving Utility

ALMETYEVSK, Tatarstan -- Oil company Tatneft has opened a small hydropower plant at the Karabash water reservoir in Tatarstan in a first step toward fulfilling a plan to save the equivalent of 300,000 tons of crude on yearly electricity bills.

The $360,000 Small Karabash Plant, which opened last week, is expected to pay back its construction costs in just over five years, said utility director Ilsiyar Gabidulin.

The 500-kilowatt station on the Zay River uses excess water from the basin and produces roughly 2.3 million kilowatts of electricity per hour.

A station of that scale can power about 20 oil-well pumps, Gabidulin said. Tatneft operates 17,778 wells at its 128 oil fields in Tatarstan.

The Small Karabash Plant is just the first station of 10 stations that will be built at a cost of $2.3 million over the next few years, officials said. The 10 stations will produce 18.9 million kilowatts of electricity per hour.

The hydropower blueprint is a part of a broader cost-saving program launched by Tatneft three years ago. Under the plan, the company has been cutting costs by laying off employees, spinning off unprofitable fields and reducing production expenses.

Energy-saving measures alone cut the oil company's electricity bill by 7 percent in 1998, Tatneft president Shafagat Takhautdinov said at the company's annual shareholders' meeting last week.

"Over the last three years Tatneft has already reduced it electricity use by 326 million kilowatts per hour," Takhautdinov said.

Tatneft last year also spun off some secondary servicing and social infrastructure assets and transferred several dozen small, hard-to-recover oil fields to 26 independent Tatar oil companies. The deposits harbor roughly 55 million tons of oil reserves and involve about 1,000 jobs.

Tatneft currently has 100 percent participation in 43 independent servicing ventures.

Meanwhile, the company slashed its personnel by 15 percent to 46,715 employees in 1998. officials said. The oil major plans to lay off additional employees this year, bringing the number of staff down to 40,000.

The average salary at the company is 1,720 rubles ($176).

Tatneft also managed to cut the cost of producing oil by about 17 percent over the last year, bringing the average cost of crude production down to 263.40 rubles ($27.10) per ton. The oil company sold the output for about 474.20 rubles ($48.70) per ton on the domestic market and $70.70 per ton on the West European market, according to Tatneft figures.

Tatneft produced about 24.4 million tons of crude in 1998, and the 26 new oil firms produced about 1 million tons of oil in 1998. The 26 companies expect to double their output this year and Tatneft predicts that total crude production will reach about 30 million tons over the next few years.

Meanwhile, the Tatarstan government is pushing the 26 oil producers to issue shares that could be sold on the market. The authorities would retain at least blocking stakes of over 25 percent in most of the companies and give some of the securities to Tatneft, which lends equipment and infrastructure to smaller producers.

The Tatar government is the biggest shareholder in Tatneft with a 31.5 percent stake. Foreign investors hold 27.9 percent of the shares, and employees own another 22.6 percent, Tatneft official Viktor Gorodny said.

The Tatar-American Investment Fund holds a 5 percent stake, investment group Solid, Tatneft & Co. owns 1.6 percent and the remaining 11.3 percent are shared by various Russian organizations, Gorodny said.