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04:29 GMT 08:29 Moscow
Local Time: 08:29
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The problem |
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G8 response |
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Russia's position and role |
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Opinions |
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Russia’s Position
International energy security is of special significance to Russia, which has one of the world’s biggest fuel and energy potentials. It occupies 13% of the world’s territory and has less than 3% of the world’s population, but 34% of gas and some 13% of the prospected oil reserves. Russia’s energy complex is an inalienable part of the global energy market. Russia leads the world in international gas trade and is the second biggest oil and petrochemicals exporter. From 2002 to 2004, it posted the world’s highest growth rate for major oil producing countries.
Based on current estimates, we can conclude that Russia’s oil production can reach 530 million tons and export 310 million tons by 2015. Its role of a reliable energy supplier has been reinforced by the efforts to diversify oil export routes. The Russian government has made a decision on building an East Siberia – Pacific oil pipeline with the throughput capacity of 30 million tons and a terminal on the Pacific coast by 2008. The capacity of its trunk oil pipelines and sea terminals can be increased by 20% by 2010 and 40-50% by 2015 compared to 2005.
Its gas production can reach 740 billion cubic meters and export 290 billion cubic meters by 2015. Russia is energetically working on new projects, such as the North European Gas Pipeline, and is preparing to develop the Shtokman field and East Siberian and Far Eastern fields.
As a global energy and resource power, Russia will use its G8 Presidency in 2006 to promote international action on acute problems of energy security with due regard for the interests and possibilities of Russia and its role of a reliable and stable energy supplier.
In this period, Russia will work to reinforce G8 approaches to energy security and at the same time outline its view of the problem and national priorities.
On the one hand, Russia is a full member of the G8, a group of countries that are the world’s biggest energy consumers. But on the other hand, it is one of the biggest producers, which makes it objectively close to hydrocarbons exporters, above all the OPEC countries. Taking this into account, Russia can act as the link between hydrocarbons suppliers and consumers, taking into account the opinions of all concerned parties and promoting the search for a balance of interests of all players on the global energy market.
During its Presidency, Russia will offer its partners to draft a coordinated strategy for reliable and prompt supply of the global economy and nations with all kinds of energy at prices based on the main economic principles, with the least possible damage to the environment.
This strategy will stipulate joint measures to ensure the stability of global energy markets, increase investment into the main links of global energy, develop alternative sources of energy, accelerate the introduction of energy saving and efficient technologies, and ensure access to modern energy services for everyone.
Russia will put forth a package of measures and an action plan to overcome economic and technological barriers to raising the efficiency of traditional and developing new energy technologies. As the holder of a considerable share of the world’s energy resources and a major energy producer and exporter with a high research and technological potential, Russia is ready to participate in the creation of a global energy infrastructure to ensure effective production, transfer and use of clean energy.
Russia’s Energy Industry and its Global Role
Russia’s energy industry includes oil, gas, coal, turf, shale production as well as oil refining, electricity generation, centralized heat supply systems, pipeline energy transportation, power transmission networks.
The importance of the energy industry stems as much from advanced technology and excellent workforce as from Russia’s vast resource base. Its mission is to supply energy and provide energy-related services, contributing as strongly as possible to the advance of the national economy. The energy industry is currently one of the most important, sustainable, and fast-developing sectors in Russia, accounting for a quarter of GDP, a third of industrial output and a half of federal budget, export and hard-currency revenues. The Russian energy industry has unmatched experience in the deployment and management of huge centralized gas, electricity, heat supply systems and pipeline energy transportation networks.
Fundamental institutional changes took place in the national energy sector in the past 15 years, with much of the industrial capacity privatized to make companies more competitive in a free market environment. In the oil industry privatization has led to 10 vertically integrated majors and about a hundred smaller producers; in natural gas Gazprom, a monopoly, had to give up some market space in favor of independent producers; in coal Russia has over 60 coal-producing companies now. The national electricity system comprises the giant RAO UES (Unified Energy Systems) of Russia with many subsidiaries and over 70 regional power distributing companies. The changes have obviously improved independence, efficiency, and competitiveness in the sector.
Russia’s energy reserves are among world’s largest – a country with less than 3% of world population controls around 13% of global prospected oil reserves, 34% of natural gas, around 20% of coal, 32% of brown coal, and 14% of uranium. With over 12% of global primary energy production, Russia is an important player in international energy trade.
In 2000-2004, production of primary energy resources grew by 19.4%, while domestic demand increased only by 4.9%. This can be partly explained by export growth. The other important reason has been continuous improvement of energy efficiency as the energy intensity of the national economy has gone down by 21% in the past five years. Since 2003, this has also contributed much to GDP energy efficiency as energy-saving industries have grown faster than energy-intensive ones. Seen as an effective way to curtail domestic demand and raise the reserves-to-production ratio, energy efficiency is set to remain a top priority for the future.
Oil Production and Refining. Since 1999, Russian oil production has been growing faster than anywhere else in the world, with the initial growth rate three times as high as in the Organization of Petroleum Exporting Countries (OPEC). Last year’s output was 470 million metric tons (3.45 billion bbl) compared to 323.5 million tons (2.38 billion bbl) in 2000 – a figure that the Russian Industry and Energy Ministry expects to increase to 530 million tons per year (10.67 million bpd) by 2015, primarily on the back of new explorations and developments.
Oil is transported through a unique world-largest pipeline system. Transneft, Russia’s state-owned pipeline company, operates 50,000 km (31,000 miles) of trunk and over 19,000 km (12,000 miles) of auxiliary pipelines; 856 oil tanks with a total capacity of 13.4 million cu m (84 million bbl), and 360 oil booster stations.
Centralized management of the main pipeline network spanning 53 Russia’s regions enables unified economic, financial and technological policies and an ability to concentrate on the most effective projects and know-how.
Though Russia’s oil exports (the country is the second largest in the world after Saudi Arabia) are still focused on Europe (93%), supplies to the Asia-Pacific Region are also growing. The Asian dimension is largely about China, both in absolute numbers and in growth proportions. The United States is also seen as a promising market with a high import capacity.
A future oil export system will rely as much on seaports as on pipelines. European supplies will increase as soon as the Baltic Pipeline System and the 62-million-ton seaport of Primorsk come on stream. The Asia-Pacific is to be covered by the proposed Eastern Siberia-Pacific pipeline network with the Perevoznaya transshipment terminal. The latest feasibility study of this system suggests a total capacity of 80 million tons (588 million bbl) per year.
In the long term, U.S. markets are going to be accessed through the Western Siberia-Barents Sea pipeline system that is also expected to pump through up to 80 million tons (588 million bbl) of crude annually by 2020. Another increase is anticipated from the Caspian Pipeline Consortium expected to transit up to 67 million tons per year (1.35 million bpd) through Kazakhstan. All these projects might raise Russia’s total pipeline and tanker export capacity to 303 million tons per year (6.1 million bpd) by 2010. Oil is also exported in steadily increasing quantities by rail.
Russia’s refining sector includes 28 facilities refining 295 million tons of oil per year (5.94 million bpd). Primary refining is increasingly concentrated at home: 2005 growth rate in this sector was 6.5%. Growth has also been strong in the production of automotive fuels (gasoline and diesel) and heavy fuel oils.
Natural Gas Production. Russia is the world leader in natural gas reserves (48 trillion cu m). OAO Gazprom currently accounts for 85% of the national gas production, which grew from 584 billion cu m in 2000 to 640.6 billion cu m in 2005.
The Russian gas industry has traditionally been operated as a technologically and economically unified system in which output is optimized in each producing region to ensure reliable supplies to domestic as well as foreign consumers. Russia’s world-largest 600-billion cu m centralized gas transport system includes over 200 gas and gas condensate fields, 24 underground gas storage facilities, over 153,300 km (95,000 miles) of main pipelines, and 264 gas compressor plants (44,000 MW).
This powerful 5,000-km (3,100 miles) system spanning from the north of Russia’s Tyumen Region to France and Italy, in which gas pressure changes take five to six days to go from one end to the other, is monitored and controlled by a multifunctional system. Security of Russian gas supplies to Europe is guaranteed by bilateral and multilateral import and transit agreements on a company level; the supplies are monitored by European dispatch centers, for example, the Balkans Dispatch Center in Sofia, which covers exports to the Balkans and Eastern Europe. Another dispatch center is in Berlin and it monitors the Yamal-Europe gas pipeline.
Gazprom is closely involved in multi-company international Edigas Workgroup, creating a joint interactive system of communication between companies and dispatch centers to improve coordination and timing of the increasing number of European short-term contracts.
The Russian gas transport system has a solid space capacity to meet contingency plans, which includes thorough integration of all pipelines, underground gas storage facilities, operational pipeline reserves, and a centralized management system. In Russia alone, the operational pipeline reserve is nearly 8 billion cu m, a healthy insurance against any emergency that might lead to disruption of supplies. This reserve is frequently used by Russian and foreign partners. No less important are underground storages: by helping alleviate risks of disruption in case of seasonal consumption peaks, they provide additional guarantees to national and export consumers. The total recoverable gas storage increased to 62.6 billion cu m last year.
The reliability was well tested during the unusually cols spell that spanned over Russia and most European countries in January 2006. Having retained and even increased supplies at times of need, Gazprom passed the test with flying colors. In late January, Gazprom additionally supplied 3.4 billion cu m and increased supplies to European consumers by 7%, an amount comparable to the fall of supply in the wake of Katrina, to 80 million cu m per day, even though Russia also suffered from extreme cold. On January 16-28, when the cold was the strongest, Gazprom was nearing its operational limits, increasing primary production by an emergency 800 million cu m (up to 1 billion cu m for the whole month) and supplies from underground storages by 2.6 billion cu m.
Like in oil, gas export has been growing faster than production in recent years, culminating in a 4% rise in 2005 (8% rise to 152.5 billion cu m for Western Europe and Turkey). With 22% of global gas trade, Russia is firmly in the first place as an international gas supplier. It sells gas to 21 countries in Europe, satisfying 25-28% of aggregate European demand. In 2005, Russia started its first spot deliveries of liquefied natural gas (LNG) to the U.S.
Russian gas comes to international markets by three main routes: via Ukraine, Belarus and under the Black Sea. To increase export capacity, Russia is building new export facilities: the North European Gas Pipeline (with an annual capacity of 55 billion cu m), which is to be laid under the Baltic Sea, will connect Russia with Germany. The recently discovered giant Shtokman offshore gas condensate field in the Barents Sea, when put on stream, will be used as a base for LNG production, and new Eastern Siberian and Far Eastern fields will justify an effort to reach out to Northeast Asian markets. The unique combination of vast reserves and centralized transport capability makes deliveries of Russian gas flexible and reliable.
Coal Production. Russia’s total coal reserves are around 157 billion metric tons. With the fast-growing national coal production that reached 296 million tons per year in 2005, Russia is the world’s fifth coal producer after China, the U.S., India and Australia.
All modern trends point at a need to produce and handle higher-quality coal. Performance figures of Russia’s coal preparation industry (over 110 million tons a year), which includes 41 plants, suggest coal companies go in line with the latest developments. All produced coking coals are prepared at home; the proportion of domestically prepared steam coals is also growing fast.
Coal exports are growing. In 2005, Russia sold abroad 76.7 million tons of coal, mainly through seaports.
Electricity. In the electricity sector, Russia relies on a 216.7-GW generating capacity of over 700 power plants and on a 2,500,000-km (1,500,000 miles) power transmission network. RAO UES of Russia, the national electricity champion, operates around 90% of these assets.
UES is the world-largest integrated electricity company running its nationwide electricity supply network through an automated centralized control facility which ensures most efficient use of energy resources and most reliable supplies to public, corporate and individual consumers. In power generation, it is more efficient that a network of smaller power plants because it can concentrate enough resources to build and operate larger plants which ensure more efficient use of primary fuel, less expensive electricity and greater labor efficiency in maintenance as well as construction. Modern steam power plants mostly operate efficient high-power generators to diminish the fuel intensity of generated power and, ultimately, the operational costs of electricity and heat. RAO UES of Russia has also introduced comprehensive water utilization programs to balance off its own interests against the interests of other users of water resources at its hydro power plants and power transmission cost optimization programs to reduce power losses. Importantly, lower fuel intensity resulting from its large scale also helps diminish environmental risks.
UES provides more efficient use of generation machines and transmission lines and, thanks to greater flexibility, it has lower reserve requirement, which is to be spent in an emergency to rectify deficit in one or more regional power systems. The company continuously redistributes power flows between main producing and consuming regions and flexibly reorients power between day- and nighttime supply modes, which is an important reliability reserve in a country spanning eleven time zones and several areas with different climatic conditions, from the Baikal region and northern Urals to the Black and Caspian seas.
Another reason for having a centralized system is that it is more reliable in an emergency: delay of commissioning of a new generating site, unexpected changes in primary fuel supplies, unexpected rise or fall of power consumption, etc. UES also develops a flexible maintenance schedule for various generating sites so that not to undermine power supplies because of local repairs. Flexible distribution of resources also helps when part of the country’s territory is affected by extreme weather conditions and, importantly, improves quality, as well as sufficiency, of consumed power (stable voltage and frequency).
This enormous system is efficiently controlled via a computing and data management network.
With the last year’s aggregate output of 952.2 billion KW/h, electricity exports rose by more than 50% year-on-year to 12.3 billion.
Around 70% of power is generated by the 148-million-kW/h nationwide network of steam power plants. In European Russia and the Urals, 75% of thermal power plants are gas- or oil-firing, while in the east more than 90% of plants are coal-firing. On average, natural gas remains the basic fuel for more than 70% of the national generating capacity.
In electricity generation, Russia is hard to beat technologically as well as economically. The Russian gas turbine industry dates back to the 1960s and stands firmly on the cutting edge of global technology. Russian scientists have proposed many efficient and non-conventional solutions to the better use of coal in power industry. But where Russian advantage is the most evident is nuclear power.
Currently, the nation’s hydro power plants generate 45.7 GW, which accounts for nearly 21% of the overall generating capacity. The nation’s 10 nuclear power plants with 32 generating units provide 10% of the overall generating capacity (23.3 GW). Furthermore, Russia is the only country with commercial fast neutron reactor technology: the Beloyarsk NPP in the Urals includes one sodium-moderated BN-600 fast reactor.
What makes Russia’s competitive edge in the nuclear industry even stronger is its decades-long experience in the development, operation, maintenance and disposal of nuclear power plants for military and civilian ocean-going vehicles (SSNs, icebreakers, etc.), a mainstay of any commercially viable nuclear industry. The priority today is to successfully convert mostly defense-related expertise and industrial capacity into serial production of small and medium (under 600 MW) nuclear power plants on the basis of nuclear maritime propulsion units. The first 70-MW floating nuclear power plant on the basis of several converted icebreaker reactors in Severodvinsk (Arkhangelsk region) is to enter experimental operation soon.
A key problem to be solved if there is to be a sustainable nuclear power industry is full fuel cycle technology, to provide answers to such sensitive questions as resource sufficiency, proliferation concerns, and global radiation balance. Russia has been seeking a full fuel cycle since the early days of its nuclear industry and, with an efficient network of spent nuclear fuel reprocessing plants, has made substantial progress to date.
The 2000 Presidential Nuclear Initiative has formulated a concept of the next generation of the nuclear industry, which is to be in line with proliferation, global energy security, and sustainable development requirements. Centered around a full fuel cycle, a fast-neutron generating capacity, and international nuclear fuel centers, this concept enjoys increasing recognition in the world energy community.
On the whole, the Russian energy industry seeks to diversify energy supplies through progress on innovative source of energy such as hydrogen. Abundance of hydrocarbon reserves is seen also as a resource to fund research into future renewable sources of energy. One example is a Kamchatka network of geothermal power plants; the total output power of small hydro plants has reached 630 MW, and 24 Russia’s biofuel plants already yield 607 MW.
Heat supply. Heat supply is a crucial issue in most of Russia where winters are severe. The major part of heating capacity comes from electricity generation: centralized combined power/heat plants account for a third of electricity and two thirds of heat in the country. Russia and the Commonwealth of Independent States produce more electricity-related heat and run longer heat supply networks than all other countries put together.
International Cooperation. Already an active player on the international energy markets, holding the first place in gas (208.6 billion cu m per year) and second in oil exports (251 million tons per year, or 5.05 million bpd), constantly increasing, thanks to high energy prices and healthy growth of domestic demand, Russia seeks to further increase its role as a reliable and responsible partner and a key global and regional energy security provider.
Today’s energy market without Russia is unthinkable. With over 90% of Russian energy exports focused on Europe, Russia has been seeking to secure the existing and create new export routes to improve consumer security. The Baltic Pipeline System, the Yamal-Europe Gas Pipeline, the Caspian Pipeline Consortium, the expansion projects for the Druzhba Pipeline and Black Sea transshipment facilities have been great steps to achieve these objectives.
The latest major project in this department, the North European Gas Pipeline (NEGP), promises an ultimate solution to the diversification problem. It will expand the capability to export gas to Western Europe, honoring the existing and securing future long-term commitments; the NEGP is, in effect, seen as a direct link between Russian and European gas systems.
This pipeline facilitates intensive cooperation between Russia and the European Union on convergence of energy systems and strategies. This work is on the stage of a feasibility study into a future simultaneous unification of power transmission lines run by the Union for the Coordination of Transmission of Electricity (UCTE), UES of Russia, and electricity companies of CIS nations. Russia and the EU focus on greater stability, reliability, and sustainability of production, distribution, transmission/transport, and consumption of energy, including energy efficiency, energy saving, environmental safety, and the role of renewables.
The Russia-U.S. energy dialog has also made considerable progress. Sakhalin I project has produced first oil for the U.S. market; Gazprom delivered the first LNG cargo to North America in September 2005. Russia demonstrates impressive growth on the U.S. energy market, doubling performance there. While Russia’s current share on the U.S. energy balance has not yet gone beyond 4%, Shtokman provides enough reason to hope for major improvements: Gazprom has not yet named partners on Shtokman, but a complete investment decision on the development of this giant field is already planned to be on the table before the end of this year.
The Eastern dimension of Russia’s energy cooperation has as much to do with Asian and Pacific nations as with North America. By 2020, Asia is expected to account for 30% (100 million tons, or 735 million bbl) of Russian oil exports and 25% (65 billion cu m) of gas exports, compared to the current 3% and 5%.
Russia is geographically most competitive as a Eurasian energy transit operator, capable of spanning equally effective centralized control of energy supply in the North-South, East-West, and South-Northwest dimensions. This is important less for Russia as an individual player than for international energy markets and, accordingly, global economy, which justifies the role of the Russian energy sector as a pillar of national economy and a key element of global energy security.
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