| Abstract: |
Russia and four other CIS countries – Azerbaijan, Kazakhstan, Turkmenistan and
Uzbekistan – are important energy producers and possess substantial reserves,
particularly as far as natural gas is concerned. Russia alone accommodates
about one quarter of the global gas reserves and has established itself –
along with Saudi Arabia – as one of the world’s two leading oil exporters.
However, Russia’s relations with OPEC so far have been largely a history of
non-cooperation, and the prospects of future cooperation appear equally
problematic. The prospects of the Russian energy sector are to be seen against
the background of the newly adopted ‘Energy Strategy until 2030’. The key
problems tackled in the Energy Strategy are the so far generally insufficient
exploration and investments in the new hydrocarbon fields. This is due to a
number of factors such as the rising state involvement in the oil sector, the
confiscatory tax regime, and the low domestic tariffs for gas. Deposits in the
traditional energy-producing regions are largely depleted, while the fields
which would enable maintaining or raising production volumes in the years to
come lie predominantly in remote and technologically and climatically
challenging areas. Their development would require the creation of appropriate
production, transport and social infrastructure. The related total investments
over the period until 2030 are estimated at some USD 1 3 trillion, implying
that a substantial boost from the current investment levels is needed. In
addition, the development of offshore gas deposits would require the
construction of LNG plants, the expertise for which within the Russian gas
industry has been very limited so far. Therefore, attracting more foreign
investment and related know-how, and more private capital in general, appears
to be indispensable for the government plans to materialize. Intensifying the
existing ‘Energy Dialogue’ between Russia and the EU and deepening the mutual
investment penetration would be highly instrumental in achieving these goals.
The government’s target is to increase, by the year 2030, oil production by
10% and gas production by some 40%, with half of the latter to be provided by
the so-called ‘independent’ (from Gazprom) producers. The increase in the oil
output would be largely channelled to domestic consumption, whereas half of
the additionally produced gas should be exported: gas exports are to rise by
about 50%. The rise in domestic gas consumption will be constrained by the
planned tariff hikes, which should facilitate the substitution of gas by coal
and nuclear energy, and induce energy-saving behaviour. The announced target
is to lower the energy intensity of the economy by about three times and bring
it close to the levels observed in developed countries with similar climatic
conditions. Domestic gas savings resulting from higher energy efficiency, but
also reduced flaring and leakages, should further improve Russia’s gas export
prospects – along with the increased supplies from Central Asia and
particularly Turkmenistan, where Russia has been recently successful in
advancing its presence. The Russian government’s target of exporting up to
20-25% of energy to the potentially promising Asian-Pacific region (including
China) by 2030 mirrors the EU’s stated objective of diversifying its energy
supplies away from Russia. However, so far the results in this respect appear
to have been mixed at best. While the geographical diversification of Russian
oil exports has been slowly advancing, the diversification of gas exports has
been constrained by the price disagreements with China and the limited
progress with LNG. Given the envisaged sizeable overall increase in Russian
gas exports, such diversification – even if successful – is unlikely to ‘crowd
out’ Russian gas exports to Europe. This implies that Europe will almost
certainly remain Russia’s biggest energy export market in the medium and long
run. |