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Russian Energy Strategy up to Period 2030: Questions, Troubles, Risks

IES. Russian Energy Strategy up to Period 2030: Questions, Troubles, Risks. Dr. Alexey Gromov Deputy General Director Institute for Energy Strategy Moscow, Russia. 10th Annual Aleksanteri Conference Helsinki 27 October, 2010. IES. ENERGY STRATEGY 2030 and its PREDECESSORS.

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Russian Energy Strategy up to Period 2030: Questions, Troubles, Risks

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  1. IES Russian Energy Strategy up to Period 2030: Questions, Troubles, Risks Dr. Alexey Gromov Deputy General Director Institute for Energy Strategy Moscow, Russia 10th Annual Aleksanteri Conference Helsinki 27 October, 2010

  2. IES ENERGY STRATEGY 2030 and its PREDECESSORS Conception of the state energy policy in new economic conditions (Ratified by the Government: №26 of 10.09.92) 1992 Decree of the President №472 of 07.08.95 «About the basic directions of the state energy policy» 1995 Fundamentals of the ES - 2010 (Ratified by the Government: №1006 of 13.10.95) ES – 2020 (approved be decree №1234-r of the Government of the Russian Federation of 28.08.03) 2003 ES – 2030 approved by decree N° 1715-r of the Government of the Russian Federation of 13.11.2009 2009 2

  3. IES Energy Strategy 2030 in the System of Documents of the Strategic Development Long-term forecast of the development of Russian economy for the years 2009-2030 Conception of the long-term development of the Russian Federation for the year 2020 ES-2030 General scheme of development of the gas industry for the year 2030 General scheme of allocation of power generating facilities for the year 2020 General scheme of development of the oil industry for the year 2030 State program of energy saving Eastern Gas Program Conception of the state program for exploration and exploitation of the continental shelf of the Russian Federation Program of long-term development of the fuel and energy complex of the Russian Far East Strategy of development of the power generation in the Russian Far East Investment programs of energy companies 3

  4. IES ES-2030: from FORECAST to TARGET MODELING ES-2020 ES-2030 Target Modeling Forecasts and Scenarios 4

  5. 1ST STAGE 2ND STAGE 3RDSTAGE IES 2020 2022 2013 2015 Share of Energy sector in Economy Overcoming the crisis in the Economy and Energy sector Modernization of Energy sector Increase of power efficiency and energy saving in the Economy and Energy sector Innovative development of Energy sector New oil and gas fields development (Arctic shelf, Eastern Siberia and the Far East) Highly effective use of traditional power resources Switch to the Energy of the Future Growth of national economy and quality of life of the population ENERGY STRATEGY 2030 approved by decree N° 1715-r of the Government of the Russian Federation of 13.11.2009 2009 2030 5

  6. MECHANISMS 1 STAGE 2 STAGE 3 STAGE POLITICS State Energy Policy in Russia Key priorities' realization Rational market environment Advanced standards and regulations Prospective state of Russian FEC Strategic initiatives Energy security Management of state property Energy efficiency of economy Development of home energy markets Formation of rational energy balance Subsoil resources management Economic efficiency of FEC Regional energy policy External energy policy Social policy in the energy sector Ecological security of FEC Scientific, technical and innovative policy KEY PRIORITIES 6

  7. Aim and Goals of the ES-2030 Innovative and efficient energy development Aim Stable institutional environment in the energy sector Modernization and construction of new energy infrastructure Goals Energy and ecological efficiency of the national economy and energy sector Efficiency of reproduction, extraction and processing of energy resources Further integration of the Russian energy sector into the global energy system Aim of the ES-2030 remains stable despite consequences of the global economic crisis 7

  8. Forecasted Change of the Fuel and Energy Complex’s Role in the Russian economy 2030 2005 Energy sector in GDP Energy sector’s export in GDP Energy resources in export Investment in energy sector in total investment 8

  9. Expected Dynamics of Specific Energy Intensity of GDP and Domestic Demand for Primary Energy Resources 9

  10. Foreign energy policy and ES-2030 targets:Eastern and Western vectors IES Western Vector (European Market) Eastern Vector (Asian-Pacific Market) Russian Gas Export, 2009 Russian Gas Export, 2030 (projected) • EU market is essential for Russian gas export (75%) • Western Vector accounts for 96% of Russian gas export (EU + other Europe) • Russia seeks for export diversification • Russia promotes eastern vector of energy export 10

  11. Eastern Vector for Russian Energy Policy IES 11

  12. IES EASTERN VECTOR IN ES-2030: NEW SIDES OF “OLD” TASK Road Map of implementation of ES-2030 : Eastern vector task №19«Increase in the share of the Asia-Pacific countries in the structure of the Russian energy export to 16–17%» task №10«Implementation of a complex of program measures for petrochemistry and gas-chemistry development in the Eastern Siberia and Far East» task № 17«Extended reproduction and attraction of human resources for development of new areas of the Eastern Siberia and Far East» Eastern vector Key initiatives in the Russian energy sector: Eastern vector Energy infrastructure: development and diversification ESPO pipeline, Eastern Gas Program, petro- and gas-chemistry development Development of oil and gas complexes in Eastern regions of Russia Sakalin, Yakutia, Magadan, Irkutsk and Krasnoyarsk regions Shelf of the East Arctic, reanimation of the Northern Sea Way Exploitation of the oil and gas potential of the Northern regions of Russia and Arctic shelf Large-scale development of hydro energy and renewables Non-fuel energy Modernization of electric power and heat supply systems in the Region Energy saving 12

  13. IES THE EAST IS A KEY DIRECTION OF DIVERSIFICATION OF THE RUSSIAN EXPORT Forecast of oil and oil products export Forecast of gas export 13

  14. IES KEY PROJECTS IN THE EASTERN SIBERIA AND THE FAR EAST • Eastern Gas Program • Natural gas Export to China • Sakhalin development • LNG Projects in Sakhalin 14

  15. FIRST RESULTS OF ES-2030: CAREFUL OPTIMISM IES 15

  16. Western Vector for Russian Energy Policy IES 16

  17. IES WESTERN VECTOR IN ES-2030: KEY PROJECTS & GOALS task №19Increase the Russian gas export to European market 160 bcm in 2008 120 bcm in 2009 2030 target - 200 bcm task №21Promote the gas pricing system in Europe, including both long-term and spot contracts task № 22-23Bilateral investment in gas projects • Nord Stream (started in April 2010) • South Stream (projected) • Shtokman (projected) 17

  18. DISTURBING RESULTS OF 2009ON EUROPEAN GAS MARKET IES 12% 24% Export to Europe Export (total) Gas production (Russia) Gas production (GAZPROM) Gas production has fallen to level of 2000 Gas export to Europe was reduced to a quarter 18

  19. Long-term export dynamics & reasons Composition of EU gas import Source: EEGA Factors of decrease in export expectations Price situation in 2009 • Europe: • Competition growth (LNG, new pipelines) • Pricing change (spot market vs. long-term contracts) • Renewables & energy efficiency • Geopolitics (Nabucco, anti-Gazprom rules in 3rd Gas Directive etc.) 19

  20. Conclusions IES 20

  21. Export Expectations vs. Reality IES Russian Gas Export forecast up to period 2030 Factors of decrease in export expectations • Europe: • Competition growth • US: • refuse of future Russian LNG (the boom of shale gas production) • Asia-Pacific: • competition growth (Central Asia) 15-20% Russian gas export forecast (high level from ES-2030) Russian gas export forecast (low level from ES-2030) Russian gas export forecast (IES expectations) Risk of decrease in export on 15-20 % 21

  22. Balancing Eastern and Western Vectors:Tasks for Russian Energy Policy From export orientation to the domestic market Cost reduction in Russian natural gas industry Revision of investment projects - Selection of priority projects among declared in ES-2030 - Refusal of a number of ineffective projects-giants (the Southern stream, etc.) Flexibility of gas export policy - Revision of pricing system in long-term contracts of Gazprom - Flexibility increase in mutual relations with Ukraine and Central Asia IES 22

  23. Issues for Russia – EU relationships - EU gas market forecast - EU secure demand for Russian natural gas - The real need for new pipeline project in relation to future demand - The transit problem & politics toward Ukraine & Belarus - 3rg Gas Directive & Regulative issues - Bilateral investment in gas fields, pipelines, and marketing IES 23

  24. Thank you for your attention! IES 24

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