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RUSSIAN FAR EAST TEAM CONTRIBUTION TO AES PROJECT. Asian Energy Security (AES) Project Asian Energy Security Workshop 2006 6 to 7 November, 2006, Beijing, China RFE Team Members: Ruslan Gulidov, Victor Kalashnikov, Alexander Ognev
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RUSSIAN FAR EAST TEAM CONTRIBUTION TO AES PROJECT Asian Energy Security (AES) Project Asian Energy Security Workshop 2006 6 to 7 November, 2006, Beijing, China RFE Team Members: Ruslan Gulidov, Victor Kalashnikov, Alexander Ognev [Presented for Team by David Von Hippel, Nautilus Institute]
RFE AES CONTRIBUTION: PROJECT TEAM AND ROLES • Dr. Victor Kalashnikov: Overall supervisor of Russian team • Develops the strategic framework of the LEAP modeling activities and follow-up analysis of the results • Defines basic qualitative and quantitative assumptions of the scenarios implemented • Resolves various theoretical problems • Dr. Alexander Ognev: Advisor for all general and specific issues related to the RFE electric power industry • Mr. Ruslan Gulidov: Modeler • Collects and processes data, inputs to LEAP model • Creates and examines LEAP scenarios for RFE energy sector based on advice from other members
RFE AES CONTRIBUTION: RFE ENERGY SECTOR OVERVIEW • RFE Energy Sector • Generating, transmission & distribution companies, marketing and management bodies of the electric power industry • Coal-mining industry (in all territories of the RFE) • Oil and gas industries (Yakutia, Sakhalin, Kamchatka, Chukotka) • Refining industry (mostly in Khabarovskiy Krai, but also in Sakhalin and Yakutia) • Characterized by huge distances, low level of development, non-uniform and dispersed character of the development of RFE's economy • 20+ "energy districts" independent in power supply, energy sectors based on local resources. With some imports from elsewhere in RFE • Favorable conditions for concentration of energy production and centralization of energy transportation and distribution • Power grid: Integrated Power System of the East (OES Vostoka).
RFE AES WORK:RFE ENERGY SITUATION Energy production in the Russian Far East in Recent Years
RFE AES WORK:RFE ENERGY SITUATION • Energy industry accounts for more than 10% of regional GDP, 28% of industrial output, employs 4% of economically active population • Investments in modernization and development of energy sector in 2003-2004 > 50% of total capital investments in region’s economy • Implementation of large-scale, capital-intensive projects -- “Sakhalin-1”, “Sakhalin-2”, Bureiskaya hydropower power plant
RFE ENERGY SITUATION, RECENT TRENDS • Growing signs of stabilization in current energy supplies in RFE since 2002, due to solution of financial problems related to payments for energy products and services • 2003-2004, ratio of RFE and Russian average tariffs stabilized at 1.6 for electricity, 1.8 for heating • Regional energy companies operated at a profit in 2004 • Cross-subsidies between consumer groups, inter-regional subsidies in wholesale electricity sales still exist • Coal industry stabilizing gradually with closing of unprofitable mines; share of coal in underground mines in RFE in 2004 fell to 10% from 26.1 % in 1991 • Increasing demand in energy industries for equipment renovation of outdated and obsolete equipment
RFE ENERGY SITUATION, RECENT TRENDS • Bureiskaya HPP (designed capacity of 2000 MW, average generation 7.1 TWh/yr) unit additions to total of 1005 MW • To transfer power from Bureiskaya HPP, construction of high voltage transmission lines continues • Increasing electric load on TPP in “OES Vostoka” grid, increased Bureiskaya HPP output by 2007 will decrease average electricity prices • Mergers, takeovers and processes of vertical integration of assets, restructuring of RFE coal and power industries • 2005-2007--Unified holding company created for RFE electricity sector (existing and new) controlled (over 52%) by Federal government
RFE ENERGY SITUATION, RECENT TRENDS • Phase out of coal facilities in some territories of RFE and Transbaikalia as Sakhalin gas comes to market • Northern/NE territories of RFE self-sufficient in coal supply, import petroleum as refined products from Khabarovsk area
RFE ENERGY SITUATION, RECENT TRENDS • Highly likely that major projects in the energy sector will shift the trade balance of primary energy towards export supplies to international and interregional markets of crude oil, LNG and coking coal, and electricity to “isolated districts” in Northeast China. • Despite overall good prospects for supply in RFE, there are continuing problems of “small” communal utilities (electricity and heat supply) • Neglect and malfunctioning of production facilities and engineering infrastructure, unresolved financial problems
RFE ENERGY SITUATION, RECENT TRENDS • Stationary “small” power industry varies both technologically and in respect to its manageability. For communal heat supply alone in the RFE there are more than 5300 municipal heating plants, which generate about 25 million gigacalories. • Positive examples of vertical integration of communal energy utilities, form basis for structural reforms in communal services. • Strategic position of RFE in North-East Asia energy sector is being restructured, strengthened • Construction/investment activities for implementing the “Sakhalin-1” and “Sakhalin-2” projects mean doubling primary energy production in RFE by 2008 net energy exporter, supplying crude oil, LNG to energy markets of Northeast Asia
RFE ENERGY SITUATION, RECENT TRENDS • End 2004 RF Government approved a framework project for construction of Taishet – Scovorodino – Perevoznaya Bay Oil Pipeline (the East Siberia – Pacific Ocean Project – ESPO project) first section is to be completed by second half of 2008, with throughput of 30 Mte crude oil • Oil terminal in Perevoznaya Bay is to be finished by second half of 2008, with similar throughput • 2005, RF Government of Russia Federation re-orienting Kovyktinskoye gas project to meet domestic gas needs in W. RF, thus excluding it from NEA market, probably meaning a focus on the triangle "Sakhalin shelf – Northeast China – the Korean Peninsula“ for exports
RFE ENERGY SITUATION, RECENT TRENDS • 2004 and 2005 Exxon Neftegas (operator of the Sakhalin-1 project) in commercial negotiations on pipeline gas supply to Northeast China via Khabarovsk Krai, 8-10 BCM/year • Gazprom negotiating with operator of the Sakhalin-1 project to obtain 25% share, which may speed development of international connections • Completion of Bureiskaya HPP construction, power availability in “OES Vostoka” created preconditions for export-oriented power industry, but so far only strong activities in near-border power trade (negotiations on 600 MW power lines from Blagoveschensk to Kheikhe)
POSSIBLE COOPERATIVE INITIATIVES: RFE AND NEA • "Amur Arc" Project: • Planned specialized infrastructure for fuel and energy resources transit, goods transit • Oil and gas pipelines • High-voltage power lines • Trans-Siberian Railway • Arc-like energy corridor on the route "Eastern Siberia – Skovorodino – Blagoveshchensk – Khabarovsk and Komsomolsk-on-Amur – south of Primorskiy Krai“ • Economic concept of industrial-service development of energy corridor
POSSIBLE COOPERATIVE INITIATIVES: RFE AND NEA • "Amur Arc" Project: • Oil-and-gas projects of the Sakhalin shelf—Sakhalin 1 and 2, onshore and offshore, extraction/processing • Oil pipeline “Eastern Siberia – Pacific Ocean” (ESPO) • Integrated system of gas production and transportation in Eastern Siberia and the Far East • Prospects for electricity cooperation with China: the “Small China” project--Export electricity into “loading islands” – near-border areas/cities of NE China • Prospects for electricity cooperation with China: the “Big China” project—25-30 TWh/yr into integrated energy systems of Northeastern and Eastern Chinese provinces
POSSIBLE COOPERATIVE INITIATIVES: RFE AND NEA • "Amur Arc" Project: • Energy bridge "Far East – Korean Peninsula • Project induces important external benefits: • Improved investment climate in region • New technological opportunities for development of joint enterprises for hydrocarbons processing • Energy-intensive enterprises based on new efficient hydroelectric power plants, gas- and coal-fired power plants • In view of the large scales, investments required, complex effects, planning, implementation, the power supply and pipeline sections of Project require support and coordination of Russian Government
LEAP MODELING OF RFE ENERGY SYSTEM • Information Sources: Current Accounts • State Statistics in Russian Far East for Petroleum, electricity product supply and balances • Customs data on imports and exports • Statistics on social and economic indicators • Russia’s regional fuel and energy complexes • Provincial government data sources • Data from private companies; such as "Unified Power Grid of Russia“ • Information from experts in Energy Departments of territorial administrations of subregions of RFE • Estimates of research fellows of Institutes in region
LEAP MODELING OF RFE ENERGY SYSTEM • Information Sources: Paths/Scenarios • Official materials from government authorities, private companies • Economic and social development projections • Demographic forecasts • Plans for energy and other infrastructure • Reports and papers on futures of energy industries of RFE (Russian and International publications) • Coal, gas, petroleum extraction industries • Hydroelectric development • Other materials: RF-wide projections/futures documents, regional experts, company publications
LEAP MODELING OF RFE ENERGY SYSTEM • Data Gaps and Challenges • Little demand data except for electricity—no energy balance since 1990, errors in data that do exist • Energy supply data good for most sources, with the exception of heat production units • International export and import data available, but information on imports/export to/from other parts of RF lacking • Cost data generally had to be estimated
LEAP MODELING OF RFE ENERGY SYSTEM • Structure of RFE LEAP dataset • General economic assumptions (exogenous parameters) • GDP growth rates, industrial output growth rates • population dynamics, • Economic cooperation: RFE (and RF), other NEA countries • Driving factors of energy policy (key variables) • Necessary and cost-effective energy supply/demand in RFE • Regional energy cooperation • Environmental standards and constraints, • Investment limitations, availability of advanced energy technologies • Energy conservation/energy efficiency policy • Role of renewable sources of energy • Diversification of primary energy demand and supply in RFE
LEAP MODELING OF RFE ENERGY SYSTEM • Structure of RFE LEAP dataset • Demand: no sectoral structure, just final demand by fuel, with fuel demand by geographic area for natural gas, heat, electricity, crude oil (sector division planned) • Transformation (multiple modules for geographic areas): • Heat and Electricity T&D modules • 5 Export Transmission Line modules • 6 Electricity Generation modules, alternating with 6 Heat Generation modules • Pipeline Oil Export, 4 Oil Refining modules • Coal Washing, Gas Processing, LNG Production Modules • Natural Gas T&D, 2 Crude Oil Production modules • Pipeline Gas Export, 4 Natural Gas Extraction Modules • Modules for Bituminous and Lignite Coal Production
LEAP MODELING OF RFE ENERGY SYSTEM • Structure of RFE LEAP dataset: Paths
LEAP MODEL OF RFE ENERGY SYSTEM: PATHS AND RESULTS • LEAP Paths (“Scenarios”) • Reference Case: extrapolation of currently evolving economy/energy sector trends • Moderate economic growth, slowing of population decrease • Energy supply priorities sufficient production of energy and fuels at minimal costs self-sufficient energy balance • Coal and petroleum products will remain balance compensators • Stagnation in the sphere of international economic cooperation with NEA and Pacific Rim: only Sakhalin-1 and Sakhalin-2 projects realized
LEAP MODELING OF RFE ENERGY SYSTEM • LEAP Paths (“Scenarios”) • National Alternative Case: Similar to Reference Case: extrapolation of currently evolving economy/energy sector trends, but… • More dynamic development of renewable energy sources, more active energy efficiency policy, switching from oil and coal to natural gas • New energy priorities nominally supposed to be supported with legislative acts, administrative directives but regional and local business unable to carry out in full • Stagnation in the sphere of international economic cooperation with NEA and Pacific Rim: only Sakhalin-1 and Sakhalin-2 projects realized
LEAP MODELING OF RFE ENERGY SYSTEM • LEAP Paths (“Scenarios”) • Regional Alternative Case: Fast integration/ transformation of RFE into "the Russian center of fuel and energy production and supplies within NEA“ • Implement energy integration of Russia into NEA • Projects in the southern zone of RFE core source for optimization of energy usage in the territory • International cooperation, sound domestic policy yield rapid economic growth, slowing of the rate of population decrease increase from 2015 due to migration and international labor • Priorities of energy policy: sufficient production of energy and fuels at acceptable costs, large-scale energy export, active diversification of energy consumption to hydro and other renewables, intensive switching to natural gas; joint regional programs on energy efficiency, environmental protection.
