|Gazprom Meets To Develop Yamal Peninsula||Oil 2000
United States Energy Information Administration
Russia holds the
world's largest natural gas reserves,
the second largest coal reserves, and the eighth largest oil reserves.
* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar and wind electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 1998
Organization: Russia's energy sector is overseen by the Ministry of Fuel and Energy, except for nuclear power, which is administered by the Ministry of Atomic Energy (Minatom). Russia's Oil Sector is dominated by large joint-stock companies, although smaller independent producers also produce oil. The vertically integrated companies include: Lukoil, Yukos, Surgutneftegaz, Tyumen Oil (TNK), Sidanko, Sibneft, Slavneft, Eastern Oil (VNK), Onako, Komitek, Grozneft, and Rosneft. Transneft undertakes crude oil transport, while Transnefteprodukt transports petroleum products. Russia's Gas Sector is dominated by the joint-stock company Gazprom, which is 38% owned by the government of the Russian Federation. Russia's Electricity Sector is operated by the joint-stock company Unified Energy Systems, or UES, which is majority-state-owned. The UES controls 70% of the country's distribution system, 21 thermal power plants, 8 nuclear power plants, and oversees the country's 72 regional electricity companies, known as energos. Russia's Coal Sector is operated by Rosugol, a government-owned holding company. Rosugol is organized along regional lines, with separate associations for each mining region.
Major Producing Oil Fields: Samotlor, Romashkino, Mamontov, Fedorov, Lyantor, Arlan, Krasnolenin, Vatyegan, Sutormin
Major Oil Terminals: Novorossiisk (Black Sea), Tuapse (Black Sea); Russia also uses Ventspils (Latvia), Odessa (Ukraine), Klaipeda (Lithuania)
Oil Export Pipelines outside the former Soviet Union: Friendship (Druzhba) (1.2 million bbl/d nominal capacity)
Major Oil Refineries (1/1/00, capacity: bbl/d): Omsk (566,000), Angarsk (441,000), Nizhniy Novgorod (438,000), Grozny (390,000), Kirishi (388,000), Novo-Ufa (380,000), Ryazan (361,000), Novo-Kuibishev (309,000), Yaroslavl (290,000), Perm (279,000), Ufaneftekhim (251,000), Salavatnefteorgsintez (247,000), Moscow (243,000), Ufa (235,000), Syzran (211,000), Volgograd (200,000), Saratov (177,000), Orsk (159,000), Samara-Kuibishev (154,000), Achinsk (147,000), Ukhta (127,000), Nizhnekamsk (120,000), Komsomolsk (108,000)
Major Foreign Oil Company Involvement: Agip, BP Amoco, Arco, British Gas, Chevron, Statoil, Conoco, Exxon-Mobil, Neste Oy, Norsk Hydro, Marathon, McDermott, Mitsubishi, Mitsui, Royal Dutch/Shell, Texaco, and TotalFina
Major Producing Gas Fields: Urengoy, Yamburg, Medvezh, Orenburg, Severo Urengoy, Vyngapurov
Gas Export Pipelines outside FSU (Capacity): Brotherhood (Bratrstvo), Progress, and Union (Soyuz) (1 Tcf each); Northern Lights (0.8 Tcf), Volga/Urals-Vybord (to Finland) (0.1 Tcf), Yamal (0.8 Tcf), Blue Stream (under construction)
Major Coal Producing Basins: Chelyabinsk, Donetsk, Kansk- Achinsk, Kuznetsk, Lena, Moscow, Pechora, Raychikhinsk, South Yakutia, Taymyr, Zyryanka
After months of instability following the 1998 financial crisis, Russia's economy is showing signs of stabilizing. Russia's gross domestic product (GDP), after declining by 7-8% after the crisis, rose by about 1% during the second quarter of 1999. In addition, the Russian ruble has also stabilized, reducing the upward pressure on the cost of imported goods and consumer prices.
Russia's economic turnaround has been driven in large part by increases in its industrial production, which was about 6% higher during the first 8 months of 1999 compared to the same period a year earlier. Industrial output rose, in part, because the sharp decline in the value of the ruble in 1998 made domestic goods more price-competitive with imported goods. Improvements in the trade balance also helped the economy, as imports declined and exports increased (helped greatly by sharply higher world oil prices).
Meanwhile, fears of Y2K-related power disruptions in Russia proved unfounded. Despite international worries that Russian power grids and nuclear plants were not prepared to handle the Y2K computer bug, Russia greeted the New Year without problems.
Russian oil production has continued to fall since the breakup of the Soviet Union. From 7.86 million barrels per day (bbl/d) in 1992, production fell nearly 23%, to 6.07 million bbl/d, in 1998. Preliminary data for 1999 shows Russian oil production dipping even further, to 5.90 million bbl/d. Despite the added incentive of a three-fold increase in world oil prices since December 1998, declines in drilling and capital investment mean that a drop in Russia's oil production is virtually unavoidable in 2000. Although Russia is blessed with vast oil reserves--estimates vary between 49-55 billion barrels--run down equipment and poorly developed fields are making it difficult to develop them.
Russian energy firms are still recovering from the twin blows of the August 1998 financial crisis and the oil price collapse of December 1998. Russia's oil majors were hard hit by the financial crisis, causing them to limit their capital investments and exploratory drilling. The industry is trying to shed inefficient capacity in upstream and downstream operations while maintaining cash flow in the face of ongoing international worries over the investment climate in Russia. In addition, the Russian government is keeping a tight rein on the oil industry, raising export tariffs and squeezing margins. As a result, the industry kept little of the estimated $2.4 billion in extra foreign currency that flowed into Russia in 1999 from higher oil prices.
Despite a reorganization and privatization process begun in 1993, there is an ongoing debate within the Russian government about the creation of a state oil company. In January 2000, Deputy Prime Minister Viktor Khristenko was placed in charge of the energy sector, taking over from former First Deputy Prime Minister Nikolai Azyonenko in a cabinet reshuffle. Khristenko downplayed the idea, saying it would give cash-strapped government organizations even less incentive to pay for their fuel supplies than they have now. However, Fuel and Energy Minister Viktor Kalyuzhnyy reiterated his support for a state oil company--a project dubbed "Gosneft"--uniting Rosneft, Slavneft, and Onako.
Legislation, Regulation, and
Oil companies in Russia have complained that they are taxed too heavily, noting that they, along with Gazprom, account for more than half of federal tax receipts. However, acting President Putin has already toughened rules to ensure that the oil industry pays all of its taxes in cash, and in December Putin signed a resolution raising the oil export duty to 15 euros per ton ($2/bbl). For its part, the industry claims constant increases in export tariffs interfere with investment programs and hinder payments on credits.
In another blow to the industry, the recent battle between Tyumen (TNK) and BP Amoco for control over Sidanko has badly shaken investor confidence in Russia. Sidanko, Russia's 6th largest oil producer and 10% owned by BP Amoco, was declared bankrupt in May, and TNK used the opportunity to buy some of Sidanko's key production units while BP Amoco argued that it was shut out of the auction. Although Sidanko, TNK, and BP Amoco returned to the negotiating table and reached an agreement, as a result of the Sidanko debacle, BP Amoco is rethinking its strategic investment position in Russia, and the episode has shaken investor confidence in the country just as some foreign investors were returning to the market.
Preliminary figures on Russian oil exports for 1999 show a slight drop from the record tally of 1998. In 1998, Russian exports (crude oil and products) totaled a record 3.5 million bbl/d, of which 3.1 million bbl/d was destined for customers outside the former Soviet Union (FSU). Since 1991, Russian producers have shown a preference for increasing their hard-currency earnings by exporting outside of the FSU, mostly to European customers such as the United Kingdom, France, Italy, Germany, and Spain. The share of net exports to countries outside the FSU has risen from 53% in 1992 to 89% in 1998.
The majority of Russian oil is exported via terminals in the Baltic and Black Seas. Black Sea exports must pass through the increasingly crowded Bosporus Straits. Russian crude oil also is exported to Europe via the 1.2-million bbl/d capacity Druzhba (Friendship) pipeline. As traditional export routes through Black Sea ports have been running at full capacity, companies are turning toward the Baltic ports and the Druzhba pipeline as alternatives. Estonia, Latvia, and Lithuania are attempting to secure to get a bigger share of Russian oil exports.
To increase export capacity, Russia has a number of plans to build new export terminals and pipelines and to expand capacity at several existing terminals. The Baltic Pipeline System is the largest new pipeline export scheme proposed outside of the Caspian region. The proposal involves the construction of three ports on the Russian Baltic coast--at Ust-Luga, Bukhta Batereinayaat, and Primorsk.
Russia is pushing for the main export pipeline of the Azerbaijan International Oil Consortium (AIOC) in Azerbaijan to be routed through Russia to the port of Novorossiisk instead of to Ceyhan or to the Black Sea port Supsa, Georgia, where a 100,00 bbl/d pipeline is already in operation. In the meantime, Russia is guaranteeing its inclusion in the potential Caspian wealth through the construction of a 980-mile pipeline by the Caspian Pipeline Consortium. The pipeline, which is already under construction, will have the capacity to export 1.34 million bbl/d from the Tengiz field in western Kazakhstan to a terminal near the Black Sea port of Novorossiisk by 2015.
Meanwhile, the Transneft oil transport company announced in late December 1999 the completion of the first stage of a Baku-Novorossiisk pipeline bypassing Chechnya, and despite an estimated cost of $250-$300 million, the ongoing Chechen conflict may make the bypass pipeline more attractive. Russian oil strategists also are considering the feasibility of reviving a discussed pipeline located in the Astrakhan salient to pump Kazakh oil to Black Sea terminals, with a small branch that could provide a link to the under-utilized Baku-Novorossiisk route.
Russia's refineries possess refining capacity of 6.6 million bbl/d, with Russia's internal demand for refined products limited to 2.8-3.4 million bbl/d. As a result, many refineries are operating well below capacity. Although the Russian government has attempted to ensure deliveries to refineries by making allocation of export pipeline access for the oil producers conditional on the producers' meeting their delivery targets to the refineries, it is doubtful that this regulatory mechanism will be sufficient to keep refineries operating anywhere near capacity.
Many Russian refineries are relatively unsophisticated, oriented towards heavier products, and in need of modernization. Despite numerous economic, financial, and technical problems, several major refineries are undertaking modernization programs. The Yaroslavl 359,000-bbl/d refinery is undergoing a $416 million upgrade by 2002, and NORSI-Oil is undergoing a $350 million upgrade on its 438,000-bbl/d refinery by 2005. However, financial constraints still prevent most Russian refineries from undertaking major modernization work to boost efficiency.
Russia's natural gas industry is dominated by Gazprom, which controls more than 95% of Russia's gas production. Gazprom oversees eight production associations, operates Russia's 88,000-mile gas pipeline grid, runs trading houses and marketing joint ventures in many European countries, and controls one-fifth of the world's natural gas reserves.
The Russian government recently approved a draft federal law envisaging development of the Russian gas market by setting up trade companies, encouraging investment opportunities, and gradually liberalizing prices. This follows on reforms aimed at ending Gazprom's monopoly position by offering equal access and competitive rates on Russia's national pipeline network to all, as well as abolishing price controls on gas sold by independent producers.
Still, Gazprom is Russia's largest earner of hard currency, and its tax payments account for around 25% of federal government tax revenues. Russia's gas industry is heavily dependent upon exports since only about 15-20% of Gazprom's domestic consumers pay promptly and in cash. As a result of the approximately $2.7 billion debt of domestic gas consumers, Gazprom has been unable to make all of its tax payments.
The Russian government is squeezing Gazprom's bottom line with a planned 5% natural gas export duty in 2000. In an effort to boost its cash flow, in late December 1999 the Gazprom board announced that the price of natural gas for Russian industry would be increased by 40%-50%, and that gas supplies for power generation would be reduced. Gazprom also is stepping up pressure on foreign debtors to pay their bills.
and International Projects
Russian gas exports to Turkey, up 33% in 1999, should continue rising this year, paving the way for a big leap in deliveries when the highly anticipated Blue Stream gas pipeline begins operations. Despite falling 6 months behind the original schedule, Gazprom still is trying to meet the original target of 2001 for commencing deliveries. By the beginning of 2001, Turkey should receive some 138 Bcf of extra natural gas annually from Russia. Gazprom is also working on expanding transit capacity through Romania and Bulgaria to allow for an eventual increase in deliveries to Turkey via the Balkans.
Gazprom also recently signed a deal with Dutch trader Gasunie for delivery of 80 Bcm (2.8 Tcf) over a 20-year period starting in October 2001. To fulfill this contract, Russia resumed imports from Turkmenistan for the first time since 1997, signing an import deal with Turkmenneftegaz for a one-year import of 20 Bcm (700 Bcf).
Gazprom's long-term aim is to reduce gas transit via Ukraine to between 35-40% of all exports outside the former Soviet Union (from around 90% now). Russia-Ukraine relations have been strained by allegations of Ukrainian natural gas theft, and Gazprom believes that transit capacity through Ukraine will decline because of Ukraine's failure to invest in maintaining its transit infrastructure. Gazprom also is seriously considering building a second leg of the Yamal-Europe pipeline to double capacity on the route, although it is not likely to be needed for a number of years.
The precipitous drop in coal production and consumption is a result of the painful restructuring of Russia's economy. Russia's restructuring plan calls for the closure of all unprofitable coal enterprises, with the intention of using the money saved from these closures to upgrade more profitable mines.
With $800 million in financing provided by the World Bank's Second Coal Sector Adjustment Loan, the government has embarked on the second phase of its restructuring program, attempting to completely liquidate the national coal company, RosUgol, and establish a substantially improved subsidy management system. In addition, the plan includes funding for an adequate social safety net to affected workers, their families and communities, as well as the continuing reduction of coal subsidies that sustain inefficient and uneconomic mines.
However, implementation of the restructuring program has been slow due to labor unrest and strikes in the coal industry, and even efficient mines in Russia are not without problems. Payment arrears have made it nearly impossible for mines to pay workers and purchase needed supplies and equipment. The country's financial crisis of August 1998 exacerbated these problems, and the coal sector is still feeling the effects. Russia's coal mining industry is likely to undergo further painful changes in coming years in its attempt to become more efficient and profitable.
Russia has a total of 440 thermal and hydroelectric stations, with a production capacity of 132 gigawatts (GW) and 44 GW, respectively, with 13 thermal electric stations with over 1,000 megawatt (MW) capacity and 13 hydro stations with over 1,000 MW capacity. Total current electric generation capacity is 205 GW, down from 213 GW in 1992 but still enough production potential to supply Russian producers and the public with electricity, as well as meet the country's obligation of export contracts. However, fuel shortages at power stations, as well as inefficient and obsolete capacity, are cause for power outages.
Russia's electricity sector is controlled by the majority state-owned Unified Energy Systems of Russia (UES). The UES, headed by former privatization minister Anatoly Chubais, controls 70% of the country's distribution system and oversees Russia's 72 regional electricity companies. Chubais has identified a number of priorities for UES, including abolition of payments arrears by customers, introduction of competition in the production and wholesale electricity markets, and pursuit of more rational pricing policies.
Without significant investments and equipment upgrades in the electricity sector, regional power shortages will likely be more widespread. Only 1 GW per year of new plant capacity was built during the past 5 years, and installation of new power lines also has dropped markedly. Russian officials estimate that the country will need $6 billion-$11 billion annually from 2001 to 2005 to carry out expansion plans. Financing will be difficult to secure domestically, especially in light of continuing payment collection problem by the power companies.
In August 1999, Gazprom announced it would supply significantly less gas to power producers in 2000-2002. UES analysts have estimated that reduced gas supplies will mean production at power stations will decrease by 40 Bkwh in 2000, by 70 Bkwh in 2001, and 100 Bkwh in 2002. Because of the reduced supplies, UES announced plans to spend $1.25 billion to convert all its power stations from gas to coal and other types of fuel. The decreased reliance on gas and the need to increase coal consumption to produce electric power will also cause more ecological problems with increased pollution.Russia is looking to Asia and other areas (mainly Western countries) to bo
electricity exports. Russia's vast natural resource
base, as well as UES price competitiveness, gives the company a real
of breaking into the European and Asian energy markets, but Russia will
have to cooperate with transit countries in order to realize its full
potential. UES also plans to increase power exports to the Commonwealth
of Independent States, but only after the issue of payment for energy
supplied is resolved.
By 2001, four of Russia's 29 nuclear plants will be aged 30 years or older, the maximum prescribed service life for a reactor. By 2007, as many as 10 Soviet-era reactors will come to the end of their prescribed service life. Extending that service life has become a priority, but the industry lacks the large amount of money that renovation and modernization would require.
Lack of funding has forced Russia to focus on completing near-complete nuclear generating units rather than building new ones. The 1,000 MW Rostov 1 reactor is scheduled to be completed by end-2000, while the 1,000-MW Kalinin 3 and the 1,000-MW Kursk 5 reactors also should be operational this year. Russia's economic woes have put on hold plans to build any new nuclear plants, and the country will need private financing to cover the estimated cost of $1.5 billion per new nuclear reactor.
Russia has a single 11 MW geothermal plant (built in 1966) at Pauzhetskaya in the Kamchatka region. A 7-MW addition is planned by the year 2010. Another 80-MW geothermal power plant is under construction at Mutnovsk in the Kamchatka region. The European Bank of Reconstruction and Development signed a $100-million agreement for the construction of the first stage of this station; total costs are expected to reach $500 million for the power plant and $120 million for the pipeline. There are a total of 9 geothermal fields in Kamchatka, with an estimated aggregate capacity of 380-550 MW. In addition, a 30-MW power plant is planned for Iturup Island in the Kuril Archipelago.
Reduced industrial production (and economic activity in general) in recent years has resulted in less energy consumption and a drop in Russia's carbon emissions. However, energy and carbon intensities in Russia remain high, and while per capita carbon emissions have fallen over the last five years, Russia will need to pursue more sustainable environmental policies in the 21st century in order to maintain this trend. Although it has abundant natural energy resources, Russia will need to look increasingly toward renewable energy options and cleaner environmental technologies to preserve its natural wonders.
|Gazprom Meets To
Develop Yamal Peninsula
The Headquarters of Gazprom hosted a meeting on issues related to design work arrangement for the Company's major projects. The meeting was headed by Yaroslav Golko, Member of the Company's Management Committee, Head of the Investment & Construction Department.
Participating in the meeting were Vasily Podyuk, Member of the Management Committee, Head of the Gas, Gas Condensate & Oil Production Department, heads and specialists of the Company's core business units, subsidiaries and design companies.
The meeting addressed the issues of arranging design work to construct new natural gas production and transmission capacities on the Yamal Peninsula, in Eastern Siberia and the Far East. In particular, it was emphasized that these projects were strategically significant for the development of the gas industry up to 2030, which requires a strict observance of the design work schedule.
The meeting paid special attention to the Sakhalin -- Khabarovsk -- Vladivostok gas trunkline construction project as well as to the Gas Supply to the Kamchatka Oblast Phase 1 -- Gas Supply to Petropavlovsk-Kamchatsky project. Based on the meeting results, core business units and subsidiaries of Gazprom received respective tasks.