Gazprom Meets To Develop Yamal Peninsula Oil 2000 2008

United States Energy Information Administration
February 2000

Russia holds the world's largest natural gas reserves, the second largest coal reserves, and the eighth largest oil reserves.
Russia is also the world's second largest energy consumer,
and is the world's largest exporter of natural gas and second largest exporter of energy and petroleum in the world.

Information contained in this report is the best available as of February 2000 and is subject to change.

President (Acting): Vladimir Putin (since December 31, 1999)
Premier: Vladimir Putin
Independence: August 24, 1991 (from Soviet Union). National holiday: Independence Day, June 12, 1990
Population (7/99E): 146 million
Location/Size: Eurasia/6,592,850 sq. mi., slightly more than 1.8 times the size of the United States
Major Cities: Moscow, St. Petersburg, Yekaterinburg, Irkutsk, Murmansk, Yakutsk, Vladivostok
Languages: Russian, others
Ethnic Groups: Russian (81.5%), Tatar (3.8%), Ukrainian (3%), and 100 other nationalities (11.7%)
Religions: Russian Orthodox, Muslim, other

Currency: Ruble
Market Exchange Rate (2/14/00): $1 = 28.90 rubles
Gross Domestic Product, or GDP (1998 purchasing power parity): $593.4 billion
Real (adjusted for inflation) GDP Growth Rate (1998): -5%; 1999 estimate 1.5%
Inflation Rate (1999E): 43%
Current Account Balance (1999E): $13.0 billion
Merchandise Exports (1998): $71.8 billion
Merchandise Imports (1998): $58.5 billion
Major Exports: Petroleum and petroleum products, natural gas, wood and wood products, metals, chemicals, and a wide variety of civilian and military manufactures
Major Imports: Machinery and equipment, consumer goods, medicines, meat, grain, sugar, semifinished metal products
Major Trading Partners: Belarus, Cuba, Germany, Japan, Ukraine, United States
Monetary Reserves (gold and hard currency)(1999E): $11.5 billion
Foreign Debt (1/1/00E): $166.2 billion

Minister of Fuel and Energy: Viktor Ivanovich Kalyuzhnyy
Proven Oil Reserves (1999E): 49-55 billion barrels (estimates vary)
Oil Production (1999E): 5.90 million barrels per day (bbl/d)
Oil Consumption (1998): 2.46 million bbl/d
Crude Refining Capacity (1/1/00E): 6.6 million bbl/d
Net Oil Exports outside FSU (1998): 3.5 million bbl/d
Net Oil Exports within FSU (1998): 0.3 million bbl/d
Major Oil Customers: CIS, Europe
Natural Gas Reserves (1/1/00E): 1,700 trillion cubic feet (Tcf)
Natural Gas Production (1998): 20.9 Tcf
Natural Gas Consumption (1998): 13.9 Tcf
Coal Reserves (1/1/99E): 173 billion short tons
Coal Production (1998): 272.5 million short tons (Mmst)
Coal Consumption (1998): 262.6 Mmst
Electricity Production (1998): 772 billion kilowatt-hours

Chairman, State Committee for Environmental Protection: Viktor Ivanovich Danilov-Danil'yan
Minister of Natural Resources: Boris Aleksandrovich Yatskevich
Total Energy Consumption (1998E): 26.0 quadrillion Btu* (6.9%) of world total energy consumption)
Energy-Related Carbon Emissions (1998E): 405.0 million metric tons of carbon (6.6% of world carbon emissions)
Per Capita Energy Consumption (1998E): 177.3 million Btu (vs. U.S. value of 350.7 million Btu)
Per Capita Carbon Emissions (1998E): 2.8 metric tons of carbon (vs. U.S. value of 5.5 metric tons of carbon)
Energy Intensity (1998E): 74,200 Btu/ $1990 (vs U.S. value of 13,400 Btu/ $1990)**
Carbon Intensity (1998E): 1.2 metric tons of carbon/thousand $1990 (vs U.S. value of 0.21 metric tons/thousand $1990)**
Sectoral Share of Energy Consumption (1997E): Industrial (64.3%), Residential (17.9%), Transportation (17.1%), Commercial (0.7%)
Sectoral Share of Carbon Emissions (1997E): Industrial (64.8%), Transportation (17.8%), Residential (17.4%)
Fuel Share of Energy Consumption (1998E): Natural Gas (54.1%), Oil (19.8%), Coal (16.5%)
Fuel Share of Carbon Emissions (1998E): Natural Gas (50.0%), Coal (26.7%), Oil (23.3%)
Renewable Energy Consumption (1997E): 2,482 trillion Btu* (1% increase from 1996)
Number of People per Motor Vehicle (1997): 6.5 (vs. U.S. value of 1.3)
Status in Climate Change Negotiations: Annex I country under the United Nations Framework Convention on Climate Change (ratified December 28th, 1994). Under the negotiated Kyoto Protocol (signed on March 11th, 1999, but not yet ratified), Russia has agreed to stabilize greenhouse gases at 1990 levels by the 2008-2012 commitment period.
Major Environmental Issues: Air pollution from heavy industry, emissions of coal-fired electric plants, and transportation in major cities; industrial, municipal, and agricultural pollution of inland waterways and sea coasts; deforestation; soil erosion; soil contamination from improper application of agricultural chemicals; scattered areas of sometimes intense radioactive contamination
Major International Environmental Agreements: A party to Conventions on Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulphur 85, Antarctic-Environmental Protocol, Antarctic Treaty, Biodiversity, Climate Change, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Marine Dumping, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Wetlands and Whaling.  Has signed, but not ratified, Air Pollution-Sulphur 94.

* 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 Related Issues

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.

Oil Exports

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.

Caspian Sea Activities
Russia has raised the stakes in its bid to become a major transit center for oil from the Caspian Sea Region. The legal status of the Caspian and the division of its wealth of resources are major points of contention between the states that border the sea (Azerbaijan, Russia, Turkmenistan, Iran, and Kazakhstan). Although an agreement was signed between Turkey, Azerbaijan, and Georgia in November 1999 for the construction of a pipeline bypassing Russian territory, Russia continues to be a major player in Caspian Sea energy politics.

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.

Since the breakup of the Soviet Union, Russian gas production has remained relatively steady, with a drop in annual output of only 1.7 trillion cubic feet (Tcf), or 8%, from 1992 to 1998. Consumption, however, has declined over 15%--from 16.5 Tcf in 1992 to 13.9 Tcf in 1998. As the world's largest producer of natural gas, Russia's gas production still far exceeds the country's consumption, and the excess 7 Tcf in 1998 helped maintain Russia's status as the world's largest gas exporter.

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.

Exports and International Projects
Gazprom is attempting to diversify its gas export strategy to bring in more hard currency. In 1999, Russian gas exports outside the former Soviet Union were up by 5%, rising by over 200 billion cubic feet (Bcf) to reach 4.5 Tcf per year on the strength of a 350 Bcf per year jump in exports to Western Europe. Exports to Germany, Italy, and France all rose in 1999, and Gazprom forecasts another 140 Bcf hike in total exports in 2000 to lift the annual tally to 4.6 Tcf per year.

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.

Coal accounted for roughly 17% of Russia's domestic energy supply in 1998, down from approximately 20% in 1997. Russian coal production and consumption have followed a downward trend since the breakup of the Soviet Union, with production experiencing a 33% drop between 1992 and 1998 and consumption falling nearly 30% over the same time period.

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.

Russian power generation has continued a steady pattern of decline since the breakup of the Soviet Union. Power generation has dropped nearly 20% since 1992, from 964 billion kilowatt-hours (Bkwh) to 772 Bkwh, largely as a result of the transition to a market economy. Russian electricity consumption has followed a similar downward trend, falling from 880 Bkwh in 1992 to only 703 Bkwh in 1998.

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
lster electricity exports. Russia's vast natural resource base, as well as UES price competitiveness, gives the company a real chance of breaking into the European and Asian energy markets, but Russia will have to cooperate with transit countries in order to realize its full export potential. UES also plans to increase power exports to the Commonwealth of Independent States, but only after the issue of payment for energy already supplied is resolved.

Russia has 9 operating nuclear plants and a total installed capacity of 21 GW, accounting for 13% of the country's total generating electricity capacity. Russia maintains that its reactors are among the safest in the world, but safety issues are an ongoing concern, especially with regard to the 16 relatively old reactors of the design used at Chernobyl. However, Russian nuclear power plants entered year 2000 without any problems related to the Y2K computer bug. Although financing was low, the transition to 2000 went smoothly for Russian nuclear plants, defying many Western forecasts of possible accidents.

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.

Hydropower accounts for 43 GW of Russian generating capacity, about one-fifth of the country's total. Over 70% of this is accounted for by 11 stations of more than 1 GW capacity, led by three of the four largest power stations in Russia: the 6.4-GW Sayano Shushenskoye station in Khakassia; the 6.0-GW Krasnoyarsk station in Krasnoyarsk province; and the 4.5-GW Bratsk station in Irkutsk province.

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.

After years of neglect under the Soviet Union, the environment has become a pertinent issue in today's Russia. Soviet policies that encouraged rapid industrialization and development left a legacy of air pollution and nuclear waste that Russia is struggling to clean up. Although environmental awareness in Russia is rising, the cost of environmental remediation remains high.

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
Gazprom 4/8/2008

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.