Key points of Russian energy strategy

up to 2030 – between Europe and Asia

Dr. Alexey Gromov

Deputy General Director

Institute for Energy Strategy

Moscow, Russia

The future of the global gas market:

an EU-Russian perspective

Brainstorming workshop

Milan, 30 september – 1 October, 2010

Energy Strategy 2030 in the System of

Documents of the Strategic Development

Program of long-

term development

of the fuel and

energy complex of

the Russian Far

East

Conception of the long-term

development of the Russian

Federation for the year 2020

Strategy of

development of the

power generation

in the Russian Far

East

Long-term forecast of the development of Russian economy for the years

2009-2030

Eastern Gas

Program

General scheme of allocation of power generating facilities for the year 2020

General scheme of

development of the oil

industry for the year

2030

General scheme of development of the gas industry for the

year 2030

Conception of the state

program for exploration and

exploitation of the

continental shelf of the

Russian Federation

ES-2030

State program of energy saving

Investment programs of energy companies

2

ENERGY STRATEGY 2030approved by decree N 1715-r of the Government of the Russian Federation of 13.11.2009

2

1ST STAGE 2ND STAGE 3RD STAGE

Growth of national economy and quality of life of the population

Sh

are

of

En

erg

y s

ec

tor

in E

co

no

my 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

2020 202220152013 20302009

Foreign energy policy and ES-2030 targets:Eastern and Western vectors

3

Western Vector

(European

Market)

Eastern Vector

(Asian-Pacific

Market)

- 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

Russian Gas Export, 2009

Russian Gas Export, 2030 (projected)

Eastern Vector for Russian

Energy Policy

4

EASTERN VECTOR IN ES-2030: NEW SIDES OF “OLD” TASK

5

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»

Key initiatives in the Russian energy sector: Eastern vector

Energy infrastructure: development and diversification

Development of oil and gas complexes

in Eastern regions of Russia

Exploitation of the oil and gas potential of the Northern regions of Russia and Arctic shelf

Non-fuel energy

Energy saving

ESPO pipeline, Eastern Gas Program, petro- and gas-chemistry development

Sakalin, Yakutia, Magadan, Irkutsk and Krasnoyarsk regions

Shelf of the East Arctic, reanimation of the Northern Sea Way

Large-scale development of hydro energy and renewables

Modernization of electric power and heat supply systems in the Region

Eastern vector

6

THE EAST IS A KEY DIRECTION OF DIVERSIFICATION

OF THE RUSSIAN EXPORT

95,8 88-9087-92

78-92

159,8 158-168

189-194

201

24-36

55

70-75

256,0

310-311

336-359

353-390

0

50

100

150

200

250

300

350

400

2005 1st Stage 2nd Stage 3rd Stage

bc

m

Europe Asia-Pacific итого

Forecast of gas export

Gas export in Asia-Pacific

region, % of total export

0

19-20

0

20

40

60

80

100

2005 2030

7

KEY PROJECTS IN THE EASTERN SIBERIA AND THE FAR EAST

Eastern Gas Program

Sakhalin development

LNG Projects in Sakhalin

Natural gas

Export to

China

8

FIRST RESULTS OF ES-2030: CAREFUL OPTIMISM

2008 2009

Strategic

Indicator for

the first stage

of ES-2030

(2013-2015)

Share of Eastern Siberia and the

Far East in gas production2% 3,7% 7-8%

LNG share in gas export 0% 3,5% 4-5%

Share of the countries of the Asia-

Pacific Region in the structure of

gas export

0% 3,5% 11-12%

Western Vector for Russian

Energy Policy

9

10

WESTERN VECTOR IN ES-2030: KEY PROJECTS & GOALS

Nord Stream (started in April 2010)

South Stream (projected) Shtokman (projected)

task №19 Increase the Russian gas

export to European market

160 bcm in 2008

120 bcm in 2009

2030 target - 200 bcm

task №21 Promote the gas pricing

system in Europe, including both long-term

and spot contracts

task № 22-23 Bilateral investment in gas

projects

DISTURBING RESULTS OF 2009

ON EUROPEAN GAS MARKET

583,9 583,6

664,9

400

425

450

475

500

525

550

575

600

625

650

675

700

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

годы

мл

рд

куб

. м

Добыча газа в РФ, всего В т.ч. Группа Газпром

11

Gas production has fallen to

level of 2000

12%

120,3

158,4

168,3

195,4

100

125

150

175

200

225

250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009м

лр

д.

куб

. м

Экспорт в дальнее зарубежье Экспорт, всего

24%

Gas export to Europe was

reduced to a quarter

Gas production (Russia) Gas production (GAZPROM)

Export to Europe Export (total)

Price situation in 2009

Price,

USD/bcm

Russian gas

(long-term contracts, Europe)288

LNG (US, Henry Hub) 147

LNG (Great Britain, NBP) 142

LNG (Japan, Korea) 260

LNG (Chine) 160

Source: EEGA

Factors of decrease in export expectations

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.)

LONG-TERM EXPORT DYNAMICS & REASONS

12

Composition of EU gas import

Conclusions

9

EXPORT EXPECTATIONS VS. REALITY

368

349

234

203

300

150

175

200

225

250

275

300

325

350

375

400

2008 (факт) 2009 (факт) 2010 2015 2020 2030

bc

m

Прогноз экспорта российского газа (верхний уровень по ЭС-2030)

Прогноз экспорта российского газа (нижний уровень по ЭС-2030)

Прогноз экспорта российского газа (ожидания ГУ ИЭС)

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Risk of decrease in export on 15-20 %

15-20%

Russian Gas Export forecast up to period 2030

Russian gas export forecast (high level from ES-2030)

Russian gas export forecast (low level from ES-2030)

Russian gas export forecast (IES expectations)

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)

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

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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

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Thank you

for your attention!

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