Energy Strategy of Russia for the Year 2030: Approaches, Priorities and Reference Points

Alexey Gromov

PhD in Economic Geography Deputy General Director Institute for Energy Strategy

«EU-Russia cooperation: Energy and Climate Changes»

October, 23, 2009 Moscow

Energy Strategy 2030 in the System of Documents of the Strategic Development

Conception of the long-term development of the Russian Federation for the year 2020 Long-term forecast of the development of Russian economy for the years 2009-2030

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 2

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

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2005

Forecasted Change of the Fuel and Energy Complex’s Role in the Russian economy

2030 Energy sector in GDP 30% 18% 19% 64% 27% Energy sector’s export in GDP Energy resources in export Investment in energy sector in total investment 5% 11% 34%

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

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Key priorities in the Russian energy sector

Energy Security Energy Efficiency Economic Efficiency Ecological Security

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Energy security

Strategic indicators First stage Second stage Growth of energy consumption per capita, % by the level of 2005 Third stage no less than 10% no less than 20% no less than 40% Growth of electricity consumption per capita, % by the level of 2005 no less than 13% no less than 43% no less than 85% Growth of petrol consumption per capita, % by the level of 2005 no less than 23% no less than 41% no less than 70% Decrease of the current level of equipment’s run-out (in 2005 – 60%): by 10% by 10% by 5% Elimination of deficit and maintenance of the sufficient reserve of the power and heat generating capacities Maintenance of power generating reserves at the level of 17% of the total installed capacity of the United Energy Systems (UES) of Russia. Maintenance of normative heat generating reserves of heat stations and boiler-houses.

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Energy efficiency of the economy

Strategic indicators First stage Second stage Specific energy intensity of GDP, % of the 2005 level Third stage no more than 80% no more than 62% no more than 46% Formation of additional energy potential for economic development: 100 mln. t c.e./y 200 mln. t c.e./y Development of high-technological energy services with volume of: 300 mln. t c.e./y 200 bln. RUR/y 300 bln. RUR/y 400 bln. RUR/y Mean decrease in specific losses and auxiliaries in FEC’s enterprises, % by the level of previous year no less than 1% no less than 1% no less than 0,5% Decrease in specific fuel rate for heat generation of heat stations and boiler houses, % by the level of 2005 no less than 2% no less than 6% no less than 10%

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Economic efficiency of the energy sector

Strategic aim: Efficient relationship between government and energy business Principles and mechanisms of realization Creation of favorable economic environment Support of strategic initiatives Optimization of tax burden Development of the insurance system of long-term investments’ risks Rationalization of amortization policy Formation of united leasing companies Perfection of state price (tariff) regulations in the sphere of natural monopolies Support of small and medium-scale business in FEC Completion of liberalization processes in power generation System of prospective regulations, standards and norms Perfection of license policy, elimination of inadequate administrative barriers Stimulation of modernization and innovative development of FEC Organization and stimulation of raising the level of stuff’s skills in FEC Strategic indicators of economic (budget) efficiency of FEC First stage Second stage Third stage

Formation of stable institutional and legal environment in FEC Financial stability of FEC and national economy 9

Ecological security of the energy sector

Strategic indicators First stage Second stage Third stage Decrease in emission of pollutants into atmosphere and hydrosphere by the FEC, % by the level of 2005: no less than 50% no less than 15% no more than 83% 95% no less than 30% Volume of greenhouse gases emission, % of 1990 level: no more than 92% Rate of APG utilization (in 2005 – 75%): 95% no more than 105% 95% 110 100 90 80 70 60 50 100 1990 73 Forecasted dynamics of СО2-emissions 80 76 89 82 69 70 1995 2000 2005 105 92 1st Stage 2nd Stage 3rd Stage

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Key initiatives in the Russian energy sector

Energy infrastructure: deevelopment 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 off-shore Non-fuel energy Energy saving

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Energy infrastructure: development and diversification

OIL NATURAL GAS



Baltic Pipeline System - 2 – 50 mln. т/y



North Stream – 55 bln. cub. m/y

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Eastern Siberia-Pacific Ocean – 80 mln. т/y



South Stream – 30 bln. cub. m/y

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Development of oil and gas complexes in Eastern regions of Russia

Exploration and exploitation of oil and gas resources in Eastern regions of Russia will help to satisfy the domestic demand for energy resources and diversify directions of export

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Shift in natural gas extraction in Russia 1000 900 800 700 641 3 4 885-940 85-87 45-65 67-68 600 46 3 185 220 500 30-32 400 131-137 300 585 200 100 317 323 0 2005 Nadyum-Pur-Taz Region Bolshekhetskaya valley Ob-Taz estuary Far East 2030 European part of Russia Yamal Eastern Siberia Others 600,0 500,0 400,0 300,0 Shift in oil extraction in Russia 470,1 24,5 49,1 52,2 4,4 5,3 0,2 530-535 32-33 69-75 21-22 42-43 25-29 34-36 200,0 334,3 301-303 100,0 0,0 2005 2030 Far East Eastern Siberia Northern Cacauses and Caspian region North and North-West of Russia Urals region Volga region Western Siberia

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Non-fuel energy

Priority development: Nuclear Hydro Renewable POWER GENERATION Putting into operation installed capacity of 23-33 GWt will increase the share of renewable energy in power generation from 0,5 to 4,5%

35 30 25 20 15 10 5 0

Forecasted development of renewable power generation 0,5 9 5 25 18 87 61

60 50 40 30 20 10 0 100 90 80 70 2005 1st stage 2nd stage 3rd stage

Installed capacity, mln. Kilowatt Power generation on the basis of renewable energy resources, bln. kilowatt-hour

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Potential of energy saving in Russia is estimated at level of 45%

Energy Saving

of the current consumption of energy resources 1 Expected results of energy saving and increase in energy efficiency in Russia Saving of 240 bln. cub. m of natural gas, 340 kilowatt-hour of electric power, 90 bln. mln t of coal and 45 mln t of oil and oil products Consumption of energy resources can be reduced by: 2 Improvement in competitiveness of national economy under conditions of growing tariffs for energy resources 20% in heat supply 30% in power generation 40% in industry and transportation 50% in living apartments 3 4 5 Increase in revenues from extra export of oil and natural gas: 84-112 bln. USD Decrease in governmental expanses: 3-5 bln. USD Reduction in CO 2 –emissions: 790 mln t/y Improvement in ecological situation in the country

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State Energy Policy in Russia

Rational market environment Advanced standards and regulations Strategic initiatives Management of state property Subsoil resources management Development of home energy markets Formation of rational energy balance Social policy in the energy sector Regional energy policy External energy policy Scientific, technical and innovative policy

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Export of primary energy resources up to 2030

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Forecasted dynamics and structure of oil and oil products export

Forecast of oil and oil products export Strategic directions of external energy policy 400

mln. t

350 328,1 20,2 300 339-341 30-33 332-349 47-55 306-329 70-80 Diversification of the commodity composition of export Diversification of the directions of export 250 200 264,1 265 249 Support of Russian energy companies (from upstream to downstream) abroad 150 200 100 Stimulation of transit flows of oil through the Russian territory 50 0 43,8 2005 CIS 264 265 1st Stage Europe 248 249 194 207 2nd Stage 3rd Stage Asia-Pacific Formation of new Russian marker oil brand REBCO and promotion of its international trade

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400,0

Forecasted dynamics and structure of Russian gas export

Forecast of gas export Strategic directions of external energy policy 353-390 Diversification of export directions 350,0 336-359 70 75 55 300,0 256,0 310-311 24-36 Support of Russian energy companies (from upstream to downstream) abroad 250,0 200,0 150,0 100,0 159,8 158 168 189 194 201 Import of natural gas from Central Asia and its re-export to the CIS mainly Production and transportation of LNG. Expansion into the new markets: the USA and Asia-Pacific 50,0 0,0 95,8 88-90 87 92 78 92 2005 CIS 1 этап West 2 этап 3 этап East

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3000

Forecast of investment in energy sector and energy supply of the national economy for the year of 2030

2356-2763 Energy saving 2500 242-253 147-154 40-45 113-134 Autonomous energetics 2000 Centralized heat supply 1311-1552 572-888 Renewable energetics 1500 158-160 82-97 24-27 68-72 68-76 Power generation 1000 500 0 534-551 29-34 8-9 122-125 41-43 7-9 150-155 12-13 162-165 1st Stage 55-59 8-9 516-660 38-39 24-28 110-234 131-136 134-139 14-16 2nd Stage 340-529 284-299 313-321 42-47 565-590 609-625 Coal industry Gas industry Oil industry 3rd Stage Total 2008 -2030 24-32% of investment in FEC will be directed in power generation, 22-26% - in oil industry, 21-24% - in gas industry and 3% - in coal industry. The sphere of energy supply will receive 22-23% of investment, forecasted in ES-2030

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Expected results of ES-2030

1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

Guaranteed energy security of Russia and its regions Competent participation of Russia in ensuring global energy security,

diversification of export partly by means of

Gradual decrease in dependency of national economy from oil and gas sector and respective

decline of FEC’s share in the structure of GDP from 30 to 18%

Decrease in specific energy intensity of GDP

by 2,1-2,3 times

Optimization of fuel and energy balance,

decline in the share of natural gas in energy consumption from 52 to 46-47% and increase in the share of non-fuel energetics from 11 to 13-14%

Exploration and exploitation of new oil and gas producing regions Development of the social partnership between energy companies and society

Improvement in companies

financial

stability

, budget

efficiency

and investment

prosperity of energy

Innovative

renovation of production assets and energy infrastructure

, development of new energy technologies Ecological security and efficiency of FEC,

limitation of greenhouse gases emissions (up to 100-105% by the level of 1990) owing to realization of the potential for energy saving

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Thank you for your attention!

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