Sales to Europe remain consistent and yet cooperation with the West still entails risks. For that reason, North Stream-2 and the Turkish Stream pipeline projects will allow Russia not only to expand exports but also reduce the risk associating with having to move natural gas across Eastern Europe while expanding direct sales, notes the Energy Bulletin of the Analytical Center.
Russian Natural Gas and Electricity Offer Best Competitive Advantages
"Oil exports to the EU are gaining in stability: in the future the region's dependence on imports is only going to increase. This creates conditions conducive to Russia retaining its positions in the market, but that is about the end of the good news from Europe," Alexander Amiragyan, Deputy Head of the Department for the Fuel and Energy Sector of the Analytical Center, told a Rossiyskaya Gazeta correspondent.
In 2001-2016, Russia re-oriented significant amounts of its oil and coal exports towards the East: sales to South and South-East Asia went up 17 and 12 times respectively, reaching 73.4 million tons for oil and 76.8 million tons for coal last year, according to the estimates the expert made from the data of the Federal Statistics Service and the Federal Customs Service. In other words, almost every third ton of oil and every other ton of coal that Russia exported last year was sold in the East.
Exports of coal are unlikely to keep growing at the same pace in the foreseeable future as all the markets Russia is exporting coal to (China, Japan and Europe) have reached saturation, with no significant increase in coal consumption recorded in 10-15 years.
"However, when it comes to oil, projections are very strong, with China expecting to play the main role here," Mr. Amiragyan believes. According to him, in the past five years exports of oil to China have increased fourfold, reaching 48 million tons. The capacity of the VSTO and VSTO-2 oil pipelines (connecting Siberia and the Pacific Ocean) is expected to grow to 130 million tons by 2020 and the annual increase in export is projected to reach 25 million tons.
The share of Russia in China's oil imports in Q1 of this year was 14%, OPEC reported, but there is no direct competition between Russian oil and that from Angola (10%) and Saudi Arabia (15%), because China's oil imports are growing really fast and Beijing is trying to diversify its procurement sources, the expert noted.
"Last, but not least, the most environmentally friendly fossil fuel is natural gas and it offers the greatest potential. The Power of Siberia pipeline that is currently under construction will have a capacity of 38 billion cubic meters per year. Expanding the LNG plant in Sakhalin and the launch of the Yamal LNG project can help further increase exports of natural gas in Asia-Pacific by 15 billion cubic meters per year. In other words, these two projects can increase Russia's exports of natural gas in the East by a factor of three to four, up to 55 billion cubic meters per year, by the early 2020s," Mr. Amiragyan said.
The expert is sure that it is Russian natural gas and electricity that offer the best competitive advantages. "As for natural gas, our main competitors in China at the moment are LNG suppliers such as Australia, Qatar and, in the future, possibly the US, while Russia will be supplying natural gas to China primarily via pipeline. This gives Russian natural gas certain advantages in terms of price. Supplying electricity to China also holds a lot of promise, seeing how the southern areas of the Russian Far East have great potential for building new hydroelectric power plants and the energy those produce can then be easily exported to China," Mr. Amiragyan concluded.