Slowdown of global economic growth challenges gas consumption dynamics

12 december 2014

"In June 2014 a Federal Law "On strategic planning in the Russian Federation " was passed, and it defined a great many in the structure and objectives of the very documents we will discuss today", said the RAS member Alexey Makarov, opening a discussion on “Development of gas sector in Russia in strategic planning documents " within the international forum "Gas of Russia 2014".

“Among these documents are Russia’s energy strategy for the future 15-20 years as a goal-setting document in the sphere of energy development, and fuel and energy complex development general schemes. One of these general schemes describes gas industry development determining quantity and setting the direction for implementation of long-term programs as documents of state finance and state interference in the sector development”, said Mr. Makarov.

Gas issue is the most important now: 53% of the total energy domestic demand will be provided with gas up to 2035, as current talks on substitution of it with alternative energy cannot have a significant impact on the fuel and energy complex development inertness. Gas sector increases its interest in energy sources production in the biggest volume (up to 48-49% in the whole scenario up to 2035) and becomes a primary industry of the fuel and energy complex despite the fact that oil industry is the most profitable for the country’s GDP.

In the future the sector will undergo significant changes in both foreign and domestic markets, according to the expert. “We will have to radically reorganize the territorial structure with a decrease of the European market role and the increase of the eastern vector, we'll have to rebuild the product structure to develop the processing industry, create a new sub-sector - the natural gas liquefaction", he said. And although the integration in the Eurasian space is not in plans of the gas industry development, and only the establishment of the "eastern wing" is the issue, course of events and the geopolitical power balance will almost certainly force us to move to an unified gas supply system. "Apparently, we cannot do without the pipeline maneuver between the European and eastern regions of the country not only for economic but also for geopolitical reasons," considers the expert.

Currently the sector is developing in conditions of uncertainty, and the main among them is uncertainty in export prospects due to gas consumption lowering. In recent years Russia has planned to increase gas export, making this area more important than domestic consumption, reminded the Head of the Department for Strategic Studies in Energy Alexander Kurdin. However, concerning strategies, we must not forget that plans should change and vary with actual situation. While Russia cannot offer a new product to the gas market, it is forced to adjust actions in accordance with demand.

In the mid-term outlook a slowdown in the global economic growth is expected, which raises questions about the gas consumption dynamics. "The world GDP gas capacity increases and the projected economy growth rate declines. For now these two trends balance, and the world's long-term outlooks remain in the same passage ", explained Mr. Kurdin. However, the situation varies by region: the US is no longer among the "clients" of the Russian gas industry, possibilities of increase in net imports in the EU decrease, China is still a lot of hope, but a slowdown in its growth calls for cautious review of possibilities of export in this country, according to the expert. In such situation one cannot deny the gas industry development significance, prospects for increase of exports to foreign markets. However, while revising the Energy Strategy Russia should not forget the role of the fuel and energy complex in the future – it should become a supporting infrastructure for the economy development. "This trend will remain, and thus we will focus not only on the growth and development of the gas industry as such, but primarily on its contribution to the economy, on its increase of the economy stability", concluded the expert.