Aleksei Texler: Energy Security will be Provided Whatever Happens

18 september 2015

The Analytical Center has held a Discussion of a draft of the Russian Energy Strategy up to 2035. "It is a matter of special importance. The situation in the oil and gas market is now quite volatile; prospects for the industry have become vaguer comparing to those a year ago," said the First Deputy Head of the Analytical Сenter Vladislav Onischenko. The First Deputy Energy Minister Alexei Texler confirmed that there were many challenges and issues which determined the need for the Energy Strategy update. The Strategy also was brought into accordance with the federal law "On the Strategic Planning in the Russian Federation."

Mr. Texler identified the slowing economic growth to be the main problem in Russia and presented two scenarios developed by the Ministry: a conservative and a target-oriented, which basically coincide for the next 5 years, and for the long-term prospect the target-oriented one is characterized by being based on more favorable conditions. Both scenarios take into account the EU and the US sanctions against the Russian energy sector, as well as lower prices on hydrocarbons. The conservative scenario assumes moderate GDP growth by 1.5 times by 2035, the target-oriented - 1.9 times and achieving the sustained annual growth by 4% by the end of the forecast period.

Talking on the oil sector development the Deputy Minister noted such key challenges as volatility of the world market prices, increasing costs of extraction, permanent degradation of properties of the produced oil. What does the Strategy say?

Stable 525-million-tons-per-year oil production, making it possible to increase capacities if the world and domestic markets are in a favorable state, the increase in oil exports to 110 million tonnes, in particular 2 times in the Asia-Pacific Region. Fundamental modernization and development of advanced technologies should ensure an increase in the oil recovery factor from 28% to 40%, development of tight resources in the amount of 17% of total production, increase from 72 to 90% in the oil refining depth with the production of motor fuels of top environmental classes. The utilization of at least 95% of APG (associated petroleum gas) and generation of clusters for hydrocarbons’ advanced refining are also mentioned.

Key issues of the gas market are: increased costs of production and distribution, reduction of high-productive and shallow reserves being under production, remoteness of new mining areas from centers of consumption. Pivotal aspects are the slowdown of the demand for Russian gas in Ukraine and the EU, and of course, the increased competition due to the LNG (liquefied natural gas) market growth.

How is the gas market developing? How will these problems be address? According to the Strategy, the total gas production will increase by 40% in Eastern Siberia, the Russian Far East and in the sea shelf area as well. The advanced processing of  gas produced, taking into account the presence of valuable components, including helium, expanding production and consumption of the motor fuel, 8-9-times increase in exports to Asian markets (from 14 to 128 billion cubic meters.), are expected to be provided. The Unified Gas Supply System will be developed; the LNG production (from 14 to 74 billion cu.m) will increase 5 times.

We count on the development of Russian technologies in the production of unconventional gas resources, deep-sea drilling, gas processing and gas conversion.

The coal industry challenges are: increasing competition in international trade due to likely slowdown in the global demand for coal and simultaneous increase in the cost of its production and distribution in Russia. The Strategy includes development of the industry by creating new centers of coal mining in the Sakha Republic, the Republic of Tuva, the Zabaykalsky Krai, the Amur Oblast and others, use of advanced technologies and increase of the thermal coal share under processing 2-2,5 times. Coal exports should increase by 30% and will be focused primarily on the Asia-Pacific Region.

The electric and thermal power industry needs to meet the effective demand in the availability of prices and the energy infrastructure, ensure an effective combination of the centralized supply with the development of distributed generation and intellectualization of energy systems. The imperfection of the current model of the heat market, as well as the lack of competition in the wholesale and retail energy markets dictate the need to eliminate inter-territorial cross-subsidies, the structure optimization and load of electro- and heat production capacities by generation types and types of energy used. It is planned to increase capacities of the nuclear power generation 1.4-1.8 times, the hydro power generation - 1.2-1.3 times, as well as the decommissioning of underperforming, outdated energy equipment and the provision with up-to-date, mostly domestic equipment and skilled personnel.

The development of energy efficiency is of high importance. Its increase is a key factor in the Energy Strategy. Moreover, thorough consideration is paid to the development of unconventional energy sources. New, breakthrough technologies will be developed, but in general, "in 20 years the world will continue to be a hydrocarbon," according to Aleksey Texler. The Strategy provides with ideas on development of domestic stock mechanisms for hydrocarbons sales and at the same time development of new competencies in renewable energy.

Participants of the event noted the high level of solutions elaborated for the energy sector being in difficult economic and political conditions, the real prospect of what can be achieved in its developmen, proposed amendment options within their competences.