Russian gas industry should seriously and accurately assess internal and external demand

2 october 2015

The experts of the Analytical Center have prepared next edition of energy bulletin “Positions of natural gas in the energy balance”, where they analyzed the supply and demand of natural gas in Russia and the dynamics of the role of gas in the China’s energy balance.

Russian gas industry plays a triple role in the country, providing the population, industry, power and heating plants with gas and the fourth element of demand - export, the experts write in the introductory comments to the bulletin. These gas consumers have different interests, fluctuations in demand, the degree of centralization of decision-making, long-term perspectives and solvency. Until 2010, domestic supplies of gas were un-profitable, the losses of producers were covered by export - although domestic consumption twice larger than export. Increased inter-fuel competition against the background of rising costs of production and transportation of gas is added to complex problems of industry strategy (including the expected growth in the gas chemistry). If we also take into account the difference between corporate interests and optima for the national economy, we will receive a need for serious and accurate evaluation of internal and external demand.

The Chinese situation is opposite to the Russian: a net importer against a net exporter. The growth of gas consumption in 2010-2014 was an average of 15% per year. The State Planning Commission of China is interested in long-term gas deliveries predictable both in terms of volume and in price to take them into account as a factor of internal growth and economic efficiency improvement, reduction in greenhouse gas emissions, replacement of coal, general improvement of ecological situation. China will seek to diversify energy sources, reduce the price for imports and achieve simultaneously several social and economic goals that are as complex as those that stand in Russia, experts believe.

Multidirectionality of dynamics of investments in the energy sector reflects a number of factors: the difference in demand for energy sources within the country, inter-fuel competition in terms of tariffs and taxes, dynamics of external demand, correlation between corporate interests of industries, rate of realization of economic interests of the state as the sum of institutions and a decision-making center. In 2014 more than 36% of the total investments in Russia were accrued to investments in the energy sector. “Against the background of the general economic downturn dynamics of different sectors of the fuel and energy sector investments are not unidirectional: the volumes of investments rise in the mining sector and fall in the production and distribution of electricity. However, what are the main reasons for changing the dynamics of investment activity in the energy sector - the economic crisis, the sectoral sanctions or the factors regulating the industry - it is hard to say definitely”,- experts write.

Detailed information – in bulletin “Positions of natural gas in the energy balance”.

Other editions of energy bulletins can be found in the section Publications.