the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
Market Attractiveness Analysis
Russia Energy Market Overview
The June 2009 BP Statistical Review of World Energy attributes 79.0bn bbl of proven oil reserves to
Russia, which is a possibly conservative total that still represents almost 7% of the world's oil. However,
the end-2009 Oil & Gas Journal (OGJ) annual survey suggests just 60bn bbl. Large parts of Russia are
under-explored, while there appears to be significant reserves potential in its share of the Caspian Sea.
Gas reserves of 43,302bcm (BP data) account for more than 30% of the world total.
In 2009, oil production was around 11.6% of the world's total at an estimated 10.15mn b/d, and Russia
meets 22% of the world's gas demand. There are 42 oil refineries in Russia, many of which are incapable
of meeting modern fuel standards. Total crude distillation capacity is around 5.55mn b/d. With 157bn
tonnes of proven coal reserves, Russia ranks second in the world behind the US.
Poor management during the Soviet era and a sharp decline in demand during the early 1990s undermined
the coal industry. After a slight decline in 2002, production rebounded in 2003-2008, with 2008 output of
327mn tonnes. According to the government's energy strategy, Russia should produce more than 400mn
tonnes by 2020. Russia's adherence to the stipulations of the Kyoto Protocol may lower utility sector
demand for coal. In a December 2008 BBC interview, the governor of the Kemerovo region, which is
responsible for over half of the country's coal production, voiced concerns over the region's ability to
sustain coal production growth. He noted that the region had already seen almost 200 rivers ruined after
being used for mining activities. These environmental problems may hinder Russia's desire to keep
increasing coal production.
Gas is the dominant fuel in Russia, accounting for an estimated 56.2% of 2009 primary energy demand
(PED). It is followed by oil at 18.3%, coal at 14.4%, hydro at 5.6% and nuclear with a 5.3% share of
PED. Regional energy demand is forecast to reach 1,543mn toe by 2014, representing 17.0% growth over
the period. Russia's estimated 2009 market share of 50.4% is set to fall to 49.7% by 2014. State gas
monopoly Gazprom provides subsidised gas to the power industry through a deal with former monopoly
supplier Unified Energy System (UES), meaning that price increases as part of a deregulation
programme could make gas too costly for much of the Russian population.
Russia's power sector includes more than 440 thermal and hydro-power plants (approximately 80 of the
former are coal-fired), plus 31 nuclear reactors. A few generators in the far-eastern part of the country are
not connected to the power grid. The system has a total electric generation capacity of almost 216
gigawatts (GW), with 2009 generation at an estimated 984TWh. The collapse of the Soviet Union initially
precipitated a dramatic decline in energy generation, (down 18% between 1992 and 1999), followed by a
gradual recovery (up 18% between 2000 and 2009).
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