the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
The Russian government has stated that it intends to expand the role of nuclear and hydro-power
generation in the future to allow for greater export of fossil fuels. Russia has an installed nuclear capacity
of more than 21GW, distributed across 31 operational nuclear reactors at 10 locations, all west of the Ural
Mountains. However, Russia's nuclear power facilities are ageing. Half of the country's nuclear reactors
use the RBMK design employed in Ukraine's ill-fated Chernobyl plant. The working life of a reactor is
considered to be 30 years -- and nine of Russia's plants are between 26 and 30 years old, with a further six
approaching 25 years of age.
The Russian Ministry of Atomic Energy predicts that by 2020 nuclear generation could reach 300TWh,
more than double the 2003 level. However, many plants are due for decommissioning, and meeting this
target will require between US$5bn and US$10bn per year of investment over the next decade.
Russia has adopted the European Emissions Standards for fuels, although on a different timeframe.
Russia phased out Euro-2 standard fuels in 2008 and hopes to phase out Euro-3 by the end of 2009. Euro-
4 is expected to be allowed until 2013. In Europe, Euro-5 has already been introduced for most vehicles
and Euro-6 is slated for implementation in 2014/2015 for all vehicles. This means that while upgrades to
facilities are particularly important when the refined products are destined for export to the EU, even fuels
used in Russia will need to meet higher quality standards.
Russia's newest crude oil export terminal, the port of Kozmino, began operations in December 2009. The
port sent its first cargo to Hong Kong. The oil exported via Kozmino port is sourced from East Siberia. It
is transported to Kozmino from the Meget railway terminal, in the Irkutsk region. From there it is sent to
the Skovorodino oil terminal, which started operations in October 2009. Kozmino terminal, which is
operated by national oil midstream monopoly Transneft, is intended to be the terminus of the Eastern
Siberia-Pacific Ocean (ESPO) pipeline, which is due to be completed in 2014-15. The Skovorodino oil
terminal is the end point of Phase 1 of the ESPO pipeline, but Kozmino will receive oil delivered by rail
from Skovorodino until the second phase has been completed.
Russia may relax rules limiting offshore exploration and production (E&P) in the country to Rosneft and
Gazprom, according to a report by the Moscow Times newspaper. According to the report, which cited
deputy energy minister Sergei Donskoy, the proposal would allow subsidiaries of the two companies to
join them in offshore exploration and could lead to international oil companies (IOCs) also becoming
involved.
In the Moscow Times article, published in March 2010, Donskoy claimed that the Natural Resources and
Environment Ministry believes the two companies have insufficient resources to develop Russia's
continental shelf on their own. Under a plan drafted by the ministry, both Gazprom and Rosneft would be
allowed to share access with their subsidiaries and could farm out a stake of up to 50% in offshore
projects to foreign companies. The proposal would also allow any of the subsidiaries of the two
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