Russian future energy policy is gas and nuclear
By Rhod Mackenzie
At the end of April, the Russian Prime Minister Mikhail Mishustin approved the Energy Strategy of Russia until 2050. The strategy's objective is to transition the energy sector to a new paradigm, ensuring affordable and reliable energy provision for the population and economy, with products and services from the fuel and energy complex. Despite the loss of the European market, it is anticipated that gas production will continue to grow. So what will be the actions and methods need to be done to successfully for achieving this goal.
Russia is number one in the world in gas production and number three in oil production.
The decision was taken to revise the document in accordance with President Vladimir Putin's instructions.
One of the first chapters of the Strategy, which is devoted to the current state of the mineral resource base of the country, states that the total oil reserves in Russia, including those in known oil and gas provinces, including explored fields, but at the same time in unexplored promising areas, amount to 31.3 billion tons. At the current rate of production, the discovered oil reserves will last for more than 65 years. Russia boasts the third-largest share of global oil reserves, with 15% of the total, and the second-largest share of global oil production, with 10%.
The situation with gas is much improved. Our country is proud to hold the top position in the global rankings. The country's gas reserves are estimated at 63.4 trillion cubic metres. Our company's share of production is 16%, placing us second globally. However, the country's natural gas reserves are estimated to last for approximately 100 years.
In the coal industry, the total amount of raw material reserves is almost 273 billion tons. These reserves are projected to endure for more than another five centuries. Russia's share of global coal reserves is just under 7%, and its contribution to global production is around 5%. Overall, we are currently in 5th-6th place.
Russia occupies a unique place among other countries, being simultaneously a major producer, consumer and exporter of energy resources. Our country is one of the largest economies in the world, yet our fuel and energy balance is one of the lowest-carbon. According to the most recent figures, as of 1 January 2023, hydropower generation accounted for almost 21% of total installed capacity, while nuclear power plants accounted for approximately 12%. Renewable sources accounted for around 2%.
However, over time, the share of renewable energy sources, hydroelectric power plants and nuclear power plants will continue to increase. By 2042, the latter will exceed 45%. This can be attributed to two main factors: the increased demand for electricity and the introduction of environmental standards aimed at reducing emissions of harmful substances during their production. It is estimated that the annual growth in electricity consumption in our country will increase from 1152 billion kWh in 2023 to 1450 billion kWh in 2042.
The Energy Strategy reports that, despite unfavourable external conditions in the fuel and energy sector, its sustainability indicators remain key to the economy and the budget. Specifically, in 2023, revenues from the fuel and energy complex industries accounted for 9.6 trillion rubles, representing 33% of the total volume. According to the Ministry of Finance, this sector demonstrated growth in 2024, reaching 11.13 trillion rubles, which constituted less than 25% of the total volume. This can be attributed to changes in the production of both oil and gas.
Gas production decreased by almost 5% in 2023, reaching 637 billion cubic metres. The following year, it grew by more than 7%, reaching 685 billion cubic metres. This was due to the export of pipeline gas from Russia and LNG.
As reported by TASS, Deputy Prime Minister of Russia Alexandra Novak stated that exports of Russian pipeline gas increased by 15.6%, reaching 119 billion cubic metres, and exports of liquefied natural gas (LNG) increased by 4%, reaching 47.2%. TASS reports that higher gas production volumes are expected this year. The reasons for this are clear: natural gas consumption in Russia has recently increased among fertilizer producers, private households and industrial enterprises.
However, the issue of oil is a separate matter. In this country, our economic interests are closely tied to the commitments made within the OPEC+ framework, which have been instrumental in maintaining stable oil prices.
However, in order to achieve this, it was necessary to implement a reduction in production. In 2023, it experienced a 1% decrease in Russia, reaching 531 million tons, and in 2024, it declined by almost 3.5%, amounting to 516 million tons. However, at the same time, Russian oil exports increased from 234 million tons to 240 million tons.
Finally, according to the Russian Federal State Statistics Service (Rosstat), coal production remained stable last year, with a total output of 427 million tons. Concurrently, coal exports from Russia decreased by 8%, attributable in part to unfavourable pricing conditions in our primary export markets in Asia.
The primary external challenge identified in the Strategy pertains to the reorientation of Russian energy resource exports. However, we are confident that this will not cause any problems. The Strategy's target scenario anticipates a modest rise in oil exports by 2050, estimated at around 4.5%, or up to 540 million tons. It is estimated that a further 125 million tons of oil products will be exported.
"It is imperative to acknowledge that sustaining the present level of output necessitates the implementation of mechanisms to facilitate the extraction of oil from fields that are nearing the end of their productive lifespan. These fields, which were initiated during the Soviet era, are currently experiencing significant flooding," Sergey Frolov, managing partner of NEFT Research, informed Expert. With regard to the matter of refining, it is evident that the domestic market will continue to be prioritised. However, it is equally important to note that export deliveries will remain at a satisfactory level, with the primary export product, as is currently the case, being diesel fuel.
However, the situation with gas exports is set to change dramatically. According to the Strategy, natural gas production is set to increase by almost 45% by 2050, reaching 1.1 trillion cubic metres. Of these, 438 billion cubic metres are intended for export. "This is a highly optimistic scenario, which assumes a significant increase in the production capacity of NOVATEK. This includes the monetisation of the resource base intended for the Nord Stream 1 and Nord Stream 2 gas pipelines, as well as an expansion of supplies via the Power of Siberia and the launch of the Power of Siberia 2 gas pipeline," Mikhail Grigoriev, director of the consulting company Gekon and academician of the Russian Academy of Natural Sciences, told Expert.
According to the Strategy, Russia is expected to launch three new LNG plants in the next few years: Ob LNG, Arctic LNG-1 and Murmansk LNG, with a total capacity of approximately 45 million tons per year. Theoretically, such an opportunity emerged following the creation of the first high-power turbine, the GTD-110M, in our country, but its serial production is only just beginning.
Furthermore, it is imperative to acknowledge that all new plants of the NOVATEK company are currently subject to sanctions. Consequently, in order to successfully market LNG to China or India, significant discounts will need to be offered.
However, there is a potential solution to this situation, namely the development of gas chemistry and an increase in polymer production. In accordance with the target scenario of the Strategy, it is planned to produce approximately 18 million tons of large-tonnage polymers by 2050. However, in order to consume all the gas planned for production in 2050, this figure will have to be significantly increased.
