RUSSIAN ENERGY POLICY LOOKS EASTWARD

02.10.06
By Viktor Khristenko, Russia’s Industry and Energy Minister

We are now actively discussing the need for global energy dialogue and the importance of building a global energy security system. The recent Group of Eight summit in St. Petersburg has focused on these key issues.

Apart from formulating common approaches toward the creation of a global energy infrastructure for the 21st century, we attach great importance to the specific parameters of different national energy policies and the extent of their coordination.

Any energy policy hinges on energy strategies. Russia’s Energy Strategy until 2020 proposes different areas of development for the national fuel and energy sector.

It should be noted that the main strategic guidelines of this document, which was approved two-and-a-half years ago, match the agenda of the current discussion. This includes energy and environmental security, energy efficiency and the Russian fuel and energy sector’s domestic economic efficiency. These goals can be attained through prudent management of natural resources, the development of domestic markets and cost-effective foreign energy policies in the global and macro-regional contexts.

The Russian Energy Strategy is shifting its attention to the East. It is quite important that energy cooperation between the Russian Federation and the People’s Republic of China not be confined to energy supplies; it should also include shipments of Russian energy equipment, the power industry and infrastructure development.

I would like to say a few words about the current stage of implementing the national Energy Strategy. First of all, this concerns the development and implementation of major projects for domestic and global energy markets.

The program for the development of East Siberian and Far Eastern gas resources is currently being finalized. This essentially means that a new Russian gas region has started to emerge. The program envisions a joint regional gas production, transportation and supply network that would also export gas to the Chinese and other Asia-Pacific markets. Proven gas reserves and their projected future increase will enable Far Eastern regions to expand annual gas output to 150 billion cubic meters by 2030. The development of the regional oil and gas industry stipulates the use of hydrocarbon fuels and the creation of a new industry that will turn out value-added products at oil and gas refineries and petrochemical enterprises.

Construction of the Eastern Siberia – Pacific Ocean oil pipeline network is another systematic project. The new pipeline will pump up to 80 million metric tons of oil per year; of this amount, 30 million metric tons will go to China. The pipeline’s initial section from Taishet to Skovorodino, now under construction, is to be completed by late 2008.

The Transneft pipeline monopoly and the China National Petroleum Corporation (CNPC) signed an agreement on designing and building the section of the oil pipeline from Skovorodino to the Chinese border during Russian President Vladimir Putin’s official visit to China.

Specific agreements between national companies are influenced by expanded Russian-Chinese energy cooperation. This concerns multilateral interaction, including joint operations on third-country markets.

In March 2006, energy giant Gazprom and CNPC signed an agreement in the presence of Russian and Chinese leaders on expanded gas cooperation. Russia’s Unified Gas Supply System will pump gas to China along the western route from established Russian gas fields and the eastern route from Sakhalin deposits. Gas supplies are to begin by 2011, and 30 billion and 38 billion cubic meters of gas, respectively, may be pumped along each route by 2020.

Although we are still negotiating construction of the Altai – China gas pipeline, its parameters and deadlines have already been established, and this project is entirely feasible.

The most significant deals include an agreement between Rosneft and CNPC on the principles for establishing joint ventures. Mutual trade differs completely from joint business operations. Rosneft-CNPC agreements on the establishment of joint ventures elevate bilateral cooperation to a higher level.

Power industry cooperation also continues to expand. Russian utility giant RAO UES of Russia and the State Grid Corporation of China have signed an agreement stating their intention to ink a long-term power-supply contract. New power plants and grid facilities are to be constructed in Russia under this contract, and additional grid facilities will appear on Chinese territory. Russia will transmit about 60 billion kWh of power to China per year.

Russian power equipment manufacturers are quite active in China. Silovye Mashiny (Power Machines) has teamed up with Chinese enterprises to supply machinery for the Qipingpu, Wangmipo and Baishi hydropower plants, as well as turbines and generators for the Weijiamao Thermal Power Plant.

These projects, along with expanded oil and gas production on the Sakhalin shelf, imply that the Asia-Pacific region, which now receives 3% of Russian oil exports, will obtain 30% (100 million metric tons) by 2020. Moreover, Russian gas exports to Asia-Pacific countries will jump from 5% to at least 25% and total at least 65 billion cubic meters.

I want to stress once again that the eastern facet of Russia’s energy strategy is an adequate response to the global challenges and risks facing this country. Moreover, it aims to diversify markets and supply routes and to minimize risks associated with transit territory.-0-