Russian Gas Project up to period 2030:Myth or Reality?

Dr. Alexey Gromov

Deputy General Director Institute for Energy Strategy

Moscow, Russia

World Independent Energy Network (Baden-Baden Group)

PragueApril 26-27, 2010

Energy Strategy 2030 in the System of Documents of the Strategic Development

Program of long-term

development of the fuel and energy complex of the Russian

Far East

Conception of the long-term development of the Russian Federation for

the year 2020

Strategy of development of

the power generation in the Russian Far

East

Long-term forecast of the development of

Russian economy for the years

2009-2030

Eastern Gas

Program

General scheme of allocation of power

generating facilities for the

year 2020

General scheme of development of the oil industry for the year

2030

General scheme of development of the gas industry for the year 2030

Conception of the state program for exploration and exploitation of the continental shelf of the Russian Federation

ES-2030

State program of energy saving

Investment programs of energy companies

2

Key reference marks for Russian Gas Sector’s Development up to period 2030

Reference Marks/Directions 2008 г. 1 этап 2 этап 3 этап

Production (extraction)Share of new areas in total volume of extraction, % 3 13-14 21-23 38-39

Yamal 0 6 9 23-24

Eastern Siberia and Far East 2 7-8 12-14 15

Share of Independent Gas Producers in total volume of extraction, %

17 16 25-26 27

TransportGrowth of length of the main gas pipelines, % to 2005 3 8-10 13-15 20-23

Share of the reconstructed working gas pipelines, % from the general length of gas transmission system

4 10-11 12-13 25-26

ExportShare of Asia-Pacific Region in total volume of export, % 0 11-12 16-17 18-19

Share of LNGДоля СПГ in total volume of export, % 0 4-5 10-11 14-15

3

Gas Production Gas Export

4

Прогнозная оценка развития газовой промышленности до 2030 года

billion cubic meters

Far East SakhalinEastern Siberia

European regions Shtokman

Tomsk regionTyumen region

Nadym-Pur-Taz region

billion cubic meters

East West CIS

1 stage 2 stage 3 stage 1 stage 2 stage 3 stage2008 200820052005

Key projects for Russian Gas Sector’s Development up to period 2030

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Project Project mission Terms of realization

Expected investments(USD bln’ 2007)

Yamal Replace old fields with falling production

2015-2030 150-170

Shtokman LNG production and export for US and Europe Gas Market

2017-2018 (first stage)

25-30(first stage 12-15)

Nord Stream Supply reliability 2011(first stage)

12-14 (first stage 6-7)

South Stream Supply reliability 2015-2020 34-35

Eastern Gas Program

Export flow’s diversificationGasification of Eastern Siberia and Far East

2015-2030 80-90

Total(ES-2030)

560-590

Disturbing results of 2009…

583,9 583,6

664,9

400

425

450

475

500

525

550

575

600

625

650

675

700

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

годы

млр

д ку

б. м

Добыча газа в РФ, всего В т.ч. Группа Газпром

6

Gas production has fallen to level of 2000…

12%

120,3

158,4168,3

195,4

100

125

150

175

200

225

250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009м

лрд.

куб

. м

Экспорт в дальнее зарубежье Экспорт, всего

24%

Gas export to Europe was reduced to a quarter…

Gas production (Russia) Gas production (GAZPROM)

Export to Europe Export (total)

Monitoring of ES-2030 realization

Reference MarksReference Mark for first stage of ES-2030

(2013-2015)

FactExpected year achievement

Probabilitypurpose achievements to 2013-2015

2008 2009

Share of new areas in total volume of extraction, %

13-14 2 3 2016 20%

Yamal 6 0 0 2014 50% Eastern Siberia and Far East 7-8 2 3 2016-2018 20%Share of Independent Gas Producers

in total volume of extraction, %20 17 20,9 2010 80%

Growth of length of the main gas pipelines, % to 2005

8-10 3 4 2013 80%

Share of the reconstructed working gas pipelines, % from the general length of gas transmission system

10-11 4 62014 60%

Share of Asia-Pacific Region in total volume of export, %

11-12 0 4,4 2016 20%

Share of LNGДоля СПГ in total volume of export, %

4-5 0 4,4 2014 50%

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Risks (uncertainties) for Russian Gas Sector’s Development

Uncertainty for export expectations

Uncertainty for export prices and contracts

Uncertainty for technologies

Uncertainty for transit

Risk Degree

High

High

Medium

Low

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Uncertainty for Export Expectations

368

349

234

203

300

150

175

200

225

250

275

300

325

350

375

400

2008 (факт) 2009 (факт) 2010 2015 2020 2030

млр

д ку

б. м

Прогноз экспорта российского газа (верхний уровень по ЭС-2030)Прогноз экспорта российского газа (нижний уровень по ЭС-2030)Прогноз экспорта российского газа (ожидания ГУ ИЭС)

9Risk of decrease in export expectations on 15-20 %

15-20%Factors of decrease in

export expectations

Europe: competition growth (LNG, Nabucco)

US: refuse of future Russian LNG (the boom of shale gas production)

Asia-Pacific: competition growth (Central Asia)

Russian Gas Export forecast up to period 2030

Russian gas export forecast (high level from ES-2030)Russian gas export forecast (low level from ES-2030)Russian gas export forecast (IES expectations)

Uncertainty for export prices and contracts

474,7

298,2

406,1

483,3

726,5

354,2

251,4292,9

351,9376,9

0

100

200

300

400

500

600

700

800

2008 (факт) 2009 (факт) 2010 2015 2020 2030

долл

. СШ

А за

ты

с. к

уб.м

Средняя цена российского газа (верхний уровень)

Средняя цена российского газа (нижний уровень)

10Price expectations are overestimated…

Forecast for Russian gas export prices up to period 2030

(The Ministry of Economics of Russia)

Factors of decrease in price expectations

High volatility of oil prices

Rapid development of spot trade trade in natural gas

Decrease in the regional prices on LNG

Price situation in 2009 Price,USD./bln. cub. m

Russian gas(long-term contracts, Europe)

288

LNG (US, Henry Hub) 147

LNG (Great Britain, NBP) 142

LNG (Japan, Korea) 260

LNG (Chine) 160

USD/1000 cub. m

Uncertainty for transit• Russia-Ukraine

- long-term reliability of transit

- deterioration of Ukrainian Gas transmission system

- Transit price for Russian gas

• Russia – Central Asia- Sufficiency of gas reserves

- Competition for Central Asia’s gas with Chine

- Competition for Central Asia’s gas with Europe (Nabucco)

- Throughput expansion of Gas transmission system between Russia and Central Asia (Pre-Caspian pipeline)

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Uncertainty for technologies

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• Shale gas production: outlook for Europe and Chine

• Limits for Renewables in Europeprices, economy, ecology

• Gas production in Arctic regionclimate changes

• LNG production in Arctic regionclimate changes

Overcoming ways to uncertainties for Russian Gas Sector’s Development

• Change Изменение вектора развития газовой отрасли- From export orientation to the domestic market

- From deliveries of fuel gas to gas processing

- From pipeline to LNG

- Change of principles for Arctic development : a support on ecological and economic expediency

• Revision of investment projects- Selection of priority projects from among declared in ES-2030

- Refusal of a number of ineffective projects-giants (the Southern stream, etc.)

• Flexibility of gas export policy- Revision of pricing system in long-term contracts of Gazprom

- Flexibility increase in mutual relations with Ukraine and Central Asia

• Technological breakthrough- Decrease in the cost price of extraction of natural gas on the Arctic shelf

- Development of LNG infrastructure

- Start of projects on extraction of nonconventional gas (shale gas, low-pressure gas, ets)

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Thank you for your attention!

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