RUSSIANS FORESEE HUGE INCREASE IN GAS EXPORTS
12 February 1997
NEW FORECASTS PRESENTED AT UN/ECE GAS MEETING
Gas exports from Russia, the worlds leading gas exporter, are expected to almost
double within the next 20 years, according to a VNIIGAZ report. The report, which covered
1996 developments in the Russian gas industry and the industrys evolution to 2015, was
presented by Alexander Gritsenko, Director General of VNIIGAZ, the scientific and
research arm of Russias GAZPROM, at the seventh session of the Economic Commission
for Europe Working Party on Gas, held in Geneva from 28-30 January. Despite the fall in
economic activity in Russia, the gas sector achieved good results in 1996, and its future
now seems more promising than ever.
55% increase in gas production expected by 2015
VNIIGAZ expects Russias current production to jump by 55% to 929 billion cubic
metres (Bcm) by 2015. This increase will come from two new areas to be developed after
the turn of the century: Yamal, where production could start in 2005 and reach 250 Bcm
by 2015, and Gydan, a field located north of Yamal, which could be developed after 2010,
with an expected production of about 60 Bcm by 2015.
Production of gas from the oil industry is also expected to increase significantly:
from 25 Bcm in 1996 to 75 Bcm in 2015. This is a new trend compared with previous
forecasts and with the trend observed in recent years. There are three main explanations
for this reversal: the first is that a number of new gas-processing plants will be put into
operation, allowing the recovery of associated gas previously flared; the second is the
expectation that in the future small gas producers may have access to Gazprom high-pressure transmission lines, thus allowing them to market their gas. Finally, it is expected
that oil production will stabilize and probably recover within the forecasted period, which
eventually would bring additional quantities of associated gas.
In 1996, Russian gas production totalled 600 billion cubic metres, a slight increase
over 1995 (+ 6 Bcm). This was the first year since 1991 that gas production recovered an
upward trend. The downward trend since 1991 practically halted after 1994, mostly due
to the introduction of new fields in the Yamburg, Yubileinoe and Komsomolskoe areas,
with an additional annual production of 50 Bcm.
Gas exports surging
Russia is the major gas exporter to central and western Europe. Exports to this
region totalled 124 Bcm in 1996, a rise of 6% compared with 1995 (+ 7 Bcm). Whereas
exports to western Europe stabilized in 1996 (76 Bcm compared with 75.1 Bcm in 1995),
exports to central Europe increased by 13.5 per cent to 48 Bcm in 1996 (+ 6 Bcm). Russia
also exported 73 Bcm to Ukraine, Belarus, the Republic of Moldova and the Baltic States.
Altogether the deliveries to eastern, central and western Europe (197 Bcm in 1996)
constitute 33% of the total Russian production and 40% of the worldwide gas trade.
By 2015, it is expected that about 360 Bcm or 39% of Russias total production will
be exported. Europe has been the main market for the Russian gas industry. According
to the French information centre on natural gas, CEDIGAZ, in 2020 the western and
central European market will consume 630-650 Bcm/y or 50-60% more than today.
Russian exports to this market are foreseen to grow from 124 Bcm in 1996 to about 230
Bcm in 2015. Likewise, deliveries to the Commonwealth of Independent States (CIS) and
the Baltic States are expected to soar from 73 Bcm in 1996 to about 130 Bcm in 2015.
The latest forecasts far exceed those of just one year ago. In its 1996 report
VNIIGAZ gave a total export figure of about 250 Bcm for 2010 - the time horizon of the
report -, whereas its 1997 current report is forecasting 350 Bcm.
Reassessment has been made of the two markets. For the European market, 1996
forecasts to the year 2010 were 140 Bcm. In the new forecast, the figure has jumped to
232 Bcm. For the CIS and Baltic market, also for the year 2010, the new assessment is
127 Bcm, significantly up on the 105 Bcm of last years forecast.
There are two main reasons for the reevaluations: the first is based on a marketing
review carried out by Gazprom in the CIS gas-consuming countries, with an expectation
of a stabilization and eventual recovery of their economic situation, leading to increased
energy and gas needs, and their ability to pay for delivered gas; the second is a more
optimistic view of available supply of gas from Russia.
New strategy to develop residential consumption
The outlook for gas consumption is particularly optimistic. Gas consumption is
expected to increase to 485 Bcm in 2015, a rise of 44% compared with 1996, or 25% over
1991, the historical peak consumption in Russia. Most of the increase is expected in the
power and heat generation sector, where consumption could almost double, with the
greatest increase coming from centralized heating production. The future trends also show
a sharp growth in the residential and commercial sectors, while the industrial sector should
recover, but its relative share in total consumption will decrease to 33% in 2015.
According to the Energy Strategy of Russia, adopted last year, the use of gas by local
small industry and the population is foreseen to double by 2010 compared with the 1995
situation.
In 1996, gas consumption amounted to 337.3 Bcm, a marginal decrease compared
with 1995 (- 2 Bcm). Domestic gas consumption fell in all sectors in the period 1991-1996,
except for the domestic and small service sectors. A sharp decrease was observed in the
power and heat generation sector, where consumption fell from 180 Bcm in 1991 to 138.5
Bcm in 1996. Nevertheless, this sector is still the major sector of gas consumption, with a
share of 41% of the total domestic market.
High investments requested
To sustain the predicted export levels, considerable investments are required in the
Russian gas industry. By way of illustration, the development of the Yamal project requires
investment to the tune of US$ 40 billion. It is still foreseen that the field will start producing
by 2005, as initially projected. Owing to lack of financial resources, this might be
considered over-optimistic. Start-up date will obviously depend on availability of resources
and the involvement of foreign partners.
Potential savings in natural gas transportation
To deliver all expected gas quantities to the market, significant refurbishing and
technical upgrading of compressor stations and high-pressure pipelines will be carried out.
On the basis of reconstructing and refurbishing existing compressor stations and using
efficient equipment in new construction, the savings of natural gas could reach 8 Bcm in
2000 and 12.5 Bcm in 2005.
The refurbishing will be done in two phases: 1996-2000 and 2001-2015. While in
the first phase attention will be paid to technical replacement and refurbishing of
compressor stations and pipelines, in the second increased efficiency and profitability of
the transportation system will be the priority.
The VNIIGAZ report is available in Russian and will be published in English and
French as a document of the Working Party on Gas.