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FSUOGM COMMENTARY FSUOGM

Russia bets on gas in

new strategy

The outlook for Russian gas production is far better than for oil

RUSSIA RUSSIA has approved a new national energy will grow, although it recognises supply diversi-
strategy up until 2035 (ES-2035) that targets big fication and the rise of renewables as risks to its
WHAT: gains in gas production while forecasting that oil market share. In any case, thanks to the recent
Russian gas production output will either remain stable or decline. launch of the TurkStream pipeline to Turkey
is expected to continue Whether these forecasts are realised will and the anticipated start-up of the Nord Stream
growing between now and depend not only on the ability of Russian pro- 2 next year, Russia will have enough transport
2035, while oil extraction ducers to bring new fields online and maximise capacity to meet extra European demand.
will either remain flat or recovery at older ones, but also global demand Meeting European needs will also require the
decline, according to the trends. While these trends have been thrown development of additional deposits on the Yamal
country’s new energy into uncertainty by the coronavirus (COVID- Peninsula. Gazprom currently produces gas at
strategy. 19) pandemic and efforts to accelerate the tran- only one field in the region, Bovanenkovskoye,
sition away from fossil fuels, Russia’s strategy which is on its way to reaching its third-phase
WHY: places more confidence in gas than it does on oil. capacity of 115 bcm per year. But the company
The forecast reflects not This is line with international expectations. wants to raise output at Bovanenkovskoye to
only how much supply The International Energy Agency (IEA), for above 140 bcm per year by exploiting its deeper
Russian producers can example, sees oil demand flattening out in the layers, while also bringing two fields into pro-
bring on stream but also 2030s, while gas consumption is anticipated to duction in the coming years, Kharasaveyskoye
global demand trends. continue growing, partly at the expense of coal’s and Kamennomysskoye-more.
share in the global energy mix. Fresh from initiating piped gas flows to China
WHAT NEXT: in December via the Power of Siberia pipeline,
The outlook for global gas Gas Gazprom is already drawing up plans to run a
consumption is brighter Russian gas production has risen steadily over second pipeline to its eastern neighbour, this
than for oil, helping the past two decades, from 590bn cubic metres time through Mongolia. This pipeline would be
to explain Russia’s in 1999 to around 790 bcm last year. ES-2035, bigger, with a capacity of 50 bcm per year versus
expectation that gas will approved by the government on June 9, calls for a Power of Siberia’s 38 bcm.
play a greater role in its further growth to 795-820 bcm per year by 2024 There is clearly political will for development
exports. and 860-1,000 bcm by 2035. of a second pipeline to China, but whether it is
LNG, which until recently had only a minor economically feasible is another matter. The
role in Russia’s gas mix, is expected to drive cost of Power of Siberia and details of the supply
production increases. Production of the super- contract that underpinned its construction are
cooled gas is slated to rise to between 46mn shrouded in secrecy, making it difficult to say
and 65mn tonnes per year by 2024, and 80mn whether the project had sound logic. A recent
and 140mn tpy by 2035, from just 30mn tpy last Russian media investigation even claims Russia
year. Russia’s largest independent gas producer may struggle to deliver on its supply deal after
Novatek is developing a raft of new liquefaction overestimating the production capacity of its
projects on the Yamal and neighbouring Gydan source fields.
peninsulas in the Russian Arctic. The company
has set a goal of producing 70mn tpy of LNG in Oil
the region by the end of this decade. Russian oil and condensate production has been
Russia is also hoping to expand piped gas on a faster growth trajectory than gas over the
exports – both to Europe and China. ES-2035 last 20 years, rising from about 6mn barrels per
assumes that Europe’s dependency on imports day in 1999 to more than 11.25mn bpd last year.

P4 www. NEWSBASE .com Week 24 17•June•2020