Page 95 - RusRPTDec18

electricity surplus glut shows no signs of resolution, as capacity commissioning still matches demand growth. This is what drives our current conservative assumptions for the electricity price outlook: we do not expect day-ahead (RSV) market prices to catch up with the growth rate of domestic gas prices, putting pressure on the spark spreads Russian gencos earn. Nevertheless, we note that the country is likely to see a substantial drop in new capacity commissioning as the DPM-1 programme is fulfilled while new government stimuli packages are aimed at modernisation of the existing capacity, rather the commissioning of new.
The Deputy Minister of Energy in charge of the electricity sector, Vyacheslav Kravchenko, had left his post. According to Kravchenko, he stepped down of his own initiative. Kravchenko’s role in the sector cannot be overestimated: he was in charge of the initiatives on grid reserve payments, and supported renewable energy schemes and the long-term tariff regulation for electricity grids. Most importantly, he was the architect of the modernisation programme for fossil-fuel generation, the so-called DPM-2 (which is still a project, rather than adopted legislation). His departure might further delay this fundamental piece of legislation while the general utilities-friendly stance of the regulations could start gradually shifting towards a more consumer-oriented approach, raising regulatory risks for the sector.
9.1.12 Transport sector news
The navigation along the Russia's Northern Sea Route could be extended by one additional month each year thanks to global warming and consistently higher temperatures, Tass said on November 12 citing Professor Oleg Anisimov of the State Hydrology Institute said on Friday. "Currently, the Northern Sea Route’s exploitation term is about two months, and forecasts based on climate models say the term may be extended by another month in the middle of the century, making it three months, which opens new economic opportunities," Anisimov argues, as cited by Tass. The navigation would still require ice breakers, although the ice will be thinner, other researchers presenting alongside Anisimov said. The northern route is an alternative shipping route to sailing around the Horn of Africa and cuts weeks off the trip between Europe and Asia. In 2017, the cargo flow via the Northern Sea Route amounted to 10.7mn tonnes, and its capacity is planned to be expanded to 40mn tonnes by 2020 due to the projects that developed in the ports of Sabetta and Murmansk. After sending the first container ship Venta Maersk loaded with 3,600 containers through the Northern Sea Route in September, Maersk representatives told the Financial Times that "we do not see the Northern Sea Route as a commercial alternative to our existing routes." The main problem of the Northern Sea Route, which became possible due to thinning of ice, is that only narrow container ships with limited capacity accompanied by atomic icebreakers can pass, while the standard ships circulating between Asia and Europe fit about 20,000 containers. The route also does not pass many markets, allowing little uploading diversification, and is not available all year long. Nevertheless, Kremlin is still betting on the development of the route as it is well suited for tanker transportation of oil and gas, with most of the total turnover so far accounting for oil tankers and liquefied natural gas (LNG) shipments of Novatek Russian gas producer. On November 12 in a separate report Reuters said that new ice-breaking tanker Georgiy Brusilov capable of navigating the Arctic on its own left South Korea's Daewoo Shipbuilding and is set to load its first LNG from Novatek's Yamal plant. This will make the seventh ARC7-class LNG carrier to join the Yamal
95 RUSSIA Country Report December 2018 www.intellinews.com