Alexander Novak: Mr. Energy, Deputy Prime Minister
A year ago I translated a paper written by Alexaander Novak, “Russia's Fuel and Energy Complex Today and Tomorrow: Results and Tasks,” that was published in the Russian journal Energy Policy. Its latest edition is out and has a great volume of information within and linked—indeed, almost every major planning document can be obtained that goes to either 2030 or 2035. Some of them were discussed and approved back in 2008, meaning Putin/Russia’s planning horizon was 20+ years and remains in that realm. Only China has similar planning depth. Other Global Majority nations are realizing that aspect for their own political-economies and are beginning to adjust. Along with well supported human capital, a nation needs viable food and energy policies to further modernize and develop. IMO, if you haven’t read last year’s paper, I suggest taking he time to do so prior to reading what follows, “Russian Fuel and Energy Complex – Reliability, Sustainability, Development:”
In recent years, the Russian economy has demonstrated its ability to develop successfully, despite external shocks. Last year also ended with positive dynamics in key indicators. According to preliminary data, GDP growth was about 4%. From 2020 to 2024, the economy grew by almost 13%. The main driver was investment; their growth was more than 37% and industry—investments in this area increased by almost 16%.
The fuel and energy complex remains a key sector of industry and one of the most attractive areas for investment. The share of the fuel and energy complex in GDP is about 20%, the volume of investments at the end of last year was 10.5 trillion rubles.
Oil industry
Oil production in 2024 amounted to 516 million tons, exports—240 million tons [One ton of oil is about14.5 barrels; overall production would be about 7.5 Billion barrels or 20.5 Million/day]. In addition, the deal has a positive effect on our country's revenues. Due to rising prices for Russian oil, the share of oil and gas revenues in the federal budget in 2024 amounted to about 30%.
Work continued to replenish the mineral resource base, which is one of the key tasks of the oil industry. As part of the implementation of the largest oil production project Vostok Oil, pilot development of the Payakhskoye, Ichemminskoye and Baikalovskoye fields is underway, work is underway on the Vankor – Payakha – Bukhta Sever oil trunk pipeline, and logistics infrastructure is being prepared to increase cargo turnover along the Northern Sea Route.
The development of the Chonsky cluster, the largest group of sites in Eastern Siberia with geological reserves of over 1.7 billion tonnes of oil [@25 Billion Barrels] and 500 billion m3, has begun,gas that are hard-to-recover. The implementation of the project will ensure long-term supplies of hydrocarbons to promising markets in the Asia-Pacific region.
The improvement of the fiscal system to increase the efficiency of oil production, including hard-to-recover reserves, continued. Since last year, subsoil users of viscous and high-viscosity oil reserves have been able to apply the AIT regime if the production of such oil accounts for at least 70% of the annual volume. The transfer of such fields to the AIT will ensure the investment attractiveness and profitability of development and thereby will make it possible to involve new resources in the turnover, which will increase revenues to the budget system and maintain the employment of citizens in the regions.
In 2024, the implementation of the federal project "Technologies for the Development of Hard-to-Recover Hydrocarbons", the purpose of which is to create profitable technologies for the exploration and production of unconventional hydrocarbon reserves, was successfully completed. The project was implemented in the Khanty-Mansi Autonomous Okrug for the development of the Bazhenov formation. During the period of the project, the efficiency of hard-to-recover reserves production increased by 3 times (development costs in 2024 decreased to 8.5 thousand rubles per ton compared to 30 thousand rubles per ton in 2017).
As part of the project, a technological test site was launched for the first time in Russia for the development of technologies for geological study, exploration and production of hard-to-recover reserves, where more than 50 high-tech wells were built to test optimal technologies for the development of the Bazhenov formation and more than 1000 high-flow hydraulic fracturing operations were carried out. Thanks to the work carried out at the test site, a number of technologies were imported, many of which have a wide potential for adaptation and application for other hard-to-recover reserves, including the Achimov and Tyumen deposits.
Industry tests of the first domestic fleet for hydraulic fracturing have been completed. The project will make it possible to start serial production of a new set of equipment for the main method of enhanced oil recovery.
Reliable supply of the domestic market remains a priority. Consistently high volumes of oil refining and the modernization of oil refining facilities made it possible to guarantee an uninterrupted supply of high-quality petroleum products to the domestic market.
Primary oil refining last year amounted to 266.5 million tons, while the depth of refining exceeded the values of 2023 and amounted to 84.4%. The production of fuel of the highest environmental class K5 increased significantly compared to 2016 (when it began operating in Russia): gasoline - by 10.5%, to 41.1 million tons, diesel fuel - by 25.9%, to 81.6 million tons.
In order to saturate the domestic market with oil products, stabilize price exchange indicators to the level of inflation and maintain a stable situation in the domestic fuel market, a temporary ban on the export of gasoline was introduced last year.
In addition, in 2024, the Government of the Russian Federation adjusted the criteria for accounting for the volume of Class 5 fuel for sale at exchange trading. The sale of fuel on the exchange gives independent gas stations the opportunity to purchase it at market prices, this approach reduces the risk of monopoly pricing. The volume of trade in petroleum products and a number of refined oil and gas products on the St. Petersburg International Mercantile Exchange (SPIMEX) reached a record and amounted to almost 37.2 million tons, which is 20% higher than in 2023.
The key task of the industry also remains the implementation of all the announced projects of the Plan for the Development of Gas and Petrochemistry of Russia for the period up to 2030, which will increase the provision of the domestic market with domestic large-tonnage polymers and effectively realize the export potential.
Gas industry
In the gas industry, there is a recovery in production after a decline in previous years, which is due to growing demand in the domestic market, the development of petrochemistry, and an increase in gas exports.
At the end of 2024, gas production reached about 685 billion m3(+7.6% by 2023). Pipeline gas exports added 15.6% and amounted to more than 119billion m3, LNG exports increased by 4% to about 47.2 billion m3.
The development of the production base continues, in particular, the production projects of the Yamal gas production center are developing. Gas production started at the Severo-Chaselsky field with an annual production level of more than 3 billion meters3natural gas and 0.1 million tonnes of gas condensate. Commercial production of hydrocarbons began at the Achimov deposits of the Urengoyskoye field in the Yamalo-Nenets Autonomous Okrug. The new production complex will ensure annual supply of up to 5 billion m²3gas and 1.5 million tons of condensate.
As part of the Eastern Gas Program, the development of gas transportation infrastructure continued. The priority stage of the Eastern Gas Supply System project is being implemented–-the construction of the Belogorsk–-Khabarovsk gas pipeline. It will connect the Power of Siberia and Sakhalin–-Khabarovsk – Vladivostok gas pipelines.
Gas supplies to the East are increasing. Since December 1 last year, daily supplies of Russian gas to China via the Power of Siberia gas pipeline have been brought to the maximum contractual level of 38 billion cubic meters ahead of schedule3per year. At the end of 2024, gas supplies through the gas pipeline exceeded Gazprom's contractual annual obligations. The project for the supply of Russian gas to China via the Far Eastern route is actively underway. The commissioning of the gas pipeline is scheduled for 2027.
The construction of the Amur Gas Processing Plant, which is an important link in the technological chain of Russian gas supplies to China via the Power of Siberia gas pipeline, is at the final stage. The fourth train of the enterprise was launched in the summer of 2024, and in 2025 the plant will reach full design capacity.
At the same time, the development of liquefied natural gas (LNG) production in Russia continues. Projects are being implemented for the construction of large-scale production facilities, in particular, an ethane-containing gas processing complex in the village of Ust-Luga. At the end of 2024, the readiness status of the complex was 46%. After the completion of construction, it will become the second largest in the world.
On behalf of the President of the Russian Federation, special attention is focused on the social gasification of the regions of Russia. At the end of 2024, the level of gasification of the Russian Federation was 74.7% (at the beginning of 2024 - 73.8%). Last year, network gas was brought to the borders of more than 303 thousand plots. The transition to network gas from boiler houses of medical and educational institutions continues. On behalf of the President of the Russian Federation, garden non-profit partnerships (SNT) are included in the program. Almost 23 thousand contracts have already been concluded with residents of SNT.
As part of efforts to expand the use of gas as fuel, the state programme to subsidise the construction of gas filling infrastructure and convert transport to methane continues. The programme to subsidise the production and refuelling infrastructure of liquefied natural gas, launched in 2023, was successfully implemented.
A draft decree of the Government of the Russian Federation on the approval of the Concept for the Development of the NGV Fuel Market in Russia for the Period up to 2035, the target scenario of which provides for an increase in consumption from 2.19 billion m3, is at the stage of approval3in 2023 to 15.4 billion m3in 2035, including CNG consumption will increase to 8.4 billion m3, and LNG - up to 5 million tons.
Coal industry
Coal production in 2024 amounted to about 443.5 million tons, 196.2 million tons were exported, and supplies of solid fuel to the domestic market in 2024 amounted to about 178 million tons.
In 2024, the implementation of coal mining projects, as well as the development of coal exports, continued. To increase supplies in the promising Eastern direction, a project is being implemented to build the port of Elga and the Pacific Railway, which will be fully operational this year.
Work continues to improve the environmental friendliness of coal production. In 2025, the key task will be to improve the system of statistical reporting in the field of environmental safety in the industry. It is planned to amend the rules for land reclamation and conservation in terms of clarifying the timing of reclamation reporting by stages of technical and biological reclamation.
Exchange trade in coal is developing, the demand for which among market participants is growing. In 2024, 1.34 million tons of coal were sold at the SPIMEX site, which is more than 5 times higher than in 2023 (262.6 thousand tons).
Electricity
Electricity production in 2024 increased by 2.9% and reached a record 1,198.3 billion kWh. Last year, about 1.7 GW of generating capacity was commissioned. 3 power units of the Udarnaya TPP were commissioned in the Krasnodar Territory with a total capacity of 562 MW. The generating equipment of the third power unit of the station included the first domestic high-power gas turbine GTD-110M, which has already begun supplying electricity to the wholesale market.
Among the priority tasks is to meet the long-term demand for electricity, the consumption of which will grow simultaneously with the advanced development of the economy. To ensure the further reliable operation of the power system, the Scheme and Program for the Development of Electric Power Systems of Russia for 2025-2030, as well as the General Scheme for the Location of Electric Power Facilities until 2042, which includes the commissioning of new facilities for both traditional and renewable and nuclear energy, as well as the modernization of generating equipment, were approved.
To improve the reliability of the electric grid complex, last year a law was adopted on systemically important territorial grid organizations (STSO), which were created in each region and perform the function of a single operator for organizing the reliable operation of electric grid facilities, including, if necessary, eliminating the consequences of emergencies.
New substations have been modernised and built in the Tula and Sverdlovsk regions, the Republic of Sakha (Yakutia), the Krasnodar Territory, Kuzbass and a number of other regions, which helps to improve the reliability of power systems. In the Far East, in the extremely difficult natural and climatic conditions of the Arctic, the second Pevek-Bilibino power transmission line was put into operation. In December last year, the main power supply facilities of the second stage of the expansion of the Eastern Polygon of Railways were commissioned, which will increase freight traffic and provide electricity to new large industrial consumers.
To increase the availability of energy infrastructure, amendments to the legislation were adopted last year, which provide for a reduction in the number of documents when applying for technological connection and increasing the transparency of payment for the service, simplifying the connection for households in SNTs, as well as for investors in the territory of special economic zones (SEZs).
The regulatory framework was approved, which made it possible to include the energy systems of the Komi Republic and the Arkhangelsk Region in the first price zone of the wholesale electricity and capacity market from January 1, 2025, and the unified energy system of the East in the second price zone. One of the prerequisites for the spread of competitive pricing in non-price zones was the task of attracting investment in the modernization and construction of new generation to meet the growing demand for electricity.
Last year, a target model of demand management was also introduced, thanks to which the energy efficiency of the energy system is increased by creating economic incentives for the consumer. 3 competitive selections have already been held, while their dynamics are positive.
An important legislative change was the law on the regulation of digital currency mining, according to which a ban on mining was introduced in certain regions with a difficult regime and balance situation in the electric power industry, for example, where a shortage of electricity and capacity is predicted in the autumn-winter heating period. In addition, the features of technological connection and power supply for mining were determined.
The development of renewable energy sources (RES) continued. In 2024, new large renewable energy facilities were commissioned, including the first projects implemented based on the results of competitive selections under the state program to support RES CDAs 2.0 - these are 5 solar power plants with a total installed capacity of almost 300 MW in the Republics of Buryatia and Kalmykia, the Trans-Baikal Territory and the Astrakhan Region. To date, the installed capacity of renewable energy facilities in Russia is about 8.3 GW.
Since last year, a national system for certifying the origin of electricity for low-carbon energy has been launched, which includes generation facilities based on the use of renewable energy sources, including large hydroelectric power plants, as well as nuclear generation.
Work continued on the development of hydrogen energy and infrastructure for electric transport. Work on digitalization is gaining momentum: the fuel and energy complex ranks 3rd among the sectors of the economy in terms of readiness for the introduction of artificial intelligence, as well as a leading role in the implementation of the principles of the best available technologies in the fuel and energy sector. At the end of 2024, more than 66% of the received comprehensive environmental permits are for fuel and energy facilities.
Particular attention is focused on achieving the technological sovereignty of the Russian energy sector. This year, the implementation of the national project "New Nuclear and Energy Technologies" begins, which is aimed at expanding Russia's presence in the international market of nuclear and related developments, supplying domestic equipment to fuel and energy enterprises.
In May last year, a new Scientific and Technical Council (STC) was formed under the Ministry of Energy of Russia on the scientific and technological development of the fuel and energy complex, the task of which is to create and implement critical technologies for knowledge-intensive areas of the fuel and energy complex.
Our country is actively involved in the international energy agenda. Throughout 2024, Russia chaired BRICS, paying special attention to strengthening cooperation in the field of energy security, deepening cooperation in the exchange of technologies and innovations, and developing research activities of the BRICS energy research platform. Thanks to Russia's contribution, the alliance promoted a unified position on the need for a balanced approach to the development of the fuel and energy sector, taking into account national specifics and ensuring the stability and security of energy systems in the context of the climate agenda, the inadmissibility of illegal unilateral barriers to trade and investment in the fuel and energy sector, which hinders the achievement of sustainable development goals, as well as the Russian approach to the concept of a just energy transition, which was reflected in a number of final documents.
In 2024, work continued on the energy track within the framework of the SCO, the G20, ASEAN, UNESCAP, HPPF, OPEC, IRENA, and bilateral energy cooperation was developed.
Last year, the Russian fuel and energy complex continued its steady development – it reliably met domestic energy needs, retained its role as a guarantor of global energy security, and became an important link in the implementation of the national development goals set by the President of the Russian Federation. [My Emphasis]
One of the issues facing Russian energy output is its distribution network. Some regions have enough excess capacity in their transmission lines so adding a nuclear or other high output plant is possible without adding to the network. However, that’s not possible everywhere, which is one reason why long-term integrated planning is essential. Overall Russian energy resources continue to grow as more geological studies are conducted. The new fields revealed above are massive. That Russia is moving to provide a network of Compressed Natural Gas refueling stations is significant. To avoid sanctions, Iran converted much of its auto fleet to run on that fuel. IMO, it’s far more viable commercial application than hydrogen fuel cell vehicles. The latter work better in public transport fleet situations using busses and trams with centralized refueling depots.
Much of Russia’s future energy output will go towards mineral extraction operations in Siberia, Arctic and Far East. Those regions are also where Russia would like to see future urban development occur to improve Russian demographic balance. The gasification program continues to connect more homes, but the easier connections are done and now the more complex ones remain that require pipeline infrastructure to bring the gas to where the people live. There’re many side topics for readers to explore. I mentioned a document that is linked to many other development documents, which of course is in Russian, and is published by The Security Council of the Russian Federation, “Russia's Energy Strategy until 2030.” It’s very long and detailed. For those with the time and translation software, a mass of info is available publicly, meaning those working within the USG bureaucracy has absolutely no excuse for not knowing where Russia stands, where it’s heading and its plans to get there.
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Thank you for this post. I appreciate the details and the work required to produce it. It appears that Russia has a longer (20+ years) and more comprehensive planning regime than the west does.
But, I do have a serious concern. Fossil fuel deposits are finite, and while the US and Russia have abundant production of oil and gas, those reserves aren't going to last forever. US oil production is probably near the peak and gas is probably only a decade behind. Russian oil and gas have a few decades on the west before peaking. Both have at least a century, probably more, of coal production.
But, sooner or later, the fossil fuels will run out. And, before that happens, they will run low and start putting strain on the economy. The US has decided to ignore this problem. Do you have any sense of how Russia is approaching it?
Russia got it right.. In comparison Trumps Drill baby Drill cant happen without massive energy infrastructure development such as electric transmission and NG pipe lines much of which is in poor repair resulting in higher utility bills for years to come.
Then there is the massive energy requirements for Jumpstarting Trump grandiose re-development of American industrial manufacturing base and the now new planned nuclear mega power stations for AI.
Its all hyperbole considering todays Net Zero carbon restrictions mandates and years of neglect in domestic energy planning and bureaucratic red tape all of which are huge obstacles in obtaining today's energy needs that could be met through nuclear or NG or both.
Unfortunately due to political polarization america is still currently in deadlock and in a dismal predicament in comparison to what is happening around the world.
Thank you for this post. I appreciate the details and the work required to produce it. It appears that Russia has a longer (20+ years) and more comprehensive planning regime than the west does.
But, I do have a serious concern. Fossil fuel deposits are finite, and while the US and Russia have abundant production of oil and gas, those reserves aren't going to last forever. US oil production is probably near the peak and gas is probably only a decade behind. Russian oil and gas have a few decades on the west before peaking. Both have at least a century, probably more, of coal production.
But, sooner or later, the fossil fuels will run out. And, before that happens, they will run low and start putting strain on the economy. The US has decided to ignore this problem. Do you have any sense of how Russia is approaching it?
Russia got it right.. In comparison Trumps Drill baby Drill cant happen without massive energy infrastructure development such as electric transmission and NG pipe lines much of which is in poor repair resulting in higher utility bills for years to come.
Then there is the massive energy requirements for Jumpstarting Trump grandiose re-development of American industrial manufacturing base and the now new planned nuclear mega power stations for AI.
Its all hyperbole considering todays Net Zero carbon restrictions mandates and years of neglect in domestic energy planning and bureaucratic red tape all of which are huge obstacles in obtaining today's energy needs that could be met through nuclear or NG or both.
Unfortunately due to political polarization america is still currently in deadlock and in a dismal predicament in comparison to what is happening around the world.