Russia's Fuel and Energy Complex Today and Tomorrow: Results and Tasks

Alexander NOVAK
Deputy Prime Minister of the Russian Federation

There’re a great many happenings to share that are perhaps more important and need more depth, so I’m sharing this excellent article by Mr. Energy, Alexander Novak. Many readers will be impressed by the scope of what Russia’s doing developmentally. The article’s dateline is 25 January 2024. The translation from Russian reads smoothly:

Over the past two years, the Russian fuel and energy sector, as one of the key sectors of the economy, has been subjected to the most powerful external pressure in history in the form of all kinds of sanctions and artificial restrictions. The past year has shown a high degree of stress resistance of the Russian energy sector. The domestic fuel and energy complex adequately coped with the challenges, continued to reliably ensure the country's energy security and obligations to foreign partners.

In our work on the development of the fuel and energy sector, we are guided by the priorities outlined by the President of the Russian Federation during his speech at the Russian Energy Week 2023 International Forum. This is the provision of the domestic market with affordable and high-quality energy resources, the creation of maximum added value and the development of deep processing of oil and gas, the achievement of technological sovereignty of the energy sector, the diversification of supplies and the increase in export potential.

Oil industry

In 2023, the Russian oil industry actively developed its resource base, continued to modernize its refining facilities, and commissioned new infrastructure facilities.
A total of 43 hydrocarbon fields were discovered. The leader was the Volga Federal District, where 34 oil and 1 gas condensate fields were discovered. New resources were also discovered in the Republic of Sakha (Yakutia), the Khanty-Mansi Autonomous Okrug, the Irkutsk and Tomsk regions and in the Caspian Sea. Their total reserves amounted to 43.56 million tons of oil, 145.5 billion m3 of gas, and 24.5 million tons of condensate.

Three wells of the Sauzbashevskoye field in the Republic of Bashkortostan were put into commercial operation. For the first time in 30 years, new hydrocarbon deposits have been discovered in the Chechen Republic. As part of the implementation of Vostok Oil, the largest investment project in the global oil and gas industry, the construction of the underwater section of the oil trunk pipeline across the Yenisei River, which will become part of the large-scale 770-kilometer Vankor – Payakha – Sever Bay oil pipeline, has begun. The active development of the continental shelf of the Russian Federation and the development of existing hydrocarbon fields continued.
At the end of 2023, a slight decrease of less than 1% in oil and gas condensate production (about 530 million tons) was recorded, which is due to our country's participation in the OPEC+ agreement. Coordination of the efforts of oil-producing countries within the framework of the deal contributes to the stabilization of the supply and demand ratio and the formation of a fair oil price. To date, the agreement has been extended until the end of this year.

Recycling rates are increasing. Primary oil refining increased by 1.1% (274.9 mmt). Gasoline production increased by almost 2.8% compared to 2022 (to 43.8 million tons), diesel fuel by 3.4% (to 88 million tons).

The priority outlined by the President of Russia is to reliably supply the domestic market with petroleum products.

The Russian Government pays special attention to control over pricing in the fuel market. Last year, as a result of the rise in world oil prices, we observed fluctuations in the cost of fuel on the stock exchange and in the small-scale wholesale segment. The Government of the Russian Federation has taken both operational and systemic measures. A temporary ban on the export of gasoline and diesel fuel from Russia was established, protective export duties on petroleum products were introduced, and the standards for exchange sales of motor fuel were increased. This made it possible to maintain price stability and the availability of motor fuel for citizens.

Today, the situation is stable and under constant control. Meetings are held regularly with oil companies and representatives of relevant authorities in order to promptly respond to challenges if necessary.

To stimulate the oil refining sector, the modernization of refineries continues. By 2028, 50 fuel production units will be commissioned through the mechanism of investment agreements. As a result of the implementation of the agreements, the production of motor gasoline and diesel fuel of environmental class 5 will increase by almost 4 million tons per year and 30 million tons per year, respectively.
Starting from 2022, 5 investment agreements have been concluded with manufacturers of petrochemical products to create new and modernize existing facilities. The commissioning of new capacities under these agreements from 2022 to 2027 will make it possible to additionally invest about 800 billion rubles in the petrochemical industry.

Production of large-capacity polymers will increase to 9.9 million tonnes by 2025 from 7 million tonnes in 2023, and the share of hydrocarbons as feedstock for petrochemicals should increase from 26.2% in 2023 to 35.2% by 2025.

Gas industry

The level of gas production at the end of the year amounted to 636.7 billion m3, which is 5.5% lower than last year, while gas production from offshore fields at the end of 2023 increased by 10.9% (to 34.5 billion m3). At the end of 2023, pipeline gas exports amounted to 91.4 billion m3, and liquefied gas exports amounted to about 43.6 billion m3.

In 2023, the commissioning of new gas fields and infrastructure facilities continued. The first billion cubic meters of gas were produced from the Jurassic deposits of the South Tambey gas condensate field on the Yamal Peninsula, which is the base for the Yamal LNG plant. As part of the development of the Sakhalin Gas Production Centre, comprehensive testing of two final production wells at the Kirinskoye field was successfully completed in 2023.

Gasification of the country's regions remains a priority for the development of the domestic gas market. At present, 78 regions of Russia have been supplied with natural gas. At the end of 2023, the level of gasification was 73.8%. The President of the Russian Federation has set the task of bringing the level of gasification of the country to 83%.

Since 2021, the program of social gasification has been continuing, that is, free gas supply to the homes of citizens in gasified settlements. During this time, more than 1.5 million applications for social gasification have been submitted, more than 1.1 million contracts have been concluded, more than 877 thousand have been executed to the boundaries of the site, and gas has already been supplied to 485 thousand households.

In 2023, in 74 regions, about 6.7 billion rubles were provided in regional budgets for the allocation of social support measures for a number of categories of citizens for the performance of work within the land plot, the purchase and installation of gas equipment in the amount of at least 100 thousand rubles per household.

Starting from November 2022, the social gasification program became indefinite and extended to boiler houses that provide heat to educational and medical institutions.
The reorientation of Russian gas exports to new markets continues, with an emphasis on strengthening cooperation with the countries of the Asia-Pacific region.
We are accelerating the expansion of gas exports to China via the Power of Siberia pipeline, the Far Eastern route project with a capacity of 10 billion m3 of gas per year is being implemented, and the Power of Siberia 2 gas pipeline project through Mongolia with a capacity of 50 billion m3 of gas per year is being worked out. In order to speed up the construction of new transport infrastructure facilities, the Government of the Russian Federation has simplified the procedures for approving part of the work in the design and construction of main gas and oil pipelines.
A phased implementation of the Eastern Gas Supply System project has begun, at the first stage of which it is planned to connect the Power of Siberia and Sakhalin – Khabarovsk – Vladivostok main gas pipelines, and at the subsequent stages it is planned to build the Power of Siberia – 2 main gas pipeline.

Currently, design and survey work is underway for the construction of the Belogorsk – Khabarovsk gas pipeline with a length of about 830 km from the Amur Gas Processing Plant to the tie-in to the Sakhalin – Khabarovsk – Vladivostok main gas pipeline system near Khabarovsk. Construction is scheduled to be completed in 2029.A feasibility study of the construction of the promising Power of Siberia-2 gas pipeline has been carried out, during which its resource base and preliminary technological parameters have been determined.

The timing of the construction of the gas pipeline and its main technical and economic indicators will be finalized after the signing of binding agreements with Chinese partners.

This year, the reorientation of export flows and the increase in Russia's share in the global gas market will continue. According to our estimates, in 2024, pipeline gas exports will increase by 11% y/y to 108 billion m3 against the backdrop of the Power of Siberia gas pipeline gradually reaching its design capacity, and LNG exports will increase by 14% to 38 million tons.

The Arctic LNG 2 project is being implemented. A complex for processing ethane-containing gas and producing LNG near the village of Ust-Luga is in operation.
In particular, the development of medium- and small-scale LNG projects continues. In November 2023, gas was supplied to small-scale gas liquefaction complexes in the Tver and Tyumen regions. Consumers of the first liquefied natural gas production in the regions will be regional road carriers and transit transport.

We are working to unlock the potential of transport corridors that will increase mobility Russian energy resources. In 2023, cargo traffic along the Northern Sea Route reached a record 36 million tons. The route is critical for the transportation of goods from Arctic energy projects. Starting this year, cargo navigation along the entire Northern Sea Route will become year-round.

Coal industry

Coal production at the end of last year amounted to about 438 million tons, exports reached about 213 million tons.In 2023, almost 52% more coal was exported to China, and 43% more to India compared to last year.

The share of exports to the BRICS countries increased by about 46%.

The efforts of the Government of the Russian Federation and coal companies are aimed at further reorienting Russian coal exports to the Asia-Pacific countries. To this end, new fields are being commissioned in the East, and the railway and port infrastructure is being expanded.

Coal continues to be shipped through western ports to consumers in Africa, the Middle East and the Atlantic, as well as to Asia-Pacific countries.

In the coming years, coal exports will be maintained at the level of 220 million tons due to the growing global demand for solid fuels. China, India and Turkey will remain the key importers of Russian coal. At the same time, the expansion of the carrying capacity of the Eastern Operating Domain to 173 million tons will increase exports through the ports of the Far East. After optimising the second stage of modernisation and implementing the third stage of the Eastern Polygon development project, its carrying capacity in 2031 will amount to 210 million tonnes.

Among the priority tasks are the development of the deep coal processing sector and the restructuring of the coal industry in new regions.

Electricity

At the end of the year, the energy complex again exceeded the previously achieved indicators. In 2023, electricity generation was estimated at 1151.6 billion kWh, electricity consumption at 1139.2 billion kWh, which indicates the progressive development of the Russian economy, an increase in business activity and, accordingly, the creation of new jobs.

In 2023, 801 MW of new capacity was commissioned, of which 340 MW is renewables. Among the largest facilities are two wind farms in the Stavropol Territory. These are the Kuzminskaya wind farm with an installed capacity of 160 MW and the first stage of the Trunovskaya wind farm with an installed capacity of 60 MW. Two gas turbine units with a total capacity of 144.8 MW were also launched at the Polyarnaya GTPP in the Krasnoyarsk Territory.

To improve the stability of the energy system of the Crimean peninsula, the construction and repair of three substations was completed, which increased the capacity of power centers by 68 MVA. After the modernization, a test run of power unit No. 8 of Primorskaya GRES with a capacity of 210 MW took place, and power unit No. 1 of Vladivostok CHPP-2 with a capacity of 120 MW was tested with connection to the power system.

As part of the further development of the country's Unified Energy System, large-scale projects have been launched to ensure the operation of the unified energy systems of Siberia and the East, to strengthen inter-system connections between the unified energy systems of Siberia and the Urals, which will increase the reliability and quality of power supply to consumers.

Also, in order to meet the long-term needs for electricity and capacity of citizens and industrial consumers, the construction and reconstruction of 9 generation facilities is being carried out with an increase in the installed capacity in the IPS of Siberia and the IPS of the East by 1692 MW.

In 2023, new power lines were commissioned, including the 110 kV Pevek-Bilibino overhead line in the Chukotka Autonomous Okrug (1st stage of construction) with a length of 490 km, which will have a positive impact on the quality of power supply to consumers at the Chaun-Bilibino energy hub.

From 2023, a new system for the long-term development of the electric power industry was launched, which is aimed at optimizing construction, modernizing grid infrastructure and generating capacities. Schemes and programs for the development of electric power systems until 2029 have been approved, and a draft long-term forecast of electricity and capacity consumption in the Russian EPS until 2042 has been prepared, which will form the basis of the general scheme for the location of electric power facilities until 2042, which is being developed for the first time.
Systematic work is underway to consolidate the power grid complex and reduce the number of inefficient territorial grid organizations (TGOs). Also, in all regions, work continues to identify and accept ownerless power grid facilities on the balance sheet.
One of the priority tasks is to improve the efficiency of power supply to remote and isolated areas. The solution here is the creation of legal and economic instruments for the modernization of existing and the construction of new generation facilities, as well as the determination of optimal contractual schemes for interaction between consumers and electricity suppliers.

Particular attention is paid to the restoration and development of the energy complex in new regions.

Nuclear energy is developing dynamically. The share of nuclear generation in the total energy balance is about 20%. Rosatom is the largest producer of electricity in the country and the largest producer of CO2-free energy. The President of the Russian Federation has set the task of increasing the share of nuclear generation to 25%.
Rosatom also remains the undisputed leader of the global nuclear market. The portfolio of foreign orders at various stages of NPP implementation includes
33 projects in 10 countries of the world, 22 of them in 7 countries are under construction. In particular, last year the construction of the Belarusian nuclear power plant was completed, where two ultra-modern ultra-reliable power units of generation 3+ VVER-1200 were erected.

The development of competencies in the field of hydrogen continues, which is in line with the strategy for expanding the use of low-carbon energy in the country. At the beginning of last year, an agreement on cooperation in the development of high-tech areas was signed between the Russian Government, Rosatom and Gazprom under the Hydrogen Energy roadmap. Such work will contribute to the consolidation of the efforts of companies and organizations, the creation of competitive domestic technologies for the production, transportation and storage of hydrogen for large export-oriented projects.

Import substitution

We continue to pay special attention to import substitution in the energy sector. Over the past 10 years, the import dependence of the fuel and energy sector has decreased from 67% to 38% at the end of last year.

In 2015, the share of imports in power and oil and gas engineering reached about 30% and 55%, respectively. Today, we supply most of the Russian market, the share of imports is about 18% and 35% in these industries, respectively. At the same time, Russian energy companies note the high quality of our equipment and developments at a favorable price.

To further increase the level of technological sovereignty, on behalf of the Prime Minister of the Russian Federation, a coordinating council for import substitution of oil and gas equipment was established with the participation of key companies.
The development of the production of high-power gas turbines continues. It is expected that the first serial high-power gas turbine GTD-110M will be launched in the Krasnodar Territory as early as 2024.

Terms of reference have been prepared for 78 positions of mining equipment.
Particular attention is paid to the development and implementation of Russian software at fuel and energy enterprises.

The past year 2023 has shown that external challenges have become a powerful incentive for the Russian fuel and energy sector in the development of infrastructure, technology, and scientific potential, and have opened up opportunities for building cooperation with a number of states that are ready to build partnerships based on the principles of mutual respect and consideration of national interests. The Russian fuel and energy complex continues to adequately fulfill its obligations to supply energy to citizens, plays a key role in the country's economy and maintains a leading position in the global energy market.

There’re two other articles in this great Russian publication by Novak I’d add to this but it would be far too long; so, I’ll do the same as with this and merely copy/paste the translated article. Energy Policy does have an English version that lacks many of the Russian articles. Taken altogether, the three articles inform the depth of development, its current abilities, and the plans for future development of many new sites while existing infrastructure gets modernized. What it exemplifies is Social-Capital Planning; much of its output will be exported to a hungrily developing Global Majority.

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