Energy Strategy of Russia for the Year 2030: Approaches, Priorities and Reference Points «Energetika XXI: economy, policy, ecology» «Energy security provision within world economic crisis» October, 15-16, 2009 Saint Petersburg Alexey Gromov PhD in Economic Geography Deputy General Director Institute for Energy Strategy

Energy Strategy: resistant model of development Indexes 2008 г. Ratio, % data report 2008/ ES forecast ES Data report GDP Growth, % ,4165,2111,3 World oil price, USD per barrel 24,094,4 393,3 World gas price, USD per bln cubic metres 120,0353,7 294,8 Production of primary energy resources, mln tce 1747,01803,0103,2 Consumption of primary energy resources, mln tce 1043,01002,096,0 Electricity consumption, bln KWth 980,01019,7104,0 Export of primary energy resources, mln tce 805,0873,0108,4 2 Results of monitoring ES-2020

Energy Strategy 2030 in the System of Documents of the Strategic Development Program of long-term development of the fuel and energy complex of the Russian Far East Conception of the long- term development of the Russian Federation for the year 2020 Strategy of development of the power generation in the Russian Far East Long-term forecast of the development of Russian economy for the years Eastern Gas Program General scheme of allocation of power generating facilities for the year 2020 General scheme of development of the oil industry for the year 2030 General scheme of development of the gas industry for the year 2030 Conception of the state program for exploration and exploitation of the continental shelf of the Russian Federation ES-2030 State program of energy saving Investment programs of energy companies 3

Aim and Goals of the ES-2030 Efficiency of reproduction, extraction and processing of energy resources Modernization and construction of new energy infrastructure Energy and ecological efficiency of the national economy and energy sector Stable institutional environment in the energy sector Further integration of the Russian energy sector into the global energy system Aim Goals Innovative and efficient energy development Aim of the ES-2030 remains stable despite consequences of the global economic crisis 4

Forecasted Change of the Fuel and Energy Complex’s Role in the Russian economy Energy sector in GDP Energy sector’s export in GDP Energy resources in export Investment in energy sector in total investment 5

Expected Dynamics of Specific Energy Intensity of GDP and Domestic Demand for Primary Energy Resources 6

years Basic Forecasted Characteristics of the ES-2030 (Electricity Production and Consumption) 7

Key priorities in the Russian energy sector 8

Energy security First stageSecond stageThird stage Growth of energy consumption per capita, % by the level of 2005 no less than 10%no less than 20%no less than 40% Growth of electricity consumption per capita, % by the level of 2005 no less than 13%no less than 43%no less than 85% Growth of petrol consumption per capita, % by the level of 2005 no less than 23%no less than 41%no less than 70% Decrease of the current level of equipment’s run-out (in 2005 – 60%): by 10% by 5% Elimination of deficit and maintenance of the sufficient reserve of the power and heat generating capacities Maintenance of power generating reserves at the level of 17% of the total installed capacity of the United Energy Systems (UES) of Russia. Maintenance of normative heat generating reserves of heat stations and boiler-houses. Strategic indicators 9

Energy efficiency of the economy First stageSecond stageThird stage Specific energy intensity of GDP, % of the 2005 level no more than 80%no more than 62%no more than 46% Formation of additional energy potential for economic development: 100 mln. t c.e./y200 mln. t c.e./y300 mln. t c.e./y Development of high-technological energy services with volume of: 200 bln. RUR/y300 bln. RUR/y400 bln. RUR/y Mean decrease in specific losses and auxiliaries in FEC’s enterprises, % by the level of previous year no less than 1% no less than 0,5% Decrease in specific fuel rate for heat generation of heat stations and boiler houses, % by the level of 2005 no less than 2%no less than 6%no less than 10% 10 Strategic indicators

Efficient relationship between government and energy business Perfection of state price (tariff) regulations in the sphere of natural monopolies Completion of liberalization processes in power generation Development of the insurance system of long-term investments’ risks Perfection of license policy, elimination of inadequate administrative barriers Stimulation of modernization and innovative development of FEC Organization and stimulation of raising the level of stuff’s skills in FEC Optimization of tax burden Rationalization of amortization policy Formation of united leasing companies Support of small and medium-scale business in FEC First stageSecond stageThird stage Formation of stable institutional and legal environment in FEC Financial stability of FEC and national economy 11 Economic efficiency of the energy sector Strategic aim: Principles and mechanisms of realization Creation of favorable economic environment System of prospective regulations, standards and norms Support of strategic initiatives Strategic indicators of economic (budget) efficiency of FEC

First stageSecond stageThird stage Decrease in emission of pollutants into atmosphere and hydrosphere by the FEC, % by the level of 2005: no less than 15%no less than 30%no less than 50% Volume of greenhouse gases emission, % of 1990 level: no more than 83%no more than 92%no more than 105% Rate of APG utilization (in 2005 – 75%): 95% Forecasted dynamics of СО2-emissions 12 Ecological security of the energy sector Strategic indicators

Stages of ES

Basic Hypotheses of the Social and Economic Development of Russia for the Year 2030 Realization of the competitive advantages of the Russian economy in traditional and new science-intensive industries Predicted development of the Russian economy Hypothesis IHypothesis II By the end of the first stage of ES-2030 (post-crisis period) the economy will be characterized by the rates of social and economic development, declared in the Concept of long-term development By the end of the second stage of the ES-2030 the level of social and economic development, declared in the Concept of long-term development, will be achieved  Specification of the goals and priorities of the development are carried out in the frames of annually conducted Monitoring of the ES Stages of the ES-2030 realization First stage (till ) Second stage (till ) Third stage (till 2030) Concept 14

Characteristics of the Stages of ES-2030 First stage (till ) Main goals:  elimination of the crisis’ consequences and invigoration of the national economy  modernization of the energy sector External conditions:  possible post-crisis renaissance of the global economy  volatility of the global financial, stock and energy markets Main goals:  increase in energy efficiency of the national economy and energy sector  realization of energy projects in the Eastern Siberia, Far East, Yamal and Arctic offshore  innovative renovation of the energy sector External conditions:  stabilization of the global energy markets  decrease in dependence of budget revenues and national economy from the energy sector Main goals:  high-performance use of traditional energy resources  gradual shift to the energy of the future External conditions:  substantial decrease of the energy sector’s role in the national economy Second stage (till ) Third stage (till 2030) 15

Key initiatives in the Russian energy sector 1616

Development of oil and gas complexes in Eastern regions of Russia Exploitation of the oil and gas potential of the Northern regions of Russia and Arctic off-shore Energy infrastructure: deevelopment and diversification Non-fuel energy Energy saving Key initiatives in the Russian energy sector 1717

OIL NATURAL GAS  Baltic Pipeline System - 2 – 50 mln. т/y  North Stream – 55 bln. cub. m/y  South Stream – 30 bln. cub. m/y  Eastern Siberia-Pacific Ocean – 80 mln. т/y Energy infrastructure: development and diversification 1818

Development of oil and gas complexes in Eastern regions of Russia Exploration and exploitation of oil and gas resources in Eastern regions of Russia will help to satisfy the domestic demand for energy resources and diversify directions of export 1919

Exploitation of Oil and Gas Resources of New Regions (including Arctic offshore) Shift in oil extraction in Russia new regions 20 Shift in natural gas extraction in Russia

Non-fuel energy Priority development: Nuclear Hydro Renewable POWER GENERATION Putting into operation installed capacity of GWt will increase the share of renewable energy in power generation from 0,5 to 4,5% Forecasted development of renewable power generation 21

Energy Saving Saving of 240 bln. cub. m of natural gas, 340 bln. kilowatt-hour of electric power, 90 mln t of coal and 45 mln t of oil and oil products Expected results of energy saving and increase in energy efficiency in Russia Improvement in competitiveness of national economy under conditions of growing tariffs for energy resources Increase in revenues from extra export of oil and natural gas: bln. USD Decrease in governmental expanses: 3-5 bln. USD Reduction in CO 2 –emissions: 790 mln t/y Improvement in ecological situation in the country Consumption of energy resources can be reduced by: 20% in heat supply 30% in power generation 40% in industry and transportation 50% in living apartments Potential of energy saving in Russia is estimated at level of 45% of the current consumption of energy resources 22

State Energy Policy in Russia Rational market environment Advanced standards and regulations Subsoil resources management Development of home energy markets Formation of rational energy balance Social policy in the energy sector Regional energy policy External energy policy Scientific, technical and innovative policy Strategic initiatives Energy security Energy efficiency of economy Economic efficiency of FEC Ecological security of FEC Management of state property 23

Expected results of ES )Guaranteed energy security of Russia and its regions 2)Competent participation of Russia in ensuring global energy security, partly by means of diversification of export 3)Gradual decrease in dependency of national economy from oil and gas sector and respective decline of FEC’s share in the structure of GDP from 30 to 18% 4)Decrease in specific energy intensity of GDP by 2,1-2,3 times 5)Optimization of fuel and energy balance, decline in the share of natural gas in energy consumption from 52 to 46-47% and increase in the share of non-fuel energetics from 11 to 13-14% 6)Exploration and exploitation of new oil and gas producing regions 7)Development of the social partnership between energy companies and society 8) Improvement in financial stability, budget efficiency and investment prosperity of energy companies 9)Innovative renovation of production assets and energy infrastructure, development of new energy technologies 10)Ecological security and efficiency of FEC, limitation of greenhouse gases emissions (up to % by the level of 1990) owing to realization of the potential for energy saving 24

Thank you for your attention! 25