1. Updates on the RFE Energy Sector and the RFE LEAP model, and Implications of a Regional Alternative Path for the Russian Far East Victor Kalashnikov Economic Research Institute FEB RAS Alexander Ognev Vostokenergo-RAO EES Rossii, Khabarovsk, Russia Ruslan Gulidov Economic Research Institute FEB RAS Asian Energy Security Workshop 11-14 May, 2004, Beijing, China

2. Some Economic Indicators of the Russian Far East (as of 2003) GDP Growth – 11.1 % Industrial Product Growth – 4.7 % Investments Growth – 37.3 % Incomes Growth – 12 % Export Growth – 12.7 %

3. Investments into the RFE Energy Sector, million USD 199920022003 (estimated) Electric Power123421435 Oil & Gas817321940 TOTAL21412962445

4. Bureiskaya HPP & Related Network Project Construction of a hydropower plant of 2 GW with an output of 7.1 bln kWh per year First Unit of 185 MW commissioned in June 2003 Second Unit of 185 MW commissioned in December 2003

5. Basic Characteristics of the RFE Energy Balance, 2002 Primary Energy Production - 30 million tce

6. Basic Characteristics of the RFE Energy Balance, 2002 Total Energy Consumption - 36.4 million tce

7. Basic Characteristics of the RFE Energy Balance, 2002 Total Energy Import - 22.8 million tce (62.5 % of Total Energy Consumption ) Net Energy Import – 6.3 million tce (17.3 % of Total Energy Consumption )

8. Basic Characteristics of the RFE Energy Balance, 2002 Final Energy Consumption - 20.8 million tce

9. Energy Security Attributes Applied for Modeling the RFE Energy Sector secure of energy supply for reasonable prices rational use of energy resources ecologically sustainable energy production and consumption

10. Methods to Model the Impact of Various Decisions on the RFE Energy Security Demand for primary energy Sufficient energy supply with minimal costs Reasonable energy self-sufficiency, or energy independence Diversification of energy resources Energy efficiency policy Development of renewable sources Minimization of environmental impact (by the structural and technological factors) International cooperation with NEA countries

11. Southern Region Sakhalin CHINA THE RUSSIAN FAR EAST JAPAN

12. Key Assumptions for the Both Scenarios Growth of GDP in 2002-2010 – 5.5% annually, in 2011-2020 – 5% annually Growth of industrial product in 2002-2010 – 4% annually, in 2011-2020 – 3.5% annually Population growth in 2002-2010 – 0%, in 2011-2020 – 0.8% annually

13. Key Assumptions for the BAU Scenario There is no development of international energy cooperation There is no intensification of the use of renewable energy resources (the federal law “On Renewable Energy Resources” has been frozen) Russia does not ratify the Kyoto Protocol and the Energy Charter Treaty. There is no enhancement of ecological standards in the transformation sector The energy saving policy is absent Municipal reform is frozen.

14. Basic Implications of the Assumptions Accepted in BAU Scenario (1) The final electricity demand will amount to: 2.5% (2002- 2010), in 2.8% (2011–2020) annually The final commercial heat demand 0.5% (2002-2010), 0.8% (2011-2020) annually The increase in production of primary energy will be associated to the projects of Sakhalin-1 (oil), Sakhalin-2 (oil, LNG). The projects’ total output will be exported The domestic primary energy demand will be mainly covered by a slight growth of coal production and expansion of coal import from Siberia

15. Basic Implications of the Assumptions Accepted in BAU Scenario (2) The growth of electricity generation will be connected with the completion of Bureiskaya HPP and the construction of conventional coal units The lack of financial resources will restrict installation of small HPPs, wind power and other renewables power Weak growth of heat generation will be connected mainly with conventional coal boilers and coal CP Units in the cities Emissions of greenhouse gases and oxides will increase The energy consumption diversification index will rise (Herfindal index) Energy dependence of region will grow Demand for primary energy will grow

16. Key assumptions for the Regional Scenario There is an expansion of cooperation in the sphere of oil, gas, and electricity infrastructure There is an intensification of the use of renewable energy (the federal law “On Renewable Energy Resources” is adopted and activated) Russia ratifies the Kyoto Protocol and probably the Energy Charter Treaty There is an enhancement of ecological standards in the transformation sector The energy saving policy is activated Municipal reform is promoted

17. Basic Implications of the Assumptions Accepted in Regional Scenario (1) The final electricity demand will amount to 2.5 % (2002- 2010), 2.8 % (2011–2020) annually. The increase in production of primary energy resources will be associated with the projects of Sakhalin-1 (oil, gas), Sakhalin-2 (oil, LNG), Sakhalin-3 (gas), the Siberian Kovykta project (gas) The growth in electricity generation will be connected with the completion of Bureiskaya HPP, steam-and-gas units, new hydro-power plants (oriented towards NEA countries) The promotion of the energy saving policy and the municipal reform will optimize the final use of commercial heat. The final demand for commercial heat will decrease as compared to the BAU scenario and annual growth rate will amount to 0% (2002-2010), 0.5 % (2011- 2020) annually.

18. Basic Implications of the Assumptions Accepted in Regional Scenario (2) The demand for heat generation will be covered with gas and low- sulfur oil-fired boilers The efficiency of energy transformation and distribution will significantly grow The non-traditional renewable energy will be applied in isolated and remote districts No increase in coal production is expected. Import of coal from Siberia will decline. Emissions of greenhouse gases and oxides will comparatively decrease The energy consumption diversification index will decline (Herfindahl index) The share of renewable energy resources will grow Energy dependence will decrease Demand for primary energy will comparatively decline

19. Major Projects for International Cooperation for the Regional Scenario Oil Extraction from Sakhalin-1 and Sakhalin-2, million tones per year Sakhalin-1Sakhalin-2Total 200201.9 200612.64.717.3 201012.86.619.4 201512.64.7317.3 202011.23.514.7

20. Major Projects for International Cooperation for the Regional Scenario Oil Pipeline Angarsk – Nakhodka RouteLength, km Capacity, mln t annually Costs, bln USD Date of Commission Angarsk – Taishet – Kazachinskoe – Tynda – Skovorodino – Nakhodka (incl. section of Tynda – Datsin) 437080 (incl. 30 to Datsin) 82012

21. Major Projects for International Cooperation for the Regional Scenario NG Extraction from Sakhalin-1 and Sakhalin-2, BCM annually Sakhalin-1Sakhalin-2Total 2002000 20061.52.54.0 20101.515.416.9 201510.216.426.6 202010.216.426.6

22. Major Projects for International Cooperation for the Regional Scenario International Gas Infrastructure Projects

23. Major Projects for International Cooperation for the Regional Scenario Possible New Power Plants in the RFE

24. Major Projects for International Cooperation for the Regional Scenario Electricity Infrastructure Projects

25. Thank you for Attention !