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Russian Federation energy profile
Table of content:
1. Geographical position
2. Climate
3. Population
4. Political system
5. GDP
6. Natural resources
7. Energy sector and development of energy markets
8. Energy markets
1. Geographical location
Russia, also officially known as the Russian Federation is a country in northern Eurasia. It is a federal semi-presidential democratic republic, comprising 83 federal subjects. Russia shares borders with the following countries (from northwest to southeast): Norway, Finland, Estonia, Latvia, Lithuania and Poland (both via Kaliningrad Oblast), Belarus, Ukraine, Georgia, Azerbaijan, Kazakhstan, China, Mongolia, and North Korea. It also has maritime borders with Japan (by the Sea of Okhotsk) and the United States (by the Bering Strait). At 17,075,400 square kilometres (6,592,800 sq mi), Russia is by far the largest country in the world, covering more than a ninth of the Earth's land area. Russia is also the ninth most populous nation in the world with 142 million people. It extends across the whole of northern Asia and 40% of Europe, spanning 11 time zones and incorporating a wide range of environments and landforms.
2. Сlimate
The climate of the Russian Federation formed under the influence of several determining factors. The enormous size of the country and the remoteness of many areas from the sea result in the dominance of the humid continental and subarctic climate, which is prevalent in European and Asian Russia except for the tundra and the extreme southeast. Mountains in the south obstruct the flow of warm air masses from the Indian Ocean, whilst the plain of the west and north makes the country open to Arctic and Atlantic influences. Throughout much of the territory there are only two distinct seasons — winter and summer; spring and autumn are usually brief periods of change between extremely low temperatures and extremely high. The coldest month is January, the warmest usually is July. Great ranges of temperature are typical. In winter, temperatures get colder both from south to north and from west to east. Summers can be quite hot and humid, even in Siberia. A small part of Black Sea coast around Sochi has a subtropical climate.
3. Population
The Russian Federation is a diverse, multi-ethnic society, home to as many as 160 different ethnic groups and indigenous peoples. Though Russia's population is comparatively large, its density is low because of the country's enormous size. Population is densest in European Russia, near the Ural Mountains, and in southwest Siberia. 73% of the population lives in urban areas while 27% in rural ones. The population of Russia is 141,915,979 as of 1 November 2009. The primary causes of Russia's population decrease are a high death rate and low birth rate. While Russia's birth-rate is comparable to that of other European countries (12.1 births per 1000 people in 2008 compared to the European Union average of 9.90 per 1000) its population is declining at a greater rate than many due to a substantially higher death rate.
4. Political system
The Russian Federation is a presidential republic with a bicameral parliament, the Federal Assembly of Russia, which is composed by the Federation Council of Russia and the State Duma. The former President Vladimir Putin left the office in May 2008 and was replaced by Dmitry Medvedev, who won the presidential elections of March 2008 by an overwhelming majority. After the victory of Medvedev, Vladimir Putin was nominated by his successor to be the Russian Federation's Prime Minister by 8 May 2008.The next elections are planned for December 2011 (parliamentary) and March 2012 (presidential). The Russian Federation is composed of 83 federal subjects, subdivided into: 21 republics, 46 oblasts (provinces), 9 krais (territories), 1 autonomous oblast (autonomous province), 4 autonomous okrugs (autonomous districts) and 2 federal cities. These subjects have equal federal rights in the sense that they have equal representation, i.e. two delegates each in the upper house of the Federal Assembly of Russia.
5. Gross domestic product
After the financial crisis of 1998, the Russian Federation experienced a decade of high gross domestic growth, averaging 7 per cent between 1999 and 2007 and subsequently witnessed a solid growth in 2008 of 5.6 per cent. However, due to the worldwide financial crisis the GDP has decreased by 14.2 per cent in the first seven months of 2009. Although the Russian Government has laid out plans to diversify the economy, the Russian Federation’s economy is still heavily dependent on oil and natural gas exports, as whitnessed during the first seven months of 2009 when the overall exports of the Russian Federation declined by 50 per cent mostly due to declining gas and oil prices compared to the previous years.
6. Natural resources
Russia is rich in energy resources. Russia has the largest known natural gas reserves of any state on earth, along with the second largest coal reserves, and the eighth largest oil reserves. This is 32% of world proven natural gas reserves (23% of the probable reserves), 12% of the proven oil reserves (42% of the probable reserves), 10% of the explored coal reserves (14% of the estimated reserves) and 8% of the proven uranium reserves.
Natural gas
In recent years Russia has identified the gas sector as being of key strategic importance. The share of natural gas as a primary energy source is remarkably high compared to the rest of world. Russia has the world biggest natural gas reserves, mainly owned and operated by the Russian monopoly Gazprom, which produces 94% of Russia's natural gas production. In global context Gazprom holds 25% of the world's known gas reserves and produces of 16% of global output. In 2006, Russia was the world's biggest natural gas producer with 22.0% of global natural gas production and also the biggest exporter with 22.9% of global natural gas export.
Oil
Russia is the largest oil producer in the non-OPEC countries, and second biggest in the world after Saudi Arabia, which it overtakes as the world's number one from time to time. In 2006, Russia contributed 12.1 % of global oil production and 11.6 % of global oil exports. In June 2006, Russian crude oil and condensate production reached the post-Soviet maximum of 9.7 million barrels per day (b/d), exceeding production in 2000 by 3.2 million b/d. Russian export consists more than 5 million b/d of oil and nearly 2 million b/d of refined products, which go mainly to the European market. The biggest Russian oil company is Rosneft followed by Lukoil, TNK-BP, Surgutneftegaz, Gazprom Neft and Tatneft.
Coal
Russia has the world’s second largest coal reserves, with 157 billion tonnes of reserves. Russian coal reserves are widely dispersed. The principal hard coal deposits are located in the Pechora and Kuznetsk basins. The Kansk-Achinsk basin contains huge deposits of brown coal. The Siberian Lena and Tunguska basins constitute largely unexplored resources, the commercial exploitation of which would probably be difficult.
Non-conventional oil
Oil shale
Russia owns the biggest oil shale reserves in Europe equal to 35.47 billion tonnes of shale oil. More than 80 oil shale deposits have been identified. Main deposits are located in the Volga-Petchyorsk province and the Baltic Basin. Extraction of the deposits in the Volga-Petchyorsk province began in the 1930s, but was abandoned due to environmental problems. Main oil shale industry was concentrated on the Baltic Basin in Slantsy, but at the end of the 1990s the Slantsy oil shale processing plant and oil shale-fired power station were converted to use traditional hydrocarbons and mining activities ceased before 2005.
7. Energy sector and development of energy markets
Energy supply
Russian energy imports consist of fossil fuels and represent only 3.3 per cent of the total energy supply. The total primary energy supply of the Russian Federation in 2006 amounted to 676’196 ktoe. Due to large domestic production of crude oil, gas, petroleum products, and coal, the Russian Federation generates an energy export surplus of 78.5 per cent.
Energy production and imports of the Russian Federation amount to 1,242,808 ktoe. The primary energy supply is dominated by gas and crude oil, with shares of 43 per cent and 39 per cent respectively. Around 3.4 per cent of the total primary energy supply is based on renewable energy sources (mainly hydro power). The Russian Federation has proven oil reserves of 60 billion barrels, most of which are located in Western Siberia. Overall, the Russian Federation holds the world’s largest natural gas reserves, the second largest coal reserves and the eighth largest oil reserves. In 2006 the Russian Federation was the world’s largest natural gas producer (656 billion m3), as well as the world’s largest exporter (187 billion m3). According to official Russian statistics, production during 2007 amounted to around 654 billion m3, of which 85 per cent (549 billion m3) was produced by Gazprom. Russian government forecasts expect gas production to grow to 881 billion m3 by 2030.
The Russian electric system has a total generation capacity of 217 GW and includes over 440 thermal plants (approximately 77 of which are coal-fired) plus 29 nuclear reactors. The electricity generation capacity located in the far-eastern part of the country is not connected to the integrated Russian power grid, but operates in an autonomous grid system, the United Grid of the East.
Heat production in the Russian Federation amounts to 6,429,968 TJ (or almost twice the electricity generation), and uses 32 per cent of total fossil consumption. It is mainly produced by gas (65%) and coal (21%).
Energy demand
The Russian Federation is worldwide the third largest energy consumer. Within the Russian Federation, the industry and residential sectors are the biggest consumers of primary energy, representing 57 per cent of the total consumption. The 10 per cent of non-energy use in Russian Federation reflects the current growth of manufacturing of synthetic materials and chemical products with the use of coal and coke, natural gas, oil, and petrochemical products. Economic recovery contributed to an increase in total electricity consumption from 715 TWh in 1998 to roughly 980 TWh in 2007. The industry sector is by far the biggest consumer of electricity with a share of 52 per cent of the total consumption. The size of the country explains also the high consumption of electricity by the transport sector (mainly railways and urban infrastructures).
8. Energy markets
Electricity market
The Russian electricity market used to be dominated by Unified Energy System of Russia (RAO UES), which was established on 15 August 1992 as an electric energy holding company. Most of the state-owned electric energy assets, such as thermal and hydroelectric power plants, transmission lines as well as state-owned shares in power companies, research and engineering companies, and construction entities of the industry were transferred to RAO UES, with exception of assets related to nuclear energy. In total, RAO UES owned more than 70 energy companies and more than 400 power plants with federal level importance. It also owned the transmission system operator, i.e. the Federal Grid Company (RAO FGC).
After the completion of the structural transformation, which resulted on 1 July 2008, in the merger of RAO UES with UES FGC, the Federal Grid Company, the Russian State owns more than 75 per cent of shares in the Federal Grid Company (with account of budgetary funds and part of state-owned shares in wholesale generation companies and territorial generation companies), more than 75 per cent of shares in the System Operator, more than 50 per cent of shares in RusHydro, more than 50 per cent of shares in Inter RAO UES and more than 52 per cent of shares in the IDC Holding and RAO ES of the East, while minority shareholders own the rest.
Electricity tariffs
The state policy on electricity tariffs is implemented by the Federal Agency for Tariffs, which approves minimum and maximum tariffs for the energy producers. The concrete tariffs in the oblasts (regions) of the country are decided by the Regional Energy Commissions in accordance to the local conditions. The tariffs for electricity can vary considerably in the different regions. Social sphere users (hospi-tals, schools etc) benefit from preferential tariffs in comparison to other users (for example industry). The structure and amounts of preferential tariffs are prerogative of the respective Regional Energy Commission, which sets them in accordance to the local conditions.
Gas market
Although Gazprom, whose majority owner is the Russian Government, is the largest gas market player in the Russian Federation, owning 80 per cent of the total production assets, controlling the pipeline network and having established an export monopoly, there are several independent gas producers and oil companies who can sell gas on a deregulated sector.
Gazprom’s natural gas production forecast shows a moderate growth of 1-2 per cent per year by 2010. The Russian Federation’s natural gas production growth reflects its aging fields, state regulation, Gazprom’s monopolistic control over the industry, and insufficient export pipelines. Although the company expects increases in its natural gas output between 2008 and 2030, most of the Russian Federation’s natural gas production growth will come from independent gas companies such as Novatek, Itera, and Northgaz.
Gas tariffs
Gas prices are differentiated according to 11 territorial zones. In 2008, following a 14 per cent increase in 2007 and a 15 per cent increase in 2006, they averaged EUR 0.04/m3 (USD 0.06/m3). Export prices are considerably higher with levels largely above USD 0.2/m3. The prices for gas extracted and supplied by Gazprom and its affiliates are set by the Service of Federal Tariffs every year. Different prices are set for different price belts. There were seven price belts until 2005, but since 1 January 2006, there are 13 price belts.
Heating market
The heat market in the Russian Federation is one of the largest domestic markets and is split into more than 50,000 local markets with USD 33 billion annual sales.
Heating tariffs
In 2005, average heat prices in the Russian Federation were 11 EUR/Gcal (473 RUB/Gcal). ] |