Russian energy industry to reach new level in 2018

The potential for the development of the Russian energy sector and the increased supply of goods to the east were discussed during the panel session ‘New Energy Markets: The Far Eastern Vector’ as part of the business programme of the fourth Eastern Economic Forum on 12 September. Russian and foreign experts noted that progress has been achieved in many areas in recent years.

“This year will not only be a record year, but will take Russian exports to a new level when the number of annual contracts for exported raw materials reaches an all-time high. Now a new situation is taking shape: increased demand in Europe is inevitable, and now we are discussing whether this will be an additional 60, 80, or 100 billion in imports as early as 2025, to say nothing of the prospects for 2030”, Deputy Chairman of the Gazprom Management Board Alexander Medvedev said.

He noted that cooperation with China is proceeding according to plan, the Power of Siberia pipeline will be completed within the deadlines that have been announced, and “there are no doubts” that supplies to China will begin in December 2019.

“One very important factor is that technological progress in the decarbonization of natural gas will make gas as eco-friendly as renewable energy sources. No matter what technology is used, gas from the intermediate fuel category will reach a different level – destination fuel”, Medvedev said.

State Grid Corporation of China Chairman Yinbiao Shu spoke about his company’s interaction with Russia within the framework of the Belt and Road Initiative and the Eurasian Economic Union. “We are actively expanding cooperation in the transportation of electricity and supplying electricity annually on a large scale”, Shu Yingbiao said, adding that the corporation has the technology to transfer ultra-high voltage electricity over long distances.

Japan Oil, Gas and Metals National Corporation Chairman and Chief Executive Officer Tetsuhiro Hosono said that Japan does not have such vast natural resources and is trying to find solutions to achieve its goals. “We have various enterprises that are currently working on renewable energy sources, but much depends on fossil fuels. The Japanese government is working on these issues and we are considering different options on the countries from which we can obtain hydrocarbons. Other countries in the Asia-Pacific region are experiencing similar problems. This is why energy supplies from Russia look very attractive. They will help Japan achieve a certain level of energy security and solve issues related to diversification”, Hosono said.

Hosono noted that Japanese and Russian companies are creating partnerships and are working together on various projects, for example Sakhalin 1 and Sakhalin 2. “Oil supplies have increased by 30% in the last decade alone, and the supply of electricity has tripled. Japan is the largest buyer of LNG and the second-largest buyer of oil after China”, he said, adding that private companies in Japan and Russia have been making a lot of productive efforts in their joint work in recent years. “Japanese companies have the requisite knowledge in the construction and maintenance of LNG terminals and are ready to share their experience. Thanks to President Putin and Prime Minister Abe, we have been able to achieve a lot, start realizing our potential, and move to the next level of interaction”, Hosano said.

Sovcomflot President and CEO Sergey Frank pointed out that Asia is the largest recipient of energy in the 21st century and that “oil has been moving more to the east than towards the west” since 2011. “Demand is growing, and the construction of the northern Arctic bridge is economically viable. There are factors that present fantastic opportunities. The Arctic is now more accessible with the technological revolution and the construction of new ships that can travel on ice that is 2.3 metres thick, which seemed impossible several years ago. Close cooperation with China allows for the construction of the Ice Silk Road”, Frank said in comments about the prospects for cooperation.

Frank added that one of the most important issues today is the creation of even cleaner and safer technologies. “Our dream is to open energy channels and switch from oil to gas. We will transport LNG and use LNG as fuel for the first time. Yesterday an order was placed at the Zvezda shipyard, and this opens up new opportunities for cooperation between Russia and Asia”, Frank said.

Continuing the theme of the Arctic, NOVATEK Deputy Chairman of the Board Lev Feodosyev noted that huge volumes of reserves are concentrated in this region. The main issue here is delivering them to consumers, and “this issue is being resolved”. He also spoke about the potential for the consumption of LNG, whose market is undergoing major changes. “Ten years ago, we were talking about delivering them from point A to point B, while today the share of spot sales is 30%. Soon we will be talking about the LNG market as we do the oil market”, Feodosyev said.

Russian Minister of Energy Alexander Novak said that cooperation with the Asia-Pacific region is a priority for Russia. “The APR market is developing at a faster pace and energy consumption will grow twice as fast as the world average: 60% of the world’s population resides in APR countries”, he said.

Novak also underscored the importance of work on the Northern Sea Route. “We expect that the goal that has been set for the development of the NSR will be realized. A strategy has been adopted to increase LNG supplies to 550 million tonnes, with APR countries accounting for 70% of this consumption. The icebreaking fleet is actively developing, and we are confident that we will achieve the goals. The Russian Federation is competitive both in terms of the extraction and transportation of raw materials. We actively involve our partners in the APR in joint investment projects”, he said.

The session ‘New Energy Markets: The Far Eastern Vector’ was a continuation of the energy agenda of the fourth Eastern Economic Forum. A more intensive discussion of the industry’s problems and prospects will be continued during the Russian Energy Week International Forum in Moscow on 3–6 October. REW 2018 guests will also have an opportunity to learn about proven strategies on the global oil and petrochemical markets and discuss whether the coal industry will continue to drive growth in the economies of developing countries. In addition, the Forum organizers will hold sessions dedicated to the pressing issue of alternative energy and renewable energy sources.