The energy strategy in pink

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to Infotech on the preliminary draft of Russia's Energy Strategy for the period up to 2050.

According to Alexey Gromov, the targets prescribed in the draft energy strategy of Russia until 2050 are still too optimistic, and for gas they are completely unrealistic.

According to the Vedomosti newspaper, the draft energy strategy, which has been developed and updated for several years (version until 2035) by the Ministry of Energy, assumes a significant increase in production and exports of gas, coal and oil.

According to the document, gas exports will triple to 421 billion cubic meters, oil – by 3.8% (up to 243 million tons), coal – by 59% (up to 338 million tons). Gas production will increase from 638 billion cubic meters (in 2023) to 922 billion cubic meters in 2030, and in 2050 it will exceed 1 trillion cubic meters. Coal production will increase in 2030 to 482 million tons, and in 2050 to 556 million tons.

Alexey Gromov noted that the figures published by Vedomosti with reference to the draft document look too optimistic.

Oil

In terms of the oil market, the forecast of the Ministry of Energy is alarming with the conviction that there will be no major changes in the global oil market in the long term.

"In principle, we can agree with this with a certain degree of conditionality, since in recent years we have seen a slowdown in energy consumption and a constant shift to the right of expectations regarding the timing of peak oil demand. At first they said that it had already been passed, then this deadline was shifted to 2025, then to 2030. But so far we see that the market is in no hurry to move away from oil," the expert said.

According to him, Russian oil has good prospects to preserve the markets of developing countries: China, India, but only if current trends persist. In the future, the country may actively enter the markets of Pakistan and Bangladesh.

The analyst noted that in such a long-term perspective, uncertainty remains around the Chinese market, which intends to start reducing oil consumption after 2030 to reduce emissions.

"If this happens, then we will have to revise our forecast. This is a serious risk," he said.

Coal

As for the coal industry, the expert noted that Russia can indeed increase exports by 59%, since the Russian energy resource is competitive on the world market due to its quality and price. In addition, many Asian countries continue to rely on coal in the energy mix, including for energy security reasons.

"We believe that demand for Russian coal will grow not only from China, as it has been observed in recent years, but also in the future from India and Vietnam, where the development of coal generation continues," he added.

Gromov clarified that everything for coal will depend on the sales markets and demand for coal in the world. What is clear so far is that it will remain in China at least until 2030, as China is actively balancing energy at the expense of high-quality Russian coal and investing in the modernization of coal-fired power plants.

Gas

Gromov noted that the forecasts of the Ministry of Energy for the gas industry are most doubtful, especially in terms of increasing exports.

"Export growth to over 400 billion looks very ambitious. We have never reached such figures, while Russian natural gas exports on the eve of 2022 amounted to about 220 billion cubic meters, and this is at a good time for the industry. Therefore, the ambitions of such a strong increase in gas exports raise big questions," he said.

In his opinion, the developers of the strategy most likely included in the forecast the volume of the Power of Siberia-2 with a capacity of 50 billion cubic meters, as well as the launch of a gas pipeline through Iran to the markets of South Asia for 110 billion cubic meters per year. But it’s not obviously that both of these projects will be implemented, as it will be quite difficult for the parties to agree on the price of gas.

As for the sixfold increase in LNG production by 2050, it should be borne in mind that Russia has not yet been able to meet even current goals on time due to sanctions and the lack of ice-class vessels. Most likely, the opposition to the Russian LNG industry will continue in the future, the expert noted.

"There are many questions about this energy strategy project. Yes, it should reflect the country's goals for the development of the energy industry, but still we should consider not only very optimistic scenarios for the development of hydrocarbon production and export, but also risky scenarios, which, unfortunately, can be fully realized in terms of gas," the analyst summed up.