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Export Strategy of Russia’s Oil and Gas Sector

Export Strategy of Russia’s Oil and Gas Sector

In 2010 the Russian oil industry set an absolute record in terms of production. An oil pipeline to China has been launched this year expanding our potential of oil supplies to Asia. Diversification of export routes seemed to be quite a reasonable strategy on the background of growing production. Moreover, the demand of Asian states for energy sources is the most impetuous. Chinese and Indian economies are booming with their population getting richer, which contributes to fast increase in energy consumption in the region.

However, there are certain factors that should be taken into account. Despite a huge number of optimistic scenarios of the Russian oil and gas sector development, the situation is far from being optimal. Production may reach its peak already in 2011 to 2012; further growth is under question. Oil firms complain more and more often of taxation procedures and demonstrate willingness to make investments outside Russia actively entering production projects in various parts of the world. In this situation diversification looks as redirection of deliveries of hydrocarbons from the European to Asian markets, which turns it into a political project. As a result, division of Russian elites into pro-West and pro-Asia camps is becoming more apparent.

The situation in the gas sector is quite similar. A new gas accord with China was promised to be signed in June. But this did not happen, although negotiations continue. Since among new major projects only the Bovanenskoe deposit can boast a final investment decision, there is quite a logical question about the resource base of future supplies to the PRC. It is indicative that only the Altai project is being negotiated; this pipeline is to link old deposits of the Nadym-Purtazovsky district with China. The deposits already cater for the EU market, while China stubbornly refuses to pay a European price.

The report elaborates on the following issues:

  • Correlation of production and infrastructure potential

    • The analysis of the situation around construction of new pipelines in the western and eastern directions and prospects of filling them

  • Positions of major elite clans towards the state export strategy

    • Export priorities of different groups and companies

  • Gas and oil talks with China

    • Reasons for the failure of “the contract of the century”. Real interests of participants of the negotiations
    • First scandals around the oil pricing formula
    • Prospects of a gas agreement

  • Gazprom’s export monopoly and prospects of its abolition

  • Medium-term forecast of developments

The contents of the report::

Introduction 3
Chapter 1. Resource Base to Expand Exports of Russian Hydrocarbons: Economic Reality and Political Mystification 4
Chapter 2. Confrontation of Pro-Chinese and Pro-European Vectors of Russian Oil Exports 16
Chapter 3. Battles for Russian Gas Exports: Strengthening of Gazprom or Beginning of Demolition of Its Export Monopoly? 25
Chapter 4. Medium-Term Forecast of Developments 41
Date of issue: July 25th, 2011

If you are interested to obtain please contact » Elena Kim

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After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.
Oil and Gas Sector Regulation in 2022 and Prospects for 2023
Gazprom at the Forefront of Economic and Political Battles with Europe
Gazprom is being actively thrown out of the market. Its annual supplies to Europe have shrunk from the previous 150 billion to 65 billion cubic metres of gas. European officials assure that they have already learnt how to live without Russian gas, so they will bring its purchases down to but nominal values in 2023. Their main hope is liquefied natural gas. Today the EU must make a crucial decision: whether it has passed the point of no return in gas business with Russia and whether it is certain that its economy will endure without supplies of Russian pipeline gas. Or, on the contrary, Europe will realise after all that the gas balance will not be achieved and the payment for so headlong a rush for LNG will be disproportionate. Assessment of the potential volume of LNG that will appear on the market before the end of the current decade will be the most important factor for making the decision.

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