Country Analysis Brief: Russia: Last Updated: October 31, 2017
Country Analysis Brief: Russia: Last Updated: October 31, 2017
Country Analysis Brief: Russia: Last Updated: October 31, 2017
Overview
Russia is the world’s largest producer of crude oil (including lease condensate) and the second-
largest producer of dry natural gas. Russia also produces significant amounts of coal. Russia’s
economy is highly dependent on its hydrocarbons, and oil and natural gas revenues account
for more than one-third of the federal budget revenues.
Russia is a major producer and exporter of oil and natural gas. Russia’s economic growth is
driven by energy exports, given its high oil and natural gas production. Oil and natural gas
revenues accounted for 36% of Russia's federal budget revenues in 2016. 1
Russia was the world’s largest producer of crude oil including lease condensate and the third-
largest producer of petroleum and other liquids (after Saudi Arabia and the United States) in
2016, with average liquids production of 11.2 million barrels per day (b/d). Russia was the
second-largest producer of dry natural gas in 2016 (second to the United States), producing an
estimated 21 trillion cubic feet (Tcf).
Russia and Europe are interdependent in terms of energy. Europe is dependent on Russia as a
source of supply for both oil and natural gas. More than one-third of crude oil imports to
European countries in the Organization for Economic Cooperation and Development (OECD) in
2016 came from Russia. More than 70% of natural gas imports to those countries also came
from Russia in 2016. 2 Russia is dependent on Europe as a market for its oil and natural gas and
the revenues those exports generate. In 2016, nearly 60% of Russia’s crude oil exports and
more than 75% of Russia’s natural gas exports went to OECD Europe. 3
Russia was the fourth-largest generator of nuclear power in the world in 2016 and had the fifth-
largest installed nuclear capacity. With seven nuclear reactors under construction, Russia is
second to China in terms of number of reactors under construction as of October 2017. 4
petroleum
22%
natural gas
nuclear, 52%
renewables,
and other
13%
coal
13%
In response to the actions and policies of the government of Russia with respect to Ukraine, in
2014, through a series of executive orders, the United States imposed progressively tighter
sanctions on Russia. 6 Among other measures, the sanctions limited Russian firms’ access to U.S.
capital markets, specifically targeting four Russian energy companies: Novatek, Rosneft, 7
Gazprom Neft, and Transneft. Sanctions also prohibited the export to Russia of goods, services,
or technology in support of deepwater, Arctic offshore, or shale projects. 8 The European Union
imposed similar sanctions, although they differ in some respects. 9
In August 2017, the United States enacted new legislation codifying the existing sanctions on
Russia. This legislation also extended the prohibition on providing technology in support of new
deepwater, Arctic offshore, or shale projects to cover not only projects in Russia, but also
projects anywhere in the world in which a person or entity already subject to sanctions owns
33% or more of the project. The legislation also authorizes the President of the United States to
impose additional sanctions on persons or entities providing support to energy export pipelines,
but it does not require the President to do so. 10
Virtually all involvement in Artic offshore and shale projects by Western companies has ceased
following the sanctions. In recent years, the Russian government has offered special tax rates or
tax holidays to encourage investment in difficult-to-develop resources, such as Arctic offshore
and low-permeability reservoirs, including shale reservoirs. Attracted by the tax incentives and
the potentially vast resources, many international companies entered into partnerships with
Russian firms to explore Arctic and shale resources. ExxonMobil, Shell, BP, and Statoil also
signed agreements with Russian companies to explore shale resources. ExxonMobil, Eni, Statoil,
and China National Petroleum Company (CNPC) all partnered with Rosneft in 2012 and 2013 to
explore Arctic fields. 11 Despite sanctions announced in March 2014, Total agreed in May to
explore shale resources in partnership with Lukoil. However, Total halted its involvement in
September 2014, as additional sanctions were announced later in the year.
Arctic offshore and shale resources are unlikely to be developed without the help of Western oil
companies. However, these sanctions will have little effect on Russian production in the short
term as these resources were not expected to begin producing for 5 to 10 years at the earliest.
The immediate effect of these sanctions has been to stop the large-scale investments that
Western firms had planned to make in these resources.
At the same time as the United States and the European Union were applying sanctions, oil
prices fell by more than half, from an average Brent crude oil price of $109/barrel (b) in the first
half of 2014 to an average of less than $50/b in January. Both the sanctions and the fall in oil
prices have put pressure on the Russian economy in general and have made it more difficult for
Russian energy firms to finance new projects, especially higher-cost projects such as deepwater,
Arctic offshore, and shale projects.
In addition to taxes, the Russian government also collects dividends from oil and natural gas
companies in which the state is a shareholder. In April 2016, the Russian government directed
state-controlled companies to pay out a minimum of 50% of 2015 net income as dividends,
nearly double the dividends companies would normally pay. 12 Oil companies have objected to
both the tax and dividend increases, arguing that they divert money from capital investment
programs. Based on similar arguments, Rosneft negotiated a lower dividend payout in 2016, but
the company plans to pay out 50% of 2017 income as dividends. 13
In January 2016, the Russian government announced its intention to sell some of its shares in
several Russian companies, including Bashneft and Rosneft. Bashneft was one of Russia’s 10
largest oil producers. In October 2016, the federal government sold its 50.08% controlling stake
in Bashneft to Rosneft for $5.3 billion. Then in December 2016, the Russian government
announced that it had sold a 19.5% stake in Rosneft for $11 billion. The stake was split evenly
between Glencore (a commodity trader) and the Qatar Investment Authority (QIA—Qatar’s
sovereign wealth fund). In September 2017, Glencore and QIA sold a 14.16% stake in Rosneft to
CEFC China Energy for $9.1 billion, retaining 0.5% and 4.7% interest in Rosneft, respectively. The
Russian government retains a controlling interest in Rosneft.
Another way to try to increase oil and natural gas revenues is to try to increase prices. In late
2016, the Organization of the Petroleum Exporting Countries (OPEC), Russia, and several other
oil-producing countries agreed to limit production from January 2016 through June 2016 to try
to stabilize the oil market. Russia agreed to reduce its production by 300,000 b/d versus its
October 2016 production level, implementing these cuts gradually to reach the full cut by the
end of April 2017. OPEC and Russia have generally adhered to their agreed production cuts, and
in May 2017, OPEC and non-OPEC countries met and agreed to extend production cuts through
the end of March 2018.
In 2016, Russia produced an estimated 11.24 million b/d of petroleum and other liquids (of
which 10.55 million b/d was crude oil including lease condensate), and it consumed about 3.6
4 consumption
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: EIA International Energy Statistics and Short-Term Energy Outlook, September 2017
A number of new projects are in development. Some of these new projects may only offset
declining output from aging fields and not result in significant output growth in the near term.
The use of advanced technologies and the application of improved recovery techniques is
resulting in increased oil output from some existing oil deposits.
Khanty-Mansiisk
The Khanty-Mansiisk area of West Siberia is Russia’s largest oil-producing region, accounting for
about 4.8 million b/d of liquids production, nearly 45% of Russia’s total production in 2016. 18
One of the largest and oldest fields in Khanty-Mansiisk is Samotlor field, which has been
producing oil since 1969. Production from the Samotlor field has been declining since its post-
Soviet era peak of 635,000 b/d in 2006. Other large oil fields in the region include Priobskoye,
Mamontovskoye, Malobalykskoye, and Prirazlomnoye (Rosneft). 19
The start-up of the Rosneft’s Vankorskoye (Vankor) oil and natural gas field in August 2009 has
notably increased production in the region and has been a significant contributor to Russia’s
increase in oil production since 2010. Vankor, located north of the Arctic Circle in Russia’s
Krasnoyarsk region near the border with Yamal-Nenets, was the largest oil discovery in Russia in
25 years. Rosneft built a 345-mile pipeline to connect Vankor field to the Transneft oil pipeline
system at Purpe. In 2015, the field produced about 440,000 b/d. 22 Rosneft is also developing
three smaller nearby fields—Suzunskoye, Tagulskoye, and Lodochnoye—also known as the
Vankor cluster fields. Production at Suzunskoye started in late 2016.
To the west of Vankor and the Vankor cluster of fields, on the eastern edge of the Yamal-Nenets
region, is another cluster of fields under development. Lukoil’s Pyakyakhinskoye oil,
condensate, and natural gas field started commercial production in October 2016. Other fields
in the area include Gazprom’s Zapolyarnoye natural gas and condensate field, as well as the
Vostochno Messoyakha, Zapadno Messoyakha, and Russkoye oil fields. Transneft recently
completed construction of the Zapolyarye-Purpe and Purpe-Samotlor pipelines to connect these
fields to the Eastern Siberia-Pacific Ocean (ESPO) pipeline.
East Siberia
Rosneft’s Verkhnechonskoye oil and natural gas condensate field lies in the Irkutsk region near
the ESPO pipeline. Production at Verkhnechonskoye field began in 2008, with full production
reaching about 160,000 b/d. 23 The Yurubcheno-Tokhomskoye and Kuyumba fields lie in
southern-central Krasnoyarsk and connect to the ESPO pipeline via the recently completed
Kuyumba-Taishet pipeline. The start of commercial production has been delayed at both fields.
Bazhenov shale
The Bazhenov shale layer, which lies under much of the existing West Siberian resource
deposits, also holds great potential. In the 1980s, the Soviet government tried to stimulate
production by detonating small nuclear devices underground. In recent years, the government
has used tax breaks to encourage Russian and international oil companies to explore the
Bazhenov and other shale reservoirs. However, Russian firms have made little progress in
developing shale resources because sanctions and low oil prices have hindered shale projects.
Caspian Sea
Lukoil has been actively exploring some of the deposits in the North Caspian Sea, and in 2010,
Lukoil launched the Yurii Korchagin field, which produced about 30,000 b/d in 2016. 24 Lukoil
launched the Filanovsky field in the second half of 2016. Production at Filanovsky reached
100,000 b/d in June 2017, with plateau production expected to be more than 120,000 b/d. 25
Other discoveries in the area include the Khvalynskoye and Rakushechnoye fields. The
development of the region is highly sensitive to taxes and export duties, and any change or
cancellation of tax breaks may negatively affect development.
The Sakhalin-2 PSA covers two major fields—the Piltun-Astokhskoye oil field and the Lunskoye
natural gas field—and it includes twin oil and natural gas pipelines that run from the north of
the island to the south end of the island, where the consortium has an oil export terminal and a
natural gas liquefaction and export terminal. The Sakhalin-2 consortium members include
Gazprom, which owns 50% plus one share, Shell with 27.5%, Mitsui with 12.5%, and Mitsubishi
with 10%. 28 When the PSA was originally signed, the consortium did not include any Russian
companies, and compared with most PSAs, the terms were heavily weighted in favor of the
interests of the consortium over the interests of the government. Sakhalin-2 produced its first
oil in 1999 and its first liquefied natural gas (LNG) in 2009. The project incurred significant cost
overruns and delays, and these issues were part of the justification the Russian government
used to force Shell, which at the time owned a 55% interest in Sakhalin-2, and the other
consortium members to sell a controlling interest in the consortium to Gazprom. 29
Sokol grade is produced by the Sakhalin-1 project and is a light, sweet crude oil with an API
gravity of 35.5° and 0.28% sulfur content. 31 Sakhalin blend includes crude oil produced from the
Piltun and Astokh fields under the Sakhalin-2 PSA and condensate produced from Gazprom’s
Kirinskoye natural gas and condensate field under the Sakhalin-3 license. 32 Sakhalin is a light
(42.5°API), sweet (0.16% sulfur content) blend. 33 Sakhalin blend is loaded at the Prigorodnoye
port on the southern tip of Sakhalin Island.
The Eastern Siberia-Pacific Ocean (ESPO) blend came on stream in late 2009 and is a mix of
crudes produced in several Siberian fields. This grade is exported through the recently
constructed ESPO Pipeline to China and through Russia’s Pacific coast port of Kozmino to other
Asian countries. ESPO blend is a fairly sweet, medium-light blend with a typical gravity of
36.0°API and a 0.47% sulfur content. 34
Sector organization
Domestic companies dominate most of Russia’s oil production (Table 2). 38 Following the collapse
of the Soviet Union, Russia initially privatized its oil industry. Starting in the late 1990s, privately-
owned companies drove growth in the sector, and a number of international oil companies
attempted to enter the Russian market with varying degrees of success. More recently, the
Russian oil industry has consolidated into fewer firms with more state control.
In 2003, BP invested in the Tyumen Oil Company (TNK), forming TNK-BP, a 50-50 joint venture
and one of country’s major oil producers. However, in 2012 and 2013, the TNK-BP partnership
was dissolved, and the state-controlled Rosneft acquired nearly all of TNK-BP’s assets. 39 In the
previous decade, Rosneft emerged as Russia’s top oil producer following the liquidation of Yukos
assets, which Rosneft acquired. In 2016, Rosneft further increased its share of oil production in
Russia when it acquired the federal government’s 50.8% controlling interest in Bashneft, the
country’s sixth-largest producer.
In 2016, the top five firms in Russia (counting Rosneft and Bashneft as a single firm) accounted
for more than 80% of total Russian oil production. 40
A number of ministries are involved in the oil sector. The Ministry of Natural Resources and
Environment issues field licenses, monitors compliance with license agreements, and levies fines
for violations of environmental regulations. The Ministry of Energy develops and implements
general energy policy. The Finance Ministry is responsible for hydrocarbon taxes, 41 and the
Federal Antimonopoly Service regulates tariffs.
Russia has two main hydrocarbon taxes: the minerals extraction tax (MET) and the export tax.
The export tax varies for crude oil and for petroleum products. In 2011, Russia changed product
export taxes so that export tax rates on all products were lower than the crude oil export tax to
encourage investment in refining capacity. In recent years, the government has also offered
special MET rates or MET holidays for difficult-to-develop resources such as Arctic offshore and
low-permeability reservoirs, including shale reservoirs. Recent increases to the MET rate have
increased the value of these previously-agreed MET discounts for difficult resources.
On January 1, 2015, hydrocarbon tax rates changed again. These changes are often referred to
as the 2015 tax maneuver. Previously, the export tax was about twice as high as the MET. This
tax maneuver raised the MET and lowered export taxes for 2015 and set out additional changes
for 2016 and 2017 that would further raise the MET and lower export taxes. The increases in
the MET were designed to roughly balance the decreases in the export taxes, making them
roughly revenue neutral, neither increasing nor decreasing overall taxes on the energy
industry. 42
Beginning January 1, 2018, the Finance Ministry plans to test a new tax system, applying it to
several small fields. The new tax would be calculated based on profits rather than values, which
is how the MET and export taxes are currently calculated. The profits-based tax could eventually
replace the existing tax system, however the Finance Ministry’s current proposals face some
opposition.
Refinery sector
Russia had more than 30 oil refineries with a total crude oil distillation capacity of 5.1 million b/d
as of January 1, 2017, according to Oil and Gas Journal. 43 Rosneft, the largest refinery operator,
owns nine major refineries in Russia. 44 Lukoil is the second-largest operator of refineries in
Russia with four major refineries. 45 Many of Russia’s refineries are older, simple refineries, with
mazut, a low-quality fuel oil, accounting for a large share of their output. Recent tax changes
have raised the export duty on mazut and other heavy oil products to equal the export duty on
crude oil, eroding the already slim profit-margins of less-complex refineries. Mazut production
and exports dropped significantly in 2016 as refinery upgrades continued and as companies
lowered utilization at less-complex refineries.
Oil exports
In 2016, Russia exported more than 5 million b/d of crude oil and condensate. Most Russian
exports (70%) went to European countries, particularly the Netherlands, Germany, Poland, and
Belarus (Figure 3). 46 About 36% of Russia's federal budget revenue in 2016 came from oil and
Asia and Oceania accounted for 26% of Russian crude oil exports in 2016, with China accounting
for a growing share of total Russian exports. In 2016, Russia was the largest supplier of crude oil
to China, surpassing Saudi Arabia. 49 Part of the increase in Russian crude oil exports to China
has been growing exports to independent refiners—known as teapot refiners—in China.
Russian ESPO crude oil does not have to travel as far as Middle East crude to reach Chinese
ports. This shorter distance allows Russian crude oil to be shipped in smaller volumes and with
more flexible scheduling, which makes it more desirable to independent refiners.
Russia’s Transneft holds a near-monopoly over Russia’s pipeline network, and most of Russia’s
crude oil exports must traverse Transneft’s system to reach bordering countries or to reach
Russian ports for export. Smaller volumes of exports are shipped via rail and on vessels that
load at independently-owned terminals.
Asia &
Germany Oceania Japan
663 1,373 205 South Korea
112
Other Asia
OECD Non-OECD 102
Europe Europe Belarus
Poland 3,099 & Eurasia 369
407 705 Lithuania
Finland 155
214
Bulgaria
Italy Other OECD
Spain Europe 96
Sweden 137
164 117 461 Other Non-OECD
Europe & Eurasia
France United States
Slovakia 85
123 40
115
Source: U.S. Energy Information Administration based on Russian export statistics and
partner country import statistics, Global Trade Tracker
Russia also exports fairly sizeable volumes of oil products. According to Eastern Bloc Research,
Russia exported about 1.3 million b/d of fuel oil and an additional 990,000 b/d of diesel in 2016.
It exported smaller volumes of gasoline (120,000 b/d) 50 and liquefied petroleum gas (75,000
b/d) during the same year. 51
Sources: U. S. Energy Information Administration based on Transneft, Sakhalin Energy, Caspian Pipeline Consortium, State Oil Company of the Azerbaijan Republic,
European Parliament, and Orlen Lietuva.
Novorossiysk is Russia’s main oil port on the Black Sea coast. It handles petroleum from Central
Asian countries as well as from Russia. The Primorsk and Ust-Luga terminals are both located
near St. Petersburg, Russia, on the Gulf of Finland. The Primorsk terminal opened in 2006, and
the Ust-Luga oil terminal opened in 2009. Both Primorsk and Ust-Luga receive oil from the Baltic
Pipeline System, which brings crude oil from fields in the Timan-Pechero, West Siberia, and
Urals-Volga regions. Ust-Luga is also a major port for Russian coal and hydrocarbon gas liquids
exports.
Kozmino is located near the city of Vladivostok, in Russia’s far eastern Primorsky province, and is
the terminus of the ESPO crude oil pipeline. The port opened in December 2009 with an initial
capacity of 0.3 million b/d. Kozmino initially received crude oil by rail from Skovorodino until
the second phase of the ESPO pipeline opened in 2012. 54 In 2016, almost 0.6 million b/d of
crude oil was exported through Kozmino port, slightly below the current capacity. 55
Changes in Russia’s export taxes have spurred investment in refining capacity to produce higher
quantities of gasoline and lighter distillates, instead of the high share of heavier fuel oil and
With a surplus of liquefied petroleum gas (LPG)—primarily propane and butane—on the Russian
market, major producers have targeted the export market and the development of HGL-fed
petrochemical capacity as outlets for their growing production. Traditionally, the main outlet
for Russian LPG exports had been shipments to Europe by rail. In mid-2012, Russia’s first
modern LPG export terminal came online in Taman on the Black Sea. With a design capacity of
approximately 30,000 barrels per day (b/d) of pressurized cargo, 56 the port handled, on average,
nearly 14,000 b/d in 2016, 57 all brought in by rail. In mid-2013, Sibur, Russia’s largest LPG
producer, shipped its first LPG cargo out of Ust-Luga, near St. Petersburg. 58 In a first for Russia,
the Sibur-operated terminal can handle both pressurized and refrigerated product, and it has
recently undergone a capacity expansion from nearly 50,000 b/d to about 75,000 b/d. 59 The
Ust-Luga terminal, like Taman, is capable of receiving LPG by rail. Additional volumes of LPG are
produced on-site at the Novatek-operated Gas Condensate Fractionation and Transshipment
Complex. 60
In addition to direct exports, Russian companies are seeking to use domestically produced LPG
in petrochemical manufacturing, which would capture more value and minimize their export
tariff exposure. In December 2014, Sibur commissioned its propane dehydrogenation (PDH)
facility at the Tobolsk-Polymer complex in West Siberia, 61 which can produce 510,000 tons per
year of polymer-grade propylene from an estimated 33,000 b/d of propane feedstock. The
company plans to further increase its liquids consumption at the Tobolsk site with a proposed
1.5 million ton per year ethylene cracker, 62 which is expected to be in operation by 2021. The
feedstock for the $9.5 billion plant is expected to consist primarily of propane and butane.
Some ethane will also be used to produce ethylene, propylene, and butylene/butadiene that will
then feed into the production of derivative products, including high- and low-density
polyethylene and polypropylene. 63 Rosneft is also planning a major petrochemical complex at
Nakhodka, on Russia’s Pacific Coast, near the Kozmino oil terminal. The new complex will
include a refinery and a petrochemical plant with 1.4 million tons per year of ethylene capacity.
The petrochemical plant will primarily consume naphtha as a feedstock. 64
Natural gas
Russia holds the largest natural gas reserves in the world and is the second-largest producer of
dry natural gas. The state-run Gazprom dominates the country’s upstream natural gas sector,
although production from other companies has been growing.
According to Oil and Gas Journal, Russia held the world’s largest natural gas reserves, with 1,688
trillion cubic feet (Tcf), as of January 1, 2017 (Figure 5). 65 Russia’s reserves account for about
one quarter of the world’s total proved natural gas reserves. Most of these reserves are located
in large natural gas fields in West Siberia. Five of Gazprom’s largest operating fields (Yamburg,
Urengoy, Medvezhye, Zapolyarnoye, and Bovanenkovo)—all of which are in the Yamal-Nenets
region of West Siberia—together account for about one-third of Russia’s total natural gas
reserves.
Sector organization
The state-run Gazprom dominates Russia’s upstream natural gas sector, producing about two-
thirds of Russia’s total natural gas output in 2016 (Table 5). 66 While independent and oil
company producers have gained importance, upstream opportunities remain fairly limited for
independent producers and other companies, including Russian oil majors. Furthermore,
Gazprom’s dominant upstream position is reinforced by its legal monopoly on pipeline gas
exports.
Much like the oil sector, a number of ministries and regulatory agencies are involved in Russia’s
natural gas sector. The Ministry of Natural Resources and Environment issues field licenses,
monitors compliance with license agreements, and levies fines for violations of environmental
The Federal Antimonopoly Service is the main regulatory agency involved in the natural gas
sector. This agency regulates pipeline tariffs and oversees charges of abuse of market
dominance, including charges related to third-party access to pipelines.
The Yamal-Nenets region is home to three of the country’s historically most prolific fields—
Yamburg, Urengoy, and Medvezhye—all of which are licensed to Gazprom. These three fields
have been operating for more than 30 years and have seen output declines in recent years but
still have significant remaining reserves and large annual production volumes. Gazprom has two
other large operating natural gas fields in the region. The Zapolyarnoye field started production
in 2001, and in 2013, reached its production design capacity of 4.6 Tcf per year. 69 Zapolyarnoye
was supposed to continue to produce at capacity for almost 10 years, but instead it has
declined, producing just 2.7 Tcf in 2016. 70 Production at Bovanenkovo field on the Yamal
peninsula has been growing since it started in 2012, reaching 2.4 Tcf in 2016. Gazprom plans to
Gazprom and other producers are increasingly investing in new regions, such as Eastern Siberia
and Sakhalin Island, to bring natural gas deposits in these areas into production. Gazprom is
currently working to develop two large natural gas fields in Eastern Siberia—Chayadinskoye field
in the Yakutia region and Kovytka field in the Irkutsk region. Both fields will connect to the
Power of Siberia natural gas pipeline and serve demand in Eastern Russia and China.
Additionally, the partners in the Sakhalin 1 project, Rosneft and ExxonMobil, are considering
ways to monetize their natural gas reserves, which could include building a new LNG export
facility or selling the natural gas to Gazprom to be exported via Gazprom’s Sakhalin LNG
terminal or planned future pipelines.
Russia
Iraq
Iran
Venezuela
United States
Algeria
Nigeria
Mexico
Angola
Malaysia
Revenues from natural gas exports in 2015 accounted for about 13% of Russia’s total export
revenues. 76 While not as large as Russia’s export earnings from crude oil and other liquids,
Russia still depends on Europe as a market for its natural gas. Europe, likewise, is dependent on
Russia for its supply of natural gas. In 2015 and 2016, natural gas imports from Russia
accounted for about one-third of natural gas consumed in OECD Europe. 77 Additionally, some
countries within Europe, especially Finland, the Baltics, and much of Southeast Europe, receive
almost all of their natural gas from Russia.
Since the mid-2000s, natural gas consumption in OECD Europe has generally been flat to
declining, prompting Russia to look to Asia and LNG as a means to diversify its natural gas
exports. U.S. and European Union (EU) sanctions, implemented in 2014, accelerated Russia’s
pivot to the east, with Russia signing two pipeline deals with China in 2014 covering exports that
could eventually reach 2.4 Tcf per year.
Pipelines
In 2016, Russia’s natural gas infrastructure included about 107,000 miles of transmission
pipelines and more than 20 underground natural gas storage facilities. 78 Since the late 2000s,
Gazprom has been adding major new pipelines to accommodate new sources of supply,
including fields in Yamal and Eastern Siberia, and new export routes, including exports to China
and new pipelines to Europe that avoid Ukraine.
The Unified Gas Supply (UGS) system is the collective name for the interconnected western
portion of Russia’s natural gas pipelines (Table 7). 79 The UGS system includes domestic pipelines
and the domestic portion of export pipelines in European Russia. In 2007, the Russian
government directed Gazprom to establish an Eastern Gas Program (EGP) to expand natural gas
infrastructure in eastern Siberia and Russia’s Far East. The backbone of the EGP is the Power of
Siberia pipeline, which is currently under construction (Figure 4).
Sources: U. S. Energy Information Administration, based on Gazprom, GazpromExport, Sakhalin Energy, TurkStream, World Gas Intelligence, Nefte
Compass, and Argus FSU.
Despite these long-standing laws, independent natural gas producers, including state-owned oil
companies, have only recently begun to get access to some of Gazprom’s domestic pipelines.
Actions by the Federal Antimonopoly Service (FAS) have helped promote better third-party
access. Between 2008 and 2011, the FAS brought 28 infringement cases against Gazprom
related to third-party access. 81 Third-party natural gas transported by Gazprom grew from 12%
of UGS system inflows in 2010 to about 23% in 2016. 82 The FAS has also proposed new laws that
would fix many of the deficiencies in the current laws and regulations, including the current lack
of regulations for third-party access to pipelines that are not part of the UGS system. Many of
the recent disputes over pipeline access have been related to eastern natural gas pipelines,
which are not part of the UGS system.
In 2013, Russia modified its Law on Gas Exports to allow Novatek and Rosneft to export LNG,
breaking Gazprom’s monopoly on all natural gas exports. Yamal LNG, which began construction
in 2013, is owned by a consortium, led by Novatek with a 50.1% interest. Total and CNPC each
have 20% interest, and the Silk Road Fund (an investment fund established by the Chinese
government) holds the remaining 9.9% interest in the project. The first of three liquefaction
trains is scheduled to be online by the end of 2017. The three trains will each have a capacity of
5.5 mt of LNG per year, and they will draw natural gas from the South Tambeyskoye natural gas
and condensate field located in the northeast of the Yamal Peninsula. 85 A number of other
proposals for new LNG terminals in Russia are in various stages of planning (Table 8).86
To transport LNG from its arctic location, Yamal LNG has commissioned the construction of up to
16 ice-class tankers. Exports are mainly aimed at Asian LNG markets, and during most of the
year, the ice-class tankers will take cargoes west from the Yamal peninsula directly to Asia,
transiting the Arctic Ocean and the Bering Strait. In winter, when the direct route is too ice-
bound to be navigable, the ice-class tankers will take cargoes west from the Yamal peninsula to
Europe. In Europe, the LNG will be loaded onto regular LNG tankers that will deliver the cargoes
to Asia via the Suez Canal.
Sources: U. S. Energy Information Administration based on Gazprom, Yamal LNG, Reuters, Rosneft, Sakhalin Energy, Shell, and
Total
Russian companies are also interested in building a network of small- and mid-scale LNG
liquefaction facilities, mainly to serve remote natural gas demand and to serve transportation
demand for LNG in Russia and neighboring areas. There are already a handful of small-scale
liquefaction plants in Russia, with total combined capacity of less than 0.1 million metric tons
per year of LNG. More than a dozen additional small- and mid-scale facilities are planned or
under construction, with total combined capacity of more than 5 million metric tons per year. 87
Electricity
Russia is one of the top producers and consumers of electric power in the world, with more
than 240 gigawatts of installed generation capacity. In 2016, gross electric power generation
totaled 1,071 billion kilowatthours, and Russia consumed about 900 billion kilowatthours.
Fossil fuels (oil, natural gas, and coal) are used to generate about two-thirds of Russia's
electricity, with hydropower and nuclear each accounting for about one-sixth of total electric
generation. Most of the fossil fuel-fired generation comes from natural gas. Russia’s gross
electric power generation totaled 1,071 billion kilowatthours (BkWh) in 2016, 88 and net
electricity consumption was about 900 BkWh. Russia exported approximately 18 BkWh of
electricity in 2016 and imported about 3 BkWh of electricity. 89
The main regulatory agency involved in the sector is the Federal Antimonopoly Service, which
regulates transmission tariffs and oversees compliance with the unbundling rules and charges of
abuse of market dominance in competitive electric markets. The state atomic energy
corporation, Rosatom, controls all aspects of the nuclear sector in Russia, including uranium
mining, fuel production, nuclear plant engineering and construction, generation of nuclear
power, and nuclear plant decommissioning. 90
Russia has seven regional power systems in the electric sector. These systems are: Northwest,
Center, South, Middle Volga, Urals, Siberia, and Far East. The Far East system is fragmented with
a weak connection to its neighbor to the west, the Siberian system. The Siberian system is also
weakly connected with its neighbor to the west, the Urals system. The remaining five systems
covering European Russia are well-integrated with one another and connected to systems in
neighboring countries. 91
The Russian electric sector was restructured in the past decade, and much of it was privatized.
The reform required ownership unbundling in the electric sector, separating the industry into
largely privately-owned, competitive generation assets and state-controlled, regulated
transmission assets. No company is allowed to own both generation and transmission assets.
The Federal Grid Company, which is more than 70% owned by the Russian government (directly
and through Gazprom), controls most of the transmission and distribution infrastructure in
Russia. The grid comprises more than 1.5 million miles of power lines, including slightly less than
100,000 miles of high-voltage cables of 220 kilovolts (Kv) or more. The government has been
trying to attract private investment into the wholesale and regional electric generating
companies. As part of the market reform, most of Russia’s fossil-fueled power generation was
also privatized, while nuclear and hydropower remain under state control. 92
Nuclear power
Russia has an installed nuclear capacity of more than 26 million kilowatts distributed across 35
operating nuclear reactors at 10 locations. Nine plants are located west of the Ural Mountains.
The exception is the Bilibino plant in the far northeast. 93
Russia's nuclear power facilities are aging. The working life of a reactor is considered to be 30
years, but Russia has an active life-extension program. The period for extension is established
by the government as 15 years, and 24 of Russia's nuclear reactors, accounting for about 60% of
the country’s operating nuclear capacity, are 30 or more years old (Figure 8). 94 Eleven of the
country's 35 nuclear reactors use the high-power channel reactor (RBMK) design employed in
Ukraine's Chernobyl plant. 95 Russia’s newest reactor, the 1,114 megawatt electric (MWe)
Novovoronezh 6 reactor began commercial operation in February 2017. 96
12,000
10,000
8,000
6,000
4,000
2,000
0
more than 30-40 20-30 10-20 10 years
40 years years years years or less
Note: Capacity age is as of September 1, 2017; capacity for the Beloyarsk 4 reactor is included.
Source: U.S. Energy Information Administration, based on International Atomic Energy
Association, Power Reactor Information System
Russia’s current federal target program envisions a 45% to 50% nuclear power share of total
generation by 2050 and a 70% to 80% share by 2100. To achieve these goals, the rapidly aging
nuclear reactor fleet in Russia will need to be replaced with new nuclear power plants. As of
July 1, 2017, seven new nuclear reactors were officially under construction across Russia with
5,468 MWe net generating capacity (5,904 MWe gross). One of the plants under construction is
a floating nuclear power plant, which is scheduled to be commissioned by 2019. 97
In addition to the seven nuclear reactors currently under construction, another 26 units are
planned, with a total gross generating capacity of more than 28,000 MWe. These units are
planned to be completed between 2020 and 2035.
Coal
Russia has sizeable coal reserves and is the world’s third-largest exporter of coal.
With 177 billion short tons of coal at the end of 2016, Russia held the world's third-largest
recoverable coal reserves, after the United States and China. Russia produced 425 million short
tons in 2016, making it the sixth-largest coal producer in the world behind China, India, the
United States, Australia, and Indonesia. 98 Almost 80% of Russia’s coal production was steam
coal, and slightly more than 20% was coking coal. 99
In 2016, Russia consumed about 45% of its coal production 100 and exported the rest. Although
coal accounts for a relatively modest share of Russia’s total energy consumption, coal is a more
vital part of consumption in Siberia, where most Russian coal is mined.
Russia’s coal exports have generally grown steadily since the late 1990s, with exports to Asia
growing strongly in the past few years. In 2016, 47% of Russia’s coal exports went to Asia
(Figure 9).101 Russia’s total coal exports have almost doubled over the past decade, and exports
are expected to continue to grow in the future.
Russia’s coal-exporting ports are geographically located to serve either European or Asian
markets. Some of Russia’s major coal ports include Murmansk, Ust-Luga, and Tuapse, all of
which lie in the West and handle exports to Europe. Vanino and Vostochny lie in the East and
handle exports to Asia. 102 China and some East European countries receive coal imports from
Russia directly by rail. 103 Russia has plans to expand port capacity to facilitate more coal exports
to Asia.
Germany South
10% Korea
Turkey 13%
7%
Japan
Netherlands OECD Asia & 10%
7% Europe Oceana
Poland 40% 47%
3%
China
10%
Other OECD
Europe Taiwan
14% 4%
Other
Asia
10%
Ukraine
5%
Other
8%
Source: U.S. Energy Information Administration, based on Russian export statistics and partner
country import statistics, Global Trade Tracker
Notes
• Data presented in the text are the most recent available as of October 31, 2017.
• Data are EIA estimates unless otherwise noted.