March 27, 2012
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Home / Issue Archive / 2012 / January #1 / New Export Priorities for Russia: Perspectives of Energy Supplies to the Countries in the Asia-Pacific Region and the APEC Block

№ 1 (January 2012)

New Export Priorities for Russia: Perspectives of Energy Supplies to the Countries in the Asia-Pacific Region and the APEC Block

   Russia has the largest known energy resources of any state on earth. Its energy resources are mostly concentrated in the Asian part of the country that includes scarcely populated regions of Siberia, the Far East and Arctic as well as industrially undeveloped territories to the north and east which also have very poor infrastructure.

By Andrei Korzhubaev, Igor Melamed, Irina Filimonova

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   However, the most dynamic development of economy and trade that also brings to life new administrative and financial centers, is happening not far from Russia’s eastern borders in the countries of Asia-Pacific region and countries located on the North and South America coastline. This process indicates the emergence of a new global economic block APRAM (Fig. 1). It is expected that in the long run CIS countries, primarily countries of Eurasian Economic Union closely linked to Russia – China trade, will join APRAM.

   The APRAM zone accounts for almost 70 percent of the world’s population, approximately 50 percent of the world’s land mass, 68 percent of energy consumption and 63 percent of overall GDP (Fig. 2). This region consumes the major part of the world energy resources of all kinds: over 86 percent of coal, 66 percent of oil, 55 percent of gas, 68 percent of nuclear power (Fig. 3). China, India, USA, Indonesia, Russia, Japan and others are the most densely populated countries of the world with a high economical potential. To a great extend global dynamics of energy consumption is determined by these countries. All of them are part of APRAM zone. Moreover, 60 percent of global energy and energy products demand is accounted for 8 biggest APRAM countries (Fig. 4). China, USA, Russia, India, Japan and Canada are the biggest energy consuming countries of the world and all of them are part of APRAM zone. Alongside with this fact, in 2009 the so called Big China (that includes Hong Kong and Macao) ranked first in energy resources consumption, thus exceeding the USA. In 2010 the use of energy and energy sources only in the continental part of Big China surpassed energy consumption level of the USA.

   The last decades of the 20th century marked the most rapid growth of energy consumption and energy resources in Asia Pacific countries among the countries of APRAM block (Fig. 5). Even in the time of a global financial and economic crisis of 2008–2010, when the world experienced a dramatic drop in energy demand, energy consumption in most of APR countries was still growing fast.
Further development of APR countries demands significant additional resources of raw materials and energy supplies, especially of oil and gas.  To a large degree this fact is caused by the change of technological structure of economy and power supplies, by the growth of motorization, higher ecological pressure and higher safety requirements for energy system. Intensification of struggle for energy resources is one of the fundamental realities of today’s globalization process.

   In this situation, Russia’s role as the world energy leader will only grow primarily due to further development of oil, gas and coal industry in the Eastern part of the country, strengthening of the country’s position at energy  markets of APR, participation in  energy development and exploitation of energy sector  infrastructure objects in other countries of the region.

Projects and Priority Guidelines

   Development of fuel-and-energy sector in the Russia’s East, strengthening of its economic positions in the countries of Asia-Pacific region and APRAM would be primarily connected to the following priority guidelines and major projects:
exploration and energy production:
large scale exploration and complex development of hydrocarbon deposits in Eastern Siberia and in the Far East, on the sea shelf of the Far East and in the Arctic seas;
development of new coal fields in Siberia and the Far East, primarily of Kuznetsky, Kansko-Achinsky, Yuzhno-Yakutsky coal basins;
additional exploration and development of natural uranium fields of Zabaykalsky region, Republic of Saha (Yakutia), Republic of Buryatia, Khabarovsk region;
further participation of major Russian companies such as  Gazprom, Rosneft, LUKOIL, Zarubezhneft, Aliance, RZD, SUEK, Atomredmetzoloto and others in exploration and development of oil, gas, coal, natural uranium fields in APRAM countries (China, Mongolia, Columbia) and CIS (Kazakhstan, Uzbekistan, Turkmenistan);
in energy processing:
gas processing production and oil and gas chemical production is to be set up, including helium plants in Eastern Siberia and the cities of the Far East, such as Sayansk, Nizhnaya Poyma, Khabarovsk and in the area of  “Vostochny” space airfield ;
construction of local oil refineries in Yakutia (the city of Lensk) and a big export refinery, including a petrochemical block, in Primorsky Region  (Elizarov Bay);
participation of Russian companies in development and exploitation of refining infrastructure facilities of Asia-Pacific region and APRAM countries (oil refineries, gas chemical facilities and others)
electric energy production:
construction of new power plants: Olon-Shibersky in Buryatia, Haranorsky and Tataurovsky in Zabaykalsk region, Erkovetsky in Amursky region, Urgalian in Khabarovsk region as well as a combined-cycle plant in the city of Khabarovsk;
construction of Turgutsky tidal power plant in Turgutsky Bay in Khabarovsk region;
creation of  chain of power plants in Southern Yakutia;
construction of a wind-power station on Russkiy and Popov islands in the Far East;
participation in construction of various energy production capacities in APRAM countries (China, India, transport system and distribution of energy and energy sources:
completion of the second construction stage and further increase of ESPO pipeline  throughout capacity, power increase of Kozmino sea-port oil terminal, increase of throughout capacity of Russia – China pipeline (Skovorodino – Daqin);
development of sea terminals for oil, crude and oil and gas chemistry products, coal on the Russian Pacific coast (Kozmino, Nahodka, De-Kastri, Prigorodnoye, Elizarov Bay, Vanino, Posyet, Slavyanka, etc.);
construction of a system for natural gas and helium concentrate underground storage in Krasnoyarsk region, Irkutsky region, Republic of Saha (Yakutia), Khabarovsk region;
establishment of a gas pipe system Siberia – Far East – Asia-Pacific region (Sakhalin – Khabarovsk – Vladivostok, a center for gas production in Irkutsk – Proskokovo, a center for gas production in Irkutsk – center for gas production in Western Yakutia – Khabarovsk – Vladivostok, Dalnerechensk – Harbin; probably, Vladivostok – Kanin – Seoul or Vladivostok – Pyongyang – Seoul); construction of natural gas liquefaction plant and LNG terminal near Vladivostok (Nakhodka);
construction and upgrade of power lines system from power plants of Siberia and the Far East to the boarders of China, Mongolia, Japan;
participation of Russian companies in development and exploitation of energy transportation facilities and distribution in APRAM and CIS countries (oil and gas pipelines, power lines, UGSF, petrol stations, etc.).

Forecast for Export of Energy and Energy Materials from Russia to the Pacific Market

   Taking into account current state of affairs and perspectives of projects implementation, development of processing and transport infrastructure, it is evident that export of oil, oil products and gas to APRAM may be provided not only from Eastern Siberia and the Far East, but also from vast deposits of Western Siberia. Export of crude oil for all lines may reach the amount of 130 million tons by 2030 while export of oil products can amount to 40 million tons (Fig. 6).

   To a great extent gas supplies will depend on the development of transport infrastructure, as well as on agreement on prices and off-take agreements. Russia is not striving to provide gas export to APRAM countries by all means. That is why, depending on the stand of recipient countries, export supplies to China (including Taiwan), Japan, Korea, Mongolia and to the Pacific coast of America, may vary from 144 billion cubic meters to 170 billion cubic meters by 2030 (Fig. 7). LNG supply will increase within the framework of Sakhalin-2 project. Another goal will be to launch exports from fields of Sakhalin-1 and Sakhalin-3 projects and LNG plant in Primorsky region. Other export flows will go through “Altai” gas pipelines (Western Siberia – Western China) and Eastern Siberia – the Far East – North-East of China).

   Coal export to the Pacific market may be increased to 120 million tons by 2030. The main supplies from coal mining regions of Kuzbas, KATEK, Southern Yakutiya, Tuva and other regions  of Siberia and the Far East will be directed to China, as well as to Korea and Japan. Interstate power exchange to China, Mongolia, as well as Korea and Japan may amount to 60 billion kWh by the year 2030, depending on the pace of development projects implementation along with creating energy transport infrastructure (Fig. 8).

Guidelines and Principles for Cooperation

    While expanding cooperation in Asian-Pacific region, it is crucially important that the Asian mentality is seriously taken into account. In this part of the world it is generally believed that any concession means weakness that is likely to be followed by another concession instead of being considered as a step towards solving the problem. In China, Japan, Korea and in other Asian counties symmetrical approach is usually emphasized in any negotiations, therefore it is necessary for Russian companies to be involved in all stages from exploration, production, transportation, underground storage to processing and sale of the product to the final consumer on the territory of Asia-Pacific region countries in case Asian partners are given access to hydrocarbon production and transportation on the Russian territory.

   International, American and European companies with business interests in the region such as ВР, ExxonMobil, Royal Dutch/Shell, Chevron, Total, BG, BHP Billiton, Rio Tinto together with the biggest Asian companies, such as CNPC, Sinopec, CNOOC, CITIC group, KNOC, KOGAS, JOGMEC, OVL, Petronas, KEPCO, China Coal Energy Company, China Shenhua Energy, Itochu, Japex, Impex, Mitsui, Mitsubishi and others will act as general partners within the framework of energy projects in APRAM.

   While developing cooperation in Pacific region, it is necessary to diversify infrastructure of supplies and sources of investment and technology. In reality it means strengthening of cooperation with CIS and European countries as well as Middle East and African states where Russia’s economic positions are most secured alongside with active expansion of business and political connections with countries of Asia-Pacific region, North and South America.

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