Russian energy in disarray

The once all-powerful Russian energy sector appears to be on unpredictable and shaky grounds today. The development of the giant Kovykta gas field, once considered as a major project, has been placed on hold; the jewel in the crown Shtokman field is in trouble; Sakhalin-2 is being forced to divert its gas to the strategic Russian Far East for domestic consumption, while original plans to sell this gas to China are being abandoned.

These fundamental changes come at a time when less-than-transparent deals are taking place in the ownership of Russian oil and gas companies. That raises the question of whether these developments are related and if so, what impact, if any, they could have on European and Asian energy security.

On August 28, the Russian newspaper Kommersant reported that Moscow intends to invest US$1.8 trilllion to $2.1 trillion in the oil and gas business by 2030 to increase production in order to keep up with projected European and Asian demand for Russian hydrocarbon exports as well as with increasing Russian domestic consumption.

The new investment strategy envisions a three-stage program – 2009-2015, 2015-2022 and 2022-2030. The costliest of these is projected to be the third stage, during which investments into the oil sector are projected at $313 million to $321 million and the gas industry is expected to receive $284 million to $299 million. Kommersant noted that as a result of these investments, gas production would increase by 4% as compared with 2008. Oil production is expected to rise by almost 9%.

Asia Times