RUSSIAN FAR EAST TEAM CONTRIBUTION TO AES PROJECT

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RUSSIAN FAR EAST TEAM CONTRIBUTION TO AES PROJECT

• Asian Energy Security (AES) Project
• Asian Energy Security Workshop 2006
• 6 to 7 November, 2006, Beijing, China
• RFE Team Members
• Ruslan Gulidov, Victor Kalashnikov,
• Alexander Ognev
• Presented for Team by David Von Hippel, Nautilus
  Institute

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RFE AES CONTRIBUTION PROJECT TEAM AND ROLES

• Dr. Victor Kalashnikov Overall supervisor of
  Russian team
• Develops the strategic framework of the LEAP
  modeling activities and follow-up analysis of the
  results
• Defines basic qualitative and quantitative
  assumptions of the scenarios implemented
• Resolves various theoretical problems
• Dr. Alexander Ognev Advisor for all general and
  specific issues related to the RFE electric power
  industry
• Mr. Ruslan Gulidov Modeler
• Collects and processes data, inputs to LEAP model
• Creates and examines LEAP scenarios for RFE
  energy sector based on advice from other members

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RFE AES CONTRIBUTION RFE ENERGY SECTOR OVERVIEW

• RFE Energy Sector
• Generating, transmission distribution
  companies, marketing and management bodies of the
  electric power industry
• Coal-mining industry (in all territories of the
  RFE)
• Oil and gas industries (Yakutia, Sakhalin,
  Kamchatka, Chukotka)
• Refining industry (mostly in Khabarovskiy Krai,
  but also in Sakhalin and Yakutia)
• Characterized by huge distances, low level of
  development, non-uniform and dispersed character
  of the development of RFE's economy
• 20 "energy districts" independent in power
  supply, energy sectors based on local resources.
  With some imports from elsewhere in RFE
• Favorable conditions for concentration of energy
  production and centralization of energy
  transportation and distribution
• Power grid Integrated Power System of the East
  (OES Vostoka).

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RFE AES WORKRFE ENERGY SITUATION
Energy production in the Russian Far East in
Recent Years
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RFE AES WORKRFE ENERGY SITUATION

• Energy industry accounts for more than 10 of
  regional GDP, 28 of industrial output, employs
  4 of economically active population
• Investments in modernization and development of
  energy sector in 2003-2004 gt 50 of total capital
  investments in regions economy
• Implementation of large-scale, capital-intensive
  projects -- Sakhalin-1, Sakhalin-2,
  Bureiskaya hydropower power plant

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RFE AES WORKRFE ENERGY SITUATION
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RFE AES WORKRFE ENERGY SITUATION
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RFE ENERGY SITUATION, RECENT TRENDS

• Growing signs of stabilization in current energy
  supplies in RFE since 2002, due to solution of
  financial problems related to payments for energy
  products and services
• 2003-2004, ratio of RFE and Russian average
  tariffs stabilized at 1.6 for electricity, 1.8
  for heating
• Regional energy companies operated at a profit in
  2004
• Cross-subsidies between consumer groups,
  inter-regional subsidies in wholesale electricity
  sales still exist
• Coal industry stabilizing gradually with closing
  of unprofitable mines share of coal in
  underground mines in RFE in 2004 fell to 10 from
  26.1 in 1991
• Increasing demand in energy industries for
  equipment renovation of outdated and obsolete
  equipment

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RFE ENERGY SITUATION, RECENT TRENDS

• Bureiskaya HPP (designed capacity of 2000 MW,
  average generation 7.1 TWh/yr) unit additions to
  total of 1005 MW
• To transfer power from Bureiskaya HPP,
  construction of high voltage transmission lines
  continues
• Increasing electric load on TPP in OES Vostoka
  grid, increased Bureiskaya HPP output by 2007
  will decrease average electricity prices
• Mergers, takeovers and processes of vertical
  integration of assets, restructuring of RFE coal
  and power industries
• 2005-2007--Unified holding company created for
  RFE electricity sector (existing and new)
  controlled (over 52) by Federal government

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RFE ENERGY SITUATION, RECENT TRENDS

• Phase out of coal facilities in some territories
  of RFE and Transbaikalia as Sakhalin gas comes to
  market
• Northern/NE territories of RFE self-sufficient in
  coal supply, import petroleum as refined products
  from Khabarovsk area

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RFE ENERGY SITUATION, RECENT TRENDS

• Highly likely that major projects in the energy
  sector will shift the trade balance of primary
  energy towards export supplies to international
  and interregional markets of crude oil, LNG and
  coking coal, and electricity to isolated
  districts in Northeast China.
• Despite overall good prospects for supply in RFE,
  there are continuing problems of small
  communal utilities (electricity and heat supply)
• Neglect and malfunctioning of production
  facilities and engineering infrastructure,
  unresolved financial problems

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RFE ENERGY SITUATION, RECENT TRENDS

• Stationary small power industry varies both
  technologically and in respect to its
  manageability. For communal heat supply alone in
  the RFE there are more than 5300 municipal
  heating plants, which generate about 25 million
  gigacalories.
• Positive examples of vertical integration of
  communal energy utilities, form basis for
  structural reforms in communal services.
• Strategic position of RFE in North-East Asia
  energy sector is being restructured, strengthened
• Construction/investment activities for
  implementing the Sakhalin-1 and Sakhalin-2
  projects mean doubling primary energy production
  in RFE by 2008 ? net energy exporter, supplying
  crude oil, LNG to energy markets of Northeast
  Asia

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RFE ENERGY SITUATION, RECENT TRENDS

• End 2004 RF Government approved a framework
  project for construction of Taishet Scovorodino
  Perevoznaya Bay Oil Pipeline (the East Siberia
  Pacific Ocean Project ESPO project) first
  section is to be completed by second half of
  2008, with throughput of 30 Mte crude oil
• Oil terminal in Perevoznaya Bay is to be finished
  by second half of 2008, with similar throughput
• 2005, RF Government of Russia Federation
  re-orienting Kovyktinskoye gas project to meet
  domestic gas needs in W. RF, thus excluding it
  from NEA market, probably meaning a focus on the
  triangle "Sakhalin shelf Northeast China the
  Korean Peninsula for exports

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RFE ENERGY SITUATION, RECENT TRENDS

• 2004 and 2005 Exxon Neftegas (operator of the
  Sakhalin-1 project) in commercial negotiations on
  pipeline gas supply to Northeast China via
  Khabarovsk Krai, 8-10 BCM/year
• Gazprom negotiating with operator of the
  Sakhalin-1 project to obtain 25 share, which may
  speed development of international connections
• Completion of Bureiskaya HPP construction, power
  availability in OES Vostoka created
  preconditions for export-oriented power industry,
  but so far only strong activities in near-border
  power trade (negotiations on 600 MW power lines
  from Blagoveschensk to Kheikhe)

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POSSIBLE COOPERATIVE INITIATIVES RFE AND NEA

• "Amur Arc" Project
• Planned specialized infrastructure for fuel and
  energy resources transit, goods transit
• Oil and gas pipelines
• High-voltage power lines
• Trans-Siberian Railway
• Arc-like energy corridor on the route "Eastern
  Siberia Skovorodino Blagoveshchensk
  Khabarovsk and Komsomolsk-on-Amur south of
  Primorskiy Krai
• Economic concept of industrial-service
  development of energy corridor

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POSSIBLE COOPERATIVE INITIATIVES RFE AND NEA

• "Amur Arc" Project
• Oil-and-gas projects of the Sakhalin
  shelfSakhalin 1 and 2, onshore and offshore,
  extraction/processing
• Oil pipeline Eastern Siberia Pacific Ocean
  (ESPO)
• Integrated system of gas production and
  transportation in Eastern Siberia and the Far
  East
• Prospects for electricity cooperation with China
  the Small China project--Export electricity
  into loading islands near-border areas/cities
  of NE China
• Prospects for electricity cooperation with China
  the Big China project25-30 TWh/yr into
  integrated energy systems of Northeastern and
  Eastern Chinese provinces

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POSSIBLE COOPERATIVE INITIATIVES RFE AND NEA

• "Amur Arc" Project
• Energy bridge "Far East Korean Peninsula
• Project induces important external benefits
• Improved investment climate in region
• New technological opportunities for development
  of joint enterprises for hydrocarbons processing
• Energy-intensive enterprises based on new
  efficient hydroelectric power plants, gas- and
  coal-fired power plants
• In view of the large scales, investments
  required, complex effects, planning,
  implementation, the power supply and pipeline
  sections of Project require support and
  coordination of Russian Government

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LEAP MODELING OF RFE ENERGY SYSTEM

• Information Sources Current Accounts
• State Statistics in Russian Far East for
  Petroleum, electricity product supply and
  balances
• Customs data on imports and exports
• Statistics on social and economic indicators
• Russias regional fuel and energy complexes
• Provincial government data sources
• Data from private companies such as "Unified
  Power Grid of Russia
• Information from experts in Energy Departments of
  territorial administrations of subregions of RFE
• Estimates of research fellows of Institutes in
  region

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LEAP MODELING OF RFE ENERGY SYSTEM

• Information Sources Paths/Scenarios
• Official materials from government authorities,
  private companies
• Economic and social development projections
• Demographic forecasts
• Plans for energy and other infrastructure
• Reports and papers on futures of energy
  industries of RFE (Russian and International
  publications)
• Coal, gas, petroleum extraction industries
• Hydroelectric development
• Other materials RF-wide projections/futures
  documents, regional experts, company publications
  

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LEAP MODELING OF RFE ENERGY SYSTEM

• Data Gaps and Challenges
• Little demand data except for electricityno
  energy balance since 1990, errors in data that do
  exist
• Energy supply data good for most sources, with
  the exception of heat production units
• International export and import data available,
  but information on imports/export to/from other
  parts of RF lacking
• Cost data generally had to be estimated

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LEAP MODELING OF RFE ENERGY SYSTEM

• Structure of RFE LEAP dataset
• General economic assumptions (exogenous
  parameters)
• GDP growth rates, industrial output growth rates
• population dynamics,
• Economic cooperation RFE (and RF), other NEA
  countries
• Driving factors of energy policy (key variables)
• Necessary and cost-effective energy supply/demand
  in RFE
• Regional energy cooperation
• Environmental standards and constraints,
• Investment limitations, availability of advanced
  energy technologies
• Energy conservation/energy efficiency policy
• Role of renewable sources of energy
• Diversification of primary energy demand and
  supply in RFE

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LEAP MODELING OF RFE ENERGY SYSTEM

• Structure of RFE LEAP dataset
• Demand no sectoral structure, just final demand
  by fuel, with fuel demand by geographic area for
  natural gas, heat, electricity, crude oil (sector
  division planned)
• Transformation (multiple modules for geographic
  areas)
• Heat and Electricity TD modules
• 5 Export Transmission Line modules
• 6 Electricity Generation modules, alternating
  with 6 Heat Generation modules
• Pipeline Oil Export, 4 Oil Refining modules
• Coal Washing, Gas Processing, LNG Production
  Modules
• Natural Gas TD, 2 Crude Oil Production modules
• Pipeline Gas Export, 4 Natural Gas Extraction
  Modules
• Modules for Bituminous and Lignite Coal Production

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LEAP MODELING OF RFE ENERGY SYSTEM

• Structure of RFE LEAP dataset Paths

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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS

• LEAP Paths (Scenarios)
• Reference Case extrapolation of currently
  evolving economy/energy sector trends
• Moderate economic growth, slowing of population
  decrease
• Energy supply priorities sufficient production of
  energy and fuels at minimal costs ?
  self-sufficient energy balance
• Coal and petroleum products will remain balance
  compensators
• Stagnation in the sphere of international
  economic cooperation with NEA and Pacific Rim
  only Sakhalin-1 and Sakhalin-2 projects realized

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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODELING OF RFE ENERGY SYSTEM

• LEAP Paths (Scenarios)
• National Alternative Case Similar to Reference
  Case extrapolation of currently evolving
  economy/energy sector trends, but
• More dynamic development of renewable energy
  sources, more active energy efficiency policy,
  switching from oil and coal to natural gas
• New energy priorities nominally supposed to be
  supported with legislative acts, administrative
  directives but regional and local business unable
  to carry out in full
• Stagnation in the sphere of international
  economic cooperation with NEA and Pacific Rim
  only Sakhalin-1 and Sakhalin-2 projects realized

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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODELING OF RFE ENERGY SYSTEM

• LEAP Paths (Scenarios)
• Regional Alternative Case Fast integration/
  transformation of RFE into "the Russian center of
  fuel and energy production and supplies within
  NEA
• Implement energy integration of Russia into NEA
• Projects in the southern zone of RFE core source
  for optimization of energy usage in the territory
• International cooperation, sound domestic policy
  yield rapid economic growth, slowing of the rate
  of population decrease ?increase from 2015 due to
  migration and international labor
• Priorities of energy policy sufficient
  production of energy and fuels at acceptable
  costs, large-scale energy export, active
  diversification of energy consumption to hydro
  and other renewables, intensive switching to
  natural gas joint regional programs on energy
  efficiency, environmental protection.

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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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LEAP MODEL OF RFE ENERGY SYSTEM PATHS AND RESULTS
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