Raw-material appendage forever

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By 2035 Russia will be the world's largest supplier of energy but the United States and Saudi Arabia will become the leading producers of oil and gas, considers the BP. All the energy flows will be redirected to Asia and the liquefied natural gas will play a more important role than the pipeline gas.

Russia will remain the world's largest energy exporter and will provide 4% of the global energy demand. The BP company has included this data in its Energy Outlook 2035. At the same time Russia's share in the global energy production will decrease from the current 10 to 9% by 2035.

Being a leading energy exporter, the Russian Federation will give way to the United States and Saudi Arabia in the production of oil and gas, says the BP`s outlook.

By that time net export of the Russian energy resources will have amounted to 712 million tons of oil equivalent (TОE) with the total oil and gas production of 1236 mln TOE, that is export will make half of the production.

Oil

"As for oil the increase in export is already encouraged by the Russian tax maneuver," says the head of the analytical company Small Letters Vitaly Kryukov. The essence of the maneuver which came into force at the beginning of 2015 is that with the gradual reduction of export duties the tax on mineral extraction (MET) will grow as well. Concerns have been expressed that the tax maneuver would have a negative impact on the domestic market, primarily on the oil market, as the cost of oil production will increase, and with low export duties it would be more profitable to sell it abroad.

"Tax maneuver will not necessarily exist in its current form, notes Kryukov. If a threat to the domestic market appears, there will be determined an export limit".

According to the BP`s forecasts in 2035 liquids production in Russia will amount to 11 million barrels per day (almost as much as now - 10,93 mln b/d). Here Russia will give its way to the United States and Saudi Arabia which by the way are already extracting more: last year the daily production in these countries amounted to 11.8 mln and 11.6 mln barrels. By the way previously the International Energy Agency released a forecast according to which by 2020 oil production in Russia will have fallen to 10.37 million b/d, while the US will have to ramp up production to 13.96 mln b/d. America will ensure such a growth by extracting shale oil.

According to the BP Russia will start scavenger oil production not earlier than 2020, by 2035 it will have made about 5% of all the produced volumes.

“In spite of the deposits depletion in Western Siberia (the main resource base of the Russian oil production), it is Western Siberia that will be a key region in future, says Sergei Agibalov, the chief of the economic department of the Institute for Energy and Finance. It is always easier to improve the efficiency of older projects rather than starting the new ones”.

In particular, tight ("shale") oil production will be further developed. For this, according to Agibalov, taxation of oil industry should be optimized. However, according to experts, there is a tax reform expected in the near future. Earlier oil companies repeatedly asked to replace the MET tax with the income tax. That is the companies would pay for every ton of extracted oil after the sale.

According to Agibalov, new fields will certainly be developed. First of all it refers to Eastern Siberia and the Arctic shelf projects.

Gas

Russia will also lag behind in the production of gas taking second place to the United States. In 2035, as predicted by the BP, gas production in Russia will amount to 779 billion cub. m., which is almost 140 bln cub. m. more than the amount expected for the year 2015 (the forecast of the Russian Ministry of Economic Development). Besides, the BP says that in comparison with the US gas in Russia will be produced in the traditional fields (in the US shale gas extraction gave an impulse to gas production).

"Natural gas will keep its dominant role in the Russian fuel and energy balance, its share will stay as it was in 2013 (53%), says the forecast of the British company. Gas will also remain to be the main fuel for the generation of electricity. Its share in power generation of about 56% will remain unchanged".

In terms of export Russia is currently trying to find a balance between the European and Asian markets. Europe remains to be the main client (in 2015 it is expected to supply about 160 billion cub. m.), but "Gazprom" is actively strengthening relations with Asia, especially China. The company has already signed a contract to supply China with 38 bln cub. m./year for the following 30 years and there is another contract in the process of drafting - for the annual supply of 30 bln cub. m. for the same period.

By the way, the BP notes a general reorientation of the energy flows to Asia. "The increase in oil and gas production in the United States, the demand contraction in the US and Europe due to improving of the energy efficiency and reducing the rate of economic growth along with the sustainable economic growth in Asia will contribute to a gradual reorientation of the energy flows from the West to the East," say experts of the company.

The BP also notes the growing importance of liquefied natural gas (LNG) in the global gas market.

"The main increase in gas trade will be provided due to the LNG supplies. LNG production will be growing rapidly (almost 8% per year) till the end of the current decade. It also means that by 2035 LNG will take a dominant position in trade, surpassing the pipeline gas," says the BP`s outlook.

In addition to the already existing plant "Gazprom" in Sakhalin there are several LNG projects scheduled in Russia. These are the Far Eastern LNG plant "Rosneft", the "Yamal LNG" project implemented with the participation of NOVATEK with the assistance of the French Total and Chinese CNPC and two more "Gazprom" projects - "Baltic LNG" and "Vladivostok LNG". In addition, "Gazprom" is building a regasification terminal in Kaliningrad region.

Last year "Gazprom" stated that it intends to occupy 15% of the global LNG market, however, according to Sergei Agibalov, Russian LNG projects (not only "Gazprom" projects) will have to scale back their ambitions.

"The projects are quite capital-intensive and in the environments of the existing sanctions (the United States and Europe have imposed restrictions on the access of a number of Russian oil and gas companies to the Western capital markets) the companies will have to adjust the terms of putting the projects into operation," explains the expert. By the way, "Gazprom" has already said that the implementation of the "Baltic LNG" project is postponed from the years 2018-2019 to the years 2021-2022.

  

By the time Russia increases the production of LNG, the market may simply be occupied by other players. The BP in its forecast particularly indicates that the persistent growth of shale gas production will lead to the fact that in the next few years North America will stop being a net importer of gas and, on the other hand, will become a net exporter. Gas from the United States and Canada will be supplied in the form of LNG.

Text and pictures by GAZETA.RU