Yury K. SHAFRANIK
Chairman
UNION OF OIL AND GAS PRODUCERS OF RUSSIA
How do you evaluate the reforms that have been introduced in the country’s oil and gas industry over the past two decades?
After the breakup of the Soviet Union, Russia’s only choice was to create a brand new policy related to energy development. In September of 1992 the government approved The Energy Policy Concept of Russia in the New Economic Condition. This document laid out the provisions for development of a new energy policy for the country with important distinctions from previous energy programs. The reforms introduced to foster developments in the previous decade were rather basic and there was little. The situation is different now.
We need to establish Russia as a scientific centre for the development of new technologies and also invest in other areas, such as oil and gas processing. We are trying to enhance technological development of our industry, source international capital and improve working contacts with professionals who will help us to develop the sector along these lines.
How has the composition of Russian natural gas exports changed over the past decade?
A lot has been accomplished and many improvements, both in exploration and production, have been made. Starting from the year 2000, we began attracting investments. We have recovered oil production and managed to more than double the level of gas production to 674 bcm (23,8 tcf) in 2012.
At the beginning of the 1990s the maximum amount of natural gas that we could export was 100 bcm (3.5 tcf) of natural gas per year. According to preliminary estimates our natural gas deliveries to European countries in 2013 will amount to 152 Bcm, with an additional 74,8 bcm (2,6 tcf) exports to Commonwealth of Independent States and Baltic countries. Currently, we have an export potential of 250 bcm (8.8 tcf), which could increase to 300 bcm (10.6 tcf) pending successful negotiations carried out by Gazprom to step up natural gas supplies via the eastern route to China.
Our main task is to maintain our current export level and at the same time start new projects, such as the Yamal megaproject aimed at exploiting the vast natural gas reserves in the Yamal peninsula and the Arctic offshore exploration.
What diplomatic questions remain regarding Russian gas supplies to Europe and what changes do you foresee?
With the second gas pipeline for the next stretch of the Nord Stream completed in April 2012 and the current construction of the South Stream to supply Central Europe with up to 63 bcm (2.2 tcf) of gas per year after 2015 we are undertaking major developments that allow us to expand our natural gas supply. The completion of the South Stream will have a major impact on the economy of Ukraine, which has not proved to be a very efficient transition country. Their volumes are dropping and they are losing cash. We also lose a lot of money due to substantial investments required to set up all of the infrastructural facilities we need for exportation.
At the same time Europeans do not have a schizophrenic fear of Russia anymore. European countries are in a favourable position to negotiate gas prices and we must acknowledge that the customer is always right in this business. For example, Hungary has become stronger because it used to bargain for lower prices. The MOL Group, a Hungarian oil and gas company was able to earn a great deal of money during the 1990s by re-exporting.
During the same decade, Europe was a really good source of income for Russia. This cash can now be directed to develop our energy diplomacy in the Far East and strengthen our economic ties with China. Russia might not be the perfect partner for Europe due to our own way of doing business and current problems we are facing, but we are working towards introducing new quality standards in our hydrocarbons industry. The potential is really high, our people are as highly educated as previously and we aim to create industrial alliances. The present European market conditions and the cash to be earned are difficult to forecast. This is the problem we have resolve. We are aware that Europe is a market that we must not lose. If Europe’s natural gas consumption decreases and we lose that market, it will be our fault. This is something well understood on our side.
(THE OIL & GAS YEAR. RUSSIA 2013)