Russia's energy strategy has been turned to the East: wishlist has not been dispensed with

The government has approved a new version of Russia's Energy Strategy until 2050. Its renewal lasted more than three years. The document assumes various scenarios for the development of the industry. At the same time, there are a lot of "wishlist" in it, experts say, but there is little strategy on how to achieve this in difficult conditions for Russia.

Prime Minister Mikhail Mishustin approved Russia's Energy Strategy until 2050.

"The energy strategy links together the processes taking place in the economy as a whole, coordinates the commissioning of new capacities in production, processing, generation with the needs of people, as well as enterprises," Mikhail Mishustin said at a meeting with deputy prime ministers.

The new document expands the planning horizon and takes into account current challenges, which will allow the oil, gas, coal sectors, the electric power industry, power engineering, and related transport to more closely match the changes taking place in the world, the government noted.

Key trends in There are several energy strategies. On the one hand, this is the stabilization of the extraction of traditional resources, deep processing of raw materials instead of simple export, technological independence and digitalization of energy at all levels. On the other hand, the diversification of export directions with a clear focus on the Asian market and the large—scale development of LNG projects as a strategic direction.

Thus, they want to increase the production of oil and gas condensate from 531 million tons in 2023 to 540 million tons in 2030, 2036 and 2050, and the capacity of the export infrastructure from 530 million tons to 550. The oil refining depth was 84.1% in 2023 and is expected to grow to 90% in 2030, 2036 and 2050. At the same time, the production of large—tonnage polymers will increase by at least 2.8 million tons - up to 10 million tons.

The level of gasification is planned to be raised from 73.8% to 86.2%. And gas exports to the Asia-Pacific region (ATOR) from 30 billion cubic meters to 98 billion cubic meters. At the same time, Europe is not mentioned. It is said that the share of Russian exports in international coal trade will grow from 14.5% in 2023 to 21-23% in 2036 and to 24-27% in 2050.

At the same time, the capacity of power plants in Russia will grow from 253.5 GW to 287 GW in five years, and in 25 years to 331.2 GW. Gordey Smirnov, an analyst at Finam, notes that predicting energy consumption for decades to come is not an easy task.

"However, the provisions of the Energy Strategy-2050 proceed from the assumption that the relatively high growth rates of energy consumption observed in recent years will continue. This poses a task for the power system to prevent a possible energy shortage," he says.

There is a coal crisis, and in There is no energy strategy

Maxim Khudalov, Chief Strategist at Vector X Investment Company, notes that from the radically new to Energy strategies are only plans to increase pipeline supplies in the Asian direction and connect the Power of Siberia with the Sakhalin-Khabarovsk-Vladivostok gas pipeline.

"It is also worth noting the forecasts for the growth of domestic coal consumption. However, it is assumed not in coal generation, which would be natural, looking at China, Vietnam and India, but in coal chemistry. This is a rather controversial direction, especially against the background of expectations of an increase in LPG processing," says Maxim Khudalov.

Alexey Kalachev, an analyst at Finam, says that the target scenario of the Energy Strategy also assumes an increase in coal exports by 25.5% over five years to 266.7 million tons.

"Apparently, the developers of the Energy Strategy proceeded from the fact that the consumption of coal by the global energy industry continues to increase. This happens mainly at the expense of developing countries, for which the price is important, since coal remains the most affordable and cheapest source of energy for them," the expert notes.

At the same time, according to him, not only the Russian, but also the global coal industry is currently experiencing a crisis related to oversupply and low prices.

"The excess of coal on the market leaves little room for increasing its exports, and low prices and expensive export logistics deprive it of profitability. So far, there is no reason for this situation to change for the better. The trade war imposed by Trump also adds risks, as it leads to a decrease in business activity and, consequently, to a reduction in demand for commodities. In addition, it seems to me that the Energy Strategy does not take into account that many countries intend to reach the level of carbon neutrality by 2050. Therefore, I admit that its target parameters may be revised downwards over time," adds Alexey Kalachev.

If you really want to

Experts note that the document was born for a long time. But it seems that he suffers from all the same vices as his predecessors, according to Alexey Grivach, Deputy director of the National Energy Security Fund (NWF).

"There is little strategy in it and a lot of projecting and outright lobbying," he believes.

Igor Yushkov, a leading analyst at the FNE and an expert at the Financial University under the Government of Russia, notes that Russian President Vladimir Putin gave instructions to update the Energy Strategy back in 2022.

"He held the first meeting on the development of the oil and gas complex literally after the start of SMO and instructed him to prepare a new version of the Energy Strategy by September 2022. Because, of course, the situation has changed a lot, and the old Energy Strategy instantly became irrelevant. By September 2022, it had not been made. By September 2023, it was already clear how we had rebuilt the markets and what the main restrictions were, but there was still no document. And only now it has been released. It was expected that there would be a well-developed document, accurate, without any blunders, at least. But there are certainly questions about the new Energy Strategy," the expert says.

The authors of the Energy Strategy noted that in the gas industry, the key areas of development are leveling the negative consequences of the refusal of the European Union countries from cooperation and cost-effective satisfaction of the increasing demand for gas within the country.

"The target scenario assumes a twofold increase in export volumes relative to the level of 2023 due to the development of pipeline infrastructure and the implementation of planned projects for the production of liquefied natural gas. This will make it possible to reorient exports to new markets by 100 percent compared to 2023," the document says.

The most striking example, which raises many questions, notes Igor Yushkov, is the assessment of LNG production.

In terms of the implementation of the Energy Strategy, the government did not change the forecasts for LNG production. By 2030, it should triple to 90-105 million tons per year. And by 2050 — up to 110-175 million tons.

"At the expense of what? There is Arctic LNG, where one queue has been launched, and the rest are still being built. Plus Murmansk LNG, Artik LNG-1, Ob LNG and the Ust-Luga project. All these new projects are under US sanctions, so it is impossible to deliver Western equipment there," says a leading FNEB analyst.

Igor Yushkov notes that the government has indicated a list of LNG projects and some of them exclude each other.

"They are separated by commas. For example, the idea of Murmansk LNG appeared in order not to use Arctic—class gas carriers, but its resource base will consist of deposits for Artik LNG — 1. The expert is also not sure that the capacity of the Murmansk center for large-capacity construction will be enough to erect a sufficient number of gravity platforms for all projects in the Arctic..

Sergey Kaufman, an analyst at FG Finam, notes that under the conditions of sanctions, Russian companies face a shortage of ice-class tankers and difficulties in finding markets.

"There is also high competition in the LNG market, primarily from the United States, which could double production by 2030. Because of these factors, we believe that the implementation of Ob LNG and Murmansk LNG until 2030 is in question," the expert says.

For pipeline gas, the strategy looks more conservative and, accordingly, more realistic, assuming an increase in exports to 151 billion cubic meters by 2030 against 119 billion cubic meters by the end of 2024, continues Sergey Kaufman.

"This implies a planned increase in supplies to China and Central Asia, as well as, possibly, a partnership with Iran or a partial resumption of gas supplies to the EU. However, the Energy Strategy does not set itself unrealistic goals like the return of pipeline gas exports to the indicators by 2022," adds the analyst of FG Finam.

Leading FNEB analyst Igor Yushkov is surprised at the same time that in The energy strategy does not mention the Power of Siberia—2 gas pipeline at all.

"Although it is clearly implied, since there is a forecast of gas exports to the Asian region, and it indicates that by 2030 our exports in this direction will amount to 98 billion cubic meters. Where do they come from? 38 billion is the current "Power of Siberia", 10 billion is the Far Eastern route agreed with the PRC. And another 50 billion is the Power of Siberia — 2, on which negotiations are still underway. But there is no such name in the energy strategy," continues the leading analyst of FNEB.

Forecast or strategy?

The document suggests several scenarios for the development of events, including a stressful one. In this case, LNG production will not grow above 45 million tons, total gas exports will remain almost at the level of 2023, 149 billion cubic meters, and oil production, for example, will drop to 403 million tons in 2030, while in 2023 it amounted to 531 million tons.

There is also a scenario of technological potential in the strategy, which assumes an increase in production to 591 million tons. Igor Yushkov does not understand the need for a super-mega-optimistic scenario in which Russia produces to the maximum regardless of economic feasibility — even from unprofitable deposits.

"Why prescribe it? Who will develop unprofitable deposits? Why?", — Igor Yushkov believes that the Energy Strategy positively focuses on the fact that in Russia's gasification will continue, coal enrichment and oil refining depth will increase.

"This is good, but the very meaning of the Energy Strategy is lost. What is she for? It shouldn't be a forecast, it's Russia's strategy. That is, it is a kind of wish of the state about what it wants to see in the energy sector. If everything is as it is now, then we will get this and that. And in principle, it is well spelled out there. There will be a decrease in oil production, for example, because many fields will become unprofitable. The quality of the resource base of everyone in the world is deteriorating, and in Including Russia, therefore, tax incentives are needed. And then — a certain positive scenario, it is also spelled out. That's if taxation changes, if we stimulate the development of the industry, and so on. And this, in fact, should be the main thing in the document: if nothing is changed, it will be like this, and this does not suit us. And we want the industry to develop like this, and the government is ready to provide the following list of incentives," said the leading analyst of the FNEB.