Deputy Chairman of the State Duma of the Federal Assembly of the Russian Federation,
the President of Russian Gas Society
Modern Trends in World Energy Sector
Dear participants of the Forum!
The development trends of the world energy sector are currently the
issue of general concern, and especially the concern of those involved in
the development and implementation of the state energy strategies. Some
tendencies of these strategies at the moment require the confirmation and
correction of the priorities, contribution to the further development of the
positive trends and impeding the negative ones. This year the key
international energy organizations expressed themselves on the energy
sector trends by publishing their reviews and predictions up to 2030. The
European Commission completed public consultations and some days ago
presented the Second Strategic Energy Review.
This year the world economy and policy witnessed the events that,
on the one hand, made the analyses of these trends more complicated, but
at the same time clearly demonstrated that the level of our instruments
used for the world energy sector modeling is not sufficient, in
consequence of which the political dialogue is often based on the
transparent methods accepted by the parties rather than on the reasonable
This September at the annual political “Eurogas” forum in Brussels
we proposed the establishment of the “Euroasian Center for Energy
Development Planning and Design” as one of the measures to mend a
Within the last years the world energy sector has been mastering
various trends of development and today it has approached the bifurcation
points. After these points the further energy sector development may
grow unstable or its numerous branches will result in scatteration of
resources thus making them insufficient for global energy security
achievement. I would like to draw your attention to some nodes.
The first trend is a stable long-term leadership of fossil
hydrocarbons in the world energy balance with the priority of
increasing the usage of natural gas and black coal. As predicted by
various agencies, a share of the fossil hydrocarbons will not decrease
below 80% in the nearest quarter of the century. This variant can be
considered as the basic one and regarding the large-scale measures for
energy resources saving it can be considered as fuel-provided.
Within this period, in spite of the active promotion, the renewable
hydrocarbons have no essential share in the total energy balance. In
places where they do not belong to traditional fuel, they are used as the
reserve local energy resources. In single regions with favourable natural
climatic conditions the share of the biomass in total energy balance can
be significant though the biomass does not save the situation globally.
The considerable biomass use for energy production is marked in the
countries with the large-scale wood working and paper-pulp industry as
total wastes make up approximately 60% of the total standing timbre
mass. In Russia the share of paper per head is approximately ten times
less than in the USA and the utilization of biomass for energy production
is about ten times lower as well. But nature teaches us, that trees that are
the best at preserving carbon dioxide, especially when they pass into peat,
coal or subjects of permanent storage. Probably this property is more
useful than the ability to burn in our furnaces. Anyway annual growth of
the biomass involvement into energy sector increases the amount of
greenhouse gases in the atmosphere, though not so intensive as burning of
I would like to dwell on the gas aspect of the biomass burning.
About 40% of the wet weight of the round timber exported from Russia,
for example, to Finland is utilized for energy needs of wood working
facilities. The energy balance of these facilities is made up of over 50%
of wood wastes and around 40% of natural gas. Thus, exporting round
timbre we also export fuel and practically at the zero price.
Another trend that becomes today the corner-stone of the
international and national energy security is the extension of routes
and means of energy resources and energy supply to the consumer.
This trend is the key feature of the European Commission Second
Strategic Energy Review.
Russia’s attitude to the development of the export gas pipelines can
be referred to as well-considered. The pipelines across the western
borders of Russia for the supply of gas the West European countries even
theoretically do not have any serious rivals and at the same time solve the
problems of gas supply to the European part of Russia, Ukraine, Belarus,
Baltic and East Europe countries, where LNG supply would be
significantly more expensive.
The North Stream presents a brilliant solution for transportation of
the Russian northern gas directly to the region of its maximum demand –
to Germany. There will be no need to crowd the Baltic Sea with the fleet
of liquefied natural gas carriers. Dependence of navigation on the
seasonal and meteorological conditions is also eliminated.
Pipeline supply of energy carriers through the Black Sea due to the
limited capacity of the Straits of Dardanelles and Bosporus also presents
a sound solution.
The sector notionally outlined by the South Stream and the Altai
pipelines provides Russian gas with the competitive advantages in the
region of natural gas transportation from Central Asia to Southeastern
Europe as well as to China, India, and Pakistan.
The strongest competition in this region is between major gas
transportation projects: between Russian gas pipelines the Blue Stream
and the South Stream on the one hand and the Nabucco gas pipeline – on
the other hand. A number of western politicians believe that the Nabucco
designed for gas supply from Western and Central Asia to Europe offers
prospects of so many advantages for the USA and EU that it is almost
impossible to overpersuade them in favor of the South Stream. The
Nabucco for them is not only the gas pipeline or Verdi’s opera, but in fact
a new geopolitical axis one of the ends of which is under the control of
the European Union. But the opposite end of the axis thrust against
China. By the way, Nabucco or Nebuchadnezzar, as we know, the King
of ancient Babylonia, led his kingdom to the short-term prosperity, died
of dementation, the successors killed the predecessors and shortly after
the kingdom was conquered by the Persians. The Nabucco project may
probably become an additional factor of the political destabilization in the
intricate region of Western and Central Asia. Besides, neighboring China
and India will not stay indifferent to the “abduction by Europe” of large
gas volumes from their immediately adjacent region.
Under the conditions when most of the countries become energy
carriers’ net importers the inflexibility in realization of the energy
carriers’ supplies diversification principle results in the situation when the
more suppliers the consumer finds, the more competitors he faces with.
Besides, strict observance of the diversification principle requires absence
of interdependence between the supply sources and the establishment of
the political isolation of the supplier-countries from each other. However
this is impossible in the contemporary world.
The problem of reliability of gas supply to Europe can be
successfully solved in the nearest future under condition of further
increase in LNG supply volumes and under consideration of the real
political situation in the Western and Central Asia. Should the already
contracted volumes of Russian gas sales to Europe be kept, Russia will be
able to pay more attention to the Eastern sector of hydrocarbon supplies,
gasification of the country regions as well as to the optimization of the
growing domestic natural gas demand by means of energy efficiency. The
optimized location of the major continental energy-intensive facilities in
the territory with more favourable energy supply conditions – in Russia
and in East European is also of specific interest. This is a good job for the
Euroasian Center for Energy Development Planning and Design.
The next highly dynamic world trend is the increase in the
liquefied natural gas (LNG) supplies and development of its market
While in 2007 the international natural gas trade grew by 2%, the
volumes of the world LNG trade increased almost by 8%. Share of the
liquefied natural gas in the global gas supplies increased from 23.7 % to
25 %. Nearly half of it is imported by Europe, 18% - by Asia and 17% -
by North America. Last year the main increase of LNG supplies was
provided by Japan and the USA (by 7.5 and 6.5 bcm accordingly).
In 2006 sales made up 216 bcm of LNG in terms of natural gas and
by 2010 they are expected to increase more than two times – up to 476
Liquid natural gas trade moves the transportation to the seas and
oceans where terrorist attacks are less possible, no payment is charged for
transit and the routes are more easily changed for the consumers’
convenience. Though it is not improbable that the problem of “Somali
pirates” may expand to the scope justifying location of large naval power
groups on the oceanic routes.
Due to its suitability for spot, forward and futures trading LNG
market will increase its effect on gas market configuration and prices. By
means of interacting with the market of pipeline gas supplies it
establishes favourable conditions for swap trading development. Russia
should be absolutely ready for the competition in this sector of
hydrocarbon market regarding the development of both overseas and
The next key trend clearly proved by the statistics and forecasts
is the growing electric power share in the total volume of ultimate
The growth rates of the electric power consumption are higher than
the growth rates of the primary energy consumption. Therefore the
efficiency and quality of electric power generation and distribution
remain the key criteria of the energy sector development for the nearest
quarter of the century. Mostly the investors are attracted by the gas
cogeneration plants though their plant ratio is not high enough. In spite of
much lower ratios of hydroelectric stations, as well as wind and solar
electric power generators these energy sources will also be in demand.
Photovoltaic deserves special attention as it utilizes not only noncritical
although not diversified energy source – the sun, but also widely spread
in the earth crust materials – silica (29%) and aluminum (8%).
Currently the highest plant ratio among electric power industry
facilities is achieved at nuclear (about 90%) and geothermal (over 90%)
power stations. Nuclear power share in the total volume of the nuclear
power produced by the EU makes up 29%, and of the nuclear power
consumed – 14% (2005). Nuclear share in the total world energy
generation is predicted to decrease from 15% in 2005 to 11% in 2030
(EIA data). This trend cannot be considered as favourable especially with
respect to the experience gained.
Due attention should be paid to the recommendations of the Russian
scientists who invoke to increase significantly the share of nuclear power
stations in the total electric power production up to 25-30% by 2030, and
if necessary up to 45-50% by 2050. Russia’s energy strategy design
provides for achieving 24.1% by 2030.
Nevertheless the development scope of electric power industry with
thermal reactors is rather impressive. Pressurized and boiling water
reactors with the high safety level are being built and planned. The units
with high single electric capacity of over 1 GW prevail.
The trend with the curve having no clear continuation is the
prolonged hesitation at large-scale utilization extension of nuclear
power on the basis of closed fuel cycle with fast reactors both for
electric and thermal power production, and for non-power
For many years the fuel problem in the nuclear power is solved by
means of the closed fuel cycle used on the basis of the fast reactors with
nuclear fuel breeding. The employment of high-temperature chemical
technologies, hydrogen formation from water and synthesis of gas from
emissions are of the interest as the non-power applications of the nuclear
reactors. The international efforts and investments shall be aimed at the
implementation of radioactive waste management system and general
application of the closed fuel cycle.
Primarily, the trend of power consumption increase will be
exhibited in cities and industrial populous districts. At this stage, except
for the stable and secure power supply, the problems of transport
and municipal wastes remain unsolved.
The cities of future will be the 3D urban agglomerations with
multilevel and multidimensional traffic arteries and will have noiseless
environmentally sound transport assured by the operation of electric and
hybrid motorcars. Petrol, diesel fuel, biofuel, compressed gas, as well as
liquid and gas fuel derived from wastes, can be the starting fuel for the
hybrids. The peculiar feature of the cities is that they are “the factories of
wastes production”, 60% consisting of hydrocarbons. Such hybrids as
“electricity-gas” allow reduction of fuel costs more than in 1.5 times, and
conversion ratio of hybrids’ chemical energy into mechanical one in 4-6
times higher, than that of the traditional motorcars.
Note another feature: in the city the hybrid motorcars accumulate in
total a big amount of electric power that if necessary can be returned to
the net. There is sense to gradually insert into the energy balances the
data on total accumulated energy including the low-power accumulators.
It is essential not only to welcome the trend of increase in hybrid
motorcars production, but dynamically implement the common policy
providing the benefits for maximum increase of hybrid motorcars in the
cities and respective infrastructure development. If the biofuel
development does not yet achieve the declared goals as the alternative to
petrol and diesel fuel, the hybrid motorcars strictly correspond to the
development in the direction of the key trends and initiate themselves the
number of positive trends. The biofuel amounts, allowed and permitted
for the production, completely “cover” the global needs in “starting” fuel
intended for hybrid motorcars, where no risks are observed for
commodity markets or territories disafforestation. Moreover, another
problem associated with oil is the problem of bitumen used for asphalt
roads construction and repair, since the more high-polymetric fraction of
oil is processed into motor fuel, the less stock will remain for bitumen
The trend establishing the directions of global energy strategies
is the general energy efficiency transmission into a special energy
resource having significant useful energy store.
Here we can specify several key stages. The first one is energy-
efficient operation of the existing equipment, technologies and items
consuming energy forwarding the decommissioning of those
modernization of which is impossible. The second one is the
implementation of substituting but more perfect and less energy-intensive
objects and technologies. The third – is the development and
implementation of qualitatively new principles, materials, technologies
and facilities. At this stage we can speculate on materials produced on
crucially new types of cloth and materials produced on the basis of nano-
and smart-technologies, on new principles of urban planning allowing
“not to release” the heat energy out of enclosures, on effective
accumulation of energy, heat energy and light. Also we can speak about
energy generation when applying low potentials and flat gradients of the
The major obstacles for useful energy generation by means of
energy efficiency are not technical, but political, institutional and legal. It
is significant to have strict policy, as well as clear and effective
instruments of its conduction. So far, these instruments cannot be
considered completely tried-and-true. In particular, it refers to energy
statistics and to its constituent part – the energy efficiency statistics, e.g.
the energy intensity of Russian gross domestic product calculated
according to the exchange rate several times differs from the energy
intensity calculated considering the purchasing power party (PPP) of
national currency. The vigour of these data is reduced by the amount of
questions always arising in their regard and not allowing the use of these
data as the indicator of the energy policy efficiency either.
Another example: regarding Russian PPP three times more energy
is expected to be spent per article. Though alternatively in Europe, in the
USA three-four times more municipal wastes fall on per head than in
Russia. To be objective (not for the purpose of comparison, but for the
analysis) we shall have the possibility to evaluate the consolidated losses
(wastes) and consolidated benefits from the gross domestic product
produced. I believe that this is a good task for the international center
mentioned at the beginning.
The energy efficiency price shall be determined on the basis of the
integrated assessments. Comparing the trends of the specific energy
intensity variation in respect to the gross domestic product per head in
different countries within the last 15 years, we will probably think twice
about the way of further energy efficiency increase. And perhaps, please,
pay attention to the slide, South Korea example will appear better than
our own one.
The next trend that within the last years became dynamic is the
energy and energy carriers’ reservation. Within the last several years
many countries reviewed their requirements to the reserves volumes. By
2027 the USA have increased their “Strategic Petroleum Reserve” (SPR)
up to 1.5 bcm and prepared the legal platform for using the oil shales
geological reserves. In the USA reserve storages the maximum volumes
of natural gas are equal to the volume of its annual import and are yearly
consumed for about two thirds. Currently EC turns the policy in the way
of oil and gas reserves increase and develops a program of enlargement of
natural gas subterranean storages. Using the generic models it is
advantageous to evaluate all the consequences of these trends regarding
the balances of economic and political interests of energy carriers’
exporters and importers. This year experience showed that neither the
change in oil production nor its strategic reserves protect from price
explosions. The striving for increasing the energy carriers’ strategic
reserves is the anxiety expectations indicator not only for the energy
carriers’ deficit and global climate changes but, in particular, for the
I would like to draw your attention to the first and foremost trend
of the world energy sector – the strengthening of its block
confrontation. The correct response to the growing world multipolarity
is not that everybody chooses a block and joins it, but that in united
global net everyone establishes equal partnership relations and through
them the relations with the whole net.
Since the energy sector globalization conditions the state of
economy and military forces, the level of social process, the direction and
rates of all resources migration to the energy-provided areas, since the
world becomes a single body, the approach for the design concept
framing shall be appropriate. Politicians’ opinions and decisions shall be
supported by the politically independent recommendations adjusted with
the calculations made using the models of the whole Euroasian region as
the single social-economic system.
Dear participants of the Forum! Evaluating the specified trends of
the world energy sector we clearly observe its defining role in geopolitics,
economy development and social progress. We also see that Russia’s role
in these trends is global, key or potentially key. To achieve the general
energy safety we must be the joint force, speak with one voice and hear
each other. Otherwise we will have to remember another story of
ancient Babylon – the story about the great tower that people failed
to construct only because they stopped understanding each other.
Thank you for your attention!