Russian impact on the global energy market from 2006 onwards

Russia is expected to be a key player in the global energy markets of the future.  In fact, Russia alongside China and India is touted to replace the traditional energy superpowers in the Middle East and Latin America. All the three countries have expanded their industry bases and are in ever more need of energy supplies to feed those industries.  Consequently, oil and gas producers have reaped rich returns due to the greater demands.  While Russia is able to make good profits out of foreign trade, the situation at home is quite different.  In fact, “Russian citizens have faced serious social and infrastructure decline on the home front, from the notorious May 2005 power cut in Moscow to the near collapse of cities’ district central heating systems right across the region” (O’Neill, 2006).  In this context, the Russian government needs to set right the existing domestic chaos if it is to fulfill its ambitions of global energy dominance (O’Neill, 2006).

Another interesting political development to have had a bearing on Russian energy industry is the stand-off between Russia and Ukraine that posed a serious threat to gas supplies to Western Europe.  On top of that it also raised doubts regarding the future security of these supplies.  This conflict between the two neighbors is a crucial challenge to the Russian administration.  So much so that its most lucrative market, in the form of Western Europe, could be made inaccessible, if no amicable resolution is to be found between the neighbors.  Hence, Russia’s prospects of dominating global energy markets cold impinge upon its successful partnership with Ukraine (Middle East Economic Digest, 2006).

With the impending power reforms, Russian market share in the global energy market is set to rise.  The United Energy Systems of Russia (UES), recently released a “forecast of demand for capital investments in power equipment” to aid its project of building supplementary power generation capacities (34200 MW of capacity by 2011). Given that UES is a key player in the Russian energy industry, its optimistic projections for the future augurs well for the industry as a whole. (Modern Power Systems, 2007)  The following snapshot of the investment plan for the five years spanning 2006 and 2010 indicates the positive sentiment in the Russian energy industry.

Investment programme 2006 to 2010
Name                            Unit MW  Fuel      Year
 OGK-1 Total 2006-2010 investment programme -- 68820 million rubles
Verkhnetagilskaya TPP           330      coal      2010
Kashirskaya TPP                 330      coal      2008
Nizhnevartovskaya TPP           800      gas       2010
Nizhnevartovskaya TPP           800      gas       2012
Permskaya TPP                   800      gas       2010

 TGK-1 Total 2006-2010 investment programme -- 104220 million rubles
Pervomaiskaya CHPP              180      gas       2009
Pervomaiskaya CHPP              180      gas       2010
CHPP-15                          30      gas/oil   2007
CHPP-5***                       400      gas       2010
CHPP-7                           50      gas/oil   2007
CHPP-7***                       200      gas       2010
Tsentralnaya CHPP                18      gas/oil   2008
Tsentralnaya CHPP                50      gas/oil   2009
Tsentralnaya CHPP                50      gas/oil   2010
Tsentralnaya CHPP                60      gas/oil   2009
Tsentralnaya CHPP                60      gas/oil   2010
Tsentralnaya CHPP                60      gas/oil   2010
Tsentralnaya CHPP                 5      gas/oil   2009
Tsentralnaya CHPP                 5      gas/oil   2010
CHPP-21***                      400      gas       2011
CHPP-22                         450      gas       2009
Volkhovskaya HPP-6               12                2007
Volkhovskaya HPP-6               12                2007
Volkhovskaya HPP-6               12                2008
Volkhovskaya HPP-6               12                2009
Volkhovskaya HPP-6               12                2010
Lesogorskaya HPP-10              30                2008
Lesogorskaya HPP-10              30                2009
Lesogorskaya HPP-10              30                2010
Lesogorskaya HPP-10              30                2011
Niva HPP-3                       40                2007
Nizhne-Svirskaya HPP-9           28                2008
Nizhne-Svirskaya                 28                2010
Svetogorskaya HPP-11             30                2009
Svetogorskaya HPP-11             30                2007
Svetogorskaya HPP-11             30                2010
Svetogorskaya HPP-11             30                2011
Hyamekoski HPP                    2                2006
Hyamekoski HPP                    2                2008
 (Modern Power Systems, 2007)

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