Energy Trends and Emissions in the Former Soviet Union GTSP Annual Meeting May 29, 2008 Presented by M. Evans
Looking back Overview Economic and demographic trends Energy trends and energy intensity Toward the future Economic projections Energy strategies of Russia and Ukraine Economic growth and energy prices 2
Looking Back: Historical Data 3
GDP trends in FSU Economic growth since 1998 crisis has regularly exceeded estimates Wages and real consumption up: 82% wage increase in Russia 1999-2003 FSU has grown despite relatively small investments in capital stock using old, inefficient stock Link between growth and oil revenue Billion 2000 USD (PPP) Change in GDP (PPP) 1600 1400 1200 1000 800 600 400 200 0 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Russia Ukraine Kazakhstan Russia Ukraine Kazakhstan -15.0% -20.0% -25.0% 4
Wealth is growing Per Capita GDP (2000 $ PPP) 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 1995 2000 2005 Russia Ukraine Kazakhstan 5
Population (thousands) 350000 300000 250000 200000 150000 100000 50000 0 1950 Population declining since 1990 1955 1960 1965 1970 1975 1980 1985 FSU Population Trends 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Uzbekistan Ukraine Turkmenistan Tadjikistan Russia Moldova Lithuania Latvia Kyrgyzstan Kazakhstan Georgia Estonia Belarus Azerbaijan Ukraine lost almost 10% of its population in 15 years Russia will see an average annual population decline of 1% through 2050 (UN estimate) Central Asia states will see increase 6
Turning to Energy 7
Reserves: Russia and Energy Largest natural gas reserves in world 2 nd largest coal reserves 8 th largest oil reserves Exports: Largest natural gas exporter 2 nd largest oil exporter Historically, Russia has never grown more than 5.5% w/o an increase in oil prices Consumption: 3 rd largest energy consumer in world 8
Energy Trends: TPES 1600000 1400000 1200000 ktoe 1000000 800000 600000 FSU Russia Ukraine Russia + Ukraine 400000 200000 0 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 TPES per capita dropped sharply and is now increasing more gradually. 9
Fuel Mix in Russian Energy Balance Share of Fuels in Russian TPES 100% 80% 60% 40% 20% Other Oil Coal Gas Russia 0% -20% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Coal s use is declining. Gas is increasing. Oil demand dropped but is now increasing 10
Gas Demand Natural Gas in TPES 400000 350000 300000 Mtoe 250000 200000 150000 Russia Ukraine Kazakhstan 100000 50000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Russian gas demand growing faster than expected 11
bcm 800 700 600 500 400 300 200 100 Decline in Natural Gas Production: A Looming Supply Gap Growing gas supply gap Call on Russian and Central Asian gas Russian production + Imports from Central Asia Russian domestic demand 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Shortages could make Russia switch to other fuels Are expectations of gas supply to China realistic? May also affect price and demand in Europe
Energy Intensity Declining but still very high 1.2 1 0.8 0.6 0.4 0.2 0 OECD average: 0.2 in 2005 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Russia Ukraine Kazakhstan Belarus 13
Power Production in Russia Russian Electricity Generation by Fuel 1200 1000 TWh 800 600 400 Renewables Petroleum Products Nuclear Hydro Coal Natural Gas 200 0 1990 1993 1995 1997 1999 2000 2001 2002 2003 Surprisingly stable fuel mix. Oil s share dropped, nuclear and coal grown slightly. 14
Heat is also very important in FSU Over 1/3 of Russian energy use is for heat (without counting most of industry) District heating supplies 70% of residential heating in Russia Russia uses almost as much gas for heating as it exports (150 bcm vs. 180 bcm) In rest of FSU, heat demand has started to grow again. ktoe 250000 200000 150000 100000 50000 0 Russian Heat Production by Fuel, 2005 Russian Heat Demand 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Gas Coal Oil Waste Biomass Nuclear Agriculture/Forestry Commercial and Public Services Residential Industry Sector 15
Emission Trends: FSU and Poland CO2 Emissions from Fuel Combustion 3000 2500 Mt of CO2 2000 1500 1000 Former USSR Russia Ukraine Poland Kazakhstan 500 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 16
Looking Forward: Future Trends 17
Population Projections Russian Population (millions) Rest of FSU Population Russia s Share of FSU Total 2005 144 142 50% 2050 108 141 43% Key Message: Rest of FSU will likely see stronger emissions growth than Russia. Starting from a weaker economic base. 18
Russia s s Energy Strategy Production Export Russian demand Optimistic/baseline scenarios Exports stable Demand grows Production grows But is it realistic? Based on policy goals. Production growth seems challenging Demand growth: to date, exceeded projections 19
Energy Strategy: Change in GDP and Energy Intensity Change in Intensity: Baseline Scenario GDP as % of 2000, Optimistic Scenario Change in Intensity: Optimistic Scenario GDP as % of 2000, Baseline Scenario 20
Energy efficiency: a bargain in Ukraine 250 180 160 200 140 120 Mtoe 150 100 100 80 Billion $ Mtoe Bill. $ 60 50 40 20 0 0 Power+Coal Energy Efficiency 21
Subsidies in FSU Russian natural gas prices: just a fraction of European netback levels, though above Russian production costs Electricity: 2.7 and 2.8 for residential and industrial customers risen in recent years In 1992: FSU $151 B in energy subsidies; today less than ¼ of this, if you ignore the rising external price of natural gas In 2005: $8 billion in Russia for electricity and natural gas; more for heat 22
Threats to Growth Energy intensity Rapid shifts in oil prices (up hurts most smaller states, down hurts Russia, Kazakhstan and Azerbaijan) Decline in natural gas production 23
Dutch Disease: How Vulnerable is Russia s s Economy to the Price of Oil World Bank study showing 25% of Russian GDP from oil and gas; 30% of government revenue Russian data show smaller % Energy s share of GDP has probably grown with the price of oil Also affects Kazakhstan, Turkmenistan, Azerbaijan If the price of oil drops Russia s economic stabilization fund at over $160B 24
Concluding Thoughts Are current energy growth levels sustainable without improvements in energy intensity? Exports of natural gas to China may be less than anticipated The rest of the FSU: Will the poorer FSU states start to see rapid economic growth? What impact will desire to diversity energy supplies have on emissions? Influence of state on energy and emissions trajectories 25