The Russian Far East and
Northeast Asia:
Aspects of Energy Demand and Supply Cooperation
Victor D. Kalashnikov
Energy Development in
the Russian Far East and Comparative Advantages for Cooperation
with Northeast Asia
The Fuel-and-Power
Complex (FPC)*10
is represented in the Russian Far
East (RFE) by the coal, oil and gas, oil refinery industries, and
also by electricity enterprises. Historically, the RFE's energy
sector has mainly supplied energy for local development, with
virtually no significant achievements in the production of fuel
and power products for interregional and external economic
exchange. The modest general economic parameters of the Russian
Far East, compared nationally, demonstrate its lack of national
importance in the production and consumption of energy resources*11
.
The period from 1980 to
1990 saw dynamic growth in the Russian Far East's production and
consumption of primary energy, and also of final energy products.
The demand for energy has continuously grown at an average annual
rate of 2.7 percent, for electricity - 4.5 percent. Over ten
years, energy production grew by 35 percent, and electricity - by
57 percent. Still, the Russian Far East has constantly
experienced a lack in production capacity to meet the growing
energy demand.
Between 1980 and
1990,
the RFE energy sector's current technological pattern was formed,
which, in the 1990s, has not undergone any substantial
modifications (except for the coal industry).
The RFE's current energy
balance is largely the result of Soviet-era energy policies. In
the Russian Far East, the energy balance's specific structure was
historically based on a high dependence on energy (Table 8). In
1990, 46 percent of total energy consumption in the Russian Far
East was based on domestic imports of energy. Thus, energy
consumption was dominated by coal (36.9 %), and petroleum fuels (46.5
%) with a low share for natural gas (6.2%) and hydro-power (6%).
Energy consumption has long exceeded energy production.
Economic changes
have
resulted in an overall reduction in the scale of the RFE's energy
balance. The reduction in the region's energy balance affected
all stages of the energy flow. In 1997, in comparison with the
maximum levels achieved during the 1985-1991 period, coal
production accounted for 57 %, oil - 75 %, natural gas - 100 %,
electricity production - 78 %, oil refining - 40 %. According to
studies, on the whole, the RFE's energy production in 1997 was 67%
of the 1990 level, gross energy consumption - 65%, industrial
production fell by 43 %.
Activating the
distributive function of prices has had a positive result in
improving energy consumption efficiency in the RFE. The
orientation toward market-based efficiency measures for using
energy resources has resulted in structural shifts in the RFE's
gross energy consumption. This has resulted in a concentration on
the utilization of relatively inexpensive coal resources with a
simultaneous reduction in the share of expensive petroleum fuels.
Petroleum fuel's share in total energy consumption for the RFE
fell from 46.5% in 1990 to 34.4 % in 1997.
The overall
reduction in
energy consumption between 1992 and 1997 lowered the volume and
degree of the RFE's energy dependence. However, in 1996 more than
36% of the RFE's total energy consumption was still supplied by
energy resource imports from other regions.
The current situation in
the RFE's energy sector is characterized by a number of factors
that are crucial for developing the region's energy balance.
Among them, the following factors should be noted:
uncertain prospects for the economy's
internal growth and, consequently, growth in the region's energy
consumption;
the prolonged economic
crisis in the RFE and Russia;
the opportunity for RFE
energy resources to enter global energy markets via the Asia-Pacific
region, and, primarily, Northeast Asia;
Table
8. Basic
Structural Indicators of the RFE's Energy Balance (as of 1990,
1997)
Source:
Figures from ERI.
In general terms,
the
basic strategic steps necessary for the formation of an effective
energy balance structure in the RFE call for:
an
increase in energy and economic efficiency during all stages of the
production, conversion, distribution and final use of energy;
a sharp increase in the
share of natural gas and crude oil energy resources in regional
production and expansion of their use for internal energy consumption.
The basis for this step is the large-scale development of oil and gas
resources on the Sakhalin shelf and in the Sakha Republic (Yakutia);
the active utilization
of the RFE's fuel and energy resources in the energy markets of the NEA
and APR countries;
a stabilization and
then increase in coal production volumes, mainly in open mines; and an
increase in coal quality by developing enrichment processes;
an intensification in
the development of local energy resources and non-traditional sources
of energy;
a rational system of
combining and concentrating local and central energy supply systems;
further development in
electrification; diversifying electricity sources via the balanced use
of coal, natural gas, hydro, and possibly, nuclear and non-traditional
sources of energy in electricity generation; development of electricity
trade with NEA countries, and purchase of the results of joint
(parallel) work from interconnected power systems in Siberia, the
Russian Far East, China, Japan, North and South Korea;
modernizing the types
of generating equipment in thermal power plants by using ecologically
safe coal-firing power generating units; introducing modern types of
equipment with steam-and-gas cycles and gas turbine units.
increase the region's
energy potential via increased exploration and prospecting;
improving the
ecological and technical safety of energy sources and power supply
reliability for consumers.
International
cooperation in the RFE energy sector occupies an important place
in the structural transformation of the NEA region's energy
sector and economy as a whole. This is mainly due to the presence
and interaction of a number of comparative advantages in the
Russian Far East, as well as the capabilities that lie in the
Northeast Asian countries.
The internal comparative
advantages of the Russian Far Eastern energy sector can be
examined by focusing on the following determinants:
I.
Geopolitical:
I.1.
General Geopolitics
I.2. Energy Geopolitics
II.
Economic:
II.1.
Basic factor conditions
II.2. Supporting infrastructure availability
II.3. Domestic demand conditions
II.4. Competitive conditions inside the region
III.
Institutional
This
approach to
classifying the above determinants is rather conditional, since
they exist not as a set of isolated components, but as a dynamic
system.
It should be noted
that
the comparative advantages of the energy sector in the RFE have a
contradictory character and are not absolute.
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