MOSCOW. (Dr. Sergei Kolchin for RIA Novosti.)
Two key issues on the agenda of the recent World Economic Forum in Davos were international energy security and the growing role of Asian countries in the global economy.
Relation between these two issues is especially important for Russia, which is a leading oil and gas exporter and wants to be a principal guarantor of global energy stability. At the same time, it has been looking East, with due regard for the realities of global energy consumption and its energy export interests.
The British newspaper The Times writes that the world is facing a new oil conflict. The reason for it is that China is rivaling the world powers for the energy resources it needs to maintain its growing economy.
Worldwatch Institute writes in the recently released report, "State of the World 2006. Special Focus: China and India," that last year China, which has nearly doubled oil consumption in the past decade, became the world's second largest oil importer after the United States. If the economies of China and India continue growing at the current pace, the planet will not have enough oil to satisfy them by 2050, when daily consumption will grow from the current 85 million barrels to 200 million. "Geologists believe that oil production will start falling before it climbs halfway to this figure," the Worldwatch report says.
China, India, Japan, South Korea and Southeast Asian countries are becoming highly attractive and reliable oil and gas clients for Russia.
There are many arguments for redirecting Russia's energy exports to the East, primarily the opportunity to simultaneously solve the energy problems of the country's eastern regions, which are short of gas supply systems.
Secondly, the bulk of Russia's "fresh" oil and gas reserves are located beyond the Urals in East Siberia and the Far East. It would be logical to take into account the requirements and investment of the neighboring countries.
And thirdly, Western Europe, the traditional market for Russian energy resources, has become concerned about its excessive energy dependence on Russia and is looking for alternative suppliers. German Chancellor Angela Merkel mentioned this in her opening address at the Davos forum.
Russia clearly wants to diversify its energy exports, which explains its interest in the Eastern oil and gas market. The attention of the Asian leaders of global energy consumption - China and India - to Russian energy has grown of late, spurring bilateral cooperation.
In 2005 Russia delivered 11 million tons of oil to China (9% of its total imports) by railroad. Yukos, which had initiated these deliveries, has left the Russian oil scene making Rosneft the main partner of China. China loaned Rosneft $6 billion for the acquisition of Yuganskneftegaz against the pledge of deliveries of 48.4 million tons of oil in the period till the end of 2010.
Last year Rosneft signed a memorandum with the Chinese Sinopec on the joint development of oilfields in Magadan, East Siberia and on the Arctic shelf. But most deposits located there are of strategic importance and will be auctioned only after the adoption of the law on mineral resources. Rosneft is also discussing possible cooperation on the Sakhalin shelf with the China National Petroleum Corporation, CNPC.
China is interested in the output of Russia's oil refineries. Harbin Longqing Petrochemical Trade Co. Ltd has recently signed a protocol of intent that stipulates the investment of over $120 million into the construction of a new refinery in the north of the Tyumen region.
China plans to increase investment into the Russian economy from the current $1 billion to $12 billion by 2020, with the bulk of the money to be channeled into the Russian fuel and energy sector.
Transportation is the key issue of bilateral energy cooperation, which provides for the construction of new oil and gas pipelines.
When making a decision to build a new oil pipeline from Siberia to the Far East, Russia had a choice of two routes, one to Nakhodka on the Pacific coast and the other to Daqing in China. Japan lobbied the former route, which was chosen because Russia decided to avoid being tied up to one market. However, Russia might build an offshoot to China with the throughput capacity of 30 million tons a year.
The future of Russia-China gas pipelines remains vague. Initially, it was planned that a pipeline would link Chinese consumers to the Kovykta gas condensate field in the Irkutsk region, where TNK-BP holds the development license. But Gazprom, which wants to block his rival's gas business in Russia, is working on two variants, the western project across the Altai, and the eastern one via the Maritime Territory that would deliver gas from Sakhalin. The latter variant seems preferable, also because ExxonMobil, the operator of Sakhalin-1, plans to reroute gas deliveries from Japan to China.
Russia's another possible partner in the East, India, has stated its interest in Russian energy even more outspokenly than China. As of now, 80% of India's oil imports come from the Middle East, but the Indian authorities want to diversify oil sources so as to minimize risks. The leading Indian Oil and Natural Gas Corporation, ONGC, said it was pondering some 20 projects in Russia with the total investment of $25 billion.
India owns 20% in Sakhalin-1 (investment contribution $2.7 billion) and is negotiating with Rosneft its involvement in other Sakhalin projects and the joint development of the Vankorskoye field.
Russia-India pipelines are not on the agenda, but they have not been ruled out either. Gazprom has expressed readiness to actively contribute to the construction of the Iran-Pakistan-India gas pipeline and signed a contract with India on the exploration and development of gas fields in the Bay of Bengal, which entails cross-investment.
Russia can safely build up oil and gas export to the East, but the project largely depends on cross-investment by Asian partners. The Kremlin is pursuing a "better safe than sorry" policy, which is logical in view of the recent attempts by China and India to bid for Slavneft and Yuganskneftegaz. Russia would not like its neighbors to own assets in the country's oil and gas sector; it prefers cooperation in practical projects, which promises good revenues to both sides.
Dr. Sergei Kolchin (Economics) is a senior researcher at the Institute of International Economic and Political Studies of the Russian Academy of Sciences.
The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.
