Konstantin Simonov’s speech presentation at The International Conference "Rebalancing the World Energy Markets: The role of China, Russia and Central Asia"
London, UK, November 29, 2012.
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The energy factor in sino russian relations
1. National Energy Security Fund
The Energy Factor in
Sino-Russian
Relations
Konstantin Simonov
London
November 29
201 2
2. Choice Point
• Choice between Europe and Asia is
traditional for Russia
• Export of energy resources is part of
this choice. But it is also a political
question
• Asia is only China?
• Possible diversification among Asian
consumers as minimization of Chinese
threat
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3. Evolution of
Pro-Western Party
• It is much more difficult to ignore
Asia as possible consumer of
Russia gas and oil
• But China is not the whole of Asia
• Idea of cooperation not with China
but with others Asian consumers
• Idea of three possible balancer s
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4. Ja
n
Fe uar
1000
1200
1400
1600
1800
200
400
600
800
0
br y 2
ua 01
r
M y2 1
ar 0
ch 11
A 201
pr
il 1
M 201
ay 1
Ju 2 0
ne 11
2
Ju 01
A ly 1
Se ug 20
p t us 11
em t 2
0
O ber 11
ct
N ob 201
ov e 1
em r 2
D 01
ec be 1
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em r 2
b 01
Ja er 1
n 2
Fe uar 011
br y 2
ua 0
r 1
M y2 2
ar 0
ch 12
A 201
pr
il 2
M 201
ay 2
Siberia ?
Ju 20
ne 12
Ju 201
A ly 2
ug 2 0
us 12
t2
01
2
Oil Production in Eastern Siberia (thousand tonnes)
Enough Oil in Eastern
Vankor
Talakan
Dulsimskoe
Verhnechonskoe
5. Enough Oil in Eastern
Siberia ?
Oil Production in Russia
(January-September 2012, million tonnes)
4,84 5,20
13,15
Vankor
10,50
Talakan
Verhnechonskoe
354,91 Sakhalin Projects
Other fields
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6. Diversification or U-turn?
Dynamics of Oil Production and Export (January-September)
2,00%
1,40%
1,50%
1,00%
0,50%
0,00%
-0,50% Production Export
-1,00%
-0,80%
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7. Difficult Consumer
• Oil contract with China
• B ench mark price was price of Urals in
Primorsk and Novorossiysk (50%-50%)
• Now b ench mark price is price of ESPO
in Kozmino
• Discount was 1,5$ per barrel
• But new b ench mark price generated 6$
premium
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8. To sell or not to sell?
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9. Question of Price
• 2011 - average price for Russian
gas in Europe was $400
• Net back price was $180-200
• CAPEX of Altai pipeline is $13
billion
• It means that China will have the
same price than in Europe
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10. Asia instead of Europe
• The potential (and in reality quite likely indeed)
shortage of funds for carrying out all its production
projects that Gazprom uses to its benefit. The
corporation which has found itself under pressure
from European users and EU governing bodies is
trying to make it clear to the Europeans that it will
shift its main investment efforts specifically to
eastern projects
• And this is not only about China or even not about
China at all, but about Japan and Korea where LNG
from Vladivostok can be supplied. At a meeting with
Putin on 19 October 2012, Miller made only a
passing reference to contracts being discussed with
China, whereas the subject of the LNG plant in
Vladivostok received much more attention
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11. Asia instead of Europe
• Gazprom seeks to bring a simple thought home
to the Europeans: that they are threatened not
only with the Altai gas pipeline (by which gas
meant for Europe may go to China), but also
with a thing as banal as underfunding by
Gazprom of those production projects that are
intended to become new sources of supplies to
Europe
• Simply because Gazprom will spend the money
on East Siberian and Far Eastern projects. The
same logic, by the way, can fully explain the
postponement of the final investment decision
on the Shtokmanskoye project for an indefinite
period of time
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12. Asia instead of Europe
• Miller did not miss the opportunity of dropping a strong
hint that even some eastern production projects in
Russia may benefit Europe if the European Union
alters its position. The Gazprom chief executive
actually recalled the old project of supplying gas from
Kovykta to the west through Proskokovo
• At the same meeting with Putin on the Eastern Gas
Programme, the Gazprom head said that the
corporation “provides for the possibility of supplying
gas in the future from the Irkutsk gas production centre
to the west, to Krasnoyarsk, Novosibirsk, and Omsk (it
is more than 2,000 kilometres there), so we plan thus
to connect the eastern part of this country, Eastern
Siberia with Western Siberia, the main consumption
centre”
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13. Two Big Dilemmas
• Europe or Asia?
• China or Japan and Korea?
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14. Thank you!
www.energystate.ru
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