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. Last Updated: 07/27/2016

Cabinet Approves Energy Strategy

With state coffers overflowing with petrodollars but thousands freezing without heating in the Far East, the Cabinet on Thursday gave preliminary approval to a long-term energy strategy.

A government plan for the period up to 2020 urges maximum efficiency in the use of natural resources in a country where oil and gas is plentiful but where energy is often wasted due to the economy’s deep structural problems.

The document was discussed at a Cabinet meeting that took place as tens of thousands of residents of the Primorye region in the Far East shivered in their homes as cash-strapped power stations cut supplies for want of fuel.

Prime Minister Mikhail Kasyanov said the country’s energy situation was very complicated, with a Soviet-era legacy of wasteful consumption and a failure to find a substitute for gas, production of which is becoming increasingly expensive.

"Given economic growth and the accompanying growth in energy consumption of 20 percent by 2020, the seriousness of this problem will grow," Interfax quoted him as saying.

"This is a key issue for us, but today we are making the first approaches in this sphere."

Energy Minister Alexander Gavrin told reporters the long-term energy strategy would be fine-tuned within three months and resubmitted to the government.

Gavrin said $700 billion was required to implement the program, with 80 percent of the funds coming from domestic resources including higher fuel tariffs. Decades of cheap fuel have given Russians little incentive to implement conservation measures.

Energy consumption is rising along with economic growth. Gross domestic product is set to rise a record 7 percent this year, thanks largely to recent high international prices for energy and commodities.

Gavrin said the share of gas in the nation’s fuel balance should drop. Russia’s main gas deposits in western Siberia have been largely exploited and have limited potential for producing more.

A government document prepared for Thursday’s meeting said output of oil and gas would both depend largely on market conditions, although gas development would depend more on prices.

It said crude oil output, given a favorable market, could rise to 335 million metric tons per year by 2010 and to 360 million tons by 2020, while natural gas output could be 655 billion cubic meters and 700 billion cubic meters per year, respectively.

This year’s oil production is expected to be about 320 million tons and gas production 577 billion cubic meters.

The long-term energy strategy envisages significant exports, rising to 600 million tons of fuel equivalent from the current 506 million tons.

"However, increasing supplies to external markets should end by 2012 to 2015 if the economy develops favorably," it said, adding that exports will depend largely on the relationship between world prices and domestic production costs.