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. Last Updated: 07/27/2016

IEA: Russia Must Invest $1 Trillion In Energy

Russia needs to invest more than $1 trillion in its oil, gas and electricity sectors through 2030 in order to keep step with the growth in global demand, the International Energy Agency, adviser to 26 industrialized nations, said in a report released Tuesday.

The IEA said in its latest World Energy Investment Outlook report that Russia is expected to need around $300 billion in investments through 2030 in its gas sector, which contains a third of the world's gas reserves, mainly in upstream developments, to replace its huge aging west Siberian fields.

"But a failure to implement much-needed market reforms, including raising domestic prices to full-cost levels and giving independent producers access to Gazprom's monopoly national transmission system, could impede the financing of new projects and opportunities for the independents to develop their own reserves," the report said.

The IEA also said Russia would need to invest up to $328 billion in the oil sector over the next three decades. It said it expects global demand to rise an average of 1.3 percent per year.

The report said $377 billion would be needed for investment in Russia's electricity sector to update generation, transmission and distribution assets, assuming global electricity demand growth of 2.4 percent per year.

Overall, investment requirements worldwide in oil, gas and electricity will total over $16 trillion by 2030, the IEA said.

World electricity investment requirements to 2030 will reach nearly $10 trillion, while global oil investments needs will top $3 trillion.

The IEA estimates that investment needs in the international oil industry will average $103 billion a year, but will increase steadily through the period as world oil demand increases.

Annual capital spending for the sector will rise to $114 billion in the decade leading up to 2030, from $92 billion in the current decade, the IEA says. This steady rise is key to meeting global crude demand but also as crude oil capacity becomes obsolete.

Exploration and development will continue to dominate oil-sector investment and account for over 70% of the total figure between 2001-2030, the report says.

Investment in the global natural gas industry, meanwhile, will average $105 billion per year over the next three decades to meet a near doubling in demand for the fuel, it said.

"Exploration and development of gas fields will absorb more than half total gas investment," the IEA said.

The investment will be needed to provide around 300 billion cubic meters of new gas production required to meet surging demand.

The United States and Canada, which have the world's biggest and most mature gas industry, will absorb more than a quarter of the investment, said the report.

Spending on liquefied natural gas, or LNG, is likely to double from $4 billion per year in the last decade to around $9 billion in the period 2021-2030, with much of the investment in projects in the Middle East. Qatar, Oman and the United Arab Emirates already produce LNG, while Egypt is due to start exporting gas in 2005.

The IEA said lifting restrictions in foreign investment and the design of fiscal policies will be crucial to capital flows and production prospects in the Middle East and Africa.