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. Last Updated: 07/27/2016

Government Expects Energy Sway to Decline

State control over the gas and oil industries may begin declining in 2013, the government said in an energy policy paper published Thursday.

Under the plan, titled “Energy Strategy 2030,” the economy and budget will steadily move away from the reliance on energy exports, spurring the changes.

“In these conditions, direct government involvement in the development of the energy sector will gradually weaken,” the paper said.

Authorities will increasingly seek private partners, especially for construction and the upgrade of energy facilities, it said.

The paper, the brainchild of a group of ministries led by the Energy Ministry, was published on the government web site after being signed by Prime Minister Vladimir Putin on Nov. 13. It divides the period to 2030 into three phases, the first tentatively stretching to 2013 or 2015.

The government is planning to reduce its interference in the energy sector in the second phase, which would run to 2020 or 2022, the paper said. Officials will encourage the creation of publicly traded energy companies with private pension funds as shareholders.

The time frame for withdrawing from the sector appears to comply with the 2012 deadline that President Dmitry Medvedev set for the government in his state-of-the-nation address earlier this month to determine what assets it wants to keep or privatize.

The policy could eventually bring about thousands of small, private energy producers, which would create jobs, if taxes also become more bearable, said Chirvani Abdoullaev, an analyst at Alfa Bank.

“If the state leaves the scene, the efficiency of the assets will increase,” he said. “Private capital will pour in, upgrading the industry and making it more competitive.”

In the run-up to 2030, the government’s role in the sector will contract further — to merely providing “support for innovations,” as the energy industry’s share of the economy will continue to slide, the policy paper said.

In a nod to the economic crisis, the government said it would remove barriers for foreign companies that want to invest in energy.

The announcement — which follows Putin’s recent meeting with foreign energy executives to invite them to Yamal gas projects — is because there’s a chance the economic crisis may still hit harder and last longer than expected, the paper said.

The strategy sets a goal of increasing the share of foreign direct investment in the energy industry to 5 percent. It does not say what the proportion is now.

Russia will not repeat its record crude exports of 253 million tons, achieved in 2005, because it will ramp up exports of refined oil products instead, the plan said.

This bodes ill for European refineries and Russia’s environment, because refining tends to cause a lot of pollution, Abdoullaev said.

“What’s the point of spending to import all this refining equipment and then having to deal with the filth of this contaminated water and air?” he said.

The strategy predicts production of at least 530 million tons of oil in 2030, up from last year’s 487.6 million. That will be the most Russia will ever produce in a year, it said.

“Oil output will reach the technological and economic maximum,” the paper said. “Exports of oil and oil products will tend to decrease.”

Abdoullaev said the introduction of new technology and tax cuts could allow output to grow further.

Gas exports to Europe are set to increase during the first phase but will stop growing afterward, the paper said, without naming figures and reasons.

In fact, things could be the other way around, said Alexander Nazarov, an analyst at Metropol. Exports are likely to stay at the same level in the near future because of the economic downturn, he said.

“This strategy is out of touch with the reality. It’s outdated,” he said.

Gas output will grow steadily to at least 885 billion cubic meters in 2030, from 664 bcm last year, according to the paper.

It also said the government would start gradually introducing market-based gas prices locally in 2011 by expanding the unregulated share of the market. Officials expect the process to be completed during the first phase of the plan.

To soften the “inevitable” increase in prices, the government will make sure gas companies have enough investment money from tax breaks, government loans and subsidies, the strategy said.