Energy in Russia

Executive Summary

This paper analyzes the developing economy of Russia, as well as the composition of the country’s energy sector. A very fossil fuel oriented country, Russia enjoys a very lucrative position in the Kyoto Protocol with many carbon credits available. Furthermore, opportunities for strategic energy management are discussed with the focus on energy efficiency and renewable energies implementation potential. The paper also discusses the political and social barriers that investments in the energy sector are faced with, as well as the potential diminishing position in the energy security of the country.

Country Background

Russia is the world’s 6th largest economy, which has been significantly transformed in the past 2 decades. Since the collapse of the Soviet Union in 1991, the country has undergone a period of privatization of all of its industries, with the exception of energy and defense industries. Russian Federation is currently being viewed as a developing country, and is considered to be a part of the BRIC countries that experience high GDP growth. Russian’s economy averaged 7% annual growth rate from the 1998 crisis to the 2008 recession. It was hit very hard by the worldwide recession in 2008, but recovered in 2010 with a GDP growth of 4% for a total GDP of $2.2 trillion. Russian population has been declining for more than 20 years to count to 139 million people today. The population growth rate in 2011 is estimated at -.47%.

Energy Sector

Being the largest country in the world, Russia is very rich in energy resources. It holds the largest share of proved natural gas reserves in the world with 47.57 trillion m3. It also has the second largest coal reserves in the world and the 8th biggest oil reserves in the world. Due to the abundance of natural resources, throughout history Russia has relied on the fossil fuels for its domestic use as well as exportation. The country currently holds number 1 and 2 positions in the world in the production and exports of oil, gas, and coal.

Natural gas dominates the energy consumption in Russia with a total share of 54% in 2005. Oil accounted for 19% of the total, coal - for 16%, hydro electric and nuclear energies accounted for 5% of the total each. The remaining percent included energy consumption from renewable energies, other than hydro power, such as biomass and wastes, and solar- and geothermal. Residential, commercial and agricultural sector consumed 43% of the total energy, Industry sector used 32%, and transportation utilized the other 25% of the total energy consumption.

Russia is the third largest greenhouse gas emitter in the world, after the US and China, and it emitted a total of 2.192 billion metric tons of carbon dioxide equivalent in 2007, according to Russian officials. The sources of these emissions are the burning of gas fuels