The Russian Far East Region is currently expecting a major oil and gas boom. Considering that Primoriye, Sakhalin, and Kamchatka are often associated with the power and fuel crisis and that Kha-barovsk Krai, Yakutiya, and Magadan are recognized to be paying excessive cost for their power stability, it may come as a surprise that the overall reserves of oil and gas of the Russian Far East allow it to compete with such regions as Bashkiriya and Kaspiy.

By early 2004 the governments of the RFE regions developed their individual oil and gas programs aiming to improve the overall power situation in each region.  Despite many benefits, these programs had two key drawbacks: isolation and lack of reliable financial resources. At the Coordination Council held in February 2004, the RFE Governors received the President’s request for the design of a consolidated proposal for the development of a system of export pipelines and regional oil and gas structure in general. ... The subsequent meeting in August 2004 resulted in the establishment of The Center for the Strategic Research of the Development of the Russian Far East Fuel and Power Complex.  Its founders included the RFE Department of the Russian Academy of Science, Moscow State Institute for Foreign Relations, the RFE Power Management Company, Far Eastern State Technical University and DV Arsenal Science and Industrial Merger.  The Center’s first task was to form a principal strategy for the oil and gas sector development in the RFE.  Based on the fundamental analysis of the region’s social and economic situation, trends in the power sector development and the perspectives for power resources consumption in Eastern Asia, the strategy would allow to create an optimal system for management of the power sector – from production and transportation to the use of resources for environmental benefits. This strategy will then be included into the package of state documents determining the key routes for export pipelines.

At this time, the Center’s flexible scientific and technical structure is formed, uniting researchers, producers, government authorities and education entities.  Its activities attract top management and specialists of large power engineering companies of the Russian Far East, leading universities, a number of organizations engaged in design, planning, and maintenance of the power-associated facilities.

Gas Supply of the RFE Territory

 In the early 2005, the unified program for the development of the Far East oil and gas complex was developed, encompassing all regions of the RFE Federal District as well as those from Western and Eastern Siberia. It focuses on two primary issues: exploration and the development of the new oil and gas deposits as well as the beginning of the construction of oil and gas pipelines linking the Eastern Siberia and Yakutiya deposits with potential consumers on the Pacific shore of Russia. The final stage (up to 2020) envisions the construction of new enterprises for oil and gas processing and petrochemical enterprises for the production of plastics and fertilizers.

On December 31, 2004 Prime-Minister Fradkov signed a decree for the construction of an oil pipeline from Taishet in Irkutskaya Oblast (Eastern Siberia) to Perevioznaya Bay in Primorskiy Krai. The pipeline’s estimated capacity is 80 million tons of oil per year with the use of railroad capacities. The first step envisions the construction of a section from Taishet to Skovorodino (Amurskaya Oblast) and the construction of an oil-loading terminal at the Perevoznaya Bay.  The second step is the construction of a section from Skovorodino to Perevoznaya Bay.  Financing for the project will be supplied by the Transneft Company and the technical and economic calculations will be provided by Trnasneft’s affiliate Giprotruboprovod.  At this time, the Company continues negotiations to attract additional investors. 

The decision about a possible need for constructing an outlet to China will be made in the process of the project’s implementation. According to Sergei Grigoryev, Vice President of the Transneft Company, the railroad oil loading station will be set up in Skovorodino (Amurskaya Oblast) in the first stage of the project to allow transporting oil to Nakhodka (Primorskiy Krai) by railroad.  This leaves room for potential transportation of oil from Skovorodino to Datsin (People’s Republic of China).  The distance form Skovorodino to China is roughly 50 kilometers. In case China makes a decision to supply oil via this route and arranges agreements with the supplier, such a scheme could be implemented under an intergovernmental agreement or without it.

The Russian Federal Power Engineering Strategy through 2020 envisions the construction of an oil pipeline to the East with an outlet to China.  Once the outlet to China is completed, it will be transporting nearly 30 million tons of oil.  The Skovorodino-Perevoznaya route will carry 50 million tons.  The expenses for the construction of the oil pipeline Taishet-Perevoznaya may amount to $ 11-16 billion. The estimated payback term is 11 years. Twenty four million tons of oil for the pipeline will come from Western Siberia and 56 million tons will come from the deposits of Eastern Siberia and Yakutiya.  At this time, most of these deposits are not being developed. Japan is expected to become the primary consumer of Siberian oil.  At the same time construction of the new oil-loading port on the Russian territory will allow free export of oil to any of the Pacific Rim Countries.

KoRus Natural Gas Pipeline: An Asset for Russia, Korea, Asia and the United States

 The KoRus Pipeline is a 2,300 kilometer pipeline that will transport up to 25 billion cubic meters of natural gas per year from Sakhalin, Russia, through the DPR (North) Korea to the Republic of Korea (South). Opening new Asian markets to previously stranded natural gas, KoRus is critical to the economic and energy integration of Northeast Asia. KoRus is commercially viable as a standalone project with commitments for financing, risk management, gas offtake, and construction. It will provide the only source of pipeline gas and the cheapest source of gas to both North and South Korea.  North Korea will depend on gas to develop its economy - it is considered to be a reliable transit partner. South Korea currently relies totally on LNG for gas supply; the pipeline will meet a growing demand and free-up LNG for other markets such as the U.S. Upon future extensions, the KoRus pipeline will service Japan and other nations. One of the gas projects currently implemented in the Khabarovsk Krai, the Komsomolsk-Khabarovsk gas pipeline will simplify the construction of the KoRus pipeline. Over 190 miles of the Sakhalin - Komsomolsk-on-Amur - Khabarovsk gas pipeline has been laid since the beginning of the construction in 2002.  The Krai government financed over 70 percent of expenses.  Upon the completion of construction, the area around the pipeline could be used as ground for the construction of the KoRus pipeline.  Although at this time the pipeline is owned by the Krai government there is a high chance it will be sold to Gazprom.