Russian Energy Report Ed 1 2006

Abstract

Introduction

• Russia ended 2005 with its seventh straight year of growth, averaging 6.4% annually since the financial crisis of 1998. This year, 2006 is a landmark year
• This report surveys six vital industries and markets in Russia; Oil, Gas, Coal, Electricity, Nuclear and District Heating
• Russia has formidable energy assets; it owns the largest reserves of natural gas in the world, it is the second largest exporter of oil and the sixth largest producer of coal. It also has an enormous but decrepit district heating network and he fourth largest electricity system
• The energy markets have taken erratic steps from centrally planned monoliths to market-orientated industries
• On 1st September 2006 the wholesale electricity market was opened to competition

Key Findings

• The Oil and Coal markets have been restructured and the Electricity market is now being unbundled and opened , with completion by 2008
• The most powerful market, Gas is almost entirely state controlled
• Increasingly it is being used as a political weapon for foreign policy
• The huge District Heating industry is facing crisis, with a 35% loss of custom, as large industrial users establish dedicated CHP plants
• The status of market liberalisation in each sector is reviewed
• The Russian energy sector is in dire need of modernisation and investment

Reasons to buy

• The deterioration due to lack of investment over many years is opening the doors to opportunities for investors in Russian energy
• With a multitude of acquisition targets for energy investors
• And large markets for new equipment and technology to repair and modernise the infrastructure