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Economy
RUSSIA NOW
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ern Europe and the CIS
Business News Energy New oil and gas routes spell the end of post-Soviet political wrangling
Russian Consumer Demand Picks Up
Russian consumers have been driving the coun-
try’s fast growth in recent years and demand Pipe Dreams Come True
passed its low point last September.
Real wages and disposable incomes soared
in December by 25 percent and 34 percent re-
spectively month-on-month, as companies that Cold War tensions between
had delayed paying workers in the depths of the Russia and Europe will
crisis caught up with the back pay. Wages were persist as long as the Cold
also up year-on-year, but as most Russians are War energy infrastructure
borrowing much less, disposable incomes were stays in place. However, a
up 1.9 percent over the year. lattice of new pipelines
The crisis is still weighing on the retail sector, should make relationships
which saw the total turnover decline in 2009 by more civlilized.
5.5 percent. But given that wages are still ris-
ing, albeit at a much slower rate, most analysts
BEN ARIS
believe that consumption should return relatively BUSINESS NEW EUROPE
quickly and boost Russia’s growth in 2010.
Cold War pipelines are still in
place, but a raft of energy in-
New Oil Refinery to Be Built in Chechnya frastructure deals and the launch
The Russian oil company Rosneft is to build an of several important new routes
oil refinery in Chechnya, Rosneft President Ser- signal major shifts in the post-
gei Bogdanchikov said. “The oil refinery will be Soviet oil and gas network. Rus-
among the best ones in the world,” Bogdanchikov sia’s imperialistic hold over pro-
said at a meeting with Chechen President Ram- ducers in Central Asia—inher-
zan Kadyrov in Grozny on February 2. “A tender ited from the Soviet Union in
will [soon] be announced. We could start the re- the form of oil and gas pipe- NIKOLAY KOROLYOFF
finery construction in 2011, and it will offer its first lines—has been broken. A new The new oil and gas pipelines will deny any country the position of dominant importer or exporter, putting politics second to the market.
products in 2013,” he said. The refinery will also gas pipeline running from the
produce up to 14,000 tons of liquefied gas, which gas-rich republic of Turkmeni-
would be enough for the neighboring regions. At stan to China is a game chang- detriment of Russia,” said Phil- its eastern neighbor. Underpinning the annual has turned its attention to
the present time, Chechnya gets 4,000 tons of gas er and joins an oil pipeline snak- ip H. de Leon, the publisher of Pipelines are intensely politi- clash between Russia and rounding out the oil pipeline
from Astrakhan. Rosneft is also planning the con- ing from oil-rich Kazakhstan to OilPrice.com. cal beasts when they are in the Ukraine is the fact that Russia is infrastructure. Like the Russian
struction of new product pipelines. China that is already in opera- The TransAsian pipeline cost planning stage, but once con- forced to send about 80 per- gas pipes that will now run both
tion. $6.7 billion to build and is the structed they are the geopolit- cent of its gas to Western Eu- east and west, Putin relaunched
The Kremlin’s response has first gas pipeline out of the Cas- ical equivalent of marriage. ropean customers through a new and ambitious Eastern
Kirov’s Governor Fails to Cut Salary been to build more pipelines, pian Region that runs east, link- The Turkmen gas pipeline fol- Ukraine. Siberia–Pacific Ocean (ESPO) oil
An attempt by Kirov Governor, Nikita Belykh, to also headed east. The result of ing Turkmenistan’s massive gas lows on the heels of a new Ka- Russia has proposed two new pipeline that will run from Si-
cut his salary and donate the rest was rejected this emerging lattice of pipe- basin with China’s West-East Gas zakh oil pipeline to China that routes that run to the north and beria to Russia’s Pacific coast.
by local lawmakers and prosecutors in January. lines is that energy relations in Pipeline. The pipeline will carry rounds out the new eastward- south of Ukraine to diversify the The 4857-kilometer ESPO
Belykh, a liberal politician who took over the the region will become more up to 40 billion cubic meters looking energy transport infra- supply routes: The Nord Stream pipeline is by far the longest
cash-strapped Kirov region in a surprise ap- civilized as competing routes (bcm) of gas by 2013, account- structure. The first phase of the runs from Northwest Russia to and most expensive of all the
pointment by President Dmitry Medvedev in will force both buyer and seller ing for half of China’s gas Kazakh oil pipeline went into Germany and the South Stream pipeline plans. Strategically it
2008, had wanted to stretch the region’s budget to put market interests first and needs. operation in July last year and runs from Southern Russia under will allow Russia to deliver oil
by cutting his salary to 4,330 rubles ($145) a politics a definite second. China’s growing importance a second phase will link Kazakh- the Black Sea to Turkey. Much directly to the whole of the Pa-
month. He said he earned 1.45 million rubles On December 14, 2009, Chi- in the region has gotten the at- stan’s rich Caspian oil resources of Western Europe was cut off cific Rim and significantly diver-
($45,000) in 2009. na's President Hu Jintao joined tention of the Kremlin: Prime to China. from crucial gas supplies when sify Russia’s customer base. Con-
Belykh said he would donate most of the savings his Turkmen counterpart, Gur- Minister Vladimir Putin signed The two Chinese pipelines Russia clashed with Ukraine over struction of this anaconda of a
to build wheelchair ramps in the regional capital, banguly Berdimuhamedow, a deal that promises to deliver have raised the ante in the en- unpaid gas bills. Future battles pipe was begun in April 2006,
Vyatka. Belykh wrote on his blog that the regional to inaugurate the new TransA- 68 bcm a year to China through ergy game for Russia and bro- with Ukraine over money will but the project has only recent-
legislature rejected a bill on the wage cut be- sian pipeline that allows ener- two new pipelines starting in ken its monopoly on the trans- be just that and 2009 should ly regained momentum.
cause it violated a local law regulating the work gy-hungry China to tap Central Siberia. These pipelines will pro- port of oil and gas to customers be the last time European coun- The success of the pipeline
of the governor, reported the Moscow Times. Asia's copious supplies of gas. vide China with the other half out of the region in Western tries faced the prospect of being will depend on the currently un-
Belykh said he would donate his January salary “The new pipeline marks an of the gas it needs. The Russian Europe. However, the Kremlin cut off from their gas heating touched oil resources thought
to charity anyway and then change the law. economic power shift to the deal represents an abrupt about- is striking back by beefing up in the depths of winter. to exist in Eastern Siberia; seri-
benefit of three Central Asian face for the Kremlin, which has its own energy transport infra- With the gas transport prob- ous exploration of the region
countries and China and to the traditionally been very wary of structure. lems well in hand, the Kremlin will begin this year.
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Global
In Focus New technology may end years of
Experts believe unconvention- and that the environmental con-
al gas resources could add as sequences, such as intensive
Russia
political wrangling over gas supplies
much as another 250 percent to water use, are often over-
world gas reserves, some of that looked.
Business
You Can Be Sure of Shale
in “stable” areas like Europe. That’s actually true. Hydrau-
The International Energy Agen- lic fracturing involves injecting
cy estimates Europe’s reserves a mix of water and chemicals
of such unconventional gas at at high pressure in order to cre-
Calendar
Western countries hope of gas could one day render the he said. 1.24 quadrillion cf, which is ate fractures in the hard rocks
advances in drilling can end fight for control over the gas By some estimates, the Unit- much less than in North Amer- and get the gas out. Industry
dependence on Russia’s pipelines meaningless. ed States now has more than ica or Russia but still enough to and environmental groups
natural gas, but Gazprom’s The gas industry’s “quiet rev- 2,000 trillion cubic feet (cf) of replace 40 years of gas imports argue this process has a signif-
LENEXPO 2010: High Tech, experts are quick to point out olution,” as Tony Hayward, chief gas available, giving it more at current levels. icant environmental impact. As
Innovations and Investment flaws. executive of BP, described it at than 100 years of supply and ExxonMobil, which in De- well as using lots of water, the
March 10-12, St. Petersburg an October gathering of indus- transforming it in one fell stroke cember shocked the markets by fracturing fluid could contam-
Lenexpo is one of the first events in Russia
NICHOLAS WATSON
try players in Buenos Aires, into a gas self-sufficient country announcing a $41 billion take- inate water supplies—and
to promote high tech and investment proj-
BUSINESS NEW EUROPE
began in North America, where if concerns about environmen- over of U.S.-based independent could even induce seismic
ects, as well as interaction between sci- new techniques such as hori- tal impact lessen. By compari- gas producer XTO Energy, has events.
entific organizations and enterprises, with European capitals spent much zontal drilling and hydraulic son, Russia’s reserves of conven- already drilled for shale gas in Such concerns prevented a
industries and potential investors. of the past decade fretting fracturing have allowed energy tional gas, the largest resource Germany, and is looking at drill- U.S. gas firm from drilling for
www.restec.ru/exhibitions/featured/hi-tech/ about energy security and the firms to access hard-to-get-at in the world, are just over 1,529 ing more wells in Hungary and shale gas in an area of New York
index.html continent’s over-reliance on Rus- deposits of unconventional tight trillion cf, according to BP. Poland. ConocoPhillips is also state. Luckily for European pol-
sia, especially for its gas, which and shale gas, as well as coal- Antonio Brufau, executive looking at Poland in a joint ven- icymakers, the most promising
Moscow used to great effect as bed methane (CBM), at much chairman of Spain’s Repsol, said ture with Lane Energy. reserves are to be found in the
Find more in the “Business
political leverage. lower costs than thought pos- the magnitude of the world’s Alexander Medvedev, Gaz- countries that are most worried
Calendar” at www.rbth.ru
However the prospect of sible five years ago. In some unconventional resources prom’s deputy chief execu- about Russia’s baleful influence
using new technology to de- cases, the costs are now lower “changes any long-term view tive, said there are many myths on their energy supplies, like Po-
velop unconventional sources than in conventional projects, on the industry.” surrounding shale production land and Ukraine.
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Infrastructure Pipelines to outlast national oil and gas reserves
Corrosion Becomes Problem of the Past
JurePromConsulting, a method ensures three to five sive and inefficient because mol- struction and other industries. tection provided today will
Russian consultancy firm, times better corrosion protec- ten aluminum is very aggres- “It is high time Russia began translate into safety tomor-
recently presented a tion for oil and gas infrastruc- sive,” he added. “The adopting modern methods of row.”
corrosion-resistant ture. conventional method of hot-dip protecting rolled steel products Based on the most conserva-
technology that could According to Bodycote, a galvanizing was developed over against corrosion,” said Yakov tive estimates, the economic
increase the service life of U.K.-based provider of thermal 50 years ago. It causes environ- Usherenko, deputy chief engi- benefit of introducing the alu-
steel structures to 90 years. processing services, the new mental pollution and provides neer at the West Siberian Iron minum-based coating technol-
method can extend the service only a short-lived protection.” and Steel Works. “Out of the ogy in Russia alone could be as
VICTOR KUZMIN
life of steel structures from the The new technology boasts 90 million tons of steel pro- high as $5 billion per year. Ac-
RUSSIA NOW standard period of 20 years up a simple design and avoids pol- duced annually in Russia, 15 to cording to Hogan & Hartson,
to 60–90 years depending on lution because it uses a negli- 20 percent is destroyed by cor- a leading global intellectual
JurePromConsulting’s new cor- the level of corrosion of the op- gible amount of chemical solu- rosion. We need to introduce property expert, the potential
rosion-resistant technology has erational environment. tions and operates as a international standards regard- market for the AlumEco tech-
the potential to eliminate the “The sulphur contained in oil closed-looped system. It is also ing acceptable areas of appli- nology developed by JureProm-
problem of aging gas infrastruc- and gas as well as the chlorine cheaper than the zinc-based cation for specific steel grades Consulting is estimated at about
ture in Russia. According to ions in sea water are highly cor- technology and will not increase and sections based on their cor- 1.8 billion tons over the next
state-owned monopoly Gaz- rosive. In these media, alumi- the cost of steel structures. rosion resistance and operation- 10 years in five major steel pro-
prom’s experts, the country’s num coating keeps the steel Noteworthy among the ad- al safety. Architects are not the ducing counties—the United
gas reserves will approximately pipe intact for a much longer vantages of the new method only culprits to be blamed for States, Germany, China, Brazil
last another 60 years. Utilizing period than zinc. Replacing zinc are its high productivity, much multiple accidents involving col- and India. By replacing the con- ALEXANDER MIRIDONOV_KOMMERSANT
the technology, new pipelines— with aluminum will be a more lower cost, compact equipment lapsed buildings. Time and ventional methods with the in- The laying of the Nord Stream pipeline begins in Babaevo, Russia.
such as the Nord and South efficient solution than, for ex- and multiple potential applica- harsh environment take their novative technology, the indus-
Stream routes—could function ample, increasing the thickness tions across a wide range of toll, too, eroding the joints be- try can potentially realize cost
without major repairs almost of the zinc layer,” explained proj- products and treatable alloys. tween structural steel compo- savings of more than $14 bil- lines are between 10 and 20 years, the company has spent
until the end of the century. ect leader Kirill Kulakovsky. The technology provides a nents that have no protective lion. years old, and another 18 per- colossal amounts on upgrades
Scientists at Bodycote Inter- “Aluminum-based corrosion strong basis for a fundamental coating. Thus, it is important to Gazprom estimates that 38 cent are over 30 years old. With and maintenance. This could
national confirmed that the new solutions have been very expen- overhaul of metallurgy, con- recognize that corrosion pro- percent of its cross-national pipe- an average life of around 30 soon come to an end.
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