Invest in Russia — invest in Russian regions!
All analytics

The Development of Natural Gas Demand in the Russian Electricity and Heat Sectors

Research
10 September 2018
Развитие спроса на природный газ в отечественных секторах электроэнергетики и теплоснабжения
Source
Release date
08/06/2018
Open PDF

Natural gas supplies to Russia’s domestic market are about twice the size of supplies to its export markets. Most of the gas supplied to the domestic market is used for electricity and heat production, which account for about 50 per cent of domestic natural gas consumption — more than 200 bcm annually. Natural gas demand in this sector is highly influenced by the economic situation in the country, fuel pricing policy, and energy policy and regulation. While the economic situation shapes electricity demand (as most of this demand comes from industrial consumers), natural gas demand for electricity production is subject to inter-fuel competition between coal and natural gas, and inter-technology competition between nuclear and gas power plants. The latter is affected by capacity support mechanisms.

Heat demand in Russia is declining due to the implementation of the Law on Energy Efficiency, which obliged consumers to assess energy efficiency and install heat metering systems. The implementation of the Heat Reform, which came into force in July 2017, included heat tariffs which should incentivize consumers to use heat more efficiently. The reform also aims to increase heat production efficiency and gradually renovate obsolete heat supply systems.

Inter-fuel competition between natural gas and coal will remain at its current level, meaning a prevalence of natural gas in the western and central parts of Russia, and a dominance of coal in Southern Siberia. Although coal prices are low and unregulated, power and heat produced using coal becomes high-cost due to delivery costs from coal production areas, operational costs related to coal storage, and the capital costs of coal power plant technology.


Based on an overall analysis of the sectors, the Oxford Institute experts suggest that natural gas demand for the power and heat sectors is not likely to change considerably from its current level. In the most probable scenarios, power demand for gas should increase by 24 bcm, while the decrease in gas demand for heating purposes in the conservative scenario will be a little above 20 bcm. Therefore, the increase in gas demand from the electricity sector will be compensated by a decrease in demand from the heat sector.


Anlytics on the topic

All analytics
Research
4 September 2022
A New Era for Fuel Retailers

The report by BCG studies the current trends in fuel retail and the strategies fuel retailers will need to implement promptly to survive and thrive under the monumental threats they face.

Research
23 October 2020
After the Initial Oil Rebound: What Next for Market Fundamentals and Prices?

The Oxford Institute For Energy Studies has prepared a forecast study on the development of the oil industry and the impact of a number of factors, in particular, the COVID-19 pandemic on the oil market and oil prices.

Research
21 April 2020
Three Crisis Scenarios: A Forecast

The Center for Macroeconomic Analysis and Short-term Forecasting (CMASF) has produced a study about the impact of the coronavirus pandemic, the oil prices plunge, and the global cyclical crisis on the Russian economy.

Articles
31 January 2018
Russia and Morocco: New Cooperation Opportunities

This article by Dmitry Medvedev is devoted to the prospects for cooperation between Russia and Morocco and is timed to his visit to this country.