US fracking has challenged the Kremlin’s hold on the global gas market and Russia is keen to regain its share, say analysts
The US overtook Russia as the world’s top natural gas producer in 2009 (Pic: www_ukberri_net/Flickr)
By Alex Pashley
Shale gas is upending global energy politics. As fracking offers a cheaper source of power and Europe independence from Russian energy exports, Moscow is concerned.
Last year, then-Nato chief Anders Rasmussen accused Russia, the world’s second-largest producer of natural gas, of spreading misinformation to destabilise shale.
President Vladimir Putin said Russia needs to “rise to the challenge” of the changing market in 2012. In other words: if you can’t beat ’em, join ’em.
Russia is being pushed towards tapping shale and its other abundant unconventional gas deposits to preserve its stake in the global energy mix, experts say.
Holder of the world’s largest natural gas reserves, the country could have up to 2.5 times the amount in unconventional reserves – shale, hydrates and coal-bed methane – as conventional supplies, Gazprom estimates.
Russia still holds five times the US’ natural gas reserves with 44.6 trillion cubic metres (tcm), according to BP’s 2014 statistical review.
Just 3% of the approximate 680 tcm of unconventional is shale. And 90% of total unconventional resources are located on the Asian side of the country, from the Ural Mountains through Siberia to the remote Arctic regions.
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Ten years after the US shale boom began, Russia is at least 15 years off commercial production, according to government projections. And amid plentiful supplies of natural gas, it doesn’t yet make economic sense, though geopolitical factors are weighing in.
“Although the present conjuncture is not conducive to investments in the still locally unproven and expensive methods of obtaining energy resources, Russia is developing its unconventional gas industry more and more boldly,” according to a policy brief by the Polish Institute of Foreign Affairs (PISM).
“The change in Moscow’s strategy is essential if the country is to maintain a strong leadership position among gas producers, as well as for the attainment of Russia’s geopolitical aspirations,” wrote analysts Zuzanna Nowak and Sonia Boczek.
Gas companies hail shale as a transition fuel, which can reduce greenhouse gas emissions by replacing dirty coal. But campaigners warn of the danger of locking in further fossil fuel-based development, rather than embracing clean energy.
Russia has come under scrutiny for being weak on climate. Russia’s pledge to cut carbon by up to 30% by 2030 from 1990 levels was criticised as “conservative”, while observers questioned its use of vast carbon-storing forests, making the target easier to reach.
Gas from coal-based methane and shale, for example, could fulfil domestic needs as Gazprom sees production decline 25% by 2020 and 75% by 2030, according to the brief.
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And as the IEA forecasts global demand for gas to rise 50% by 2040, Russia needs to embrace new technologies to retain its fifth share of the global gas market.
Sliding sales in Europe as it weans itself off Russian dependency with Energy Union, push it toward Asia where it can gain access to the latest Western technologies, withheld by sanctions over aggression in Ukraine.
While energy companies, Gazprom, Rosneft and Lukoil have expressed interest in exploring unconventional deposits, foreign investment and expertise is required for any scale-up.
Russia is looking toward Asian economies, from Indonesia and Vietnam to India and China, who are conducting research programmes in their own territories, as it pivots away from old markets in Europe, the brief said.
Even Russia and Japan may move past historically tense relations and partner in trading Japanese experience for Russia’s accessible hydrates deposits.
“To be able to lay claim to the status of gas power in the future, and to maintain its geopolitical influence in the world by trading gas skilfully, Russia is already being forced to take steps aimed at including unconventional gas in its portfolio.”