SP 3 . 1 : Russia ’ s Natural Gas Export Potential up to 2050

Recent increases in natural gas reserve estimates and advances in shale gas technology make natural gas a fuel with good prospects to serve a bridge to a low-carbon world. Russia is an important energy supplier as it holds the world largest natural gas reserves and it is the world’s largest exporter of natural gas. Energy was one of the driving forces of Russia’s recent economic recovery from the economic collapse of 1990s. The country enjoyed more that 5 percent annual real economic growth for the period of 20002008. The robust growth with ever increasing energy prices had contributed to a sense of a long-term economic stability in Russia. These prospects have changed drastically with a global recession, and the resulting reduction in demand for fossil fuels, and the collapse of oil and gas prices from their peaks of 2008. An additional factor is an ongoing surge in a liquefied natural gas (LNG) capacity and a development of Central Asia’s and the Middle East gas supplies that can compete with Russian gas in its traditional (European) and potential (Asian) markets. To study the long-term prospects for Russian natural gas, we employ the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy. While we consider the updated reserve estimates for all world regions, in this paper we focus on the results for Russian natural gas trade. The role of natural gas is explored in the context of several policy assumptions: a reference case with no greenhouse gas mitigation policy and scenarios of emissions targets in developed countries where they restrict their greenhouse gas emissions to 50 percent relative to 2005 by 2050. Scenarios where Europe takes on an even more restrictive target of 80 percent reduction of greenhouse gas emissions relative to 2005 by 2050 and reduces its nuclear-based generation are also considered. Asian markets become increasingly important for natural gas exports and several scenarios about their potential development are considered. We found that over the next 20-40 years natural gas can still play a substantial role in Russian exports and there are substantial reserves to support a development of the gas-oriented energy system both in Russia and in its current and potential gas importers. In the Reference scenario, exports of natural gas grow from Russia’s current 7 Tcf to 10-12 Tcf in 2030 and 15-18 Tcf in 2050. Alternative scenarios provide a wider range of projections, with a share of Russian gas exports shipped to Asian markets rising to 30 percent by 2030 and more than 50 percent in 2050. Patterns of international gas trade show increased flows to the Asian region Thanks are due to Elena Kalinina, Qudsia Ejaz, Henry Jacoby, John Reilly, James Jensen, Jonathan Stern, Loren Cox and participants of the International Conference on Economic Modeling in Istanbul, Turkey and The Third International Conference Energetika XXI in St. Petersburg, Russia for their useful comments. The EPPA model used in the analysis is supported by a consortium of government, industry, and foundation sponsors of the MIT Joint Program on the Science and Policy of Global Change (http://globalchange.mit.edu) Contact: [email protected]