Russian energy economy: results of 2015

2015 was a difficult year for Russia, which was dependent on exports of oil and gas. Pavel Zavalny, Chairman of the State Duma Committee on Energy, explains that exports account for more than 70% of the Russian budget. “Recently the revenues from the oil and gas exports to the federal budget accounted for more than 50%, currently this figure is less, because the share is falling. At the same time, the dependence of the subjects of the federation is very largely based on how the federal budget is filled with income, it is very high. We have only 8 donor regions, the remaining regions are subsidized. And in fact this means grants, subventions for the development of the economy, for social issues. The federal budget resolves these issues. It is clear that as long as it is fulfilled with income, you can afford expenditures.”

Russia has been living in the conditions of the oil price crisis for the second year, with a federal budget deficit. “The deficit is about 3%. The deficit is covered by the reserve fund, which was created specifically during the era of high prices. We felt that having such a high dependence on oil exports, on oil prices, occasionally, once in 15-20 years there are such oil price crises. We had to be ready for this. Thus the reserve fund was created. And this is the second consecutive year of the budget deficit – 2.2 trillion last year, this year somewhere around 2.4 trillion will be covered at the expense of the reserve fund. Still there will be somewhere around 1.7 trillion, so to speak, it will be enough for the first half of next year,” Zavalny says.

According to him, “if the average price during the next year will be less than $50 per barrel, it will be necessary to make a decision. Whether to spend the reserve fund further to increase the budget deficit or reduce the expenditure commitments of our budget… At the same time, our oil and gas industry has entered record volumes of the oil and natural gas condensate production. We expect somewhere around 530-533 million tons. This year’s investments in the oil and gas industry to maintain the production amounted to about 20% in rubles. You know that the amount of reserves is deteriorating year after year, and the cost of oil increases is objective. In our country and around the world, we are no exception. The increasing share of the production takes the recoverable oil reserves. It is around 8% of total production, 80% for North America – Canada and the United States are primarily engaged in the extraction of the recoverable oil reserves.”

Zavalny says that the oil industry works with reserves: “Due to investment, there was growth this year, despite the crisis, the devaluation. As regards the gas sector, the production is determined by demand. That demand, which is internal and external, is 100% guaranteed. Overall energy works, I think, very stably, with a good margin.”