Russian oil and gas subsidies create energy wastage equal to UK’s total demand

At least six percent of Russia’s oil and gas industry in 2010 was subsidized through direct and indirect government aid that leads to inefficient energy consumption, enough to fuel the entire United Kingdom, according to a study released Monday by non-governmental organization, WWF Russia.

WWF identified thirty different schemes of government subsidies, seventeen of which were indirect and included use of government infrastructure that amounted to a value of US$8.1 billion in 2009 and US$14.4 billion in 2010, or 4.2 percent and 6.0 percent respectively of the total value of oil and gas production in Russia, according to the WWF.

Two schemes in particular comprised almost half the total value of subsidies in 2010, according to the WWF. These were an export duty exemption for new oil fields in Eastern Siberia the WWF estimated was worth approximately $4 billion with tax holidays for mineral extraction again in Eastern Siberia worth a further $2 billion.

At issue for the WWF is that the subsidies only stimulate new field development including in the Arctic region rather than intensifying development within the energy sector as a whole.

Russia is the least efficient of OECD countries in terms of energy per output according to the US Energy Information Agency and energy saving is a critical issue, according to Mikhail Babenko, Oil & Gas Officer at WWF’s Global Arctic Programme.

“Russia has a great potential in energy saving,” said Babenko. According to International Energy Agency estimates estimates, had Russia achieved the energy efficiency of Canada, Sweden or Norway, the country could have saved over “Two hundred million tons of oil equivalent (approximately 1.5 billion barrels of oil equivalent) from its primary energy demand, equal to 30 percent of its consumption,” said Babenko.

Babenko concluded that this was the equivalent to the UK’s total primary energy in the same year.


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