A Brief Summary of Russian Petroleum and Natural Gas: Sasha Klebnikov 9/10/13

Russia has the largest reserves of fossil fuels, is the largest Natural Gas exporter and is the largest oil producer in the world. Only recently has the US begun to rival it, though the USs reserves are will only last 20 years at current rate of use. The map above has most of the relevant gas pipelines for Russia, and we will assume that Oil pipelines are sistered with the Gas Pipelines for simplicity.

There are three stages in exporting Petroleum and Natural Gas (they are usually found in the same well). First a company must find, acquire and drill reserves. This requires substantial risk, knowledge of the local environs, some sophisticated technology and a large amount of luck. Once the reserves have been tapped, the next stage is transport. Large pipelines are set up, often running for thousands of miles. To increase efficiency, all reserves in a single area (ie the Yamal Peninsula) will share the same pipeline, so there are only a few key lines. These pipes are approximately 4 inches wide, and often buried underground. The last stage of exportation is refining the product. While Natural Gas comes out almost usable, it is treated to remove water and add the obnoxious smelling chemicals. Petroleum is fractionally distilled into useable products such as Gasoline/Petrol, Kerosene, Diesel Oil or Paraffin Wax. This happens are large refineries, primarily west of the Urals.

Primary Companies: For Natural Gas, Gazprom is Russias state run monopoly. It is the worlds biggest exploration and production company. They have recently made a tactical decision that the reserves in the Yamal Peninsula (not indicated on the Green Map of Russian Oil and Gas Provinces, but directly under the Kara Sea) will be their primary production fields. This area is estimated to have the worlds single largest reserves, yet they are currently untapped. Novatek is the largest independent natural gas producer, though a much smaller player.

Transneft is a state-owned company with a near monopoly on the petroleum pipelines around Russia (93%). Transneft often operates as a contractor, taking requests and plans from other companies in laying down future infrastructure. Its head, Nikolai Tokarev is a close friend of Putins from their days in the KGB together. Transneft was exposed in 2010 for embezzling over $4 billion by Alexei Navalny, which was how the young

journalist made his name.

For Oil, the state owned Rosneft is the largest company, followed by Lukoil, Surgutneftegaz, Gazprom Neft and Tatneft. The status of all of these companies is constantly changing, as Itera purchased a 49% stake in Sibneftegaz (a shareholder in Novatek), but then was purchased by Rosneft in 2013. To this end, it is suggested for ones sanity to trace only a single company's history, not the entire conglomerate.

European Market: The primary Natural Gas pipelines for Europe are the Northern Lights pipe (51 billion cubic meters per year through Belarus), the Nord Stream underwater through the Black Sea, and South Stream which should come online in mid-2014 and transport 63 billion cubic meters across the Black Sea to Bulgaria and further to Greece, Italy and Austria.

For petroleum, Russians three primary outputs are the Baltic Pipeline System that sends over 75 million tons per year to just outside of Leningrad. The Druzhba system (Druzhba means friend) was designed to supply the Eastern Bloc, and runs for over 4000 miles, pumping 70 million tons per year. The Caspian Pipeline Consortium is the only Petroleum pipeline not entirely owned by Transneft, and pumps 40 million tons per year.

Far East Market:

Most Far Eastern fuel products come via tankers, using the primary hub of Indonesia (which moves over 200 billion cubic meters per year). However, in the face of global energy instability and rapid growth, China, Korea and Japan are

looking to diversify their supply, especially from very stable pipelines. To this end, deals that bypass the congested Straits of Malacca, whether Russian from the North, Russian or Kazakhstani from the Black Sea, shipping tar sand products from Canada or a recently completed pipeline across Burma, to bypass Indonesian influence.

The fully operating Sakhalin-Khabarovsk-Vladivostok goes from the island of Sakhalin to China and transports 36.5 billion cubic meters of Natural Gas per year. For petroleum, the massive Eastern Siberia-Pacific Ocean pipeline sends over 90 million tons per year to Japan, Korea and China. Russian companies distribute to all three countries, and use their competition to keep prices high and maintain leverage in the region.

However, to ramp up constant exports, there are two competing plans from Kazakhstan and Russia: the Central Asia-China pipeline and the Altai Gas pipeline. These would both supply approximately 25 billion cubic meters of Natural Gas. Significantly, the Kazakhstani pipeline is largely built and approved. Current estimates suggest it will go online in 2015. By comparison, Putin wanted the Altai Gas Pipeline to become the primary source, but it can only be completed in 2016.