1. INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES
Andrey Kolpakov facebook: a.yu.kolpakov
ENERGY SECTOR IMPACTS ON
THE ECONOMIC GROWTH IN RUSSIA:
OIL CASE
LV session of French-Russian Seminar Paris 2018

2. Energy sector impacts on the economy dynamics in Russia2
Energy sector impacts on the economy dynamics in Russia
Energy sector share of the main macroeconomic indicators in 2017
GDP
Exports Investments
Fedral budget revenues Consolidated budget revenues
Employment
32%
59%
41%
48%
31% 7%
Direct contribution
Interindustry interactions
The Russian energy sector
remains one of the key factors of economic growth
guarantees budget and macroeconomic stability
INSTITUTE OF ECONOMIC FORECASTING
Source: IEF RAS estimations
RUSSIAN ACADEMY OF SCIENCES

3. Economic potential of the Russian energy sector3
Economic potential of the Russian energy sector
Economic potential of the Russian energy sector is rental income generated. It may be used in different ways:
taxes to finance the socio-economic politics of the government
low domestic prices for energy sources to provide competitive advantages for national producers
energy sector income to finance its demand for the national goods and services
In Russia, first option is used primarily.
Oil case is the most representative:
“export parity” pricing mechanism was applied In the beginning of the 1990s, which caused a significant decrease in the competitiveness of most non-energy sectors
ever-increasing fiscal burden forces the oil companies to work hard on their operating efficiency, choosing more competitive imports, which breaks domestic interindustry interactions
“oil dollars” from petroleum exports make it possible to import the necessary goods that the Russian economy is not
able to provide
INSTITUTE OF ECONOMIC FORECASTING
RUSSIAN ACADEMY OF SCIENCES

4. Weakening of the ruble increases the oil tax revenues to the budget4
Weakening of the ruble increases the oil tax revenues to the budget
Urals price and Rub
Urals price in Rub
Rub/bbl
5500
5000
4500
4000
3500
3000
2500
2000
120
100 80 60 40 20
Urals, USD/bbl
USD/Rub
2014 Jan
2014 July
2015 Jan
2015 July
2016 Jan
2016 July
2017 Jan
2017 July
2018 Jan
2018 July
2014 Jan
2014 July
2015 Jan
2015 July
2016 Jan
2016 July
2017 Jan
2017 July
2018 Jan
2018 July
USD/Rub rate was traditionally in antiphase to the Urals price. It allowed to “smooth out” external market fluctuations for the Russian economy. But in the period of summer 2017 – march 2018 ruble was stable at rising oil price. And since march ruble is weakening at rising oil price
As a result, the Urals price exceeded 5 thousand rubles per barrel in the august This is approximately 30% higher the levels of when oil price was about 100 USD/bbl
INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES
Data Source: Ministry of Economic Development of the Russian Federation

5. Weakening of the ruble increases also domestic gasoline price5
Weakening of the ruble increases also domestic gasoline price
Factors of gasoline price change in 2018, rubles per liter
Responsibility for the gasoline price growth
+1.7
The only factor that restrained the gasoline price growth was decrease in gas station income
+3.1
-2.7
43.8
39.8
+5.8 rubles per liter
Gasoline price in 2017
World oil price increase
Strengthening of the ruble, which hadn't happen
Weakening of the ruble
Taxes increase
Decrease of the retail segment income
Gasoline price in may 2018
-2.2 rubles per liter
State responsibility (currency rate, taxes)
Oil companies responsibility (gas stations income)
INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES
Source: IEF RAS esVmaVons

6. 6
Tax maneuver
Tax maneuver impact on the incomes of state budget and oil sector in 2024 (in comparison with the current tax regime)
trillion rubles
1,5
State budget Oil sector
It is said that the main reason for the Tax maneuver is the need to remove export duties as the customs barriers to trade inside the Eurasian Economic Union 1
0,5
Nevertheless, the parameters of the Tax maneuver are adjusted in a way to guarantee additional tax revenues to the state budget
-0,5 -1
Urals price in 2024, USD/bbl 40 50 90
100
INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES
Source: IEF RAS estimations

7. Oil produc9on becomes more difficult7
Oil produc9on becomes more difficult
Changes of the main oil production indicators in
Drilling and wells efficiency
th ton
th m
4,0
Oil production
+11% 8
Investments (in constant prices)
+44% 7
3,5
New wells
+57% 6
3,0
Drilling
+100% 5
2,5
Horizontal drilling
+620% 4
2,0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Additional production by new well, th ton
Drilling per well, th m
Oil companies need more money to invest
If they have money they will invest
INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES
Source: IEF RAS estimations

8. Oil producIon scenarios8
Oil producIon scenarios
Oil production and investments scenarios up to 2025
mln ton
600
bln rub (2015)
2500
We should focus on the increase in oil production. The challenge is to use potential
of higher investments (in recent years imports-share of investments is 50-60%)
550
2000
500
1500
450
1000
400
500
INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES
Source: IEF RAS estimations

9. Potential for GDP growth due to the energy sector in Russia9
Potential for GDP growth due to the energy sector in Russia
Potential additional contribution of energy sector in average annual Russian GDP growth rate in is
1.33 percentage points
Potential additional contribution of energy sector in Russian GDP in
1.33
0.54
Increase in oil producOon up to 600 mln ton 51
trln rub
(in prices of 2018)
Additional GDP growth rate due to economic potential of Russian
energy sector
Increase in coal production up to 560 mln ton + Railway infrastructure
Increase in natural gas production up to 800 bcm Decrease in the dependence on imports
of equipment
Power sector modernizaOon Infrastructure for oil and gas exports
0.24
0.2
0.3
Economic inertia
Increase in oil production up to 600 mln ton
Increase in coal production up to 560 mln ton + Railway infrastructure Increase in natural gas production up to 800 bcm
Decrease in the dependence onimports of equipment
Power sector modernization Infrastructure for oil and gas exports
INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES
Source: IEF RAS esOmaOons

10. Thank you for your a2en3on
10 Taxation of electricity consumption
Thank you for your a2en3on
Andrey Kolpakov
IEF RAS
facebook: a.yu.kolpakov
Key points
The Russian energy sector remains one of the key factors of economic growth. It guarantees budget and macroeconomic stability
There are different ways to use the economic potential of energy sector. Russia focuses on the tax collection to finance the socio-economic politics of the government. Such a strategy restricts economic growth in Russia
Increase in oil production seems to be the most adequate scenario for Russia. But there are two challenges:
profitability of new production projects and b) effective use of higher investments potential
Energy sector is able to provide additional 1.33 percentage points of Russian GDP growth rate in a short- and medium-term. It may be a factor of starting and maintaining the economic growth in Russia
INSTITUTE OF ECONOMIC FORECASTING RUSSIAN ACADEMY OF SCIENCES