Energy Fact Sheet: Why does Russian oil and gas matter?
One of the world�s top oil producers and exporters

Russia is a major player in global energy markets. It is one of the world�s
top three crude producers, vying for the top spot with Saudi Arabia and the
United States. Russia relies heavily on revenues from oil and natural gas,
which in 2021 made up 45% of Russia�s federal budget.

In 2021, Russian crude and condensate output reached 10.5 million barrels
per day (bpd), making up 14% of the world�s total supply. Russia has oil
and gas production facilities throughout the country, but the bulk of its
fields are concentrated in western and eastern Siberia. In 2021 Russia
exported an estimated 4.7 million bpd of crude, to countries around the
world. China is the largest importer of Russian crude (1.6 million bpd) ,
but Russia exports a significant volume to buyers in Europe (2.4 million
bpd).

Russia produces several different types of crude oil, but its main export
blend is Urals, which is a medium sour crude. It also exports large volumes
of ESPO blend crude crude to Asia, via the East Siberia-Pacific Ocean
(ESPO) pipeline. Other grades include Siberian light, Sokol, Sakhalin
blend, Arctic oil and Novy Port.

While the Russian oil industry has seen a period of consolidation in recent
years, several major players remain. Rosneft, which is state-owned, is the
largest oil producer in Russia. It is followed by LUKOIL, which is the
largest privately owned oil company in the country. Gazprom Neft,
Surgutneftegaz, Tatneft and Russneft also have significant production and
refining assets.

Russia has extensive crude export pipeline capacity, allowing it to ship
large volumes of crude directly to Europe as well as Asia. The roughly
5,500 km Druzhba pipeline system, the world�s longest pipeline network,
transports 750,000 bpd of crude directly to refiners in east and central
Europe. At present, Russia supplies rougly 20% of total European refinery
crude throughputs.

In 2012, Russia launched the 4,740 km 1.6 million bpd ESPO pipeline, which
sends crude directly to Asian markets such as China and Japan. The pipeline
was part of Russia�s general energy pivot to Asia, a strategy focused on
shifting export dependence away from Europe, and taking advantage of
growing Asian demand for crude. Russia also ships crude by tanker from the
Northwest ports of Ust-Luga and Primorsk, as well as the Black Sea port of
Novorossiysk, and Kozmino in the Far East. In addition, Russia also exports
crude by rail.

Russia has an estimated 6.9 million bpd of refining capacity, and produces
a substantial amount of oil products, such as gasoline and diesel. Russian
companies have spent the last decade investing heavily in primary and
secondary refining capacity in order to take advantage of favourable
government taxation, as well as growing global diesel demand. As a result,
Russia has been able to shift the vast majority of its motor fuel
production to meet Euro 5 (10 ppm) standards. Russia�s energy strategy has
prioritized self-sufficiency in gasoline, so it tends to export minimal
volumes. However, Russian refiners produce roughly double the diesel needed
to satisfy domestic demand, and typically export half their annual
production, much of it to European markets. In addition, Russia is a major
exporter of vacuum gasoil and heavy fuel oil. In 2021 Russian refineries
processed 5.6 million bpd of crude and exported 2.8 million bpd of oil
products. Europe remains a major market for Russian oil products. In 2021
Russia exported 750,000 bpd of diesel to Europe, meeting 10% of demand.
A giant in natural gas markets

Russia is the world�s second-largest producer of natural gas, behind the
United States, and has the world�s largest gas reserves. Russia is the
world�s largest gas exporter. In 2021 the country produced 762 bcm of
natural gas, and exported approximately 210 bcm via pipeline.

Gazprom and Novatek are Russia�s main gas producers, but many Russian oil
companies, including Rosneft, also operate gas production facilities.
Gazprom, which is state-owned, is the largest gas producer, but its share
of production has declined over the past decade, as Novatek and Rosneft
have expanded their production capacity. However, Gazprom still accounted
for 68% of Russian gas production in 2021. Historically, production was
concentrated in West Siberia, but investment has shifted in the past decade
to Yamal and Eastern Siberia and the Far East, as well as the offshore
Arctic.

Russia also has a wide-reaching gas export pipeline network, both via
transit routes through Belarus and Ukraine, and via pipelines sending gas
directly into Europe (including Nord Stream, Blue Stream, and TurkStream
pipelines) all. Russia completed work on the Nord Stream II pipeline in
2021, but the German government decided not to approve certification in the
wake of the Russian invasion of Ukraine. Russia natural gas accounted for
45% of imports and almost 40% of European Union gas demand in 2021. This
share has increased in recent years, as European domestic natural gas
production has declined. Germany, Turkey and Italy are the largest
importers of Russian natural gas.

In late 2019, Russia launched a major eastward gas export pipeline, the
roughly 3,000 km-long Power of Siberia pipeline, which has a capacity of 38
bcm, in order to be able to send gas from far east fields directly to
China. In 2021, Gazprom exported over 10 bcm of natural gas via the Power
of Siberia pipeline, with exports set to gradually ramp-up to 38 bcm in the
coming years. Russia is looking to develop the Power of Siberia-2 pipeline,
with a capacity of 50 bcm/y, which would supply China from the West
Siberian gas fields. No supply agreements and no final investment decision
have yet been reached on the pipeline, which would further lessen Russia�s
reliance on European customers for gas.

Furthermore, Russia has been expanding its liquefied natural gas (LNG)
capacity, in order to compete with growing LNG exports from the United
States, Australia and Qatar. In 2021, the government released a long-term
LNG development plan, targeting 110-190 bcm/year LNG exports by 2025. In
2021, Russia exported 40 bcm of LNG, making it the world�s 4th largest LNG
exporter and accounting for approximately 8% of global LNG supply.

In recent years, Russia has increasingly focused on the Arctic as a way to
increase oil and gas production and offset declines at existing and older
production sites. The Arctic accounts for over 80% of Russia�s natural gas
production and an estimated 20% of its crude production. While climate
change threatens future investment in the region, it also presents Russia
with the opportunity of increasing access to Arctic trade routes, allowing
for further flexibility for seaborne deliveries of fossil fuels,
particularly to Asia.