In the next few years, three new power stations with a total capacity of 2.4 thousand MW will be finished in Eastern Siberia, including the Lensk TPP in Irkutsk oblast. This project is a joint venture between the largest private Russian energy company “EuroSibEnergo” (part of the En+ Group) and China Yangtze Power Company (CYPC). The details of this collaboration were presented by the president of En+ Group, Oleg Deripaska, in Irkutsk in September 2011. Whether the Siberians will be able to take advantage of this window of opportunity and become part of the rapid development of Asia-Pacific countries in this region is one of the most important issues on the regional agenda.
As stated by Andrey Kokoshin from the Russian Academy of Science, the economic development of these regions must be accompanied with closer cooperation between Russia and countries in the Asia Pacific countries. Oleg Deripaska agrees with the scientist; in his opinion, the main question that the authorities and large business should ask themselves is how they can integrate into the development of Asian countries: “The decision needs to be made as to how to handle the external market competition, which product to use, what depth of processing this product should have, what kind of infrastructure we require and what type of production we could create”, he comments.
Despite the common opinion that Siberia is the country’s storage room, the actual share of the Siberian Federal District in the county’s GDP is quite low – a little over 10%, Deripaska reminds us. The economy’s growth rate since 1997 has been behind that of the national average and there is a permanent rural migration of population from the regions. “The horse goes where its head is turned. If Moscow’s head is facing Europe, there are no incentives, expectations or opportunities we could use to move towards Asia. We have to review the ideology of our development very carefully”, Deripaska says.
The rapid industrial development of China, Korea and our other Asian neighbors creates demand for various resources that Siberia possesses. Including energy.
Let’s remind ourselves that last year EuroSibEnergo and CYPC founded a joint venture – YES Energo – for the realization of energy projects in Eastern Siberia. The matter in hand was the construction of up to 10 GW of new capacity. By 2020, two new power stations are planned for construction – the 660 MW Nizhne-Angarsk in the Krasnoyarsk Territory (to be launched in 2019-2020) and the 516 MW Transsiberian PP on Shilka river in Transbaikalia (planned to launch in 2014-2018). Besides these, Lensk TPP will be built near Angara, which is meant to run on associated petroleum gas. The capacity of this station will be 1260 MW and its launch is scheduled for some time between 2014-2018. The investments for the construction of the two HEPS will comprise $1.08 bln. and $1.55 bln., respectively, and the thermal power plant will cost about $2 bln.
The construction of energy infrastructure which would connect Siberia with Asia is also important for optimization of the regimes, Oleg Deripaska noted: “Collaboration with China will allow for optimization of today’s regimes and earning the financial means for the further the development of the energy infrastructure”. Thus far, such collaboration has been weak: only a single oil pipeline has been launched and two gas projects have been in discussion for some time now but with no concrete developments. Meanwhile, issues of pre-emptive infrastructure development in the region must be handled promptly. “Without a serious plan, without clear procedures and incentives, without forward investment into the infrastructure, these dreams will remain just that. But the cycle of economical development is not everlasting: in 15 years time, the Asian economies will make the transition to the next phase, with a different volume of resource consumption”, says Deripaska.
The development of Eastern Siberia is slow due to the absence of infrastructure, including not only networks and roads but also the social factor and a shortage of experienced manpower. “For the railway transport to comply with the types of projects that are under development in our region, the investments required over the next five year period are up to 60 billion rubles” – Deripaska stated. Investments only by “Russian Railways” just won’t suffice. Meanwhile, the current mechanism of creating investment from tariff alterations, when the consumer finances the monopolies’ investment programs will not work for Siberia, Deripaska believes. “The volume of investment that we require today cannot be shifted on to the consumers. The solution would be using external loans, federal budget and pension fund financing which would be placed into long-term securities” he reflects. Apart from the new financing mechanism for large investment projects, long-term tariffs for electricity and railroad transportation are needed, as well as transparent and steady regulations to entice foreign investors. “Long-term thought-out programs are needed, – Deripaska emphasized, – They [APAC] are already building new cities and we’re still believing they will always depend on our resources”.
Over the next 20 years, Asia will retain a high rate of economic grown due to continuing industrialization and urbanization. As for what this growth will be, there are a few viewpoints, noted Petr Shchelrovitskiy, deputy general director for strategic development of SC “Rosatom”. If the APAC countries follow the western example, then the demand for resources will grow exponentially. However, they might build their own resource portfolio and strive for the most rapid transition to effective consumption of resources, and then the economic growth will not require the same exponential consumption as with other earlier stages of development. One fact in favor of this method is that just about all the countries and large companies have adopted long-term programs on increasing the share of renewable resources. “Nowadays it is these Asian metropolises that demonstrate using the most modern solutions for energy-efficient buildings and urban mobility and are trying to adhere to international ecological standards” – the expert pointed out. It is entirely probable that Asian countries will become some of the world’s primary centers for the application of modern technologies and will possibly make a transition to a new technological energy platform over 15-20 years. “The window of opportunity for us to integrate into this system is quite narrow” – Shchedrovitskiy concluded.
By their own forces
Meanwhile, the 2 billion dollar expenditure for the construction of combined cycle Lensk gas power station will be shared between “EuroSibEnergo” and the Chinese corporation China Yangtze Power Company. The only thing required from the government is to facilitate the development of the infrastructure required for the station’s capacity to become available.
Last spring the tender was announced for the construction of Lensk TPP. Recently, the general director of En+ Group holdings, Artem Volynets, informed the journalists that development of the feasibility study should be completed in the first quarter of 2012. The final launch date for the station is to be established during the preparation of the documents, however, the general director of EuroSibEnergo, Evgeniy Fedorov, addressing the audience at the international conference “Europe – Russia – APR. Energy: integration and cooperation”, made a statement about “ the commissioning period in 2015”. He clarified, however, that this relates to the station’s first stage, when capacity output will be 400 MW, whereas the full station capacity will total 1.2 GW.
“Something I would like to emphasize – we’re not asking the government for any special preferences, we’re not requesting that these objects be included into the PSA list” – Fedorov pointed out. The construction expenses that he estimated at 2 billion dollars will be covered by “EuroSibEnergo” and the Chinese national corporation China Yangtze Power. As the investments return mechanism, the power engineers suggest an individual tariff for consumers of electricity from Lensk TPP. “We have almost agreed with the key consumers which will pay for electricity as per a dedicated tariff, although it will be higher than the current tariffs” – said the general director of EuroSibEnergo.
Some of the facilities to use energy generated at Lensk TPP include Udokan copper deposit, requiring 450 MW, Chineysk iron ore deposit (100 MW), Kholodninsky mining and processing complex (30 MW), the Eastern Siberia – Pacific ocean pipeline (its power requirements after expansion of the second stage will be 80 MW) and Baikal-Amur Mainline. “The power requirements for priority projects is only 300 MW, – Fedorov noted. – As for BAM, its maximum traffic capacity now is 9-11 trains [per day], and if we launch as many as two or three large coal deposits in Tuva and Yakutia, the Mainline will simply come to a standstill. And even in the near future, its traffic capacity needs to double and allow for 20-24 pairs of trains per day. The only reason we are not able to do this is the lack of electricity”.
Construction of the Ust-Kut power station in itself will not resolve the problem, as the scheme of its power distribution needs to be arranged. Primarily, this applies to 500 kV power line from Ust-Kut to the “Chara” substation in the Zabaykalsky Krai. Its construction is included in the General scheme for the location of electric power objects through 2030 and the investment program of OJSC “Federal Grid Company of Unified Energy System”, however, it is only planned to be commissioning in 2020. “But if we do want to have Udokan in 2017 and the Chineyskoye deposit in 2018, if we want to resolve the problem of providing power for Bodaybo, then this line must be constructed by 2015” – Fedorov noted. And to emphasize his words, he went on to discuss the upsides of advanced commissioning of the power line: such as opportunities for attracting up to 10 billion dollars in private investments, the production of 70 tonnes of gold, 300 tonnes of silver, up to 500 thousand tonnes of copper and 236 thousand tonnes of zinc as well as utilization of up to 4 billion cubic meters of associated petroleum gas which would be used as fuel for Lensk TPP. “I will not repeat my conclusions, I will just say that in our view, the investment program of the FGC needs to be coordinated with our plans as soon as possible”
As the company develops, it upgrades the existing capacities. Thus, in September last year, a contract for delivery of six runners for Bratsk HEPS had been signed with the Austria’s Voith Hydro. The purpose of replacing the runners is to increasing the hydroturbines’ life and improve their performance. “The Austrian company will deliver us six runners before March 2016, the first one being delivered 25 months after the singing”, Evgeniy Fedorov stated. “We estimate that Voith Hydro runners, given the variable range of operation at Bratsk HEPS, will be more efficient and will allow us to increase the average performance efficiency by 3-4%”. Evgeniy Fedorov also noted that the process of selecting the vendor was quite long and difficult; both Russian and foreign companies participated in the tender. The contract value is about 1 billion rubles.
“We’ve been working with “Irkutskenergo” since 2001 and the Bratsk HEPS is one of the world’s largest, so for us signing this agreement is a remarkable step, – the managing director and board member of Voith Hydro GmbH&Co. KG Josef Gashl said. – We will use state-of-the-art technologies during the development and production of this equipment, which, of course, will then help reduce operational expenses”.
At the end of 2010, installation of six new runners at Bratsk HEPS which had been started in 2004 (the vendor was OJSC “Power Machines”), had been completed. The installation cost 700 million rubles and thanks to the realization of this project, the company was one of the winners at the first bid for the joint implementation under Kyoto Protocol.
