As one of the world's leading producers and exporters of oil and gas, biofuels have an insignificant share of the overall energy production matrix of Russia, with an estimated 0.9 to 1.2 percent, and biomass accounting for 0.5 percent.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Required Report - public distribution
GAIN Report Number: RS1128
Biofuels Sector Update
As one of the world's leading producers and exporters of oil and gas, biofuels have an insignificant
share of the overall energy production matrix of Russia, with an estimated 0.9 to 1.2 percent, and
biomass accounting for 0.5 percent. The emerging Russian biofuels industry is driven primarily by
growing demand from Europe.
The Russian government outlined as a national objective to make the country 40 percent more energy-
efficient by 2020. While there have been vague attempts at the federal level to promote the production
of biofuels, there are a growing number of activities at the regional level. A number of innovative
projects aimed at production of alternative energies from feed stocks such as plant cellulose (including
wood), oilseeds, and agricultural wastes, have begun to be implemented. In addition, the production of
biofuel raw materials for export (including fuel pellets, rapeseed, and rapeseed oil) has increased. The
emerging Russian biofuels industry?s export orientation is driven by the continued growing demand for
biofuels in Europe and Asia. The production of biofuels, however, is still small and has no impact on
Russia?s domestic grain and oilseed prices. Experts believe that without government support the
biofuels sector will remain insignificant in Russia.
Due to its abundance of petroleum and natural gas, Russia produces small amounts of biofuels and has
minimal domestic demand. Current biofuels projects in operation are mostly supported by regional
governments and financed by foreign investors. In most cases they are pilot research projects that
produce small amounts of biofuels for generating heat and/or electricity for a facility. Currently there is
no industrial production of either bioethanol or biodiesel in Russia. Different sources estimate the share
of renewable energies, including biofuels, in the overall energy production matrix of Russia at only 1.2
percent, with biomass accounting for 0.5 percent.
In late June, the Russian Ministry of Energy and Chinese National Bioenergy Company signed an
agreement on setting up a joint venture that will construct wood pellet production facilities in Russia. It
is planned that wood waste and biomass will be used as the raw material and the objective of the project
is construction of electrical power stations that will work on different types of biomass for generating
heat and electrical energy. The project would allow Russia to increase energy capability in the rural
territories of Russia, 70 percent of which do not have centralized energy supply. Experts believe that the
implementation of the project will help control prices of traditional energy carriers and weaken
dependency on fossil fuels.
According to the Russian Bioenergy Agency, there are pilot projects in place in 14th Russian regions on
construction of biogas facilities for processing agricultural waste. In addition, 52 regions are in the
process of developing business plans to implement similar pilot projects. According to the deputy
Minister of Agriculture Shamil Vakhitov, ?it is necessary to develop a complex program for further
development of bioenergy in Russia, including mechanism for government financial support and
Policy and Programs
Russia is still in the initial stage of establishing regulatory norms for bio energy development and
standards for biofuels. The government is slow in developing legislative norms for stimulating biofuel
production in Russia. Experts believe that without government support and other development policy
measures the sector is deemed to fail.
The Russian Government passed a resolution in January 2009 that established priorities of government
policy in the sphere of renewable sources of energy up to 2020 and outlined its objective to make
Russia 40 percent more energy-efficient by 2020. Targeted indicators are also set in applying renewable
sources in electrical energy sector.
The government has started to pursue this target by replacing incandescent bulbs for more energy-
efficient lights. The government plan stipulates the need to support small energy-generating projects,
like biofuels, by instituting a reasonable tax policy and subsidized interest rates. Currently there are no
incentives to make energy projects economically feasible.
According to the new plan developed by the Russian Ministry of Energy on the use of new and existing
power capacity until 2030, new low-capacity power plants will produce up 1.1 gigawatts (GW) in 2021
to 2025, and another 2 GW by 2030. Total new capacity planned before 2030 is 173 GW, with 6.1 GW
share from renewable energy sources that will account only 2 percent out of the total 324 GW capacity
However, experts believe that it will be difficult to fulfill the objective of such an increase, unless the
government passes a law that will require grid operators to first purchase the power from generators
using renewable resources.
The next step of the government is to improve legislation on waste management that will require timber
mills to send the waste to a biomass powered generator.
Currently there are two major legislative acts in place that stimulate the development of renewable
energy sources in Russia: 1) Federal Law ?On Electrical Energy Industry? that identifies types of
renewable energy resources and authorities of the government of the Russian Federation in the sphere;
2) Government Resolution on the priorities through 2020 for increasing energy efficiency from
renewable sources adopted by the Russian Government on January 8, 2009. The new resolution
indicates a number of measures that are aimed at improving electrical power originating from renewable
Most specialists believe that the Russian government's achievements by 2020 will be modest:
Higher construction costs of the facilities producing alternative energy in comparison with fuel-
burning power plants. The equipment for facilities producing alternative energy has to be
imported as domestic equipment production lags behind.
Domestic electricity network is not adapted to support operation of the facilities for alternative
Lack of financial support from the federal government. The government is focused on
developing programs for energy efficiency rather than biofuels.
The rising costs for energy resources and electricity has prompted the government to be more proactive
in adopting more solid legislative base for stimulating production of alternative resources. Three more
legislative acts related to production of alternative energy in Russia are currently under consideration by
the Russian government: 1) Resolution on the Order of capacity added for power-producing facilities; 2)
Resolution on criteria for distribution federal government subsidies to compensate connection cost to
facility producing renewable energy resources; 3) Resolution that stipulates order and procedures for
registering of green certificates. However, these drafts are not on a particular timetable and are
unfunded. It is uncertain if they will make it through the legislative process and become policy in the
Experts also believe that Russia has great potential in developing wind energy, although currently,
biomass has more potential in terms of economic efficiency given Russia?s enormous forestry resources.
Graph 1: Russia: Share of Total Primary Energy Supply in 2008
Total generation: 686,757 ktoe
Source: International Energy Agency (latest data available).
Status of Bioethanol/Biodiesel Projects
To date there are no official statistics on bioethanol and biodiesel production, consumption and trade.
Different sources estimate the share of biofuels production in overall energy production matrix of
Russia is 1.3 percent.
Production of bioethanol in Russia can become profitable only if the Russian government abolishes the
excise tax. High excise taxes on alcohol limits the production of bioethanol for domestic use.
Bioethanol is classified under the general alcohol category, and
Russian legislation does not distinguish bioethanol from other alcohols intended for beverages. This
contrasts sharply with other nations, where bioethanol is usually exempt from excise duties. However,
the Russian government has not moved in this direction yet due to the influence of the oil industry.
Production of bioethanol can be produced for export only since it is exempt of the excise tax.
The development of the biofuels sector is not stipulated in the National Agricultural Priority Project,
and without lack of government support, the sector is likely doomed to fail. The major reasons for the
lack of interests are the high cost of biodiesel, ambiguous government policy towards biofuel producers,
insufficient domestic demand and poor machinery not adapted to biodiesel use. Higher prices of wheat
and oilseeds worldwide are also making biofuels production less profitable.
The head of the state corporation ?Rostechnology? Sergey Chekmezov recently announced the start for
construction of the first large facility for biofuels production primarily from wood waste and sawdust.
The corporation is constructing a plant that will produce bioethanol in Tulun, Irkutsk oblast.
The long-term plan for developing the forestry sector by 2020 is to substantially increase production of
value-added forestry products. While not a priority, the Federal Forestry Agency has considered an
increase in biomass production as the main alternative for developing Russia?s biofuel sector. Recently
the Agency has developed a list of priority projects for biofuel production. There are currently 20
investors from different regions in Russia that will develop biofuels production in the near future. The
program foresees 25.8 billion rubles of investments in forestry sector related to biofuel production for
the period of 2009-2016 (see table 1 below). According to the program, total timber consumption is
estimated at 8.3 million cubic meters, while area of allowable cut is 7.9 million cubic meters.
Russia?s northwestern region offers significant potential for production of bioenergy for export to
European markets. Analysts estimate that current forestry producers use 40 percent of their allowable
forestry cut in the northeast. Total actual annual harvest is not more than 200 million cubic meters from
a potential 500 million cubic meters of allowable annual cut.
The Russian forestry sector produces about 14-15 billion MT of biomass per year, equivalent to 8
billion Toe. Various experts estimate that Russia can use up to 800 million MT of wood biomass for
energy production. In the European part of Russia alone experts estimate annual wood waste at 17
million MT equivalent to 4 million MT of wood pellets. Total wood waste volumes at forestry
processing facilities vary considerably from 5 to 60 percent depending on the processing technology of
the plant. A small number of forestry facilities utilize wood waste at the facility to generate energy and
heat; while other facilities supply wood waste and saw dust to larger neighboring forestry plants or
paper mills. However, to date the majority of wood waste is not being used due to lack of special
equipment, modern technologies and the lack of government incentives and foreign investments.
According to Russian Statistics Service, Russia produces 325,000 MT of wood pellets. Different
sources estimate that actual wood pellet production is at least 3-4 times higher than official data. The
number of processing wood pellets facilities in Russia vary from 140 to 150, with a total annual
production capacity of about 1.3 million MT. Trade sources report construction of more 50 wood pellet
facilities is likely to occur in the near term primarily as side production capacities at medium and larger
wood processing plants.
The majority of the facilities are located in the Northwest, Central and Volga regions of Russia. About
80-85 percent of their total pellet production is exported to Europe. The forecast for 2012 calls for
increasing wood pellet production mostly driven by greater demand from the EU market stimulated by
EU Decision along with Russian government initiatives calling for an increase in the forestry sector
Trade sources also report that a number of new wood pellet production facilities are being constructed in
different regions of Russia, mostly in the Northwest because of its proximity to Europe. A large facility
is set to start processing wood pellets in the St. Petersburg area, Vyborg Cellulose. Its production
capacity is estimated at 1 million MT annually. A new facility started operation in Vetluga by the end of
2010 with a pellet production capacity of 15-20 thousand MT. One of the largest facilities for wood
pellet production, Vologdabioexport, is located in Vologda oblast, with a production capacity of 50,000
In 2010, a slight decrease in prices for wood pellets in Europe had an adverse impact on pellet
production in Russia. One of the largest wood pellet facility ?Vologdabioexport? with annual capacity
of 50,000 MT has shut down temporarily. Trade sources reported of other pellet facilities in
Northwestern part of Russia that had to stop their production as a result of price fluctuations for pellets
in Europe. The most common reason behind production shut down for most of the facilities is the lack
of their own timber processing plants. As domestic prices for raw material, such as wood waste
increase, along with lowering prices for wood pellets in Europe, it makes processing less cost efficient.
However, demand for wood pellets domestically is forecast to increase but at a modest pace. Experts
estimate production of wood pellets are in most cases cheaper than gas, however, lack of domestic
standards for pellets, poor transport infrastructure, warehouses, and the product seasonality will
negatively impact the wood pellet market development in Russia.
It is estimated that about 2000 boilers in private houses around Moscow and St. Petersburg use wood
pellets, and only 1,625 municipal heating boilers. Experts estimate that Russia?s potential to supply
wood pellets for 72,000 heating stations.
Recently approved EU Directive establishes an increasing share of renewable sources of energy in
electricity production to 20 percent by 2020. The decision will trigger substantial growth in the pellet
market worldwide in the near-term. Growing production will be also driven by increasing demand in
Asia. Current estimate of annual wood pellet market capacity in Europe is 9 million MT. Experts report
demand for wood pellets in the near term to increase by 8-10 percent. The largest consumers of wood
pellets are Netherlands and Belgium with 6 million MT annually, followed by Sweden with 1.5 million
MT. Sweden, Germany, Denmark and Great Britain will continue to be leading wood pellets producers
and consumers. The forecast for 2020 calls for a major increase in demand from the European market,
rising to 20-22 million MT annually. EU experts estimate Russia?s share of the EU import market in
2010 at 20 percent. Russia has a large export potential and European pellet demand will likely stimulate
an increase in production. Russia will require large investments to upgrade facilities and expand
production capacity; additionally domestic demand could absorb some of the increased near-term
According to trade sources, most Russian factories process wood pellets destined to Europe in
conformity with DINPlus quality norms approved by the EU. Trade sources report that EU currently
does not require certification for the Russian wood pellets as long as the product is manufactured in
compliance with DINplus. Traders believe that an implementation of new standards to quality and
technologies for production of fuel pellets in Europe would not affect Russian producers since physical
and chemical indicators of raw material in Russia and Europe are identical. Therefore they believe it
will not be hard to obtain an EU certification for the Russian plants exporting wood pellets.
Table 1. Status and Capacity of Pellet Production Facilities in Russia, 2011
Name of the Facility and Region Capacity, Status
?Dots Plus?, Braynsk oblast 9,000 In operation since 2010 (investment 6.9
OOO ?Stod?, Tver oblast 60,000 In operation since 2010
JSC?ABA?, Omsk oblast 20,000 In operation since 2010
OOO ?Pechora Enrgy Resource?, 10,000 In operation since 2011
Komi Republic (total project investment 1.25 billion
OOO ?Center Wood Com? 100,000 Will start operation in 2012 (total
investment 2.78 billion rubles)
JSC ?Eastern Siberia Facility of 106,000 Is scheduled for 2013, (investment 1
Biotechnologies? billion rubles)
OOO ?Ural Siberian Investment?, 27,000 Scheduled for 2013 (total investment
Sverdlovsk oblast 1.1 billion rubles)
OOO ?LesProm?, Kaluga oblast 33,600 By the end of 2011, investment 1.2
ZAO ?Novoyeniseyskiy forestry?, 40,000 in 2010- In operation since 2010
Krasnoyarsk kray 2012
80,000 by 2012
Table 2. PS& D for Fuel Pellets
PS & D for Fuel Pellets
1,000 Metric Tons
CY 2007 2008 2009 2010 2011 2012
Production 670 731 967 1,320 1,590 1,900
Imports 0 0 0 0 0 0
Exports 490 511 707 990 1,220 1,470
Consumption 190 220 260 330 370 430
Russia?s production of the major oilseed crops (sunflower, soybean and rapeseeds) is forecast to
rebound in 2011. Rapeseed production is forecast to increase more than a quarter to 0.85 MMT. Area
sown to winter rapeseed remains small but is growing steadily, driven by increasing demand for
rapeseed and rapeseed oil by EU directive and improving infrastructure for rapeseed production and
processing. Yields of winter rapeseed are almost two times higher than yields of spring rapeseed.
Spring rapeseed may be sown over a bigger territory than last year, but the total winter and spring area
will hardly exceed 0.8 million hectares.
In 2010 Russian exports of rapeseeds almost entirely stopped as a result of high export duties (15
percent for rapeseed) and were replaced by exports of rapeseed oil.
Nearly all of the 0.9 MMT of rapeseed oil exported goes to the EU, and most of that is for biofuels.
Please refer to GAIN RS1115 Annual Oilseeds and Products for more details.
Notes on Statistical Data
Bioethanol and biodiesel production in Russia is very small. There are no official data for these products
in Russia. Production and trade data for wood pellets is based on GTA, Official Russian Federal
Customs Service, and estimates of the FAS offices in EU. The trade data for wood pellets may not
correspond to the EU data since there is no HS Code for wood pellets alone in Russia. Currently it is
subsumed under HS 440130. FAS/Moscow based its estimates on figures of National Biofuels
Association, sources from research, analytical institutions as well as agricultural trade sources.
Petroleum, Natural Gas and Coal Based Energy Market
According to reports of the Russian Ministry of Economic Development (MED), in 2010 the production
and distribution of fuel and energy resources have increased by 7 percent and are estimated at 102.5
percent of production levels in 2009. The upward trend is attributed primarily to the increased
production of gas and coal. Production volumes for oil, including gas condensate, in January-October
2010 are estimated at 419.8 million MT, an increase of 1.7 percent over the same period in 2009. The
MED reports that 50 percent of all Russian oil production companies have demonstrated positive
dynamics in oil production in 2010. The leading companies in production of oil in 2010 was ?NK
Rosneft? ? with a growth of 6.5 million MT, due to rapid buildup of oil production in Vankorsk oil
deposit. New oil deposits in Republic of Sakha and decreasing export tariff for eastern Siberia and
Caspian oil deposits also attributed to positive dynamic in oil production.
The forecast for 2010-2011 calls for a continued increase in the oil production sector due to new field
developments and stronger demand in domestic and international markets.
Table 1: Russia: Production and Distribution of Electrical Power in 2010.
2010 As a percent of 2009
Production and distribution of electrical power 104.5
Electrical power, billion kVT/h 1037 104.7
Including produced by:
Electrical power stations
Nuclear power plant 170 104.1
Thermal power plant 699 107.3
Hydroelectrical power station 168 95.6
Production and distribution of steam and hot water (thermal energy)
Thermal energy, million Gcal 1355 103.0
Including produced by:
Electrical power stations 611 102.9
Heating (boiler) plants 659 102.6
Waste-heat utilization plant 74.5 106.7
Source: Federal Statistics Service of the Russian Federation
Graph 1: Russia: Dynamics of Oil Production, including Gas Condensate, January-December
2008-2010, in percent, (December 2006 ? 100 %).
Source: Official report of the Ministry of Economic Development (MED), 2011
In 2010, total gas production is estimated at 650.7 billion m3, 11.6 percent higher than in 2009. In Jan.-
October 2010, Gazprom companies produced 441.85 billion m3; oil companies and other independent
producers ? 114.1 billion m3. Production of gas in 2010 leveled off in comparison of its drop in 2009 as
a result of recovering demand in the domestic market, specifically in energy and chemical and
agrochemical sectors; as well as growing exports to CIS countries. Total export of gas in 201 is
estimated at 181.9 billion m3.
Graph 2: Russia: Dynamics of Natural Gas Production, Jan.-Dec. 2008-2010, in percent (Dec.
2006 ? 100%).
Source: Official report of the Ministry of Economic Development, 2011 (MED).
In January-October, 2010, coal production has demonstrated growth and is estimated at 298.5 million
MT in comparison with the same period in 2009. Experts attribute upward tendency in coal production
in 2010 in comparison with 2009, to stronger demand at both domestic and international markets
followed by economic downturn and improving foreign economic conditions. Leading regions for coal
production in Russia continue to be Siberia, Far East, and North-western Federal district.
Graph 3: Dynamics for Coal Production, Jan.-Dec. 2007-2009, percent (Dec. 2006 ? 100 percent)
Source: Official report of the Ministry of Economic Development, 2010 (MED)
In 2010, Russia produced 1037 billion kW/hour of electrical power, an increase of 4.7 percent versus
2009. Share of electrical energy, generated by thermal power station in the total electricity production
increased from 65.7 percent in 2009 to 67.3 percent in 2010, while share of electrical energy generated
by nuclear and hydro power stations decreased from 16.5 percent to 16.4 percent and from 17.8 to 16.2
Electrical power production increase in 2010 is attributed to increasing expansion rate in major electric
consuming industries and cold weather conditions in 2010 ?heating season? as well as abnormally high
temperatures in summer 2010.
Graph 4: Russia: Dynamics of Electrical Power Production, Jan.-Dec. 2007-2009, percent (
December 2006 - 100 %)
Source: Official report of the Ministry of Economic Development, 2011 (MED)
Table 2: Russia: Production of Major Energy Sources, 2010
2009 2010 As a percent of 2009
Electricity, billion kWh 992 1037 104.7
Production of oil with gas condensate, million MT 494 505 102.1
Primary oil processing, million MT 236 249 105.5
Automobile gasoline, million MT 35.8 36.0 100.5
Diesel Fuel,million MT 67.3 69.9 104.2
Bunker oil, million MT 64.4 69.5 108.5
Production of natural gas, billion m3 584
Coal production, million MT 298 317 105.4
Source: Ministry of Economic Development of the Russian Federation, 2010
Table 3: Russia: Distribution of petroleum products in 2007-2009, 1, 000 MT.
2008 2009 2010
Resources 32,623 36,104 36,377
- production 32,462 35,850 36,014
- imports 205.7 222.9 498.1
- change of stocks +44.6 -30.7 +134.8
- sales in the domestic market 28,456 31,602 32,858
- - - through gas stations 25,133 28,634 31,693
- exports 4,167 4,501 3,519
Resources 62,749 67,384 70,289
- production 62,902 67,063 69,891
- imports 221.0 257.3 516.5
- change of stocks +374.1 63.5 +119.0
- sales in the domestic market 28,602 27,563 28,750
- exports 34,147 39,821 41,539
Bunker Oil (Mazut)
Resources 62,520 72,372 78,440
- production 62,142 72,331 77,663
- imports 257.2 313.0 870.4
- change of stocks -121.5 +272.2 +92.4
- sales in the domestic market 10,811 8,255 6,417
- exports 51,709 64,117 72,023
Source: Social-Economic Situation in Russia (Monthly statistics of the Federal Statistical Service),
January 2010, January 2011
Table 4: Russia: Production of Oil and Major Oil Products January - May 2011.
Indicators Jan.-May 2011 +/- Jan.-May 2010
Oil (1,000 MT)
Production of oil with gas condensate, million MT 210,682 2,607
Sales in the domestic market 104,427 3,767
Exports 100,975 -1,777
Primary processing of oil raw material domestically 104,099 3,596
Production of major oil products (1,000 MT)
Gasoline 14,409 -43.8
Diesel Oil 29,332 688.4
Crude oil 29.927 1,396
Jet fuel 3,453 42.9
Gas (mln. m3)
Production (total) : 297,601 8,437
including Gazprom 230,302 1,644
Domestic consumption 225,056 -13,702
Export 94,387 14,909
Production 134,027 849.8
Total supply 127,889 500
Including export 42,723 2,473
Total Electricity generation (million kW/hr) 454,800 5,800
Production of heat energy (1,000 G/kl) 280,300 -7,600
Source: Ministry of Energy of the Russian Federation
Abbreviations and Definitions
Biodiesel = Fatty acid methyl ester produced from agricultural feedstock
(vegetable oils, animal fat, recycled cooking oils) used as transport fuel to substitute for petroleum
Bioethanol = Ethanol produced from agricultural feedstock used as transport fuel
Mtoe = Million tons of oil equivalent
MWh = Mega Watt hours = 1,000 Kilo Watt hours (KWh)
Toe = Tons of oil equivalent = 41,868 MJ = 11.63 MWh
Btoe = Billion Tons of oil equivalent
Gcal = Giga calories
1 Toe = 41.87 GJ
1 MT Gasoline = 1,342 Liters = 1.03 Toe
1 MT Ethanol = 1,267 Liters = 0.64 Toe
1 MT Diesel = 1,195 Liters = 1.02 Toe
1 MT Biodiesel = 1,136 Liters = 0.90 Toe
RS1070 Feed Sector Update 12/18/2010
RS 9037 Biofuels Annual 6/01/2010
RS1113 Grain and Feed Annual 05/17/2011
RS1115 Oilseeds and Products 03/31/2011
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