Much of the conventional fuel produced in Russia is burned to produce electric power. The Unified Electric Power System operates Russia's electric power plants through seventy-two regional power distribution companies. The power system consists of 600 thermal generating systems, more than 100 hydroelectric plants, and Russia's nine nuclear plants. Of the total rated generating capacity of 205 gigawatts, only about 188 gigawatts were available as of 1996. In 1995 Russia's power plants generated a total of 846 million kilowatt-hours, compared with 859 million kilowatt-hours in 1994. Generation for the first quarter of 1996 (normally the peak demand period of the year) was 268 million kilowatt-hours.

In 1993 natural gas provided 42 percent of electricity production; hydroelectric plants, 19 percent; coal, 18 percent; nuclear power, 13 percent; and other sources such as solar and geothermal plants, 8 percent. Natural gas and coal are burned at thermoelectric plants, which produce only electricity, and at cogeneration plants, which produce electricity and heat for urban centers. The largest hydroelectric plants are located on the Volga, Kama, Ob', Yenisey, and Angara rivers, where large reservoirs were built in massive Soviet energy projects. Thermoelectric and hydroelectric plants--located in Siberia because of available fuels and water power--send power to European Russia through a system of high-voltage transmission lines.

Consumption of electric power divides into the following categories: industrial, 61 percent; residential, 11 percent; the services sector, 11 percent; transportation, 9 percent; and agriculture, 8 percent. Regional energy commissions control the price of electricity.

Foreign Investment in Oil and Gas

In the mid-1990s, many analysts consider the oil and gas industries to be the best targets for foreign investment in Russia. The record of foreign investment in that period illustrates both the potentials and the pitfalls of such ventures. Experts have concluded that the Russian oil and gas sector will require large amounts of foreign capital to improve output. According to some estimates, the oil sector will require US$30 to US$50 billion in new investment just to maintain the mid-1990s level of production. To return production to its peak levels will require an estimated US$70 to US$130 billion in new investments, which clearly would have to come from foreign sources. The Russian oil and gas sector also would benefit from infusions of Western technology and expertise. However, according to a 1995 report by Cambridge Energy Research Associates, key figures in the oil industry, most of whom were schooled in the isolated Soviet-era approach to commerce, have been indifferent or hostile to Western management methods.

By the end of 1994, the oil and gas sector accounted for about 38 percent of total foreign direct investment in Russia, but the total input was only about US$1.4 billion. Although Western companies are poised to commit large amounts of capital for exploration, as of 1996 most foreign investment had gone to repairing and maintaining current facilities. Some analysts have estimated that foreign investment in the oil and gas sector could reach US$70 billion by the year 2000.

Among several United States oil companies active in Russia, Texaco heads a consortium in the largest project, the development of oil fields in the Timan-Pechora section of the Komi region north of the Arctic Circle. The project, under negotiation since 1989, has an estimated potential of US$45 billion in investment over the next fifty years. Conoco, a subsidiary of the DuPont de Nemours chemical firm, leads a consortium of United States and European firms and a Russian firm in the Polar Lights project to explore Siberian oil fields. Two United States companies, Marathon Oil and McDermott, along with the Japanese companies Mitsui and Mitsubishi and Britain's Royal Dutch Shell, are engaged in one of several projects to explore for oil off Sakhalin Island on the Pacific coast. The last two projects each could bring in as much as US$10 billion.

Nevertheless, Russia's generally poor investment climate and other obstacles such as special taxes have discouraged additional investment in gas and oil. As of mid-1996, a tax of about US$5 per barrel was imposed on oil exports, and a tax of about US$2.60 was levied per 1,000 cubic meters of natural gas exported. Foreign and domestic firms were also subject to royalty payments to the Government for the privilege of drilling for oil. Foreign investors have argued that reduced profit margins are a substantial obstacle to the support of some projects. Some major oil investors have received tax exemptions, but delays in rebate payments have created additional deterrents.

Data as of July 1996

NOTE: The information regarding Russia on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Russia Conventional Power Generation information contained here. All suggestions for corrections of any errors about Russia Conventional Power Generation should be addressed to the Library of Congress and the CIA.