Particular opportunities exist in the oil and electricity as well as nuclear energy sectors of the industry. The increasing nuclear power generation is expected to trigger demand for nuclear power reactors and nuclear gas turbines. Russia is emphasizing on upgrading and maintaining its old reactors and nuclear plants to enhance the electricity generation.
The demand for electricity and natural gas may rise steeply due to an expected boom in automobile sector, an increase in the number of households, urbanization, and growth in the transport sector. In the wake of such enormous demand, Russia is trying to stave off energy security-related challenges by encouraging energy-efficient consumption patterns among Russian households. It also hopes to satisfy the country's energy need through substantial R&D efforts and domestic production augmentation.
"The huge untapped oil reserves, particularly in Western Siberia, provide immense prospects for oil exploration activities," says Mary John. P, Research Associate for Frost & Sullivan's Economic Research and Analytics Group. "However, the underdeveloped refineries in the oil and gas segment require huge investments for upgrades and expansion."
Transneft and other state-owned companies are looking to increase the transmission and distribution network using sophisticated technology to enhance distribution efficiency. The Government has been encouraging new pipeline projects and the adoption of latest technologies for these projects, both domestically and internationally. Russia is also focusing on the development of the huge Shtokman gas fields in the Barents Sea, which will increase natural gas production - particularly LNG. As oil drilling projects and the amount of gas production help exceed internal gas demand, Russia will continue to increase exports to satisfy international demand.
Coal is another export-friendly sector, especially since Russia is the fifth largest coal producer in the world. This abundance of raw materials, coupled with privatization of the economy, has increased competition in the fast developing energy sector. As one of the most important and fastest developing industries in Russia, energy accounts for a quarter of the gross domestic product.
"Moreover, Russia's accession to the World Trade Organization (WTO) and the various energy agreements with countries worldwide has led to the increase in foreign investments and boosted the demand for its energy reserves," notes Mary John. "Russia's leadership in the G8 summit, on promoting energy security, has enhanced its trade ties in the international arena and promoted its huge energy reserves."
The country also shares strong associations with the European Union and the United States. The Russian Government has leveraged these favorable international relationships and signed various energy agreements to strengthen further its infrastructure. Several economic and industry-driven policies have also helped create an encouraging business climate by offering numerous attractive investment opportunities.
