The gas industry is largest element of the Russian economy and the global energy supply network. Russia ranks first in the world in natural gas production, reserves and resources, providing over 21 percent of global production levels and about 25 percent of all international shipments.
In 2010, gross production of natural and associated gas in Russia increased to 665. 5 billion cubic meters, including about 650 billion cubic meters of the effective volume, together with commercial gas, gas for technological needs and for injection and almost 16 billion cubic meters of gas flares. In 2010-2011, the global economic recovery resulted in rising global demand for energy carriers, including natural gas. Rising oil prices led to a general increase in the cost of energy resources, including gas.
The existing trend of natural gas production and consumption growth outran that of oil continued, with the cost of gas energy unit still being significantly underrated. The demand for natural gas, coal and oil gained extra impetus from the major accident at Fukushima's NPP (nuclear power plant) in Japan in March 2011, which resulted in retirement of this nuclear generating asset and reduction of nuclear energy production. Combined with traditionally large reserve margin in all types of power generation, Japan's reduction of nuclear energy production forced the country to buy significantly larger volumes of LNG and petroleum products for its thermal power plants.
On the backdrop of rising energy demand in 2010, natural gas production in the CIS countries has also risen. As a result, CIS share of the global gas supply topped 28 percent. Gas production in Kazakhstan increased from 32 to 37 billion cubic meters, in Azerbaijan from 14. 8 to 16 billion cubic meters, in Ukraine from 19 to 21 billion cubic meters, in Turkmenistan from 64. 4 to 75. 1 billion cubic meters. As a result of deposit depletion, gas production in Uzbekistan continued to decline. In 2010, the CIS region produced 861 billion cubic meters of natural gas, a record level in the history of gas industry in the area. In the early 1990s, the USSR was producing over 800 bcm of natural gas. At the time this amounted to over 40 percent of the world production.
Out of this, the Russian Federation produced 641-643 billion cubic meters a year (more than 32 percent of global production), including over 580 billion cubic meters in West Siberia. Over the past two decades, there has been a sustained reduction of Russia's share in global gas production, indicating slower development of the Russian gas industry compared to other gas-producing countries. After the global financial crisis trimmed demand and prices for energy carriers in 2008-2009, Russia's 2010-2011 growth of gas production was conditioned mainly on the recovery of the domestic market; such market environment was more beneficial for independent producers who are focused on direct sales to the domestic customers.
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