OUTLOOK FOR DEVELOPMENT OF THE NATURAL GAS INDUSTRY IN THE USSR 1959-65

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• Publication Date: November 1, 1962
• Content Type: REPORT

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CONFIDENTIAL
Economic Intelligence Report
OUTLOOK FOR DEVELOPMENT
OF THE NATURAL GAS INDUSTRY
IN THE USSR
1959-65
CIA/RR ER 62-35
November 1962
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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N?
CONFIDENTIAL
GROUP 1
Excluded from automatic
downgrading and
declassification
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CONFIDENTIAL
Economic Intelligence Report
OUTLOOK FOR DEVELOPMENT
OF THE NATURAL GAS INDUSTRY
IN THE USSR
1959-65
CIA/RR ER 62-35
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
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FOREWORD
Since the beginning of the Seven Year Plan (1959-65), Soviet offi-
cia]s have placed great emphasis on the contribution to economic growth
expected from changes in the structure of production of energy in the
USSR. Increased allocation of productive factors to the oil and natural
gas industries is expected to result in rates of growth in output for
these industries that substantially exceed rates of growth in gross
national product (GNP).
The purposes of this report are to assess the prospects for fulfill-
ment of plans for development of the Soviet gas industry and to estimate
the over-all saving that will result from the substitution of gas for
solid fuel in the USSR during 1959-65.
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Summary and Conclusions
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CONTENTS
Page
1
I. Introduction 3
II. Seven Year Plan (1959-65) for the Gas Industry 8
A. Production 8
B. Reserves and Exploration 8
C. Transmission 14
1. Compressors 14
2. Construction of Pipelines 16
3. Underground Storage 21
D. Consumption
E. Anticipated Economies
21
24
III. Prospects for the Performance of the Gas Industry,
1962-65 26
Appendixes
Appendix A. Soviet Gas Reserve Categories
Appendix B. Methodology
29
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31
Tables
1. USSR: General Level of Development of the Natural Gas
Industry, 1940, 1958, and 1965 Plan 6
2. USSR: Estimated Production of Primary Energy, by Source,
1958-61 and 1965
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3. USSR: Change in the Targets for 1965 for the Extraction
of Natural Gas, by Republic 9
4. USSR: Control.Figures of the Seven Year Plan for Explora-
tory Drilling for Natural Gas, by Republic, 1959-65 . . . 10
5. USSR: Exploratory Drilling for Natural Gas and Additions
to Proved ReserVes of Nonassociated Natural Gas,
1955-61 11
6. USSR: Effectiveness of Exploratory Drilling for Natural
Gas, by Republic, 1959 and 1960 12
7. USSR: Preparation of Structures for Exploratory Drilling
for Natural Gas and Initial Exploratory Drilling of
Structures, by Region, 1959 and 1960 13
8. USSR: Planned and Actual Additions to Proved Reserves of
Nonassociated Natural Gas, by Region, 1959 and 1960 . ? ? 14
9. USSR: Pipelines for Transmission of Oil and Natural Gas
Available and Commissioned for Use, Estimate for 1955-61
and Plans for 1962 and 1965 18
10. USSR: Planned Construction of Pipelines for Crude Oil and
Oil Products, 1959-65 19
11. USSR: Construction of 40-Inch Diameter Pipelines for
Transmission of Oil and Natural Gas During the Period
1959-65 20
12. USSR: Estimated Structure of Consumption of Natural Gas,
1958-60 and 1965 Plan 22
13. USSR: Summary Calculation of Estimated Savings in Oper-
ating Expenses Resulting from the Substitution of Natural
Gas for Coal, 1959-65 32
14. USSR: Calculation of Planned Savings in Operating Ex-
penses Resulting from the Substitution of Natural Gas for
Coal, 1959-65 33
15. USSR: Index of All-Union Average Extraction Costs for
Coal and Natural Gas, 1958-60 and 1965 36
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16. USSR: Capital Savings Resulting from the Sub-
stitution of Natural Gas for Coal, 1959-65 . . 39
17. USSR: Planned Percentage Reduction in Energy
Requirements Resulting from the Substitution of
Natural Gas for Other Fuels, 1959-65
18. USSR: Planned and Estimated Reduction in Energy
Requirements Resulting from the Substitution of
Natural Gas for Other Fuels, 1959-65
Illustrations
Figure 1. USSR: Production of Natural Gas, 1958-65
(Chart)
Figure 2. USSR: Proved Reserves of Nonassociated
Natural Gas, by Selected Geographic
Area, as of 1 January 1959 and Plan for
1 January 1966 (Map)
Figure 3. USSR: Estimated Oil and Gas Transmission
Pipelines Available for Use, 1955-61 and
Plans for 1962 and 1965 (Chart)
Figure 4. Western USSR: Natural Gas Transmission
Pipelines, 1961 (Map) (UNCLASSIFIED)
inside back cover
Figure 5. Central Asiatic USSR: Natural Gas Trans-
mission Pipelines, 1961 (Map) (UNCLASSI-
FIED) inside back cover
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OUTLOOK FOR DEVELOPMENT OF THE NATURAL GAS INDUSTRY IN THE USSR*
1959-65
Summary and Conclusions
Production and consumption of natural gas** in the USSR will increase
at an estimated average annual rate of about 25 percent from 28 billion
cubic meters (cu m) in 1958 to about 135 billion cu m in 1965. By 1965,
production of gas in the USSR probably will amount to more than 30 per-
cent of production in the US compared with less than 10 percent in 1958.
The share of as in the total production of primary energy will increase
from 5 percent in 1958 to 15 percent in 1965. During 1959-65, explora-
tory drilling for gas will be approximately six times as great as during
the previous 7-year period to provide for approximately three times as
much in proved. reserves*** by the end of 1965 as by the end of 1958.
The length of pipelines available for transmission of gas probably will
increase from about 13,000 kilometers (km) by the end of 1958 to more
than 4o,000 km by the end of 1965. In spite of this increase in avail-
ability of transmission lines in the USSR, the total length of the trans-
mission net will amount to only one-tenth of that forecast for the US in
1965. Consumption of 'gas by industry in the USSR is expected to account
for about 90 percent of the total consumption. Users in the category
Domestic and Communal Service are to account for 9 percent of the total
consumption in 1965 compared with 11 percent in 1958. In contrast, users
in a comparable category, Residential and Commercial Services, have con-
sumed from 20 to 35 percent of the total in the US. It is anticipated
that the increased investment required to accomplish the planned expan-
sion of the industry will be well justified by the substantial savings
to the economy resulting from the substitution of gas for more expen-
sive forms of energy. It is estimated that the substitution of gas for
other fuels during 1959-65 will result in a saving of about 4.3 billion
rublest -- an amount roughly equivalent to almost 90 percent of the
total investment in the gas industry planned for the period.
* The estimates and conclusions in this report represent the best judg-
ment of this Office as of 15 September 1962.
** Unless otherwise indicated, the term gas is used to mean natural gas
throughout this report.
*** Reserve classifications are explained in Appendix A.
t Ruble values in this report are given in new rubles established by
the Soviet currency reform of 1 January 1961. A nominal rate of exchange
based on the gold content of the respective currencies is 0.90 ruble to
US $1. This rate, however, diould not be interpreted as an estimate of
the equivalent dollar value of similar US goods or services.
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In spite of the 3.8-fold increase, output will fall about 10 percent
short of the original goal of the Seven Year Plan of 150 billion cu m.
Underfulfillment of plans for production during 1959-61 leaves little
doubt that the target for cumulative extraction -- 633 billion cu m --
during 1959-65 will not be met. The major factors contributing to under-
fulfillment of production goals probably will be the following:
1. Shortages of transmission equipment,
2. Shortages of consuming equipment and inadequate development
of city distribution system, and
3. Lags in additions to proved reserves in some regions.
Shortages of line pipe, although relatively unimportant at present, could
be of greater consequence during 1963-65. Production goals have not been
met in many instances, because the designated consumers have not made the
necessary preparations to receive gas. Equipment for residential consump-
tion of gas has been in short supply. In the RSFSR, for example, it ap-
pears probable that less than one-half of the requirements for gas stoves,
water heaters, space heaters, and the like will be met during 1959-65.
The failure to develop and manufacture satisfactory compressors has re-
sulted in underutilization-of existing pipelines and in underfulfillment
of production plans in each of the 3 initial years of the Seven Year
Plan (1959-65).
Partly as the result of the estimated underfulfillment of the plan
for production, savings accruing from the substitution of gas for solid
fuels probably will amount to about 60 percent of the original plan of
7.0 billion rubles. The estimated total saving of 4.3 billion rubles,
however, represents a substantial release of productive services for
allocation to other sectors of the economy.
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I. Introduction
In order to make a maximum contribution to Soviet economic growth,
the industries producing primary energy should be organized to minimize
their requirements for labor, capital, and materials while simultaneously
meeting the demands for energy* imposed by the over-all level of economic
activity. The plan for extraction, processing, and transport of coal,
oil, and gas should be chosen so that for the time period under consid-
eration the total cost of their contribution to the demand for energy
will be a minimum.
Ultimate reserves of all three basic sources of mineral energy are
possessed in relative abundance by the USSR. According to the latest
official Soviet evaluation completed in 1956, the total geological re-
serves of coal in the USSR amount to 8,670 billion tons,** or about 57
percent of the world total compared with similar reserves in the US of
less than 2,000 billion tons. 1/*** Geologic appraisal of the USSR in-
dicates that its total potential crude oil resources may exceed those
of the US. In the US the total potential crude oil reserves have been
estimated to be in the range of 27 billion to 34 billion tons. The 1955
Soviet estimate of 29 billion tons of potential petroleum resources in
the USSR appears to be geologically reasonable. The Soviet estimate of
the total recoverable reserves of gas is based on calculations for US
reserves published in 1956 by the Bureau of Mines, which estimates the
total recoverable reserves in the US at 28,000 billion cu m. The total
area in the US that is geologically favorable for the occurrence of gas
amounts to approximately 5 million square kilometers (sq km). The analo-
gous territory within the boundaries of the USSR totals about 11 million
sq km. Geologic evaluations indicate that the prospective petroliferous
regions of the USSR are no less promising than those of the US. There-
fore, Soviet geologists argue, the total recoverable reserves of gas of
the USSR should amount to somewhat more than twice those of the US, or
more than 56,000 billion cu m. 2/
In spite of this apparently enormous resource potential and the al-
leged cost advantages of gas, the Soviet gas industry remained a low-
* As a first approximation the fuels industries may be regarded as
engaged in output of heat -- a homogeneous commodity measurable in physi-
cal units such as calories, tons of standard fuel, British thermal units,
and the like. In spite of some areas of limited substitutability, the
approximation is particularly appropriate in problems involving energy
coal and gas.
** Tonnages are given in metric tons throughout this report.
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priority appendage of the oil industry until 1956. In general, explora-
tion for gas took place only incidentally to the search for oil, and it
was not until World War II that drilling expressly for gas was authorized.
The keeping of separate quantitative records of drilling for oil and gas
was not begun until 1955. Similarly, production of gas took place largely
in connection with the extraction of oil.*
During the 1930's, output of gas was concentrated in the oilfields of
Azerbaydzhan SSR -- the site of almost 80 percent of the total extraction
of gas. Nonassociated gas was obtained primarily in Dagestan SSR, where
a mere 8.3 million cu m were produced in the 1937-39 period. By the end
of the decade, associated gas accounted for approximately 90 percent of
the total production of gas in the USSR. The low level of development
of the Soviet gas industry by 1940 is shown in Table 1.**
In the postwar period, in spite of the low priority given to the gas
industry, proved reserves continued to grow, and by 1955 the ratio of
proved reserves of nonassociated gas to annual extraction had mounted to
66 to 1. At the same time, the share of gas in the fuel production bal-
ance advanced from a negligible 1.9 percent in 1940 to a mere 2.3 percent
in 1950 and 2.4 percent in 1955. The situation was aggravated by the
economically untenable policy of encouraging production of manufactured
gas. For example, under the Fifth Five Year Plan (1951-55), fully one-
half of the investment of 440 million rubles in the gas industry was al-
located to obtaining capacity for production of relatively expensive
manufactured gas. 2/ Thus output of low-cost gas was expanded much more
slowly than the rate required for minimizing the cost of meeting the de-
mand of the national economy for fuel.
On the one hand, the resulting fuel balance structure as shown in
Table 2*** has been acknowledged as a mistake Li" that retarded economic
growth in the past, and, on the other, it is viewed as a "reserve" that
can contribute toward more rapid economic growth under the Seven Year
Plan and in the more distant future.
Khrushchev himself has spelled out the problem in general and has
outlined the economies to be achieved by the restructuring of the fuel
balance:
* Previously, geologic methods were not sufficiently accurate to fore-
cast whether a successful well would yield oil or nonassociated gas. Gas
obtained from deposits where oil also is extracted is called associated
gas. Nonassociated gas is extracted independently of oil.
xx Table 1 follows on p. 6.
XXX Table 2 follows on p. 7.
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At one time we adopted decisions forbidding the
use of gas and oil fuel at powerplants and at indus-
trial enterprises using boilers.
We looked to coal to ensure the growing fuel
needs of industry. Yet gas and oil fuel, as is
known, are several times cheaper than coal. If we
were to continue meeting the fuel needs of power,
transport, and industry with costly coal while the
leading capitalist states developed their own power
system and industry on the basis of gas and oil, it
would be difficult for us to overtake them.
Therefore, in working out a long-range plan for
the development of the national economy, we are pro-
viding for the extensive use of natural gas and oil
fuel for powerplants, industry, and transport, at
the same time fully meeting communal and everyday
needs of the public and the needs of the chemical
industry for gas as a raw material in the produc-
tion of synthetic materials. 2/
In his report to the 20th Party Congress in January 1959, Khruhchey
claimed that "the total saving from the substitution of natural gas and
oil fuel for coal will come to more than 12.5 billion rubles in the seven
years ... ." g The anticipated saving in operating expenses connected
with extraction and transportation of gas alone was expected to exceed
5.0 billion rubles. 2/ In addition, expansion of the gas industry was
expected to require 2.0 billion rubles less in capital investment than
would have been required to attain the same addition to capacity in the
coal industry. .Y
Savings of this magnitude are based on the assumption that production
of gas will rise at an average annual rate of more than 25 percent per
year from 28 billion cu m in 1958 to about 150 billion cu m in 1965. The
growth in exploratory activity, in construction of transmission facili-
ties, and in consumption of gas, which will be required to make the L.3...
fold growth in production of gas possible, is discussed in the following
sections of this report. Performance of the Soviet gas industry during
1959-61 is taken as the basis for assessing prospects for developments
during the remainder of the Seven Year Plan (1959-65).*
* Text continued on p. 8.
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Table 1
USSR: General Level of Development of the Natural Gas Industry
1940, 1958, and 1965 Plan
Indicator
Unit 1940 2/ 1958 12/ 1965 Plan
Extraction of gas
Proved reserves of non-
Billion cubic meters
3.2
28.1
149.8 sj
associated gas
Billion cubic meters
15.1
1/
988 1/
4,185 2/
Share of gas in total
output of fuel
Percent
1.9
5.3 1/
15.2 1/
Length of gas trans-
mission lines
Kilometers
139
13,239
42,7o0 5/
c.
d.
e.
f.
g.
12/
As of 1 January.
As of 1 January 1966. 12/
Estimated. 2V
See Table 9, p. 18, below.
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Table 2
USSR: Estimated Production of Primary Energy, by Source 2/
1958-61 and 1965
1958
1959
1960
1961
1965
Million
Metric Tons
of Standard
Percent
Million
Metric Tons
of Standard
Percent
Million
Metric Tons
of Standard
Percent
Million
Metric Tons
of Standard
Percent
Million
Metric Tons
of Standard
Percent
Source of Energy
Fuel12/
of Total
Fuel
of Total
Fuel
of Total
Fuel
of Total
Fuel
of Total
Coal
362.1
56.7
370.0
54.3
373.1
52.1
372.3
48.8
423.8
39.6
Crude oil
161.9
25.3
185.3
27.2
211.4
29.5
237.4
31.1
379.0
35.5
Gas
33.9
5.3
42.5
6.2
54.4
7.6
70.8
9.3
162.0
15.2
Peat
21.1
3.3
23.0
3.4
20.4
2.8
21.7
2.8
27.0
2.5
Shale
4.5
0.7
4.6
0.7
4.8
0.7
5.0
0.7
7.5
0.7
Fuelwood
32.9
5.2
34.0
5.0
28.7
4.0
28.7
3.8
25.7
2.4
Hydroelectric power
22.3
3.5
21.8
3.2
23.9
3.3
26.7
3.5
41.0
3.8
Nuclear electric power
Negl.
Negl.
Negl.
Negl.
Negl.
Negl.
Negl.
Negl.
3.0
0.3
Total
638.7
100.0
681.2
100.0
716.7
100.0
762.6
100.0
1,069.0
100.0
a. V
b. Standard fuel has a calorific value of 7,000 kilocalories per kilogram.
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II. Seven Year Plan (1959-65) for the Gas Industry
A. Production
According to the original Seven Year Plan, production of gas was
expected to increase at an average annual rate of about 25 percent from
about 28 billion cu in in 1958 to almost 150 billion cu m by 1965. Cumu-
lative extraction of associated and nonassociated gas was expected to
amount to 633 billion cu in during 1959-65. If this goal were achieved,
production of gas in the USSR would rise from about 9 percent of the
level in the US in 1958 to approximately 35 percent of production fore-
cast for the US by 1965.
In view of the persistent nature of the difficulties with explora-
tion, transmission, distribution, storage, and consumption encountered by
the gas industry in the first 3 years of the Seven Year Plan, the produc-
tion goal of 150 billion cu m set for 1965 now appears to be the maximum
achievable. It is estimated as more probable, however, that during
1962-65 annual increments to production will average about 18.5 billion
cu in, an average annual rate of about 23 percent, and that in 1965 the
total production of gas will amount to approximately 135 billion cu in,
or more than 30 percent of production in the US.
The data in the Chart, Figure 1,* show the relation between
planned and actual production of gas in the USSR during 1958-61 and the
plans for 1962 and 1965.
Regional extraction targets set for 1965 have been modified in
accordance with the varying success experienced in obtaining additions
to reserves. Faster-than-anticipated development of reserves in the
Shebelinka field of the Ukrainian SSR and the Gazli field of Uzbek SSR
has permitted an increase in the goals for 1965 set for these republics.
A corresponding reduction in planned extraction, largely in the Urals-
Volga region of the RSFSR, has been announced. The change in the targets
for 1965 for regional extraction of gas in the USSR is shown in Table 3.**
B. Reserves*** and Exploration
Reserves of gas were expected to increase from 988 billion cu in
as of 1 January 1959 to 3,469 billion cu mt as of 1 January 1966. The
Following p. 8.
** Table 3 follows on p. 9.
*** Only reserves of nonassociated gas are discussed in this report.
Reserves of associated gas can be estimated only with a large margin
of error.
t Probably basing their estimates on the substantial overfulfillment
of the plan for additions to reserves during 1959, Soviet planners now
estimate that reserves of gas will reach [footnote continued on p. 9]
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Billion
cubic meters
180
160
140
120
100
80 ?
60
40
20
o
Figure 1
USSR
PRODUCTION OF NATURAL GAS
1958-65
/
PLAN
ACTUAL
1958
36633 9-62
1959
1960
1961
1962
1963
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1964
149.8 (Plan)
135.0 (Estimated)
1965
GROUP 1
EXCLUDED FROM AUTOMATIC DOWNGRADING
AND DECLASSIFICATION
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Table 3
USSR: Change in the Targets for 1965
for the Extraction of Natural Gas, by Republic
Billion Cubic Meters
Republic
Original Plan 2/
Revised Plan 12/
RSFSR
83.750
75.930
Ukrainian SSR
31.450
36.000
Azerbay17han SSR
11.600
11.600
Uzbek SSR
18.300
21.580
Turkmen SSR
1.050
1.400
Kirgiz SSR
2.070
2.070
Kazakh SSR
0.060
1.210
Total USSR
148.280
149.790
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map, Figure 2,* shows planned regional changes in proved reserve
patterns.
It has been a target of Soviet planners -- arbitrarily adopted
from recent experience in the US -- that the ratio of proved reserves to
extraction should not be permitted to descend below 20 to 1. If the plan
is fulfilled the ratio will decline from 44 to 1 in 1958 to 26 to L in
1965.
The program for transformation of possible reserves into proved
reserves was expected to require large increases in expenditures on
geologic fieldwork and deep exploratory drilling. Achievement of the
goal for additions to reserves by 1965 would require an increase in the
amount of exploratory drilling for gas from about 1.1 million meters in
1959 to about 3.4 million meters in 1965. Investment by the gas industry
4,185 billion cu m by 1 January 1966. Performance of the Soviet indus-
try in exploratory drilling and in additions to reserves during 1960-61,
however, raises some doubt concerning fulfillment of even the original,
more moderate plan.
* Following p. 10.
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in predrilling exploratory activities such as geologic surveying,
structural-prospecting drilling, and geologic fieldwork is to amount
to 770 million rubles. Expenditures on deep exploratory drilling for
gas are to amount to a total of 1.58 billion rubles during 1959-65. The
amount of exploratory drilling for gas is to attain a total of 15 million
meters, or about six times the amount of the previous 7-year period. The
planned distribution of exploratory drilling for gas is shown in Table 4.
Table 4
USSR: Control Figures of the Seven Year Plan
for Exploratory Drilling for Natural Gas, by Republic !?/
1959-65
Thousand Meters
Republic
1959
1960
1961
1962
1963
1964
1965
Total
1959-65
RSFSR
585
735
905
1,105
1,270
1,455
1,645
7,700
Ukrainian SSR
215
240
290
325
375
570
725
2,740
Azerbaydzhan SSR
110
110
110
105
105
105
105
750
Uzbek SSR
120
150
200
230
270
300
340
1,610
Turkmen SSR
30
50
70
100
130
150
170
700
Georgian SSR
N.A.
N.A.
N.A.
10
10
20
20
60
Tadzhik SSR
N.A.
5
lo
15
20
25
25
100
Kazakh SSR
4o
50
60
80
110
150
210
700
Kirgiz SSR
10
10
20
25
35
45
55
200
Lithuanian SSR
N.A.
N.A.
N.A.
N.A.
5
lo
15
30
Latvian SSR
N.A.
N.A.
N.A.
N.A.
N.A.
3
7
10
Unspecified 12/
30
4o
45
55
65
75
go
400
Total USSR
1,111.0
1,390
1,710
2,050
2,395
2,908
3,11.07
15,000
a. 11/. Control figures refer to annual goals set forth as guidelines
at the outset of a medium-range or long-range plan. Modifications are
frequently required when the actual annual plan is drawn up.
b. Part of the total drilling for gas is to be accomplished by the Main
Administration of the Soviet Gas Industry (Glavgaz) in unspecified re-
gions of the USSR.
As a result of the greatly expanded volume of exploration, geo-
logically less favorable structures will be drilled. Therefore, Soviet
authorities anticipated that the effectiveness of exploratory drilling
will decline from 290,000 cu m added to reserves per meter drilled during
10
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USSR: PROVED RESERVES OF NONASSOCIATED NATURAL GAS, BY SELECTED GEOGRAPHIC AREA
AS OF 1 JANUARY 1959 AND PLAN FOR 1 JANUARY 1966
58
189
UKRAINE
6
NORTH'
CAUCASUS 368
270
70
1? 7
AZERBAYDZHAN
36634 9-62
524
KAZAKHSTAN
AND CENTRAL ASIA
394
OTHER RSFSR*
1 January 1959
1 January 1966**
BILLION CUBIC METERS
*Total RSFSR less Urals-Volga and North Caucasus
**Plan for 1 January 1966 as herein presented calls for total reserves of 3,469 billion cubic meters.
A revised plan for this period calls for total reserves of 4,185 billion cubic meters.
Figure 2
GROUP I
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1951-55 to 200,000 au m to be added to reserves per meter drilled during
1959-65.
Consistent lags in the volume of exploratory drilling as yet have
not resulted in chronic underfulfillment of annual plans for additions to
proved reserves, as shown in Table 5. Developments to date, however, sug-
gest that the plan for additions to proved reserves may not be met during
1962-65. Continuation of substandard performance in exploratory efforts
may contribute to underfulfillment of the Seven Year Plan for increments
to proved reserves. During 1959-61, only 85 percent of the planned ex-
ploratory drilling for gas was actually accomplished. It appears un-
likely, therefore, that the much higher goals for the later years will
be met.
Table 5
USSR: Exploratory Drilling for Natural Gas
and Additions to Proved Reserves of Nonassociated Natural Gas
1955-61
Exploratory Drilling 2,/
(Thousand Meters) Additions to Reserves
(Billion Cubic Meters)
Year
Seven Year Plan
Control Figures
Annual Plan
Actual
Planned 12/
Actual 2/
1955
N.A.
N.A.
235
75
107
1956
N.A.
N.A.
N.A.
84
106
1957
N.A.
64o
602
116
126
1958
N.A.
901
746
202
310
1959
1,140
1,130
985
359
710
1960
1,390
1,295
959
411 1/
281 2/
1961
1,710
N.A.
N.A.
N.A.
260 I/
19/
50X1
Shortfalls in the volume of exploratory drilling would have had
a more detrimental effect had they not been offset by greater-than-
anticipated additions to reserves per meter drilled. During 1959-60 the
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effectiveness of exploratory drilling amounted to 0.5 million cu in of
additions to reserves per meter drilled, or more than double the figure
anticipated by Soviet officials. Additions to proved reserves, however,
declined from 721,000 au in per meter drilled in 1959 to 293,000 cu m per
meter drilled in 1960. The data in Table 6 demonstrate that the decline
in additions to reserves per meter drilled was apparent in all the gas-
producing union republics except Turkmen SSR, which possesses a negli-
gible portion of the total Soviet proved reserves of gas. Furthermore,
the exceptional performance in 1959 was primarily the consequence of
more detailed exploration of the Gazli, Shebelinkal and Krasnodarskiy
Kray fields, which are the largest in the USSR. 22/ Thus the majority
of additions to reserves were accomplished at large fields that were dis-
covered before 1959. In the past a few large fields have provided the
major part of the total proved reserves. Soviet planners have calcu-
lated that in 1959-60 two fields with reserves of 50 billion to 100 bil-
lion cu m and one with more than 100 billion cu m should have been dis-
covered. As a matter of fact, only one field with possibilities for re-
serves of this magnitude was discovered during the first 2 years of the
Seven Year Plan -- at Darvazsk in the western portion of Turkmen SSR. gg
Table 6
USSR: Effectiveness of Exploratory Drilling for Natural Gas
by Republic a
1959 and 1960
Thousand Cubic Meters of Additions to Reserves per Meter Drilled
Republic
1959
1960
1959-60
RSFSR
Ukrainian SSR
600
900
240
380
320
660
Azerbaydzhan SSR
280
52
155
Uzbek SSR
3,400
775
2,200
Turkmen SSR
N.A.
1,100
1,100
Kirgiz SSR
265
136
195
USSR
721 12/
293 12/
51012/
b. Calculated from data in Table 5, p. 11, above.
Apparently geologic fieldwork has not proceeded at the rate hoped
for by Soviet officials. As a result, the preparation of geologic struc-
tures for deep exploratory drilling has not kept pace with lagging ex-
ploratory drilling plans. In 1960 the number of structures prepared for
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exploratory drilling, as well as the number of structures on which ex-
ploratory drilling was begun, actually declined from the level of 1959,
as shown in Table 7.
Table 7
USSR: Preparation of Structures for Exploratory Drilling for Natural Gas
and Initial Exploratory Drilling of Structures
by Region pi
1959 and 1960
Units
Region
Preparation
of Structures
Initial Drilling
of Structures
1959
1960
1959
1960
Urals-Volga
48
34
41
30
North Caucasus
23
22
16
11
Other RSFSR
4o
43
27
29
Total RSFSR
111
2.2
84
1.2
Ukrainian SSR
23
16
19
11
Azerbaydzhan SSR
2
7
2
o
Uzbek SSR
12
13
17
a.'
Turkmen S1
Tadzhik SSR
20
Kirgiz SSR)
Total USSR
171
157
131
102
a. LV. Data pertain to both the oil and the gas industries.
In spite of the lags in the exploratory program, the extent of
proved reserves should be more than adequate to meet requirements of
the Soviet gas industry during 1962-65. Fulfillment of plans for pro-
duction of gas and for additions to reserves would result in mainte-
nance of a 26 to 1 reserve-extraction ratio, or well above the 20 to 1
ratio deemed appropriate by Soviet planners. Moreover, there are in-
dications that the target of 20 to 1 may not be applicable in all cases.
For example, the Gazli field may be exploited at a rate that will deplete
it in 15 years. 22./ Nevertheless, additions to proved reserves have
lagged substantially behind plans in Azerbaydzhan SSR, in the Urals-Volga
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region, and in other regions of the RSFSR, as shown in Table 8. Minor
underfulfillments of goals for 1965 may result from a continuation dur-
ing 1962-65 of the experience of shortfalls in planned additions to re-
serves in these regions.
Table 8
USSR: Planned and Actual Additions to Proved Reserves
of Nonassociated Natural Gas, by Region 2/
1959 and 1960
Billion Cubic Meters
Region
1959
1960
Planned
Actual
Planned
Actual
Urals-Volga 51
53
76
23
North Caucasus 65
150
85
106
Other RSFSR 12/ 29
7
39
11
Total RSFSR
145
210
200
140
Ukrainian SSR
50
180
64
64
Azerbayd7:nan SSR 7"
22
27
-.-2
Uzbek SSR
Turkmen SSR
130
293
103
Z.
Tadzhik SSR 8
Kirgiz SSR
2
17
1-2
Kazakh SSR
359
710
411
281
Total USSR
b. Probably accounted for largely by Komi ASSR.
C. Transmission
1. Compressors
In order to insure operation of transmission lines at planned
throughput volume, construction of 150 compressor stations with a total
capacity of approximately 3.5 million horsepower (hp) was to be accom-
plished during 1959-65. Demand for gas turbine-powered compressors was
to increase from 4o per year in 1958 to about 100 per year later in the
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plan. Li Production of a total of almost 1,000 gas turbine compressors
for gas transmission was planned for the 7-year period. 2/
In recent years the inability to develop and produce a satis-
factory gas turbine compressor for operation on trunk transmission lines
probably has been the most significant single problem encountered by the
Soviet gas industry. By the end of 1960 the decision had been reached
to convert* more than 20 stations to electric drive. 13_/ Because con-
struction of compressor stations has lagged substantially relative to
construction of pipelines and because only compressors are needed to at-
tain potential transmission capacities, Soviet authorities estimate that
the conversion will result in an increase in annual transmission capacity
of about 25 billion cu m. 121/
Although development of all types of compressors for use on
gas transmission lines has proceeded slowly in the USSR during the entire
postwar period, much of the difficulty in transmission encountered by the
industry during 1959-61 may be ascribed to deficiencies in the program
for production and operation of a 51000-hp gas turbine-driven centrifugal
compressor -- the GT-700-4. In the first place, it remained in the design
and development stages longer than had been planned. Operational use of
the GT-700-4 showed that it had a low coefficient of efficiency, insuffi-
cient capacity, and a complicated mechanism that required excessive down-
time. Thus this compressor could not satisfactorily meet requirements
for trunk line transmission.
Electric drive has been successfully substituted for gas tur-
bines at a substantial number of stations, and, as noted above, the con-
version of more than 20 stations to electric drive was planned. However,
plans for and actual accomplishment of acquisition of electric power
equipment will be a disrupting factor. By the second quarter of 1961,
schedules for construction of electric power lines and for procurement
of electrical equipment were not being met. Furthermore, the substitu-
tion of electric drive will not be feasible in all regions, as an existing
system providing inexpensive electric power is required. 3?./ Certain sta-
tions, where no such supply of electric power exists, will need gas tur-
bines. To meet this need, several new compressors are being prepared.
The GT-700-5, merely an improved version of the GT-700-4, was
to undergo a testing program in 1960. 11/ In spite of claims that the
GT-700-5 is the world's foremost compressor of its type, that assembly
line production had begun, and that installation on trunk transmission
* The word convert is used to indicate (1) the actual removal of gas
turbines and the substitution of electric motors at existing stations
and (2) a change in plans whereby stations originally slated to receive
gas turbines were to be equipped with electric motors.
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lines had been successfully accomplished, testing probably had not been
completed by the fourth quarter of 1961. 114/
Manufacture of 12,000-hp gas turbine-driven compressors,
GTN 9-750's, for use primarily on 40-inch gas lines has been claimed. 12/
Tests of the GTN 9-750, however, are to continue throughout 1962. /IQ/
Soviet experience gives reason for doubt concerning possibilities of
meeting the schedule for installation of GTN 9-750's on the dual Gazli-
Urals line -- the major gas transmission construction project under the
Seven Year Plan. As possible substitution of GT-700-5's for GTN 9-750's
on the Gazli-Urals line has been considered,111/ Soviet planners may be
apprehensive concerning the outcome of the tests.
Mass procurement of satisfactory gas turbine-driven compres-
sors is a necessary condition for successful implementation of the Seven
Year Plan of the Soviet gas industry. As of November 1961, requirements
for such compressors continued to significantly exceed the quantities be-
ing delivered. L[2/ Thus the available evidence suggests that domestic
capability for manufacture of gas turbine-driven compressors may con-
tinue to lag. If suitable compressors cannot be imported, underutiliza-
tion of pipeline throughput capacity is quite likely to persist.
2. Construction of Pipelines
During the period of the Seven Year Plan, 26,000 km of gas
trunk transmission lines were to be constructed and put into service.
The total length of gas transmission lines in operation was expected
to increase from 13,200 km at the end of 1958 to about 39,000 km by
the end of 1965.* In the US, where 262,300 km of gas transmission
lines were in existence by the end of 1958, construction of 90,000
additional km has been forecast for the 1959-65 period, bringing the
total to about 350,000 km. Thus by 1965 the total length of trans-
mission lines available in the US will be on the order of 8 to 9 times
the length of such lines in the USSR. Soviet writers claimed, however,
that in 1960 more than 40 percent (about 8,000 km) of all gas trans-
mission lines in the USSR were of 720 millimeters (28 inches) or more in
diameter, while lines of comparable diameter in the US constituted but
1.1 percent of the total.
As oil and gas pipeline laying operations are essentially
quite similar and as Glavgaz has been charged with construction of both
oil and gas lines, prospects for fulfillment of the program for con-
struction of gas transmission lines can be meaningfully considered only
in conjunction with the program for oil lines. Changes in availability
* The revised plan calls for 42,700 km by the end of 1965.
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for use of Soviet oil and gas pipelines* are summarized in the chart,
Figure 3,** and in Table 9.*** Figures 4 and 5t show the status of
the Soviet gas transmission net as of the end of 1961.
Through 1961, additions to availability of Soviet gas
lines proceeded at a pace easily consistent with achievement of the
original goal of the Seven Year Plan of 26,000 km.tt In fact, com-
missioning of gas lines during 1959-61 exceeded the amount that would
have had to occur to achieve the simple arithmetic average required to
meet the original Seven Year Plan. Thus it appears probable that in
1959-61 additions to the total amount of line pipe in service were
more than adequate for transmission of the increments to gas produc-
tion actually achieved. Even the delay in construction of the Krasno-
darskiy Kray - Serpukhov line, caused by lack of capability for the
domestic production of 40-inch pipe, probably did not seriously con-
tribute to underfulfillment of plans for gas extraction. Relying
solely on imports of 40-inch pipe, Soviet planners apparently chose
to construct a 240-km line from Shebelinka to Ostrogozhsk by the end
of 1960 even though it may have meant diverting 40-inch line pipe
from the 1,045-km Krasnodarskiy Kray - Serpukhov line. 2121/ This de-
cision probably was based on the fact that the latter 40-inch pipe
would duplicate the service provided by the existing 28-inch and 32-
inch Stavropol'-Moscow lines, which in 1960 operated at only 65 to 70
percent of capacity because of insufficient compression equipment.
In 1959-61 the use of imported pipe enabled the Soviet gas
industry to make substantial progress on the construction of its gas
transmission net. However, the brunt of any failures in pipe supply or
pipeline construction during 1962-65 probably would be borne by the gas
* In any given year a summation of the length of line laid in place
compared with the length of line placed into service may show a substan-
tial disparity. Over a period of years, however, either figure is likely
to be a good approximation of the other. system- 50X1
atic and apparently comparable data on availability for use of both oil
and gas pipeline. Such fragments as are available on actual laying of
line in place are roughly consistent with the data on additions to avail-
ability.
** Following p. 18.
*** Table 9 follows on p. 18.
t Inside back cover.
tt the plan for construc-50X1
tion and commissioning of transmission lines during 1959-65 may have been
increased from 26,000 km to about 30,000 km. Furthermore, a summation
of the length of individual gas transmission pipelines apparently planned
for construction during the period of the Seven Year Plan yields a result
in excess of 35,000 km.Ill/
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Table 9
USSR: Pipelines for Transmission of Oil and Natural Gas
Available and Commissioned for Use
Estimate for 1955-61 and Plans for 1962 and 1965
Thousand Kilometers
Year
Oil
Gas
Total
Available
at End
of Year
Commissioned
Annually
Available
at End
of Year
Commissioned
Annually
Available
at End
of Year
Commissioned
Annually
1955
10.4
N.A.
5.9
N.A.
16.3
1956
11.6
1.2
7.9
2.0
19.5
3.2
1957
13.2
1.6
10.1
2.2
23.3
3.8
1958
14.4
1.2
13.2
3.1
27.6
4.3
1959
16.7
2.3
17.1
3.9
33.8
6.2
1960
17.3
0.6
21.5
4.4
38.8
5.0
1961
20.9
3.6
25.7
4.2
46.6
7.8
1962 Plan
22.9
2.0
28.7 bj
3.0 s/
51.6
5.0
1965 Plan
45.4
7.51/
42.7
88.1
12.2:/'
b.
b. Compbted from the plan for additions to availability in 1962.
c.
d. Average annual addition to availability required during 1963-65 to meet the target for 1965.
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USSR: ESTIMATED OIL AND GAS TRANSMISSION PIPELINES AVAILABLE FOR USE
1955-61 AND PLANS FOR 1962 AND 1965
(Thousand kilometers)
1955
36635 9-62
1956
1957
1958
1959
1960
1961 1962
PLAN
Gas
Oil
Figure 3 50X1
8.1
1965
PLAN
GROUP 1
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industry. Any such failure could significantly affect the ability of
the USSR to meet the goal for extraction of gas for 1965. Although the
original Seven Year Plan for construction of oil lines substantially ex-
ceeds that for construction of gas lines, annual plans and actual achieve-
ments in the first three years of the Seven Year Plan indicate that pri-
ority was given to construction of gas lines. The plans for 1961 showed
a step toward a redress in the imbalance, however, and if plans for con-
struction of oil lines as shown in Table 10 are fulfilled, movement in
this direction will continue in the future. In 1960 the gas industry
received only 94 percent of the amount of pipe procured in 1959, and in
1961 the allocation to the gas industry had fallen to 80 percent of the
level in 1959. Lg./ Requirements of the gas industry for 20-inch pipe
were expected to be fulfilled by only 50 percent in 1961. Lg./
Table 10
USSR: Planned Construction of Pipelines
for Crude Oil and Oil Products
1959-65
Year Kilometers
1959
1960
1961
1962
1963
1964
1965
1,907 12/
2,056 2/
2,775
3,408
5,480
7,085
8,090
50X1
A1thouel indigenous production of line pipe in general has
not been sufficient to meet the demands of Soviet industry, until late
in 1961 the most prominent deficiency was the total lack of capacity
to manufacture 40-inch line pipe. Requirements of the Soviet oil and
gas industry for 40-inch pipe are shown in Table 11.* As of 1 January
1962, approximately 14 percent of the program had been completed, an
* Table 11 follows on p. 20.
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Table 11
USSR: Construction of 40-Inch Diameter Pipelines
for Transmission of Oil and Natural Gas
During the Period 1959-65
Kilometers
Pipeline
Kanevskaya-Novopskov-Ostrogozhsk-
Planned Completed 2/
Serpukhov No. 1
Kanevskaya-Novopskov No. 2
Ostrogozhsk-Serpukhov No. 2
Shebelinka-Ostrogozhsk
Krasnodarskiy Kray and Shebelinka
1,04512/
400(1/
495 2/
240 1Y
760 h/
0
0
240 E/
system
2,180
1,000 h/
Gazli-Urals system (2 pipelines)
4,465 1/
150 1/
Gas pipeline total
6,645
1,150
Kuybyshev-Mozyr' oil pipeline
1,350 h/
0
Gas and oil pipeline total
7,995
1,150
a. As of 1 January 1962.
b. 22/
c. Residual.
d. 5i/
e.
f.
g.
h. 57
1.
J.
k.
Estimated. 52/
?..2/
achievement made possible largely by imports of line pipe from West
Germany. As only token quantities of domestically produced 40-inch
pipe became available by the fourth quarter of 1961 and as future avail-
ability of domestically produced pipe is extremely uncertain, completion
of the program on schedule undoubtedly will require further imports of
40-inch pipe. Existing contracts call for the delivery of about 500,000
tons (about 1,650 km) of 40-inch line pipe to the USSR from West Germany,
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Italy, and Sweden before the end of 1964. In spite of the sizable pro-
gram for import of line pipe, construction of the Gazli-Urals line was
being delayed in mid-1961 because of insufficient stocks of pipe, L.,/
and construction planned for 1961 was reduced from 200 km to 150 km.
Construction of the 40-inch oil line from Kuybyshev to Mozyr' probably
will receive priority over 40-inch gas lines. Any future shortage of
40-inch line pipe probably will result in a delay in construction of
transmission lines.
3. Underground Storage
Operation of natural gas pipelines at near capacity is re-
quired for efficiency, and in order to achieve such operation, some
allowance for variable seasonal demands must be made. Underground stor-
age of gas is the most effective method to meet the variable seasonal
demands and still maintain uniform operation of the pipelines the year
round. Experience of the US industry indicates that underground storage
is best accomplished in exhausted oil and gas structures. As the USSR
has few such structures in major consuming regions, a total capacity of
only 2 billion cu in of underground storage was planned for 1965 com-
pared with the 81.3 billion au m available in the US by the end of
1960. Because of the predominant industrial load in the USSR, how-
ever, seasonal demand for gas probably is less pronounced there than it
is in the US, and the relatively small amount of underground storage
planned may be nearly adequate for the gas industry.
D. Consumption
As the USSR imports no gas and exports less than 1 percent of
its production, consumption has differed little from production. No
major expansion in exports of gas is expected before 1965. The distri-
bution of consumption of gas by consumer category in 1958-60 and that
expected by 1965 are shown in Table 12.* It was anticipated that in-
dustrial enterprises would continue to account for about 90 percent of
the total consumption of gas; that the electric power industry would
remain a major consumer, accounting for about 20 percent of the total
consumption in 1965; and that ferrous and nonferrous metallurgy to-
gether would account for approximately 25 percent of the total consump-
tion by 1965 compared with less than 10 percent in 1958.
The pattern of consumption of gas in the USSR differs strikingly
from that in the US. In the US, Residential and Commercial consumption
has varied from 20 to 35 percent of the total, while the most nearly
comparable Soviet category Domestic and Communal Services according to
plan was expected to decline slightly from 11 percent in 1958 to about
* Table 12 follows on p. 22.
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Table 12
USSR: Estimated Structure of Consumption of Natural Gas 24
1958-60 and 1965 Plan
Consumer
1958
1959
1960
1965 Plan
Billion
Cubic Meters
Percent
Billion
Cubic Meters
Percent
Billion
Cubic Meters
Percent
Billion
Cubic Meters12/
Percent
Electric power 2/
Mines and quarries 1/
9.9
6.5
35.6
23.4
10.4
6.6
29.6
18.9
12.8
7.5
28.4
16.7
28.8
10.4
21.4
7.7
Ferrous metals
1.8
6.3
2.7
7.6
5.3
11.7
24.1
17.9
Nonferrous metals
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
9.7
7.2
Engineering
1.9
6.8
2.8
7.9
3.5
7.9
10.8
8.0
Chemicals
0.3
1.0
1.0
2.7
2.0
4.4
7.7
5.7
Glass, ceramic, and
construction
0.9
3.2
1.4
4.0
1.6
3.6
N.A.
N.A.
Cement
1.6
5.6
2.0
5.8
3.1
6.8
7.5
5.6
Food
0.6
2.2
1.0
2.9
1.3
2.8
N.A.
N.A.
Other industry
1.4
5.1
2.9
8.2
2.0
4.5
23.1
17.2
Total industry
24.9
89.2
30.8
87.6
39.1
86.8
122.1
90.7
Residential and
communal service
3.0
10.8
4.4
12.4
13.2
12.5
221
Total consumption
27.9
100.0
35.2
100.0
45.0
100.0
134.6
100.0
b. Based on estimated total consumption of 134.6 billion cubic meters of gas
source
c. Consumption by electric powerplants of the electric power industry only.
other enterprises.
d. Including consumption by the oil and gas industries and losses. Data for
part of the category "other industry" probably should be included for 1965.
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in 1965 and on planned structure of consumption in
Does not include electric powerplants subordinate to
1965 include consumption by the gas industry only. A
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9 percent in 1965. In spite of the slight diminution in the relative
importance of the residential consumer, it was planned that the number
of cities and towns serviced with gas will rise from 150 in 1958 to 500
in 1965, and the number of individuals housed in quarters supplied with
gas was to increase from about 16 million in 1958 to 50 million in
1965. 6.Y
The estimated shortfall in production of gas will be reflected
in a corresponding shortfall in consumption, but there is no indication
that the underfulfillment of the production plan will appreciably affect
the sectoral distribution of consumption planned for 1965. The pattern
of consumption in 1959-60, as indicated by the data presented in Table 12)*
suggests general consistency with achievement of the pattern planned for
1965.
In recent years the chronic lack of preparation on the part of
consumers has been a serious obstacle to even more rapid growth in pro-
duction of gas in the USSR. During 1958, only 36 enterprises began
using gas rather than 325 as was originally planned, largely because
necessary preparations by consumers had not been made. LT/ In 1959 the
plan for capital investment in urban gasification was fulfilled by only
92 percent in the RSFSR -- the most important gas-consuming republic. g/
In the same year, rural areas in the RSFSR fulfilled the plan for sup-
plying gas to apartments by only 82 percent. L9/ In 1960, hundreds of
industrial enterprises were to receive gas, but conversion of plants, in-
cluding electric power stations, proceeded at an "extraordinarily" slow
rate. 12/ These difficulties arose partly as the result of faulty plan-
ning on the part of the RSFSR State Planning Commission, which had not
allocated sufficient quantities of pipe and gas-consuming apparatus. 11/
In the third quarter of 1961 the lack of preparation on the part of con-
sumers continued to impede development of the gas industry. 2/
The outlook is for continued difficulty of this type. In the
RSFSR the existing capacity for production of residential gas-consuming
equipment may be able to satisfy less than one-half of the requirements
placed on it under the Seven Year Plan. 11/ In 1958-59, factories of
the RSFSR produced 370,000 gas ranges annually, although requirements
amounted to 840,000 units.121/ In Azerbaydzhan SSR, achievement of the
capacity for the manufacture of gas refrigerators, dryers, water heaters
and the like was delayed because of the low priority given it by the Ad-
ministration for Machine Construction. 7
In addition to the lack of equipment, consumers may be discouraged
by the hi.el price charged for gas, and the possibility of lowering prices
has been considered. 1g By bearing the conversion charges, the state has
* P. 22, above.
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already given enterprises some financial incentive to convert furnaces
and boilers to gas. 21/
In addition to financial incentives, other measures have been
suggested for stimulating consumption of gas. In Uzbek SSR the crea-
tion of a Main Administration of Gasification was recommended. The
Main Administration would be responsible for a wide range of activities
including project planning, construction, and the manufacture of gas
equipment, as well as for all other aspects in the operation of the gas
industry. The organization was expected to exercise strict and system-
atic control over the progress in the development of the gas industry
in Uzbek SSR.
In view of the major shortfalls in achievement of capacity to
consume gas during 1959-61, financial and/or organizational measures
probably will not be adequate to eliminate similar shortfalls during
1962-65. Furthermore, there have been no indications of significant
increases in priority given to supplying equipment for consumption of
gas or for construction of distribution systems. Even if the Soviet
gas industry proved capable of delivering 150 billion cu m of gas by
1965, it appears that consumers would be unable to make use of it.
E. Anticipated Economies
The total savings anticipated by Soviet planners from the de-
velopment of the gas industry during the Seven Year Plan period were
expected to amount to approximately 7.0 billion rubles (5.0 billion
rubles saved in operating expenses and 2.0 billion rubles saved on
capital expenditures) -- approximately 1.5 times the total investment
in the gas industry planned for 1959-65. According to estimates pub-
lished in 1959, the saving on the delivered cost of fuel in major gas-
consuming regions was to be 1.2 billion rubles in 1965 alone. In the
Urals region in 1965 the saving on operating expenses was to reach
0.16 billion rubles. The reduced capital investment made possible by
the use of gas in the Urals during 1959-65 was to amount to about 0.44
billion rubles. /2/
The use of gas as a chemical raw material also was to result
in an annual saving of 0.13 billion rubles by 1965, while capital
economies in 1959-65 were to amount to 0.65 billion rubles.* .?.LY Con-
version to gas was to permit production of an additional quantity of
4.5 million tons of cement in 1965 without any greater investment than
would have been required with the old technological process. L31/ When
gas is used in place of solid fuels, certain other plants such as tex-
tile mills ?.2/ and particular types of electric power stations also
require less investment for a given capacity.** LW
* Probably including investment in the chemical industry only.
** In Soviet practice the combination of economies in both operating
expenses and capital expenditures is an [footnote continued on p. 25]
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Other benefits that Soviet planners hoped to realize from the
increased share of gas in the total consumption of energy are reduced
requirements for labor and fuel and improved conditions in employment
and quality of product. The claim was made that by 1965 productivity
of labor in gas extraction would amount to about 50 times that in coal
extraction. Productivity of labor in gas transport was to amount to
about 16 times that in coal transport. Increases in thermal efficiency
and reductions in losses were expected to reduce fuel requirements per
unit of GNP. As a result of these factors it was expected that 300,000
fewer workers would be required by the fuels industries in 1965.
Furthermore, the quality of output of the cement, brick, and textile
industries was expected to rise with the introduction of gas.
In spite of the estimated underfulfillment of plans for produc-
tion of gas and for decreases in delivered costs of gas, adjustments
for these expected shortfalls, for estimated shortfalls in reduction of
coal costs, and for peculiarities of Soviet computational and account-
ing procedures suggest that during 1959-65 savings accruing from sub-
stitution of gas for solid fuels probably will amount to about 4.3 bil-
lion rubles compared with 7.0 billion rubles originally announced. It
is estimated that savings of fuel in physical terms will amount to 83.2
million tons of standard fuel during 1959-65, falling short of the plan
in proportion to the shortfall in production of gas.*
Inclusion in the accounts of the gas industry of expenditures
for exploration, which have been omitted in official cost-of-production
calculations, may diminish the widely acclaimed cost advantage. The
use of amortization norms that do not accurately reflect lengths of
service of capital equipment and capital structures contributes to an
understatement of the relative cost advantage of gas over coal. In
the gas industry, as elsewhere in the economy, no charge is made for
the productive services of capital. To the extent that the gas industry
unusual case. Ordinarily -- at higher planning levels as well as at the
level of the individual project -- a saving of operating expenses has
been compared with the increment in investment required to achieve it.
The result indicates how many years are required to recoup the additional
investment. The shorter the recoupment period, the more effective is the
incremental investment. The gas industry is a peculiar case in that the
increment to investment (compared with the alternative of investing in
further capacity for producing coal) required to achieve the diminution
in operating costs was thought to be negative by Soviet planners. The
resulting negative recoupment period suggests that investment in this
direction is long overdue.
* For the methodologies used in making the estimates of 4.3 billion
rubles and 83.2 million tons of standard fuel, see Appendix B.
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is capable of producing the standard colinodity -- heat -- at a saving
in capital, the lack of a capital charge results in an understatement
of the cost advantage that gas exhibits.*
Incomplete regional coverage of consumption of gas probably
results in a tendency toward understatement of the savings actually
achieved. Computation on the basis of average rather than incremental
costs also contributes to an understatement of the advantage to be
gained from the use of gas.
Underfulfillment of the plan for production of gas and dif-
ferential underfulfillment of the plans for cost reduction in the
coal and gas industries will cause deviations of actual from planned
economies. A shortfall in production will mean that less high-cost
solid fuel can be replaced by gas than was planned, and this would
contribute toward less saving than is planned. Underfulfillment of
the plan for reduction of delivered costs of coal will be of greater
consequence than the underfulfillment of the plan for reduction of
the delivered cost of gas, and the differential in the delivered costs
of coal and gas would contribute toward greater-than-planned savings.
Adjustments for computational and accounting peculiarities where
possible and for the consequences of plan underfulfillment indicate that
during 1959-65 savings in operating expenses may be on the order of 3.3
billion rubles rather than the 5.0 billion rubles originally cited.
Capital savings probably will amount to about 1.0 billion rubles rather
than the 2.0 billion rubles initially claimed by Soviet authorities.
III. Prospects for the Performance of the Gas Industry, 1962-65
During 1962-65, production of gas in the USSR probably will grow at
an average annual rate of about 23 percent from 59 billion cu m in 1961
to 135 billion cu m in 1965. During this period, almost 4o percent of
the increase in the total consumption of primary energy in the USSR will
be accounted for by the increased consumption of gas. As a result, the
share of gas in the total consumption of primary energy will increase
from about 10 percent in 1961 to about 17 percent in 1965.
In spite of the outstanding rate of growth that will be achieved by
the gas industry, output probably will average about 10 percent below
* Revisions in accounting procedures affecting the calculated costs of
coal and gas have been discussed in the issue of Finansy SSSR for
December 1961, Prices based on the new cost schedules are to be insti-
tuted during 1962.
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the plan for the period. As operations in the gas industry are highly
interdependent, failure at any stage has an almost immediate effect on
final output. In any given year, lags in the installation of consuming
equipment in one region, a shortage of compression equipment or line
pipe in another, and insufficient reserves in still a third could con-
tribute to underfulfillment of the annual plan for the gas industry.
Thus persistence -- at various times and places -- of any one or a
combination of the above-mentioned difficulties would be sufficient to
cause underfulfillment of annual plans during 1962-65.
During the first 3 years of the Seven Year Plan the goals for the
manufacture of equipment necessary for the consumption of gas and plans
for construction of city distribution systems have been consistently
underfulfilled by substantial margins. It seems quite likely that
these same difficulties will continue to contribute to underfulfillment
of production plans during 1962-65.
Construction of gas transmission lines has proceeded at planned
rates only because the USSR has been able to import substantial quanti-
ties of large-diameter line pipe almost exclusively from non-Bloc
countries. Line pipe could become a bottleneck for the gas industry
in the period 1962-65 only if Soviet planners do not avail themselves
of relatively plentiful supplies from non-Bloc countries. It is doubt-
ful that production of domestic pipe will be adequate to meet the re-
quirements for 40-inch pipe for both the gas and the oil industries.
Consequently, it is anticipated that heavy demand probably will con-
tinue to be made on Free World suppliers of pipe. Any delays in de-
liveries of 40-inch pipe -- which could result from overoptimistic
expectations of increases in the domestic capacity to manufacture
it -- probably would cause delays in construction of the gas trans-
mission lines and would cause underfulfillment of the plan for pro-
duction.
During the entire postwar period and particularly in 1959-61 the
inability to develop and mass-produce satisfactory prime movers for
use at compressor stations on transmission lines probably has been
the most serious single obstacle to even faster growth of the gas
industry in the USSR. Deficits in installation of compressors that
developed during 1959-61 probably will not be made up during 1962-65.
As a result, pipelines will continue to be used at less than poten-
tial throughput capacities, and extraction of gas will be retarded.
Annual plans for exploratory drilling for gas were fulfilled by
only 85 percent during 1959-61. Furthermore, annual plans were set
even lower than the original control figures of the Seven Year Plan.
Thus it seems extremely doubtful that the volume of exploratory
drilling for gas set in the original plan will be achieved. In
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certain regions, shortfalls in drilling volumes combined with continued
relatively small additions to reserves per meter drilled have resulted
in gross shortfalls in additions to reserves. In Komi ASSR and the
Urals-Volga region of the RSFSR, as well as in Azerbaydzhan SSR, lags
in additions to proved reserves could result in failure to meet original
extraction targets for 1965. On the other hand, other regions, in spite
of lags in exploratory drilling, have exceeded plans for additions to re-
serves. In Uzbek SSR, for example, reserves sufficient to sustain levels
of extraction planned for 1965 are already available.
As indicated above, certain bottlenecks have developed that have re-
tarded the growth of production of gas in the USSR. As a result the sub-
stitution of gas for other fuels has not proceeded as rapidly as was origi-
nally anticipated, and it probably will not. Moreover, it is estimated that
the potential saving in rubles resulting from the substitution of gas for
other fuels was substantially overstated in original Soviet calculations.
Even after allowing for the overstatement, however, the saving in rubles
will be substantial. In 1962-65 as in 1959-61 the substitution of gas
for other fuels will make a significant contribution to increasing ef-
ficiency in the Soviet economy.
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APPENDIX A
SOVIET GAS RESERVE CATEGORIES
The following is a summary description of the Soviet classification
proved reserves, which is the sum of Al, A2, and B reserves. Al re-
serves include those that can be extracted from wells that were drilled
in fields where there is great confidence that the geology of the beds
is relatively well understood. The condition of the beds and their
pressures and structures have been studied on the basis of producing
wells. A2 reserves are calculated for fields that have been contoured
with wells. The character of the producing horizons, the condition of
the beds, and the structure of the fields have been studied on the
basis of exploratory wells. The quality of the gas has been studied
on the basis of laboratory tests. B reserves are calculated for an
area where the presence of wells with favorable characteristics has
been shown and at least two wells of commercial capacity exist. The
structure of the field is established, and the extent of the productive
horizons has been approximately determined. Analysis of the extracted
material has been made. The sum of A and B reserves usually is called
proved reserves.
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APPENDIX B
METHODOLOGY
As stated in the body of this report, the substitution of gas for
coal in the USSR during 1959-65 will result in an estimated saving of
capital and labor valued at about 4.3 billion rubles -- 3.3 billion
rubles in operating expenses and 1.0 billion rubles on capital expendi-
tures. The procedures used for deriving this estimate are presented
below.
1. Estimation of Planned Savings of Operation Expenses
A summary calculation of estimated savings in operating
expenses is presented in Table 13.* A calculation of resource savings
that would be appropriate if no modification of Soviet delivered cost
and consumption data were made is presented in columns 5 and 6 of
Table 14.** This calculation indicates a reduction in operating ex-
penses of 1.13 billion rubles in 1965 and about 5.17 billion rubles
during the period 1959-65. This latter figure is compatible with the
5.0 billion rubles cited in December 1958 by A.K. Kortunov, Chief of
Glavgaz. These calculated savings, however, required adjustment to
compensate for a number of computational and accounting deficiencies
and for deviations from planned consumption and delivered cost.
a. Modifications for Inappropriate Amortization Norms
In general, Soviet amortization norms do not reflect
full depreciation of the capital stock. The rates are frequently
based on overoptimistic estimations of productive life and, there-
fore, result in incomplete amortization of capital items that are to
be retired. Errors of this type have been made in estimating the
service lives of equipment and structures used in the coal and gas
industries. It is estimated that the reported cost of extraction in
the coal industry would have been about 18 percent higher, and in
the petroleum industry 4 percent higher, if adequate depreciation were
charged. _81/ The adjustment refers only to extraction, but in the
case of coal about 75 percent of delivered cost is due to costs of
extraction. The delivered cost of coal, therefore, would have been
about 14 percent higher if adequate depreciation were charged in the
coal extracting industry and if depreciation charges associated with
the transport of coal are assumed to have been completely adequate.***
* Table 13 follows on p. 32.
** Table 14 follows on p. 33.
)(XX Text continued on 10. 34.
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Table 13
USSR: Summary Calculation of Estimated Savings in Operating Expenses
Resulting from the Substitution of Natural Gas for Coal
1959-65
Billion New Rubles
Savings
Planned savings a/
Modifications for:
Inappropriate amortization norms a/12/
and
Estimated shortfalls in plans for reduction
of delivered costs a/ c/
_ _
and
Complete regional coverage d/
and
Underfulfillment of consumption plans and for
use of incremental consumption 2/
and
Amortization charges on investment in exploration ?
Yields: Estimated savings
1965
1959-65
1.13
5.17
1.41
6.33
1.54
7.03
1.75
7.73
1.05
3.86
0.94
3.31
a. Based on consumption in regions that were expected to account for
88 and 91 percent of the total gas consumption in 1965 and 1959-65,
respectively. See Table 14, p. 33, below.
b. See p. 31, above.
c. See p. 35, below.
d. Previous results increased by 13.6 and 9.9 percent, respectively.
See p. 35, below.
e. Previous results multiplied by 60 and 50 percent, respectively.
See ID. 36, below.
f. See p. 36, below.
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Table 14
USSR: Calculation of Planned Savings in Operating Expenses
Resulting from the Substitution of Natural Gas for Coal 2/
1959-65
Reduction in Operating Expenses
(Billion New Rubles)
Region
Planned Consumption
of Gas
(Million MT/SF) 12/
Delivered Cost in 1965 2/
(Rubles per MT/SF)
No Modification f/
Modifications for
Realistic Depreciation
Schedule E/
Delivered Cost h/
1965 2/ 1959-65 L/
Coal
Gas
1965
1959-65
1965
1959-65
1965
1959-65
I. North and Northwest
7.2
34.6
13.04
3.20
0.07
0.34
0.09
0.43
0.10
0.47
II. West
5.4
15.2'
10.92
2.50
0.05
0.13
0.06
0.16
0.06
0.18
III. South
33.4
175.7
8.47
1.30
0.24
1.26
0.29
1.51
0.32
1.68
IV. Southeast
15.5
64.7
8.25
1.30
0.11
0.45
0.13
0.54
0.14
o.6o
V. Transcaucasus
13.8
72.4
10.49
1.70
0.12
0.64
0.15
0.77
0.16
0.85
VI. Volga
15.8
74.2
9.70
1.30
0.13
0.62
0.16
0.74
0.18
0.83
VII. Central
33.1
149.1
11.29
1.70
0.32
1.43
0.38
1.72
0.42
1.91
VIII. Urals i/
32.9
104.4
6.28
3.42
0.09
0.30
0.15
0.86
0.16
0.51
Total
157.1
690.3
1.13
5.17
1.41
6.33
1.54
7.03
a. The conclusions regarding planned savings in operating expenses are based on 88 and 91 percent of the total consumption of gas in 1965 and 1959-65, respectively. Consumption
of gas including Regions IX through XII would total 178.3 million metric tons of standard fuel for 1965 and 757.5 million metric tons of standard fuel for 1959-65. The substitu-
tion of gas for coal in Central Asia -- the major gas-consuming region not covered individually -- probably will result in some saving in operating expenses, as the cost of ex-
tracting gas is 4.1 rubles per metric ton of standard fuel less than the cost of extracting coal./
b. Metric tons of standard fuel.
c. 162/. Average cost rather than incremental cost is used, and, therefore, the savings implied by the difference between the delivered cost of coal and the delivered cost of gas
probably are understated.
d. 22/
e. Estimated on the basis of available data for 1959-61 and 1965.
f. Derived by multiplying the planned consumption of gas times the savings implied by the difference between the delivered cost of coal and the delivered cost of gas.
See p. 31, above.
g. Derived by increasing the delivered cost of coal by 14 percent and decreasing the delivered cost of gas by 20 percent. The new adjusted unit savings implied by the utilization
of gas was then multiplied by the planned consumption of gas. The delivered cost of coal was adjusted to reflect a more realistic depreciation schedule in the coal extraction in-
dustry, and the delivered cost of gas was adjusted to reflect a more realistic depreciation schedule for gas transmission lines. See p. 31, above.
h. Modifications for estimated shortfalls in plans for reduction of delivered cost, derived by further adjusting the delivered cost of both coal and gas, including the initial
adjustment noted in footnote g, above, and then multiplying the adjusted savings implied by the utilization of gas times the planned consumption of gas. See p. 35, below.
i. The use of the coal cost figure for the Urals probably understates the savings, as gas may be used, at least in part, in place of a more expensive, higher quality of coal.
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Inappropriate depreciation norms actually may result
in an overstatement of the delivered cost of gas. It has been argued
that the service life of gas transmission lines probably is closer to
35 to 4o years than to the 16 to 17 years now used for accounting pur-
poses. 21/ If it is conservatively estimated that the probable life
of gas transmission lines is twice the period now allowed for depre-
ziation, the transportation costs of gas can be adjusted to allow for
a more realistic depreciation schedule. This adjustment is made by
the following formula:
aD
CaCo + (a)(D) 1 + Co
Cb = Co + D
1 + ?
Co
where Ca average cost after the reform
where Cb average cost before the reform
where Co cost other than amortization charges
a = factor by which the amortization charges
change as a result of more appropriate
amortization norms -- equivalent to 0.5
and D = amount of amortization charges
A value for D 12.38
'-' -,ro 9.90 i- of is given in source 92/.
Ca
1 + 0.5 (12.38)
Substitution of values yields: 9.90
- - 0.72
Cb(12.38)
1 +
\ 9.90
Applying this factor to the 75 percent of the total delivered costs
represented by transportation costs and allowing for a 4-percent in-
crease in the 25-percent share in delivered costs represented by ex-
traction costs results in an estimate of delivered costs that is about
80 percent of the present level [effect on delivered cost = (0.72)
(0.75) + (0.25) (1.04) = 0.80].*
The data shown in Table 14 for delivered costs were
adjusted by using the factors derived above (a 14-percent increase
for coal and a 20-percent decrease for gas) to allow for more realistic
depreciation schedules. The results of this adjustment are presented
in columns 7 and 8 of Table 14, which show the reduction of costs in
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1965 as 1.41 billion rubles and the reduction over the 1959-65 period
as 6.33 billion rubles.
b. Modifications for Estimated Shortfalls in Plans
for Reduction of Delivered Costs
The delivered cost data adjusted for more realistic
depreciation schedules required further adjustment to compensate for
shortfalls in the plans for reduction of delivered costs.
The delivered costs of coal and gas shown in columns 3
and 4 of Table 14 probably are based on projected cost trends. At the
time that Soviet officials made these projections -- and savings
calculations -- it was expected that by 1965 the extraction costs for
coal would be reduced to 17 percent below the level of 1958. Actually
the All-Union average extraction costs for coal both in 1959 and in
1960 exceeded the level of 1958, as shown in Table 15.* It has been
estimated that by 1965 the average cost of coal may be reduced to about
98 percent of the level of 1958, or to about 18 percent above the plan.
Adjusted for an expected rise in calorific value, extraction costs of
energy from coal will be about 15 percent above the plan. Rail freight
costs are expected to decline at very close to planned rates during the
Seven Year Plan. As the allocation of productive services to the gas
industry probably will not be reduced below planned amounts, and as the
production goal probably will not be achieved, the anticipated reduc-
tion in average delivered costs of gas also will not be achieved. It
is estimated that the delivered costs of both coal and gas will exceed
the plan by about 11 percent during 1959-65. The absolute difference
between them, however, will increase significantly. Thus deviations
from planned trends in delivered costs of coal and gas will contribute
to larger-than-planned savings of productive services.
As shown in columns 9 and 10 of Table 14, the adjustment
for failure to achieve planned reduction in delivered costs brought the
estimated reduction in operating expenses up to 1.54 billion rubles in
1965 and 7.03 billion rubles for the Seven Year Plan period.
c. Modifications for Complete Regional Coverage
Calculations on estimated savings have been on the
basis of Economic Regions I throuel VIII** and have amounted to only
a part of the total.*xx The results of the computations thus far
* Table 15 follows on p. 36.
*** See footnote a, Table 1
above.
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Table 15
USSR: Index of All-Union Average Extraction Costs
for Coal and Natural Gas a/
1958-60 and 1965
1958 = 100
Year
Coal
Gas
1958
100.0
100.0
1959
106.8
92.0
1960
104.4
90.7
1965 Plan
83.0
37.9 b/
1965
98.0 .9.1
41.6
50X1
b. 95/
c. Estimated.
are, therefore, increased by 13.6 percent for 1965 and 9.9 percent
for 1959-65 to provide for complete regional coverage (Regions I
through XII).
d. Modifications for Underfulfillment of Consumption
Plans and for Use of Incremental Consumption
At this point the calculation of savings is based on
the total consumption of gas anticipated by Soviet planners. Savings
accruing during 1965 and 1959-65 should be based only on consumption
of gas in excess of an estimated 53.2 million tons of standard fuel
and 310.8 million tons of standard fuel, respectively. These are the
amounts that would be consumed if gas should account for only 5.5
percent of the total consumption of primary energy during 1965 and
1959-65, as it did in 1958. Estimated consumption in excess of 53.2
million tons of standard fuel and 310.8 million tons of standard fuel
will amount to about 60 and 50 percent of planned consumption in 1965
and 1959-65, respectively. These percentages are applied to the pre-
vious results to obtain 1.05 billion rubles for 1965 and 3.86 billion
rubles for 1959-65.
e. Modifications for Amortization Charges on Investment
in Exploration
Operating expenses of the Soviet gas industry should
be adjusted for the lack of amortization charges on investment in
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exploration. Capital expenditures normally Charged to the coal and
gas industries are counted first as capital expenditures and then as
amortization charges included in the cost of production. Investment
in predrilling activities and exploratory drilling probably should be
treated in the same way.
During 1959-65, about 1.02 billion rubles in predrill-
ing activities probably will not be included in investment in the gas
industry. In addition, about 0.89 billion rubles of investment in ex-
ploratory drilling will not be amortized by the gas industry. The
official system of accounting for oil and gas extraction requires writ-
ing off the cost of unsuccessful exploratory wells as losses that do
not add to capital assets. Exploratory wells that later become produc-
ing wells are entered on the books at the same rate as a comparable
developmental well, even though the cost in general for an expl6tatory
well exceeds that of a comparable developmental well by approximately
50 percent. 96/ About one-half of all exploratory wells now become
producing wells. 97/ If it is assumed that this rate continues to be
true in the future, about one-half of the 1.33 billion rubles of in-
vestment will be amortized but at a rate sufficient to cover only two-
thirds of the actual outlays. Thus 0.89 billion rubles in addition
will be charged to the state budget for a total of about 1.9 billion
rubles during the period 1959-65.
It is estimated that charges for amortization of in-
vestment in predrilling activities and in drilling of unsuccessful
exploratory wells would amount to about 0.11 billion rubles in 1965
and to 0.55 billion rubles during 1959-65. Consequently, the 1.05 bil-
lion rubles shown for reduction in costs in 1965 and the 3.86 billion
rubles shown for reduction in costs during the Seven Year Plan period
were reduced to 0.94 billion rubles in 1965 and 3.31 billion rubles
for the entire period. These reductions in cost constitute savings in
operating expenses estimated at about 0.94 billion rubles for 1965 and
3.31 billion rubles for the period 1959-65.
2. Estimation of Capital Savings
Capital savings are significantly overstated because of
the failure to charge exploration expenditures to the gas industry.
Predrilling fieldwork, which is regarded as being of such long-range
character that it is financed directly from allocations in the state
budget, 98/ nevertheless requires substantial resource allocation for
optimal operation of the industry. Some Soviet writers have suggested
that all expenditures connected with the search for gas should be
charged to the industry. Such a procedure, it is argued, would provide
a better basis for minimizing the allocation of resources required
for satisfaction of the demand for energy.
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The total expenditure for exploration for gas during the
Seven Year Plan period is to amount to 2.35 billion rubles -- 0.77
billion rubles on fieldwork, 1.33 billion rubles on deep exploratory
drilling, and 0.25 billion rubles on exploration support activities.
The expenditure of 1.02 billion rubles on fieldwork together with
exploration support activities probably was not included in invest-
ment in the gas industry. No great error will be involved if the
entire 1.02 billion rubles are deducted from the total expected sav-
ings, for sums that are to be expended by the coal industry for such
purposes are very small in comparison with those to be expended by
the gas industry. The calculations are summarized in Table 16.*
3. Estimation of Savings Due to Increases in Thermal
Efficiency and to Reductions in Fuel Losses
Not only will capital and current costs required per unit
of thermal output be reduced, but also requirements for primary energy
per unit of GNP will diminish as the consequence of the substitution
of gas for other fuels. Several factors contribute to produce this
result. Transportation and storage losses are lower for gas than for
coal. In many processes, thermal efficiency is considerably higher
when gas is consumed. In other processes the need for energy-consuming
transformation of coal into gas, electric power, or coke is elimi-
nated. 99/ Increases in thermal efficiency and expected savings of
fuel are shown in Tables 17** and 18.*** If the production plan is
fulfilled by only 90 percent, as is now estimated, savings accruing
from the reduction in losses and from increases in thermal efficiency
probably also will be only about 90 percent as large as those originally
planned.
on p.
39.
*
Table
16 follows
**
Table
17 follows
on p.
39.
***
Table
18 follows
on p.
4o.
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Table 16
USSR: Capital Savings
Resulting from the Substitution of Natural Gas for Coal
1959-65
Billion New Rubles
Planned capital savings
Less:
Expenditures on fieldwork
Exploration support activities
Total
Estimated capital savings
0.77 b/
0.25 12/
1.02
2.0 aj
0.98
a. 100/
b. 101/
Table 17
USSR: Planned Percentage Reduction in Energy Requirements
Resulting from the Substitution of Natural Gas for Other Fuels 2/
1959-65
Branch of Industry
Ferrous metallurgy
Cement
Brick
Glass
Machine building
Machine building
Machine building
Food
Food
Electric power stations
Industrial boilers
Technological Process
Substitution
Substitution
Substitution
Substitution
Equipping of
Substitution
of gas for coke
of gas for solid fuel in rotary kilns
of gas for solid fuel in annular kilns
of gas for generator gas
mazut furnaces with gas burners
of gas for mazut furnaces
Substitution of gas for electric furnaces
Substitution of gas for coal in boilers
Substitution of gas for coal to heat ovens
Substitution of gas for coal to heat boilers
Substitution of gas for coal
Reduction
in Energy
Requirements
(Percent)
18 to 20
4 to 4.5
10 to 20
35 to 40
2 to 3
20 to 25
15 to 20
10 to 15
15 to 20
4 to 8
7 to 25
a. 102/
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Table 18
USSR: Planned and Estimated Reduction in Energy Requirements
Resulting from the Substitution of Natural Gas for Other Fuels
1959-65
Million Metric Tons of Standard Fuel
Reduction in Energy Requirements
Planned
Estimated
Sector of Substitution
1965 2/
1959-65
1965 12/
1959-65 .21
Ferrous metallurgy
2.3
9.6
2.1
8.7
Cement
0.5
1.8
o.4
1.6
Engineering
2.4
9.1
2.2
8.3
Electric power stations
2.4
11.8
2.2
10.7
Industrial boilers
4.5
19.3
4.o
17.6
Other industry
2.0
8.8
1.8
8.0
Residential and communal service
7.0
31.0
6.3
28.3
Total
21.1
91.4
19.0
83.2
a. 103/
b. .Planned reduction in energy requirements adjusted by the extent of the expected shortfall
in production.
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