Russia possesses enormous reserves of oil, natural gas, and coal, which provide a significant source of foreign revenue as well as a large degree of self-sufficiency in energy resources. In 1996, petroleum exports accounted for an estimated $15.3 billion, or 24% of total exports.
The Tartarstan and Chechen-Ingushetia republics and the Tyumen oblast (west Siberia) are the main regions where oil is produced. Production has fallen from 569.5 million tons in 1987 (about 11 million barrels per day) to 7.3 million barrels per day in 2001. Still, Russia was the world's second-largest oil exporter as of 2002. About half of Russia's 1,950 known oil and gas fields currently are producing. About 90 of these fields account for 75% of total output. The declining production since 1988 has resulted from several factors, including natural reservoir depletion, deteriorating equipment, insufficient investment, stalled implementation of tax reforms, and poor technical management. Refineries in Russia are generally antiquated and inefficient, relying on western Siberian crude oil delivered via pipeline. However, the privatization of most of Russia's oil industry in the mid-1990s helped production start of increase again. Pipelines are also used to export up to one million barrels per day of oil to Eastern Europe; tankers are used through the major oil ports of St. Petersburg and others. At the start of 2002, Russia had 48.6 billion barrels of proven oil reserves. In 2002, oil exports were estimated at 5.1 million barrels per day.
As of 2002, Russia had the world's largest reserves of natural gas, and gas accounted for more than 54% of primary energy consumption. Proven reserves of natural gas in Russia at the start of 2002 totaled 48.1 trillion cu m, or 34.5% of the world's total reserves. Gazprom, the huge state-owned gas company, controlled over 90% of production. Natural gas production is also centered in western Siberia, namely at the Urengoi Field. Natural gas exports now are limited to the parts of Europe that are served by the west Siberian and Ural pipelines. In 2001, Russia produced 580 billion cu m, down from 599.8 billion cu m in 1991. Future production will depend on exploiting inaccessible fields, which will require a significant amount of investment capital. Russia's proven coal reserves of 173 billion tons at the beginning of 2002 were the world's second-largest. Coal production in 2000 was estimated at 281 million tons, which satisfied domestic consumption requirements.
Several western petroleum companies have taken part in Russia's oil and natural gas development through joint venture projects. Russia is one of the most expensive operating environments in the world, with high capital expenditures, operating costs, pipeline tariffs, and royalties. As a result, many foreign joint venture partners are only producing small amounts because of reduced incentives. In 1996, many of the larger companies scaled down their investments. Smaller foreign oil companies have fared best in the oil sector because they are able to bypass the bureaucratic approval process required for large projects. As of 2000, it seemed unlikely that the investment climate would improve significantly; president Vladimir Putin signed legislation to raise oil export duties, and toughened the tax laws. However, Russia's oil companies have used some of the profits reaped from the rise in world oil prices since 1999 to expand exploration and drilling efforts.
Power generation has fallen steadily since the breakup of the Soviet Union. In 2000 it totaled 835.4 billion kWh, of which 66.1% was from fossil fuels, 18.9% from hydropower, 14.7% from nuclear power, and less than 1% from other sources. Consumption of electricity in 2000 was 767.1 billion kWh. Total installed capacity in 2001 was 204.2 million kW. Thermal generation accounted for 68% of electrical capacity. As of 2002 Russia had more than 440 thermal and hydroelectric generating stations and thirty nuclear reactors in ten locations. The most recent addition was a 1,000 MW reactor that began operating at the Rostov facility in 2001.