GAS CONSUMPTION TO ACHIEVE SUBSTANTIAL SAVINGS FOR USSR THROUGH 1980

Created: 2/19/1962

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CURRENT SUPPORT BRIEF

GAS CONSUMPTION TO ACHIEVE SUBSTANTIAL SAVINGS FOR USSR0

OFFICE OF RESEARCH AND REPORTS

CENTRAL INTELLIGENCE AGENCY

cia historical review program release as8

This report represents the immediate views oforiginating intelligence components of the Office of Research and Reports. Comments ore solicited.

t ^nntq-flfi InfnnwnHrm affecting the national defCnSC Of

the United States, Tnnin 'n" un niitnrt n' thr fsntpnai^ lame TitleSC,, the transmission or reveliiliufl UP which. In any manner to an unauthorized person Is prohibited by law.

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GAS CONSuTIPTION TO ACHIEVE SUBSTANTIAL SAVINGS

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iaba The ^enoral plan for development of the gas Industryas recently discussed by the Chief of the USSR Main Administration for the Gas Industry in more detail than is available for the other fuels industries. 1/ Production of gas la expected to increase from about 60

cubic "tern <bcm)cmcm The share of gas in the total production of Primary energy is to increase from less thanercent1 to aboutercent Exploratory drilling is to increase from abouteterso approximatelyillion meterso provide for an anticipated sixfold expansion of proved Tho plan also calls for the constructionhousand kilometers (km) of truck transmission line,housand km ofnches in diameter, it is anticipated that the increased investment requirod to accomplish the planned expansion of the industry will be well justified by the substantial savings to tho economyfrom substitution of natural gas for more expensive forms of energy.

During the two decades substitution of natural gas for other fuels, primarily coal, is to resultumulative saving9 billionimes gross industrial investment in the USSR The expected saving, (see Tables to result primarily from reduced operating expenses accuring from the lower delivered cost of natural gas. The Soviets alsoultitude of technologicalto contribute to cost reduction in the industry and are also planning to gradually lower the ratio of proved reserves to annualwhich will permit further economies, (see Table 4) Thebetween the cost of gas and coal apparently ls expected to remain substantial even though declines in drilling efficiency and the lack of appreciable gains in transmission efficiency afterthe result of increased average transmissiontend to raise the costs of gas. (see)

00 production goals are probably based on the assumption that5 target will bo met. If, as now seems almost certain, 5 plan is not fulfilled, even the ambitious increments planned00 will havo to be overfulfilled to attain the levels of production envisaged for those years.

Nevertheless, an underfulflllmcnt of production plans does not of itself mean that the expected economies will not be attained. The actual saving to be achieved will be affected by the comparative extent to which plans for reductions in tho delivered costa in the coal and gas Industries are fulfilled. Furthermore, the Soviet calculations may actually understate the contribution to Soviet national economic development resulting from substitution of natural gas for other fuels because the coal industryelatively lower amortization rate compared with the gas Industry.

ebruary^ Page *j

1 -

Economics Anticipated from Use. of NaturaltheBS

of Saving

Direct a/ Capital Saving Indirect a/ Capital Saving

Rubles

Capital Saving

Direct a/ Operating Expense Saving Indirect a/ Operating Expense Saving

Total Operating Expense Saving

5

4.4

Saving

a. Direct savings are connected with extraction, processing, and delivery of fuel. Indirect savings are those resulting from reduced capital and operating costs of fuel consumers largely because ofthermal efficiency and less extensive requirements for personnel and equipment.

Table 2

Planned Effectiveness of Drilling for Non-Associated Gas a/

In the0

Period

Exploratory Drilling b/ (Thousand Meters)

Planned Additions to Proved Reserves (bem)

Planned Effectiveness of Exploratory Drilling (Million Cubic Meters Per Meter Drilled)

0

gas is produced in association with orcrude oil. on-associated gas is expectedfor aboutercent of total production of natural gas.

f drilling willtoward finding suitable underground storage. In each offive year periodswill be drilledof storage.

2

6

3^

i

Soviet Gas Transmission Netnd Man for

Million Cubic Meters per kmNet

Table 4

Planned Relationship Between Proved Reserves and Extraction of Non-AssoclatOd Natural Gas in

Billion Cubic Motors a/

Period

1

asan First Year of Period

8

to

Reserves

N.A.

Extraction

450

.

Annual Extraction Final Year of Period

.

Ratio of Reserves to Extraction

1

1/

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