Rapid growth in demand in Asia creates new market for Russian pellets

By 2020, the European leaders by the share of biofuels in the energy industry will be Sweden (49%), Latvia (40%) and Finland (38%), such predictions were given at the XV International Forestry Forum held on 8-9 October in St. Petersburg.

The average share of renewable energy in the EU by 2020 will reach 20%. The greatest growth in consumption will come from the power sector and transport. Europe already uses a wide range of stimulation mechanisms for bioenergy: higher tariffs for thermal and electric energy generated from renewable sources, tax incentives and direct subsidies to companies.

Together with this, there is an active development of new biofuel markets, especially in China, Japan and South Korea. China does not have own well-developed pellet production (750,000 tonnes at the moment), while by 2015 consumption is expected to grow to 3 million tonnes there. Import of pellets to Japan since 2008 grew by 78%, and imports to South Korea during this time tripled. Therefore, Russian producers of pellets have an excellent chance to take advantage of this development.

As one of the priorities of development of the forest industry in Russia, honorary member of the UN FAO Advisory Committee on paper and timber products Eduard Akim sees the production of science-intensive products with high added value on the basis of processing resources in the regions of its growth.

Similar idea was expressed at the Invest in Forest conference by former Prime Minister of Sweden Goran Persson: in physical volumes, timber production might probably have moved from Europe to Asia, however, European manufacturers can compensate this with innovative products which have a very high added value.

General Director of Forestry Economics Research Centre Nikolai Petrunin in his report at the forum noted that many of the priority investment projects in Russia are not linked to the long-term logic of the development of territories where they are implemented. Choosing the way of local investment projects, the industry pushes itself in the worst case scenario. The forest complex will not move forward without having built up a system of strategic planning, said Petrunin.

St. Petersburg Forest management institute professor Igor Shutov told about possession system of forest ownership, which was used in Ancient Rome, England and pre-revolutionary Russia. This system involves the actual preservation of the forest lease, but in the most productive way, when it is profitable for the lessee to invest in the development of forests. The principal difference of possession ownership is the ability to pass a forest plot by inheritance and the inability to resell it or break it up into smaller plots.

Doctor of Agricultural Sciences, Professor of St. Petersburg State University Anatoly Zhigunov told that the reproduction of forests, being organized correctly, can be profitable, and it is necessary to tell the companies about scientific calculations on economic impact of reforestation.

It is assumed that in the north of Tyumen region, development of roads for oil and gas complex will create good prerequisites for large-scale development of logging, told the Director of Department of forestry complex of Tyumen region Denis Mamontov.

Active use of the resources in the south of Tyumen region resulted in domination of birch sprout stands. Around Tyumen city in Soviet times, logging reached 7 million m3 of softwood; today, deciduous trees are dominant. This was not only human activities but also climate change in the region: over the last 50 years, it became warmer, less snow falls, and groundwater went on average by two metres deep.

It is planned that the volume of wood processing in Tyumen region will rise from the current 640,000 m3 up to 2.9 million m3 by 2020. However, even with this increase the allowable cut will be mastered only by 40%, said Mamontov.

In Tyumen, a regional programme is developed for conversion of municipal boiler plants (primarily older ones) to biofuel: from 110 boiler-houses working on non-regional coal and black oil, 62 will be converted to wood fuel. In order to work effectively, a boiler should be located no further than 50 km from the place of production of wood chips. If this distance is larger, it is essential to establish a pellet production which can supply boilers within a radius of 350 km, Denis Mamontov concluded.

36.5% of the participants of the Forum during the e-voting predicted that the Russian forestry complex will develop according to the inertial scenario, 30.6% – to the innovative one, 32.9% – to the moderate one. 56.7% of participants believe that the development of forestry and forest industry in Russia could become a national priority project.

WhatWood expresses thanks to Nadezhda Kolodina and Ilya Sergeev (Forestry Economics Research Centre) for sharing reports and photos from the Forum.