WASHINGTON, June 21, 2017 - With Russia serving as one of the world’s leading producers and exporters of oil and gas and a renewed focused on improving domestic food supplies, it shouldn’t exactly be a surprise that biofuels have an insignificant share in the overall energy production matrix of that country.

A recent report from USDA’s Foreign Agricultural Service Global Agriculture Information Network estimates that biofuels make up only 1.2 percent of energy production in Russia, with biomass accounting for only 0.5 percent.

High excise taxes for ethanol in Russia, coupled with high production costs and increasing demand for grain for other uses, are all major obstacles for the development of the bioethanol industry, the report notes.

But Russians are tapping into another natural resource in a big way. Wood pellet production and exports will likely continue to increase by 10 percent, or to 1.45 MMT, in CY2017, driven by strong European demand and more interest from the Asian markets, a soft ruble and increasing local consumption.

In the mid-term, domestic demand for wood pellets is forecast to increase at 10-12 percent annually. In the local market, wood pellets are in demand by private heating stations and municipal housing, primarily in heavily forested areas where traditional sources of energy are not accessible. Production of wood pellets is, in most cases, cheaper than gas.

The Russian Customs Service reports exports of wood pellets from Russia in 2016 were 1.075 MMT, or more than 14 percent higher than in 2015. The leading export destination for these products was Denmark at 399,400 MT, followed by Sweden at 129,700 MT, and South Korea at 129,300 MT, and the Netherlands at 79,100 MT. These four destinations account for almost 70 percent of total Russian export share of wood pellets worldwide. Europe will continue to be the largest importer of Russian wood pellets, predicts the GAIN report.