Oil will remain the basis of the global energy balance for another 20-30 years, and it will be replaced not by renewable energy sources, but by gas. But we shouldn’t expect a sharp rise in oil prices now, Rosneft Chief Executive Officer Igor Sechin said at the X Eurasian Forum in Verona.

“I dare to assure you that rumors about the death of oil are greatly exaggerated. Oil will remain the basis of the global fuel energy industry for the next 20-30 years, and more to come,” he said. According to his estimates, global economic growth over the next 10 years will require an increase in the supply of liquid hydrocarbons by 0.7-0.8 million barrels per day annually. As volume increases, their share in the energy balance will slowly decrease - to approximately 30%.

Next year, the global oil market will continue to be balanced by the United States, Sechin believes. “The balance is still fragile and unstable - shale production in the United States, which has accumulated large reserves of drilled but unfinished wells, could, at the appropriate price level, give a significant increase in production in 2018 and again destabilize the market. Therefore, I think we should not expect a surge in oil prices in the near future,” said the head of Rosneft.

At the same time, Sechin believes that shale producers will reach a positive cash flow no earlier than 2020 at an oil price of $70 per barrel.

How to measure oil

According to Sechin, the goal of the OPEC+ agreement - the normalization of oil reserves - has not been fully realized, and it is too early to talk about a turning point in the oil market. Over the nine months that the agreement has been in effect, excess stocks have decreased by 60 million barrels, which is only 25% of the required reduction, he noted.

The stabilization of the market is hampered by the lack of reliable and transparent information and analytics about reserves, demand and supply, the head of Rosneft added. The absence of such information facilitates speculative market manipulation for short-term gain - therefore, in the future, a unified system for measuring reserves is needed, Sechin stated. “The key task is to create unified system measuring reserves and overcoming the “overhang” of reserves,” he noted.

Dirty electric cars

As before, Sechin spoke with restraint about energy-saving technologies. The accelerated development of autonomous electric transport can worsen environmental damage, when coal generation remains an important source of electricity, he believes. In addition, the issues of safe production and disposal of electric motor components, quality, durability, capacity and reliability of batteries have not been fully resolved, the head of Rosneft said.

“Wouldn’t it be better for regulators to focus more not on limiting the use of internal combustion engines and non-economic measures to abandon them, but on accelerating the reduction in the share of coal generation and expanding the use of highly environmentally friendly, such as gas, fuel or nuclear energy? Where are the regulatory measures to address these challenges? After all, it is the consumer who ultimately pays for ill-considered decisions of regulators. And today this price is quite high,” he said.

Oil will remain a key energy resource for the next 20–30 years, Rosneft President Igor Sechin said during the X Eurasian Economic Forum in Verona. At the same time, many modern technologies, such as electric cars and wind power plants, pose significantly greater environmental risks than is commonly thought. In turn, the modern fuel and energy complex sees its future in environmentally friendly gas and petrochemicals, which should begin to consume more oil than the transport sector by 2030. Eurasia, which accounts for almost 70% of global energy consumption, can become a platform for a new round of development of the oil and gas market.

Hydrocarbon energy sources are not quite the past, and alternative energy sources are not quite the future. This topic has become one of the central ones at the economic forum taking place these days in Verona. The heads of the world's largest companies in the fuel and energy sector - Eni, Glencore International, CEFC China Energy, Trafigura and Rosneft - took part in it.

I dare to assure you that rumors about the “death” of oil are greatly exaggerated. Oil will remain the basis of the global fuel energy industry for 20–30 years and longer,” said Igor Sechin.

At the same time, technology such as electric vehicles may not be as environmentally friendly as is commonly believed, he noted.

The accelerated development of electric vehicles, when coal generation is the marginal source of electricity in many countries, may lead to the fact that the actual environmental damage of the transition to electric vehicles may be significantly greater than the “status quo,” he said.

As Igor Sechin noted, today the issues of safe production and disposal of electric motor components, quality, durability, capacity and reliability of batteries have not been fully resolved.

This view was echoed by Glencore International Chief Executive Officer Ivan Glasenberg. According to him, mass production electric vehicles will also significantly increase the load on metallurgy, which has a noticeable negative impact on the environment.

Today we produce 23 million tons of copper. The world will have to produce significantly more to produce electric cars at scale. It will also require a significant increase in nickel and cobalt production. Opportunities for this are limited, Glasenberg said.

Electric cars are not the only technology that can be potentially harmful to the environment. According to Igor Sechin, it has also been proven that wind power plants can cause damage to the environment.

Germany has large wind fields in the Baltic Sea. But as soon as a storm begins, they are turned off and switched to backup generation. The consumer has to pay for all this. India has huge wind fields. From an environmental point of view, the big question is what is healthier and what is more harmful. Because the vibration load on the soil increases sharply. In India, there are no birds or worms in these fields,” said the head of Rosneft.

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In addition, technology alternative energy so far they can only exist due to colossal subsidies and are not self-sustaining, he emphasized. Market participants also have serious doubts about shale technologies. According to a recent WoodMackenzie report, the five largest US shale producers (Continental, Devon, EOG, Newfield and Pioneer), which are combined into synthetic Tight Oil, are experiencing significant financial problems: They had negative net cash flow in 28 of 29 quarters since 2010.

Competition with alternative energy on the one hand and high demand for classical hydrocarbons on the other have become an incentive for cooperation between global production companies in the fuel and energy sector. This topic also became one of the key ones at the forum in Verona. The globalization of processes is especially noticeable in Rosneft, which over the past year has received two new serious partners as shareholders - Glencore and the Qatari investment fund QIA. In addition, by the end of this year, the transaction with the Chinese CEFC, which plans to enter the share capital of Rosneft by 14.16%, is expected to be closed.

According to Igor Sechin, the total level of cooperation between Rosneft and leading global companies now exceeds $0.5 trillion. At the same time, the cost of projects with foreign partners exceeds $110 billion. Oil and gas supplies to Europe will continue to increase, and oil supplies to the Chinese CEFC will grow by 10 million tons per year. Rosneft also announced a possible increase in its share in the Egyptian Zohr project and the possibility of new projects in Indonesia.

We generally like to extract oil. Everywhere. And gas too. In Vietnam, Brazil, Mozambique, the USA,” Igor Sechin commented on the corporation’s expansion in the global market during a press conference.

RusEnergy partner Mikhail Krutikhin believes that the need for oil will remain very large for a long time.

“I believe that at least until 2040, 90% of energy production will come from oil, gas and coal in approximately equal proportions, and only 10% from nuclear, hydropower and other renewable resources,” noted Mikhail Krutikhin.

According to the leading expert of the National Energy Security Fund, Igor Yushkov, the share alternative sources Global energy consumption remains at the same level.

At the same time, it is obvious that gas today is no less environmentally friendly fuel. Considering that the cost of gas is now quite low, it is much more competitive than renewable sources. Recent forecasts make it clear that hydrocarbon consumption will only grow, he predicts.

According to the expert, the era of oil and gas has not come to an end, and due to the growing demand for gas and oil, it will continue for at least several more decades.

MOSCOW, October 19 - PRIME, Anna Podlinova. Issues of future Eurasian cooperation and prospects for the development of the global energy market became the main agenda of the first day of the tenth Eurasian Economic Forum in Verona. The special session was attended, among others, by the former Chancellor of Germany, Chairman of the Board of Directors of Rosnefi Gerhard Schröder and the head of the company Igor Sechin, who delivered his annual report.

The former Chancellor of Germany spoke first. Schröder drew attention to the contradictory relations between the European Union, the United States and Russia, noting that each player has its own interests, but Europe is interested in maintaining energy supplies from the Russian Federation. “I was criticized in my own country, but I still agreed to this important position (chairman of the board of directors of Rosneft - ed.), because I want to show by my example that dialogue is important, cooperation with Russia is important,” Schroeder noted .

Sechin immediately concentrated on the energy situation of Greater Eurasia, where almost 70% of world GDP is produced at parity purchasing power, accounts for about 76% of world exports of goods and services, with 60% direct foreign investment. “The development of energy and general infrastructure projects are the most important factors in Eurasian integration, so I would like to start our discussion with an analysis of the oil market,” Sechin said.

The “death” of oil should not be expected

“I dare to assure you that rumors about the “death” of oil are greatly exaggerated. It will remain the basis of the global fuel energy industry in the next 20-30 years,” Sechin said. The growth rate of the global economy will ensure a steady increase in demand for hydrocarbons - in the next 10 years, the growth in the supply of liquid hydrocarbons should amount to 0.7-0.8 million barrels per day annually. In the long term, the share of liquid hydrocarbons in the structure of global energy consumption will slowly decline, Sechin admitted, but will still occupy about 30% of global primary energy consumption while their physical volumes increase.

“A certain decrease in the share of oil in the overall balance of energy resources will be almost completely compensated by an increase in the share of gas and an extension of the derivative petroleum product chain,” he stated, especially highlighting the prospect of natural gas.

Oil pricing

Speaking about oil pricing, Sechin noted that the market is dominated by financial speculation over the long-term interests of the development of the oil industry.

“The predominance of financial players and short-term speculative operations leads to excessive volatility in price indicators. Unfortunately, this damages the long-term interests of the industry,” said the head of Rosneft.

Over the past 10 years, the share of participation of financial players in setting oil prices has increased significantly. Market volume of non-delivery futures contracts exceeds the market on which physical volumes of oil are traded by more than 11 times, and many tens of times exceeds the volume of physical supplies, Sechin said. He called on industry leaders to level out market volatility and take a responsible approach to the task of long-term meeting the needs of the global economy.

OPEC+ and the stock overhang

The pressing problem, according to Sechin, currently remains an excess of oil reserves. “Despite the growth in consumption and the fact that over 9 months of operation, excess reserves were reduced by 60 million barrels, this is only 25% of the required reduction before reaching the intermediate level 2012-2016,” Sechin calculated, noting that the goal of normalizing the “overhang” has not yet been fully realized, so it is too early to talk about a turning point in the oil market, and therefore one should not expect a surge in oil prices in the near future.

Successes in shale production

Sechin also commented on the sustainability of the shale industry. The five largest US shale producers (Continental, Devon, EOG, Newfield, Pioneer) are experiencing significant financial problems: in 28 of 29 quarters since 2010, there was a negative net cash flow, these companies in 2010-2016. spent over $50 billion on geological exploration and mergers and acquisitions, Sechin said. Given this behavior, positive cash flow in the industry will appear no earlier than 2020, and only if the oil price reaches approximately $70 per barrel by that time, the head of Rosneft believes.

“Given the growing investment and operating costs, a logical question arises, which will end first - the period of low oil prices or the patience and hopes of investors?” Sechin asked, noting that Rosneft’s production costs are about $2.5 per barrel.

Rosneft's business is to produce oil and comply with local regulations

There must be a universal approach to the work of foreign companies in Kurdistan, they have nothing to do with politics, Rosneft produces oil and complies with local legislation, Rosneft head Igor Sechin told reporters.

On Wednesday, Rosneft announced that it had signed with the Kurdistan government the documents necessary for the entry into force of production sharing agreements (PSAs) in relation to five production blocks located in the region. The amount of payments for entering the project will be up to $400 million. Rosneft plans to begin a geological exploration program and pilot production in 2018.

“We are working both in Venezuela and in Kurdistan, we are starting to work, we are discussing issues of working with Iran. At the same time, I am not a politician, my business is to extract oil and do it effectively. And we strictly comply with the legislation in any territory where we are located,” - he said.

“If there are any internal contradictions, they must be resolved between the government of Kurdistan and the central government of Iraq, this is not our question at all,” Sechin added.

He noted that many world companies operate in Kurdistan, “and this does not bother anyone,” - Exxon, Chevron, Total. “Why can’t we work there?” noted the head of Rosneft.

“We believe that there should be a universal approach; we are not subjects of the political component,” he emphasized.