The Head Of “Rosneft” Igor Sechin
One of the main events of the first day of the St. Petersburg forum was the session on “the Global oil market at a crossroads: investment in uncertainty, or risk management. Its organizer was “Rosneft”.
At the invitation of the head of “Rosneft” Igor Sechin in St. Petersburg was attended by the leaders of the world’s largest oil and gas companies Robert Dudley (BP), Patrick Pouyanne (Total), Lorenzo Simonelli GE Oil&Gas), Eulochio Antonio Del Pino Diaz (the Minister of oil of Venezuela and the head of PDVSA), Exxon head Rex Tillerson. Leading the session was a former Executive Director of the International energy Agency (IEA), Nobua Tanaka. In the hall on the first row is located, the Minister of energy of Russia Alexander Novak with deputies, former German Chancellor Gerhard schröder and Matthias Waring. Many top managers do not have enough place and they had to stand the entire session on my feet.
In search of balance
Performance Sechin lasted almost half an hour. The head of “Rosneft” reported about the deformation of market mechanisms in the industry. “Different players are testing the industry and market mechanisms on the realization of their interests, often at the expense of basic foundations for its development,” — said Sechin.
He complained that statistics and Analytics has ceased to be a reliable guide for investment. “The IEA represents the interests of the consumers who were happy with low prices; energy information Agency US Department of energy published projections in General without reference to the price levels; the position of the OPEC Secretariat is contrary to the comments of the representatives of the organization member countries. Obviously, the problem of adequate information and balanced sound analysis of markets has become one of the most acute,” stated the head of “Rosneft”.
The new industry regulator in the world is OPEC, Sechin called the shale production of the United States. But the quality of the resource base in the United States is such that for its proper use requires high oil prices. Long-term debt of the companies of oil shale production at the end of 2015, he estimated more than $350 billion.
According to him, the decline in oil prices and volatility in the markets has led to the loss of oil and gas companies about $350 billion investment. However, the supply and demand of hydrocarbons move to the balance, followed in the medium term and a possible shortage. He agrees with experts predicting a rise in oil prices. For example, Citi expects this year the average price of more than $50 in 2017 — about $60 in 2018 – $64. But such prices do not cover costs, so some projects are still associated with “high risk”.
Suddenly Sechin touched upon the topic of the election, the President of the United States. According to him, different approaches to the development of the oil and gas industry candidates favorites of the election race the President of the United States — former Secretary of state Hillary Clinton and businessman Donald trump are a risk for oil and gas industry. “Republicans (tramp— RBC) already offer measures for the development of domestic production and export of oil, gas and coal, while Hillary Clinton offers to enhance support for renewable energy,” he said.
Sechin believes that the gas market will grow faster than oil, and sees a threat to his balance in the supply of LNG from the US. Russia may give response to this threat, if you will ensure the equal access of Russian gas to foreign markets (right now the monopoly on export gas pipeline belongs to Gazprom). He believes the advantages of the Russian companies before foreign huge reserves, established pipeline infrastructure and long-standing system of long-term export contracts.
“Russia has huge resource potential, and the Russian oil projects profitable even at low oil prices,” — said Sechin. Rosneft now amount to just $2.1 $ per barrel. It is one of the lowest in the world, confirmed Dudley. But stable oil production in Russia will be able to save only by reducing the tax burden, Sechin warned the Russian government.
New oil province
Among the achievements of “Rosneft” Sechin recalled the discovery of “Victory” in the Kara sea with Exxon in 2014 (however, because of the sanctions, Exxon has been forced to freeze participation in the project). The field has reserves of 130 million tonnes of oil and 396 billion cubic meters of gas. “As a result, the inventory of the West Siberian oil and gas province exceed the reserves of the Gulf of Mexico and is comparable to the reserves of Saudi Arabia,” stated the head of “Rosneft”. He announced readiness to attract foreign technological and financial partners to work on these projects. “Today, we announced with BP on the joint venture “Ermak”, which will invested $300 million in geological exploration,” he said.
After the report Sechin session moderator Nobuo Tanaka asked the attending top managers, what price of oil they put in their budgets for this year. Dudley said that BP — $40, the Total head Patrick Pouyanne — $30-40. Sechin smiled and said, “And we have less.”