NEW GLOBAL PETROLEUM MARKET REALITIES
At the plenary session “New Global Petroleum Market Realities”, the participants discussed the situation on the world market for hydrocarbons and the forecast for its development in the future.
Minister of the People’s Power for Petroleum and Mines of the Bolivarian Republic of Venezuela Eulogio Antonio Del Pino Diaz believes that OPEC is still alive, that its role will not decrease and that it will determine the situation on the market, since it provides in the order of 30–35% of the global oil market.
In his speech, Vagit Alekperov, President, member of the Board of Directors and Chairman of the Management Board of LUKOIL, noted that the tax system in Russia makes it possible to compensate the investor for all lost incomes. It is forgiving at low prices. Plus the rouble devaluation plays its role. Our facilities required new investments for maintaining them in a working condition at late stages of operation. Although we are experiencing certain difficulties in our major oil provinces in West Siberia, tax and financial instruments allow us to operate under today’s conditions. I believe that OPEC is getting back on its feet and will form the vision of investors in the medium and long term.
Mr. Alekperov went on to say that, unfortunately, Russian laws do not permit our Russian national companies to work in the Arctic. I hope that they will be changed and will work actively and invest in the Arctic.
Everything Vagit Alekperov said was shared by Alexander Dyukov, Chairman of the Management Board and Chief Executive Officer of Gazprom Neft. Companies operating in Russia are in a unique position. On the one hand, the price of oil is important to us; on the other hand, the weak rouble compensates for possible losses. So, physically, we are now investing as much as before. I consider our current tax system favourable for operation. Considering the prospects for how events might develop on the oil market, there are two main issues on the agenda: technological upgrading and reorientation of the tax system making it more flexible.
The Arctic include snot just the shelf, but also the territory beyond the Arctic Circle. We are successfully implementing a number of projects at high latitudes, in particular the Prirazlomnaya rig, the major Novy Port field on the Yamal Peninsula and the Messoyakhskaya group of deposits in the north of the Yamalo-Nenets Autonomous Area.
Patrick Pouyanné, Chief Executive Officer of Total S.A., continued the Artic theme, saying that Total is investing in projects in the Arctic and on Yamal. We believe, he said, that the cost of extracting gas on Yamal is very low. Our strategy is to avoid too great expenditures on production during a period of instability and indeterminacy. In the foreseeable future, the demand for hydrocarbons will go up, even though we are already in the age of alternative energy and electric vehicles. That is why we are investing in this sector. We must not forget the changes taking place.
Claudio Descalzi, Chief Executive Officer of Eni S.p.A., told how his company was considering projects with a production cost in the region of USD 27 a barrel and, in the future, USD 18–20. Concerning the Arctic, specific projects should be considered. A large number of LNG projects were in the pipeline. The global gas market demonstrates good dynamics in the long term.
Dharmendra Pradhan, Minister of State for Petroleum & Natural Gas of the Republic of India, noted that India was implementing big plans for establishing an energy market. It is currently very profitable to invest in the country. They were waiting for partners and developing a system of benefits for them.
Adi Karev, Global Oil and Gas Leader of EY, said: “Our forecasts do not always come true, but since we implement long-term projects, we need confidence in and knowledge of the market.” We are counting on demand going up, particularly in China, but it is very difficult to manage demand and we are bad at predicting it.
Alexander Novak, Minister of Energy of the Russian Federation, focused in his speech at the session on the fact that the oil and gas complexes of many countries, including Russia, were currently facing new challenges. Russia is doing everything it can to maintain and multiply investment in this sector. Our strategy is to be prepared and open for investments. We are carefully monitoring the situation on the market and are ready for new challenges. Our energy strategy provides for diversification of the sector, introduction of new technologies, including purely Russian ones, creation of conditions for successful implementation of projects not only at new deposits but also operating ones. A rise in the oil recovery factor is envisaged there through introduction of tertiary and quaternary recovery methods. Russia intends to remain the leader on the world hydrocarbon market. We are prepared to maintain extraction volumes in the region of 525–545 million tonnes a year, with a small increase by 8.0 million tonnes in 2016.
In connection with completion of the Tax Manoeuvre campaign in 2017, we plan to introduce a forgiving tax reform for creating an effective system for developing and operating today’s unprofitable wells and deposits. Such unprofitable reserves in West Siberia amount to in the order of 10.0 billion barrels.
We hope that all world hydrocarbon market players have the same goals. That would allow us to agree on all the urgent matters. The Russia–OPEC energy dialogue will continue. We are counting on the market reaching equilibrium in mid-2017.
