Rosneft CEO Igor Sechin spoke at the energy session on the final day of SPIEF about his vision of the future of the oil market. He warned the participants of the session against underinvesting in the oil industry, warning about the future shortage of energy resources, criticized the lobbyists for the imminent energy transition, and also asked the question “whose oil is cleaner”, and he himself found the answer.
Oil demand will rebound as vaccinations continue and the impact of the pandemic on the global economy decreases. Igor Sechin expressed such confidence to Rosneft at the energy panel during SPIEF-2021, where top managers from ExxonMobil, BP, Chevron, CNPC, SOCAR, Baker Hughes, Trafigura, Glencore, ONGC, Petrochina and Vitol were invited. “The demand for energy will continue to grow, and new waves of infections can only slow down, but not stop this process,” Igor Sechin said.
The head of Rosneft estimated the need for investments by 2040 at $ 17 trillion to maintain the current level of oil production in the world. He warned that the industry could face severe oil and gas shortages if companies were to stop investing in new fields. “Companies have become dependent on the opportunistic interests of certain groups of investors. Thus, some of them are forced to implement only those projects that will yield returns in the coming years, and refuse to search for and explore new reserves, ”Mr. Sechin believes. As an example, he cited the largest iron ore producers BHP and Rio Tinto, which “underestimated the demand and the resulting underinvestment in the industry” led to a deficit and an almost double increase in iron ore prices.
According to Igor Sechin, “the world is at a crossroads before the strategic problem of inter-fuel competition, but we need to act carefully”.
““Green” energy became especially noticeable during the period of volatility in the oil markets last year, when a large-scale inflow of funds to the US stock market allowed to “accelerate” the capitalization of certain sectors, “said the head of the Russian oil company.
Thus, the increase in renewable energy capacities over the past ten years is several times higher than the increase in traditional generation capacities in Europe and the United States, but this process, according to Igor Sechin, is generally proceeding in a balanced manner and in parallel with the development of traditional energy. At the same time, subsidies for wind and solar generation in Europe have grown fivefold, to € 50 billion, and the generation volumes themselves have grown only 3.6 times, while renewable energy has not become a significant reserve for world economic development, he believes the head of Rosneft, and the development of economically viable technologies will take decades.
Igor Sechin also expressed doubts about the ability of the metallurgical sector to meet the demand for metal for batteries in connection with the growing production of electric vehicles and storage of electricity: the demand for lithium will grow more than 40 times, and the demand for cobalt and nickel – about 20 times by 2040. According to Mr. Sechin, the low economic efficiency of low-carbon solutions imposes an additional burden on the consumer. The head of Rosneft referred to the statement of the head of the auto concern Stellantis that “the transition to electric vehicles can become a problem for the European middle class, since their cost until the second half of the 2020s will be significantly – almost twice – higher than that of conventional cars.” “Too fast energy transition, which some environmentalists and politicians call for, firstly requires the introduction of renewable energy sources at an unrealistically high rate, and secondly, it faces the problem of storage, ensuring the reliability and stability of generation,” Igor Sechin believes. He drew attention to the “instability of alternative energy”, recalling the situation in February 2020, “when the temperature in the main regions of oil production in Texas dropped to -20 ° C – these are broken blades of wind turbines, and snow-covered solar panels, and a sharp rise in gas prices ”.
The head of the Russian oil company accuses “radical activist investors” of trying to put pressure on the largest hydrocarbon producers. Among such attempts, he mentioned the election of three independent directors to the ExxonMobil board of directors, 25% of its composition, requiring the company to reduce oil and gas production, as well as the Black Rock fund’s $ 60 billion investment in green energy and Tesla. Igor Sechin considers the exit of the majors from oil and gas assets to be more than $ 70 billion in three years as a consequence of such pressure. But, in his opinion, such optimization does not solve the main task of reducing emissions and achieving carbon neutrality – the least efficient and environmentally “dirty” assets are sold to smaller and most often private companies.
“In the Permian Shale Basin, a key oil production region in the United States, there are virtually no gas flaring standards,” he said. “To maximize production in the United States, four to five times more hydraulic fracturing is performed. “B”) than in Russia ”. According to Igor Sechin’s estimates, in the Russian Federation only 25 million tons of oil is produced by hydraulic fracturing, of which Rosneft accounts for 15 million tons. “In this regard, one may ask: whose oil is actually cleaner?” – he asks a rhetorical question. On the other hand, according to Igor Sechin, Rosneft’s future Vostok Oil project in Taimyr will produce “green” barrels due to the low sulfur content in oil and the complete utilization of associated gas, “which will provide the project with a carbon footprint of 75% lower than other major new oil projects in the world. “