Riyadh, 20 June 2023: Igor Sechin, Chief Executive Officer, Rosneft Oil Company, presented a roadmap for improving the efficiency of the Russian energy sector in the face of unprecedented external challenges at the 26th St. Petersburg International Economic Forum. “Global warming is a significant factor in the growth of energy consumption. Ventilation and air conditioning already accounts for about 10% of the world’s energy production. And by 2050, global demand for indoor climate could triple, surpassing the US and the EU together in terms of total energy consumption”, the head of Rosneft pointed out.
Speaking about the problems of global energy and the economy, Igor Sechin noted that underinvestment in the oil industry will inevitably create a deficit in the market and lead to higher oil prices. “According to the current forecasts of the IEA and OPEC, global oil demand will grow by 2.4 mbpd in 2023, setting a new record of 102 mbpd,” Igor Sechin said.
In the long term, physical volumes of oil consumption are estimated to grow by about 15 mbpd (+15%) by 2045, and oil, together with natural gas, will continue to satisfy more than 53% of global demand for primary energy, he pointed out.
At the same time, the Chief Executive Director of Rosneft cited underinvestment in the industry as the key reason for the inevitable shortage of energy resources and rising oil prices. He emphasized that Underinvestment occurs not only in production, but also in exploration, which has already led to insufficient production replenishment by the addition of new reserves (the replenishment is about 90%). The scope of exploration drilling has been steadily declining, and its focus has been on increasingly deep-water areas. Today the average size of discovered fields in the world is about 15 million tons of oil equivalent, which is not comparable with the giant discoveries of the 1970s made in that time in Saudi Arabia, Russian Siberia, and the US.
As Igor Sechin noted, OPEC countries are finding it more difficult to reach common solutions due to differences in economic structure and production dynamics. For example, the Middle Eastern OPEC countries are increasing production and diversifying their economies by developing the non-oil sector, while the African OPEC countries are steadily reducing production, losing their weight in the global oil market.
In this regard, the head of Rosneft believes it would be advisable to ensure monitoring not only of production quotas, but also of oil export volumes, given the different sizes of domestic markets. Since a number of OPEC+ countries export up to 90% of their oil production, while Russia at the same time supplies about 50% to the market, this puts our country (Russia) in a less favorable position under the existing mechanism for assessing influence and access to key sales markets.
While announcing the current voluntary production cuts, Saudi Arabia is concurrently increasing its production capacity and its drilling rig count could grow by at least 25% in the next 2 years, as evidenced by contractor companies and the scope of contracts signed for drilling and infrastructure development, the head of Rosneft noted. Consequently, about 2 million bpd of new production capacity will be commissioned in Saudi Arabia by 2025-2027.