Russian Energy Week 2018

The consumption of gas will grow faster than that of other hydrocarbons, at a rate of around 2.5% per year for the next 15–20 years. The reasons for this growth lie in the fact that gas is an ecological, economically competitive fuel, and crucially, it is becoming more accessible thanks to LNG. The fact that gas is becoming more accessible worldwide also stimulates its increased use. As its advantages become more apparent, it becomes more competitive compared to other fuels — and more attractive to consumers. In addition, it is very difficult to achieve the Paris Agreement targets on climate change without an upturn in gas consumption. In recent years we have witnessed the far-reaching transformation of the gas market, in part through the increase in shale gas production, and advances in production and transportation technologies. But market globalization is the most important trend today. If previously a large proportion of gas sales and supply took place via pipeline, over the past decade LNG and gas pipelines now have an equal share. The number of LNG consumers has increased from 13 countries in 1990 to 36 countries in 2017, and is set to rise further. Today’s technologies enable us to create floating gas-fuelled power stations, and floating terminals for the liquefaction and regasification of gas. All this makes connecting it to on-shore infrastructure significantly easier and accelerates the development of LNG. Other factors in gas market globalization include increased supply from non-traditional sources, the transition from long-term contracts to spot prices, and a greater focus on the ecological aspect. Groups like the Gas Exporting Countries Forum (GECF) also facilitate the further transformation and globalization of the gas market by helping to develop a balanced approach to development and by protecting the interests of all market participants. Great hopes are pinned to gas as the fuel of the future, and Russia is the largest producer and has the largest proven reserves of this fuel. How do you view the prospects for gas? Should Russia accelerate its monetization in order to strengthen its position on the market, or will the market settle into place independently? Does the development of renewable energy sources threaten the gas market? In the oil sector we already have OPEC, with countries actively cooperating in order to deliver market equilibrium and sustainable development. Is a similar form of cooperation possible in the gas sector, given the geographical difficulties of the markets involved? What prospects are there for this kind of cooperation?

Growth in the consumption of coal across the globe is slowing as a result of tougher environmental requirements in developed countries. Nevertheless, the low cost of coal makes it an irreplaceable fuel for developing countries, where around 1.5 billion people still do not have uninterrupted access to modern forms of energy. Can coal drive economic growth and improve living standards in these countries? What energy markets are the most promising in terms of demand for coal? Is it worth waiting for breakthrough technologies in coal transportation, processing and consumption, which will increase its competitiveness with natural gas and renewable energy sources? Can coal chemistry, metallurgy, construction and other industries compensate for falling power generation demand in developed countries?

For companies — and indeed countries — to be competitive in the fourth industrial revolution, they will require expertise and best practices in digitalization, automation, and the industrial internet of things. Companies at the forefront, both in Russia and other technologically developed countries, are developing and implementing smart grids, smart energy distribution, new energy-storage technology, consumer services, and the energy internet. As well as changing market demands, companies also have to examine fast-growing technologies and drivers of disruption. Can the economic benefit from implementing new technologies already be felt? What technological and social problems do companies face in the process of digitalizing the electric power industry? Where will investment come from in order for plans to come to fruition? What government support do companies rely on?

The energy sectors of various countries need to respond to shared challenges arising from the climate agenda and the current technological revolution. Nations need to identify ways to limit greenhouse gas emissions, establish their position on the development of nuclear power, and solve issues caused by a deficit in infrastructure at a time marked by digitalization and a new wave of electrification. Naturally, when tackling these challenges, regulators consider aspects specific to each country: the structure of the economy, the availability of resources, environmental and social requirements, and others. At the same time, they need to strike a balance between the interests of consumers and producers with regards tariffs, and solve issues related to long-term energy security and environmental safety. Which of the regulators’ solutions have proved to be the most effective from the point of view of investment attractiveness, energy security, and public spending? What other parameters can be used to assess the effectiveness of government policy in the energy sector? Which new factors (the spread of electric cars, trade wars, technological equality etc.) may influence a change in government policy? Could government policy be used to prepare for a potential sea change in global energy?

The large-scale development of gas fields and the development of transportation technologies has enabled natural gas to make revolutionary changes in the global fuel market for the production of electric and thermal energy over the past 50 years. Natural gas continues to maintain its competitiveness in the long term, even amid the rapid growth of renewable energy sources. Another major consumer of energy resources is the transport sector. Could natural gas play the same revolutionary role in the motor fuel market against the background of the continuing development of traditional gasoline and diesel engines, and the emergence of electric and hydrogen vehicles?

The petrochemical industry is growing apace — at twice the rate of global GDP. At the same time, this growth has a strongly pronounced regional differentiation in terms of raw materials and output. Countries without an extensive resource base, such as those in the EU as well as Japan and South Korea, are seeing growth in light-duty production with a considerable innovative component based on naphtha. In the Middle East, USA and several other countries, the sector’s growth comes from major projects based on natural gas processing. In China, coal and coalbed methane are widely used in the petrochemical industry. Countries are applying various mechanisms to regulate and encourage growth of the industry, and are increasing their competitiveness in various product niches. Why is it that the strategies of countries with fewer resources bring greater economic results? What measures to foster growth of the industry will result in the greatest economic benefit from cheap commodities? What restrictions are hindering Russian producers from increasing their competitiveness in global petrochemical markets? What can the government do to help develop petrochemical clusters? What are the prospects of new projects in the East of Russia? What infrastructure do Russian petrochemical companies lack?

The historic OPEC+ agreement has brought energy prices back in line with their fundamentals and made the energy markets more predictable. As a result, the attractiveness of energy projects as an investment has increased. Middle Eastern countries are not only the leading producers of energy resources, but also the leading investors in the energy sector. They have accumulated vast experience, and the geographical locations of their investments have for a long time stretched beyond the borders of the Middle East region. Alongside RDIF, Middle Eastern investors have begun to invest in the Russian energy sector. What makes these investments attractive for them, how will these investments be implemented and what is required to ensure the successful implementation of joint projects?

The Assistance Fund for Housing and Municipal Service Reform is a Russian state corporation. It assists in resettling people residing in unfit housing, modernizing the utilities infrastructure, and implementing energy-efficient technologies in the housing and utilities sector. Through meeting these objectives, transparency and efficiency in the housing and utilities sector will be ensured, residents will have access to high-quality services, a modern living environment will be created, towns and settlements will develop, and the Housing and Urban Environment national project will be implemented. This nationwide meeting will focus on key issues related to the development of housing and utilities, and to the creation of a modern and pleasant urban environment in the context of the objectives set forth in Russian Presidential Decree No. 204, «On the Russian Federation’s national targets and strategic objectives for the period to 2024». What are the aims and objectives of the national project? What needs to be done to implement the national project to bring about a steady reduction in unfit housing? How can accumulated experience be best employed, such as when implementing targeted programmes to relocate people residing in unfit housing in the Russian regions?

Address by President of the Russian Federation Vladimir Putin

Today infrastructure, energy, and housing construction are the most promising sectors for investment in Africa. In the past, development of the energy sector was not a priority for most African countries. That was because despite the fact that the majority of the population did not have sufficient access to electricity, there was enough energy to serve the mining and extraction industries developed by colonial powers. This issue remained a low-priority one for several years; however, today the energy agenda is beginning to play a key role on the continent. Even though Africa’s energy sector is vital for development, it remains one of the least understood parts of the global energy system, and very few international energy research centres possess reliable information about a particular region, or indeed operate there. Solar energy is finally taking root in hot countries, which are beginning to fully exploit their most accessible form of green energy. South Africa is already among the top ten leading producers of solar energy, while Rwanda is home to the first solar power station, which opened in 2014. There are also plans to construct large power stations in Ghana and Uganda. Russia and African countries have the opportunity to examine a new area of mutually beneficial cooperation, based specifically on long-term strategies. Russia is an experienced player on the global energy market, offering huge potential in terms of developing, constructing, and commissioning energy facilities such as dams, nuclear power plants, grid operating companies etc., as well as in exporting and transporting energy. Russia offers a number of competitive advantages as a partner, including experience in implementing large-scale energy programmes across vast territories, and constructing grids (something the African continent is in particular need of).

A smart city — or ville du futur — is an urban environment boasting high living conditions not only today, but for future generations too. It is a city founded on principles of sustainable development. Accessible energy resources and sustainable consumption is widely accepted as a key requisite for urban development, with energy efficient technologies as integral components. Cities cover a mere 2% of the earth’s surface, but account for 75% of energy consumption and 80% of CO2 emissions. The Trianon Dialogue, a Russian-French civil society forum initiated by the presidents of the two countries, has put forward several topics for discussion. These include questions concerning the development, construction, management and modernization of cities; and implementing digital technologies in the urban infrastructure, thereby developing the theme of the dialogue for 2018: «City of the Future». Experience has enabled French and Russian cities and energy companies to cite numerous successful examples in urban planning, automation, building security, electrical fixtures, and housing management systems, and all in environments where the urban population is growing apace, and where citizens’ expectations are high. What needs to be done for a city to become smarter? How can energy efficiency be increased, and how can fast-developing digital technologies be integrated in the urban infrastructure? What results in optimizing electricity consumption and minimizing energy losses have Russian and French cities achieved? How can the environment be protected as urban spaces grow and new projects are implemented?

Geopolitics is beginning to play an increasingly important (and, unfortunately, not always constructive) role in the fuel and energy sector. This cannot but affect how predictable and controllable processes in the global energy markets are, further increasing the uncertainty of the future of energy, changing the conditions of basic scenarios and the expected trajectories of energy development, and, from time to time, highlighting geopolitical risks (conflicts, trade restrictions, transport and transit risks, etc.) of energy security requirements. Under such conditions, is it possible to demand sustainability in world energy development, or is that becoming a chimera? Do traditional sample scenario studies with point risks estimates help find the real pathways for this development, or is it necessary to transform the role of energy scenarios, and increase their importance for the development of responsible practical recommendations in the fuel and energy sector? Is it not time to discuss the creation of an early strategic warning system aimed at the timely detection and joint rebuttal of any threats to sustainable energy development, wherever they come from? How may an open, multilateral dialogue between leading international experts in the field of global energy forecasting and analysis help to address these issues?

The latest OPEC report — the World Oil Outlook (WOO) 2018 — will be presented during Russian Energy Week for the first time. The WOO report, which has been published since 2007, provides a detailed analysis of various factors affecting the global oil market with a medium- and long-term outlook until 2040. During the session, experts will present their view on the prospects for the industry’s development, while considering changes in the world economic situation, the evolution of the balance of oil supply and demand, trends in the processing of raw materials, and specific aspects of state policy and technological challenges.

The global energy industry is undergoing a period of irreversible transformation. The concept of energy transition frequently appears in countries’ political agendas. It is geared towards the large-scale use of green energy sources and renewables, the decentralization of markets, the introduction of smart infrastructure, and the transition from consumer to prosumer behaviour models. As a leader in global energy markets, Russia is acting with these global trends in mind. Each year sees the number of renewable energy facilities increase. Russian technologies are developing, and production of equipment for renewable energy sources is increasing. Domestic companies are exporting their products. Taken as a whole, this heralds a new chapter in Russian renewables. What are the priorities for the continued development of the Russian renewables sector? As a knowledge-intensive, high-tech and export oriented sector, could renewables help accelerate economic development? What is the potential for international cooperation in the production and trade of renewable components? What are the most promising renewable markets for Russian technologies? What is the likelihood of breakthrough technologies appearing which will dramatically accelerate the development of renewable markets? What changes should be made to government support for Russian renewables?

There is a wide range of opinions on the trajectory of the long-term development of the energy markets. On the one hand, the forecasts of peak demand for oil over the next decade are justified by the expectation of the rapid spread of electric vehicles, the growth in the substitution of oil consumption with that of natural gas, and environmental restrictions on the growth of the petrochemical market. Supporters of this view believe that the share of coal in the global energy balance will be structurally reduced, and even the growth in natural gas consumption will be limited by the growth of renewable energy generation. On the other hand, concerns about a potential shortage of oil are due to a sharp decline in investment in traditional oil production projects amid a slowdown in the growth of shale oil production. At the same time, demographic factors in developing countries are leading to an increase in the global demand for energy. The Global Energy Industry Development Outlook to 2040 S&P Global Platts session will consider the key fundamental, legislative, and technological prerequisites for such forecasts, and will present the most likely scenario for the long-term development of the global energy market according to S&P Global Platts Analytics.