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Global Energy Sector: Challenges and Opportunities
7 June 2019
10:00—11:15
KEY CONCLUSIONS
Situation on the energy market has stabilized

The market was balanced in 2017–2018. The protracted crisis that we witnessed in 2014–2015 was quickly overcome, and in 2017–2018 investments began returning to the industry — Alexander Novak, Minister of Energy of the Russian Federation.

Efficiency of extraction is growing

Before the crisis of 2014, the amount of investments reached approximately USD 900 billion per year, but in 2015 this number saw a twofold decrease, to USD 500 billion. Despite the recovery of the market, the amount of investment regained no more than 10–15%. Today, we estimate that investments in the global industry are around USD 550–600 billion per year. Nevertheless, this low amount of investment allows to support the supply that basically exceeds the existing demand. This means that the efficiency of extraction has grown considerably. Low-margin projects are becoming more marginal due to this growth — Alexander Novak, Minister of Energy of the Russian Federation.

We must maintain a good level of investment. We understand that prices should not be too low or too high — Robert Dudley, Group Chief Executive, BP.

Shale hydrocarbons are losing in the competition with traditional fuels

Dynamics of growth of shale hydracarbons production surprised everyone. <…> But the growth that we witnessed last year and are witnessing this year is unlikely to be sustainable in the mid- and long-term. Another very important factor for shale hydrocarbons is quality. Most processing capacities worldwide are originally designed for oil of certain quality. This decreases demand for shale hydrocarbons, and that is why plans to build pipelines to supply American shale hydracarbons to the global market look way less attractive — Khalid A. Al-Falih, Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia; Chairman of the Board of Directors, Saudi Arabian Oil Company (Saudi Aramco) .

In reality, shale is overshadowed by economic factors — Ben van Beurden, Chief Executive Officer, Royal Dutch Shell Plc.

ISSUES
High level of uncertainty on the market

Today, there are a lot of uncertainty factors on the market. Unfortunately, despite positive changes in balancing supply and demand, we see that uncertainty is growing — Alexander Novak, Minister of Energy of the Russian Federation.

Now the market is influenced by the factors that we cannot control. We try to use all available tools, but we can have impact only on supply, and there is a huge issue regarding the demand that depends on macroeconomic factors. Expectations of the market and of investors are beyond our control — Khalid A. Al-Falih, Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia; Chairman of the Board of Directors, Saudi Arabian Oil Company (Saudi Aramco) .

Nobody likes volatility and instability, because they do not make for positive development of the situation — Ben van Beurden, Chief Executive Officer, Royal Dutch Shell Plc.

Negative impact of sanctions and geopolitics

We discussed trade wars that have really activated recently, as well as making decisions regarding introduction of export duties by two largest economies against each other. Last year global economy grew by 3%. If these duties are introduced and act as has been said, this might cut economic growth by up to 2.6%, which, in turn, will result in decrease in demand for oil and energy resources in general. We see that over the last few weeks, after announcement of different trade sanctions, the price went down by 10 dollars — Alexander Novak, Minister of Energy of the Russian Federation.

Today oil is the king of fuels in transportation, but it is hard to say how long it is going to be this way. Major important changes are happening now; we can go back to geopolitics and correlate these things — Daniel Yergin, Vice Chairman, IHS Markit.

SOLUTIONS
Joint efforts of producers aimed at stabilization of the market

Agreement between OPEC and non-OPEC countries – 24 states – is a good instrument that allows to somehow react to this uncertainty and jointly get rid of these risks — Alexander Novak, Minister of Energy of the Russian Federation.

We will continue stating a consolidated position in the oil market on supply, amount and distribution as part of the OPEC+ deal — Khalid A. Al-Falih, Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia; Chairman of the Board of Directors, Saudi Arabian Oil Company (Saudi Aramco) .

We have mechanisms for correcting our target indicators towards increase or decrease. We see a clear consensus on the need of long-term cooperation that has been discussed over the last few months. All companies, all countries have expressed their support for this suggestion. We cannot influence the market in the same extent as OPEC anymore, but we can do that as an extended group — Khalid A. Al-Falih, Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia; Chairman of the Board of Directors, Saudi Arabian Oil Company (Saudi Aramco) .

Client-oriented approach and product diversification

Transition from gas to [other — Ed.] energy can be tough, but for some companies it is a natural development. Supplying gas and energy, we become closer to people, and it has certain advantages for the company — Patrick Pouyanne, Chairman & CEO, Total.

The material was prepared by the Russian news agency TASS