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Igor Sechin presents keynote speech at special session at the XIV Eurasian Economic Forum in Verona

28 October 2021

Chief Executive Officer of Rosneft Igor Sechin has presented a keynote speech at the special session "Reliable energy and global energy transition" at the XIV Eurasian Economic Forum in Verona (Italy).

The event was attended by Gerhard Schröder, former Chancellor of Germany and Chairman of the Board of Directors of Rosneft; Mohammed Ben Abdel Rahman Al Thani, Deputy Prime Minister, Minister of Foreign Affairs of Qatar; Hardeep Puri, Minister of Oil and Natural Gas of India; Bernard Looney, Chief Executive Officer BP; Jeremy Weir, Chairman and CEO of Trafigura; Robert Dudley, Chairman of Oil and Gas Climate Initiative (OGCI); Ivan Glazenberg, Former CEO of Glencore; Antonio Fallico, President of the Discover Eurasia Association and Chairman of the Board of Directors of Banca Intesa; Lorenzo Simonelli, Chairman of the Board directors and CEO of Baker Hughes; Neil Chapman, senior vice president of ExxonMobil as well as other representatives of the business community, politicians, experts and analysts.

PERIOD OF UNCERTAINTY

The head of Rosneft, in his report on the topic "The Need for Structural Changes in the Economy and the Future of the Energy," presented a detailed analysis of the situation in the global economy, highlighting the period of uncertainty that remains due to the difficult epidemiological situation. According to Sechin, the pandemic continues to be a key factor affecting the situation in the global economy: despite extensive efforts, collective immunity has not yet been established, new dangerous strains of coronavirus are outpacing vaccination.

“There are no universal solutions to pandemic problems yet; new strains and diseases may lie ahead. We have entered a new era in which better diagnostics, accumulated knowledge, and modern clinical approaches allow us to identify more than 1,200 new diseases per year. Unfortunately, we are still unable to answer the question which ones of those are the greatest danger to the future of mankind,” Igor Sechin said.

According to him, “green” energy companies should also be concerned not so much about rapid capitalization growth through price increases for consumers, but rather about ensuring a consistent energy transition that does shake the economy and consumers.

“Global supply chains, including maritime transport, railroads, motor and air transport, have not been prepared for high supply and demand fluctuations. Not only supplies of finished goods, but also supplies of raw materials have been disrupted, as the recent situation with the tanker that blocked the Suez Canal illustrated,” Sechin said.

“The modern industrial model, which implies operating with minimal inventories, the so-called "just-in-time" model when raw materials or goods received from suppliers are immediately sent to production, allows to reduce costs. However, the economy is becoming increasingly interconnected, and the importance of reliable infrastructure comes to the fore,” Igor Sechin said.

The importance of commodity stocks was well illustrated by the current gas crisis in Europe. Due to the shortage of long-term contracts gas storages were only 75% filled compared to the 10-year historic level of 90%. This level has now fallen even further, to 65-70%. With the growing demand, the limited capacity of alternative generation to ensure stable power supplies not only in winter, but also in the more weather-friendly summer and autumn periods, led to record high gas prices.

“Long-term contracts ensure a certain stability of the gas market, but do not guarantee its full sustainability, as spot supplies on short-term deals develop,” Sechin said. Moreover, the prices for such supplies have not been properly hedged. LNG supplies under long-term contracts with Qatar have not been able to meet the growing demand. But Europe's hopes for spot LNG supplies from the United States have not been met.

“Additionally, the situation in Europe is complicated by the growth of the Chinese economy which grew by 2.3% even in the crisis year of 2020, and by the end of the current year its growth rate will reach 8%, while the Eurozone economy will grow by 5%. A consequence of the rapid recovery and growth of the Chinese economy is the growing demand of this country for all types of energy imports: compared to the previous year, oil consumption this year will increase by approximately 10%, and demand for gas will grow by 7-8%,” Sechin said.

He also recalled that Russia, for its part, contributes to resolving the crisis as much as possible by ensuring the stability of gas supplies to Europe. In doing so, our country always fully meets all of its contractual obligations.

“Although we are witnessing a politicization of energy issues, Russia remains the most important and reliable supplier of gas to Europe, and we need to not only maintain but also strengthen our bonds of friendship and mutual understanding,” Igor Sechin concluded.

INTEGRAL TRANSITION

Igor Sechin said that the current gas crisis proves the point he has repeatedly made in previous years, also at this rostrum, about the fragility of balances in energy markets and the risks associated with forcing the energy transition and discouraging conventional energy. The crisis has already begun to spread to other sectors.

China, which accounts for 90% of the world's magnesium production, has seen its output sharply curtailed due to energy rationing. Shortages of magnesium used for the production of aluminum alloys threaten the automotive industry and a number of other industries where these alloys are widely used including the production of microchips.

“As a result, chip manufacturers are choosing the customers to whom they ship products at their own discretion, thereby taking on a function of regulating the market which is not normally their remit. And since microchips are now part of virtually every piece of technology, from cars to toothbrushes, it will not be an overstatement to say that they are shaping the direction of the world economy as a whole,” Sechin said.

To prevent the crisis from spreading throughout the world economy, it is important to ensure coordination between regulators and suppliers, as well as consumers, whose demand determines economic growth. It is thought that the world's largest stock exchanges, such as New York, London and Shanghai, which are the registration centers for most transactions, could also register long-term contracts for energy supplies, thereby helping to balance markets.

“The priority of global economic development should be an integral approach with a focus on increasing the contribution of key sectors, which include energy, new materials, information technology, electronics, pharmaceuticals, agriculture, transport and logistics,” Igor Sechin stated.

RELIABILITY OF SUPPLY

According to Sechin, the issue of the technological feasibility of the energy transition is not unimportant either. The International Energy Agency estimates that, by 2050, about half of the technologies needed to achieve low-carbon development goals will still not be ready for deployment. At the same time, competition for funding is intensifying and the green energy industry is increasingly subsidized, distorting its real returns, which so far remain quite low. “This leads to the development of a new type of subsidized industries, absorbing resources from other sectors and preventing the implementation of free competition principles,” Sechin said.

“For an energy transition to happen, the structure of the global economy must change,” Igor Sechin stated. “The energy transition must be synchronized with supply of energy, reliable supplies of metals and other materials, technological development, and the adjustment of consumer behavior. Without this, the basic concept reflected in the word "transition" as a process evolving over time, will be unworkable,” Igor Sechin warned.

“The energy transition should not be a goal in itself, but the reliability of the energy supply should be its first priority”, Igor Sechin concluded.

IMPACT ON THE ECONOMY

The erroneous decisions in the area of climate policy can lead to serious negative consequences for the entire global economy and society. Along with this there are increasing calls to terminate oil and gas investments. In some cases, it seems that those advocating an early withdrawal from fossil fuels ignore the risks of imminent market imbalances, Sechin said.

Igor Sechin referred to a Dutch court in The Hague, passed a verdict in which they ordered SHELL to reduce its emissions more significantly and much faster than its shareholder-approved strategy. The company was accused of "improper public conduct" and a violation of human rights. Sechin noted that the court had to refer to human rights, since it is impossible to objectively conclude to what extent the company is responsible for global climate change.

“As the President of the Russian Federation Vladimir Putin rightly noted – «If people who lack any professional insight take these decisions [to reduce greenhouse emissions], you inevitably get price swings on the global market”, Sechin said.

According to Igor Sechin, the risk of new lawsuits of this kind is quite high. “Not only oil and gas companies are at risk, but also banks and investors who may in fact be prohibited from investing in oil and gas. Thus, in addition to the economic system of coordinates, an alternative system is being introduced that is based on climate pressure and even blackmail, which excludes the basic principle of economic efficiency. This ignores the social responsibility of market players that the overall well-being of people largely depends on,” he added.

In his speech, Igor Sechin raised the question - what is the real purpose of lawsuits that destroy corporate law and thereby violate shareholders ownership and rights to the results of their investments? “We are faced with completely new methods of shareholder and activist pressure on companies when, formally acting under the rules of corporate law, some shareholders pursue their own policies, jeopardizing the position of investors, partners, employees, and customers. This situation requires additional legal analysis and design of protective measures,” states Sechin.

He also noted that since the beginning of this year, the whole world have witnessed a sharp increase in gas prices in Europe, mainly associated with overconfidence in the reliability of alternative generation.

However, recent events show that the stability of wind power is overestimated, said Rosneft CEO. Climatologists estimate that wind strength in Europe in September and October of this year was 15% below historical levels, which has had a negative impact on wind power generation.

“Overconfidence in the reliability of wind generation was one of the reasons that led to insufficient gas reserves in storages. And only as winter approached did our European partners begin to think seriously about the risks, about the real unreadiness of renewable generation (at the current level of technology development) to ensure stable energy supplies. All this led to record high gas prices, which since the beginning of this year have increased fivefold and now threaten the long-term economic recovery of Europe,” Sechin said.

Unsynchronization of the pace of commissioning of capacity of renewable energy and the shortage of backup capacity, along with the accelerated abandonment of conventional energy also contributed to the worsening of the situation. The "molecules of freedom" that the American LNG carries with it, widely advertised by the previous US administration, also played a role. Promising to significantly increase gas supplies to Europe, in reality, the United States is primarily increasing them in a completely different direction - to the Asia Pacific countries, Sechin emphasized. As a result, the price of gas in Europe has reached $200 per barrel in oil equivalent, which is more than twice as high as the price of oil», he added.

According to the estimates of Citi and Goldman Sachs, super-high natural gas prices may cause an additional demand for oil of up to 1 million barrels a day, which will give an impulse to create an imbalance similar to that of gas and "heat up" oil prices even more.

“Also, the pressure from climate activists stops execution of joint international projects which makes the majors cut investments in production of oil and gas, diverting funds to renewable energy industry. It is the climate agenda that is now putting pressure on the global oil and gas market,” Igor Sechin thinks.

“The risks posed by abandoning oil, as well as low-carbon gas generation and coal, must be fairly assessed. The forced return to coal to guarantee the stability of power generation makes us rethink not only the timing, but also the need for the declared complete abandonment of traditional generation,” he said.

IMPACT OF LOW-CARBON ENERGY ON CLIMATE

In his report, Igor Sechin also presented a detailed analysis of the existing plans for decarbonizing the global economy. “First of all, we need to answer the question - what problems are we trying to solve with an accelerated energy transition? And will low-carbon solutions really help provide energy for future generations?” urged the head of Rosneft.

Igor Sechin noted that there is still no unambiguous answer to the question of what kind of energy sector should be considered “green” or low-carbon. He recalled that after the 2011 accident in Fukushima, Japan, which was caused by faulty design, negative public opinion has led to stronger demands to phase out nuclear power completely, even though engineering improvements in reactor design and protection measures have been stepped up.

As a result, in 2020, compared to 2011, energy production from nuclear power plants was down 27% in the United Kingdom and 41% in Germany. Even in France, where nuclear power plants represent two-thirds of the total electricity production, the volume of nuclear power plants decreased by 20%.

The gas crisis has led some European countries to rethink their low-carbon goals. In early October, at the initiative of France, the 10 European Union countries appealed to the European Commission to recognize nuclear power as low-carbon.

However, one should remember that nuclear fuel also needs to be disposed, which is more expensive and requires special technologies, because the environmental risks here are much more serious, noted Sechin.

“It is necessary to take a comprehensive approach to assessing the safety of energy resources for people and the environment along the entire process chain. In the case of hydrogen, for example, which has been given great hopes as a promising "green" fuel of the future, we should not forget that it is its explosive nature that has caused a number of disasters in the nuclear power industry and at chemical production facilities,” said Rosneft CEO.

Adherents of decarbonization do not take into account a number of other factors that impede the implementation of their ideas. A serious problem is the rise in prices for the materials needed to ensure the energy transition. Igor Sechin recalled that the development of renewable energy technologies has helped lower the cost of its production, which has helped it strive to be competitive with conventional power. However, this trend could be reversed now.

“For example, compared with pre-crisis levels in 2019, the cost of polysilicon, a key raw material for the production of solar panels, has increased by 4 times,” Sechin said. 

At the same time, emissions from mining and processing of metals for low-carbon energy do not meet sustainable development goals. “Production of metals and other materials required for low-carbon energy is often accompanied by high carbon emissions from extraction and processing,” said the head of Rosneft.

According to the International Energy Agency, the greenhouse gas emissions from lithium production are three times greater than those from steel smelting. Nickel and aluminum have 7-8 times the emissions of steel, and rare-earth metals have 50 times the emissions of steel. In order to provide the world with such important metals, resources with worse characteristics have to be developed. As a result, the International Energy Agency estimates that the greenhouse gas emissions from lithium production in future projects could be 3 to 4 times higher than for current projects, and 6 times higher for future nickel production projects.

Advocates of an accelerated energy transition, campaigning for the expansion of the use of renewable energy, ignore such an important aspect as the deterioration of equipment and its subsequent disposal. “It is no secret that in the common perception the development of renewable energy is seen as a one-time investment in an environmentally friendly energy source, which can serve for a very long time - 40-60 years, as traditional energy facilities, or even longer. But in reality, the service life of wind farms is only about 20 years,” said Igor Sechin.

Given that wind generation began to spread quite widely in the early 2000s, there is already a need to replace the wind turbines installed back then. The dirty legacy of green energy that humanity is leaving to future generations is growing rapidly.

If in 2020 about 40 thousand tons of decommissioned blades all over the world needed to be recycled, by 2025 their number will increase to 100 thousand tons per year, and with the further spread of wind generation and end of service life of the units that were commissioned earlier will grow further.

“Similar problems arise in the case of solar panels, the actual service life of which is much shorter than the 30 years expected by the industry,” said CEO of Rosneft. In 2035, the number of solar panels that will have to be recycled will be 2.6 times higher versus the number of new ones that will be sold. Due to the high content of heavy metals, solar panels are toxic and require specialized recycling, which is 10-30 times more expensive than sending them to landfill.

“All these facts should make supporters of the energy transition think about the true impact that low-carbon energy has on nature and the climate, and about whether such energy can fully become truly clean and “green",” said Igor Sechin.

POSSIBILITY OF ENERGY TRANSITION

The head of Rosneft noted that the energy transition is possible only wtith stable energy supplies and the development of new materials and technologies. He recalled that the belief of climate activists in the limitless possibilities of renewable energy is not yet supported by reliable technology. “We need research and the search for new materials that are less energy intensive and toxic and that can be used to produce and store energy and replace current ones,” Sechin said.

Moreover, forcing companies to withdraw from oil and gas projects does not solve the problem of reducing emissions. Moreover, achieving carbon-neutrality goals does not require a complete phase-out not only of oil and gas, but also of coal.

According to him, the development of new materials is no longer a matter of energy industry, but a much more serious matter of changing the structure of the economy. “In fact, despite the variety of plans for achieving carbon neutrality, without serious development of new technologies and materials, the energy transition will remain a vain dream,” said Rosneft CEO.

He reminded, that International Energy Agency published a low-carbon forecast that caused a wide public response and that assumes carbon neutrality by 2050 and an end to investment in new oil and gas projects now. “But even in this projection, conventional energy resources in 2050 will collectively meet 39% of global demand,” noted Sechin.

Rosneft CEO thinks that one of the key drivers of global oil demand growth in the long term will be India. According to the forecast of the Indian Oil and Gas Ministry, the oil consumption in India will double by 2050 (up to 452 million tons or 9 million barrels per day). Oil will account for 1/5 (22%) of the country's energy consumption.

“It is necessary to make decisions now that will ensure that future demand is met. Otherwise, we will face new larger shortages and rising prices,” Igor Sechin emphasized.

The head of Rosneft noted that another significant factor in reducing carbon emissions could be a change in consumer behavioral preferences. According to the IEA outlook the behavioral changes will make it possible to reduce carbon emissions by 2 bln tons as early as 2030. This can be achieved by replacing flights that are shorter than one hour with other types of transportation, reduction of speed of vehicles by 7 km/h, work from home, more rational heating of buildings and the use of ride sharing.

Climate pressure is already impacting the energy industry. While the world's leading oil and gas companies invested an average of $16 billion per year in exploration between 2011 and 2015, last year spending on hydrocarbon reserves replacement dropped threefold, to $5 billion. As a result, the level of global oil and gas reserves replacement has been declining for the fourth year in a row, and risks of supply shortages are already factored into the prices, negatively affecting revenues of European and global consumers, said Rosneft CEO.

According to him, given the uncertainty regarding long-term demand and oil prices, a significant number of oil and gas companies are not planning to increase investments. “As a result, global investment in oil and gas projects in 2021 will be twice lower than in 2014. Given the decline in production at the existing fields, investments in the development of new reserves are required. Based on current project trends, the cumulative shortfall in investment needed to meet oil demand between 2021 and 2025 could be $135 billion,” said Igor Sechin.

If investment remains at current levels, by 2030, the total shortage will reach $600 billion, according to J.P. MORGAN Bank estimates. Insufficient investment already poses risks to the stability of long-term supply to meet the oil and gas demand.

“The energy transition must be based not on the demands of climate activists, but on real economic patterns, providing a return on investment and long-term value growth while meeting energy demand and reducing emissions,” thinks Igor Sechin.

WHO WILL GAIN ADVANTAGES FROM THE ENERGY TRANSITION

“Current trends in the redistribution of roles in the low-carbon market are of strategic importance. Importantly, it is the actions of a government during the energy transition that not only establish current competitive advantages, but also create opportunities for energy market dominance in the future,” Sechin thinks.

The International Energy Agency estimates that the energy transition and the associated growth in demand for electric vehicles over the next 20 years will lead to a 133-fold increase in demand for lithium, a 33-fold increase in demand for cobalt, and a 30-fold increase in demand for nickel.

The growing demand for rare-earth and base metals is not only related to batteries, but also to other components for electric cars, noted Rosneft CEO. For example, electric car engines, which provide the longest mileage from a single charge, use magnets made of the neodymium alloy. Demand for this metal is growing and the price of neodymium oxide has increased by 90% over the past year.

“Production facilities for neodymium magnets are almost entirely located in China, which can not help but cause concern in some countries about growing economic dependence”, said Igor Sechin. This is pushing both individual companies and entire countries to realize the need to build their own secure supply chains in terms of metals.

Rosneft CEO reminded that in June of this year, the U.S. Administration published a report in which it had to admit that the United States is losing competition to the European Union in creating incentives for the establishment of sustainable supply chains and localization of production of electric cars and batteries, and it looses to Taiwan and other Asia-Pacific countries in creating incentives for the development of semiconductor production.

“It is possible that to ensure guaranteed access to these resources, the U.S. may again resort to political pressure tools,” thinks Rosneft CEO.

This year's gas crisis illustrated how a shortage of one energy resource can affect the price and balance of the entire energy industry, noted Igor Sechin.

According to him, discouraging conventional energy reduces the investment needed to keep up with conventional energy production, which will cause shortages and drive prices even higher.

“To prevent the global economy from slipping into such an energy «inflation spiral» approaches to changing the structure of global energy industry must be balanced,” the head of Rosneft believes.

High energy prices will undoubtedly slow economic growth, and the era of relatively low energy prices, which lasted almost 100 years and was a major incentive for the development of the world economy, may come to an end, he said.

Igor Sechin thinks that “Globalization has led to sweeping changes affecting all countries, and the new trends in developed nations are affecting the Third World, whose populations, deprived of basic energy sources, are at risk of disease and death”.

Having built their prosperity over previous decades on inexpensive fossil-fuel energy, developed countries are now effectively preventing developing countries from doing the same, forcing them to switch to expensive alternative generation, which only exacerbates social inequality.

“It would be unfair if the largest energy- and metal-consuming countries continued to exert pressure on developing countries with their enormous natural potential,” said Rosneft CEO.

He thinks that more expensive loans for developing countries and the additional restrictions often applied to them constrain their ability to develop, increasing the load of their obligations and reducing the number of tools for implementing the energy transition. “This increases the risk where developing countries will remain in energy and economic poverty,” said Igor Sechin.

The head of Rosneft called for now to make decisions on actions beyond the 2050 and to prepare for larger changes associated with the energy transition, since even having reached the goals set for carbon neutrality by 2050, humanity will still face its changes.

“The vision of the economy of the future will allow us to shape the energy of the future adequately. However, the costs and efforts to create such energy industry must be adequately distributed between energy producers and consumers,” emphasized Igor Sechin.

RESPONSE TO CLIMATE CHALLENGES

According to Igor Sechin, the gas crisis has again clearly demonstrated the multi-component and complex nature of the energy industry and economy and the fragility of many well-established systems, and that some new technologies are not yet sufficiently developed to be relied upon safely.

“So I want to reiterate that the energy transition process must be balanced, economically sound and socially responsible,” said Sechin.

He mentioned, that the global community must develop a unified approach to the global climate issue and promote the development and sharing of emission-reduction technologies, rather than looking for faults or using unilateral protectionist measures that widen the already large gap in energy supply between developed and developing countries. He said “Despite the undeniable importance of addressing environmental issues, responsibility for greenhouse gas emissions is often (and wrongly!) placed on primary energy producers rather than on polluting industries”.

It is important that the ongoing stimulation of green energy does not replace its real economic efficiency and takes into account emissions along the entire chain, from metal production to recycling of wind and solar farm equipment, batteries and electric cars, Sechin thinks.

“Only a reasonable balance between traditional and renewable energy can ensure sustainable long-term growth of the global economy. I am convinced that all players in the global energy industry need to work constructively to reduce the carbon footprint, take a balanced and professional approach to the energy transition, improve environmental efficiency and ensure not only reliability, but also flexibility in providing consumers with energy resources,” he said.

Man-caused impacts occur not only due to the burning of fossil fuels, but also because of the expanding geography of agriculture, animal breeding and other factors. Additionally, this potential is reduced by forest fires, whose global emissions amount to 8 billion tons of CO2 equivalent annually, comparable to the emissions of all industry.

The Company CEO said “In this regard, Russia pays special attention to reforestation, recreating about one million hectares of forest annually. This is especially important, given that the country has enormous potential for the natural absorption of carbon emissions. Russia is already making a significant contribution to absorbing carbon dioxide in ecosystems, including forests, whose carbon capture potential is estimated at 2.5 billion tons per year”.

Sechin noted that the Russian Federation has considerable offset potential due to the opportunities for storage of carbon in depleted oil and gas fields and salt formations. According to industry experts, the geological storage potential is about 1.7 trillion tons of CO2.

The use of such offsetting measures is being considered by Rosneft as part of the Carbon Management Plan through 2035 that was approved last year. This plan sets a number of ambitious decarbonization targets: the Company is committed to reduce its upstream emissions intensity by 30%, prevent 20 million tons of greenhouse gas emissions, reduce methane emissions intensity, and ensure zero routine flaring of associated gas.

Rosneft is already actively ramping up production of the cleanest fossil fuel - natural gas. Sechin said that Rosneft plans to increase its share in production to over 25%. The company is implementing a program for utilization of associated petroleum gas, developing environmentally friendly motor fuels and a network for charging electric cars at our filling stations.

Sechin also said that Rosneft is currently developing a new Company strategy, the main priorities of which will be adaptation to the challenges of the energy transition and integration of the "green agenda" into the business.

Our efforts do not go unnoticed - Rosneft holds leading positions in a number of specialized ratings by reputable international agencies and continues to improve them. Company’s performance has been also recognized by the shareholders. Over the past 5 years, the Company's total shareholder return has almost doubled (90.9% growth), while for the world's leading oil and gas companies this indicator was 5 times lower, around 20%.

During three past years Rosneft improved its energy efficiency by 15% which allowed to prevent emissions of 4 mln tons of СО2 equivalent. Rosneft's energy intensity numbers are 40% lower than those of a number of the world's largest oil companies.

According to Igor Sechin Rosneft's green investments exceeded $580 million in 2020, and atmospheric pollutants emissions reduced by 14%. Also, to fight the climate change, the Company annually plants new trees. In 2021 the number of threes that were planted came to more than 9.3 million.

At the same time, makes every effort to ensure the stability of hydrocarbon supply in the future, and the most important project for this is Vostok Oil. The use of advanced technologies for environmental protection from the well drilling stage to the specialized design of oil pipelines and tankers that will export the oil will ensure that the project has a carbon footprint 75% lower than that of other major new oil projects in the world.

“Energy projects are capital-intensive and long-term regardless of the type of energy resources that are developed. And the choices we make now will determine the future of the global energy industry for decades to come,” concluded Igor Sechin.

Gerhard Schröder, former Chancellor of the Federal Republic of Germany, Chairman of the Board of Directors of Rosneft, in his speech dwelled on the causes of the current energy crisis. According to him, the key factor in the crisis was the economic recovery after Covid-19, after the suspension of production, where gas supplies decreased significantly. “At the same time, due to a rather warm winter, the storage facilities were used longer last winter. Thus, no additional deliveries were made to the gas storage facilities. In the summer, this led to an increase in prices, and, accordingly, an increase in demand,” he said.

However, gas from the United States, which is being offered as a cheap alternative to pipeline supplies, does not currently enter the European market - it is supplied at higher prices to China and other Asian countries. This is the main factor behind the rise in gas prices in the world, Gerhard Schröder emphasized.

“The question is: given these figures, why do we blame only Russia for this global trend. Is there a question of competition between the United States and Russia. Of course there is. The Europeans would like to start a reasonable dialogue with the supplier countries. What is at stake is a safe, reliable supply of energy to homes,” he said.

Schröder believes that the energy transition can only be achieved in the coming years by increasing the use of natural gas. “International energy security depends on interconnection and is ensured by long-term contractual obligations that have been considered reliable in recent years,” he concluded.

Deputy Prime Minister, Minister of Foreign Affairs of Qatar, Mohammad bin Abdel Rahman Al Thani in his speech stressed the importance of realizing that the energy transition is not possible within a couple of years and requires significant investment. In his opinion, the demand for energy resources will constantly increase in connection with the recovery of the economies of developed countries after the coronavirus pandemic. “We see that investments in the energy sector have shrunk. And on the other hand, we see that the population is starting to grow, as well as the growth of economies in various developing countries. In general terms, we believe that the energy crisis is probably a longer-term phenomenon,” Al Thani added.

Indian Petroleum and Natural Gas Minister Hardeep Puri agreed with Igor Sechin's opinion that energy has become a very important aspect of national security of countries, especially against the background of today's volatility of markets.

“High energy prices affect economic decisions, increase uncertainty, adversely impact economic revival, and most importantly, disturb the pace of energy transitions. Such an unstable environment is neither advantageous to producing countries nor consuming countries and must therefore be addressed. Unless the price of crude oil is maintained at sustainable levels, it will severely impact the green shoots of global economic recovery,” Puri said.

According to him, India is advocating energy justice on every global platform. “As we have been saying, to cater increasing demand in the country we have to explore all supply options that are sustainable, secure, and affordable. India and the Eurasia Economic Union have a robust, special, and growing economic cooperation, of which a key pillar is energy cooperation. We are committed to further widening our cooperation,” he added.

Bernard Looney, Chief Executive officer of BP in his speech supported position of the head of Rosneft in his remarks, noting that as the industry transforms, the reliability of the energy system must be kept in mind. “More projects to come around the world including in Russia over the coming years. That allows us caring to pay a dividend of about four billion dollars per year,” Looney added.

According to Looney, BP is investing into low-carbon businesses with discipline in a measured way into offshore wind into hydrogen. “We can’t do any of this alone and that’s why we rely on great partners around the world. And there is no greater partner than our partner in Rosneft, a company that has incredible people, incredible resources, incredible ambition and I think is incredibly well led and well run by our dear friend Igor Ivanovich,” he said.

“The demand for fossil fuels in the world today, which is high, at around 80%,” Ivan Glasenberg, former CEO Glencore said. “We need to look at how we will combine traditional and renewable sources and how we will compare this demand with the current supply level on commodity markets," he said. Glasenberg reiterated that production of metals - copper, nickel, cobalt and others - is expected to increase multiple times in the future, which will affect prices on commodity markets.

At the same time, coal production and exports can not be stopped at once, said the former Glencore head. “It is necessary to plan what will measure this coal, what source. We can say: if we stop coal mining, the world will somehow organize itself. But this is not a game. If we promote renewable energy, we must carefully plan how we will replace one source with another because it is not enough to set goals and then the world will not be able to achieve them”.

“Such investments as Rosneft's major commitments to develop that world-class Vostok Oil project are so critically important and necessary, as it will be a vital source of low carbon intensity oil and gas production for many years to come,” said Jeremy Weir, Chief Executive Officer of Trafigura. According to him, the process of recovery of the world economy after the pandemic is proceeding at an outstripping pace, which entails a strong demand for all natural resources. And the key task of suppliers is to meet the growing demand. However, this can be hindered by chronic and significant underinvestment in key industries. “This is a much longer-term trend, and investment is drizzly even as demand rebounds”, he added.

In his opinion, one of the factors holding back the financing of projects is the pressure on investors, prompting them to reduce support for projects related to fossil fuels. “We must find ways to incentivize responsible producers to bring on new supply without lowering our environmental and social standards but without hampering or delaying new production unnecessarily either. And governments have a key role to play. Improved regulatory certainty, streamlined permitting processes, long-term commitments to fiscal stability, investments in infrastructure, and developing skills are all important signals that governments can send to incentivize private sector investment,” concluded the CEO of Trafigura.

According to Chairman of the Oil and Gas Climate Initiative (OGCI), Robert Dudley, the energy system is vulnerable to any abrupt economic changes. “the reality of this energy transition is going to cost more. But also recognise you are going to have to be flexible with each other,” Dudley said. “So being able to use natural gas as a carrier and then you can decarbonize it'll be part of the new hydrogen economies in the future,” he trusted.

“I remain optimistic about it and the future. Back in 90s nobody knew about these. And I think as long as we remain united around a single goal: consumers, governments, businesses, I think will succeed,” he concluded.

Lorenzo Simonelli, Chief Executive Officer of Baker Hughes, spoke about the need to develop technologies to reduce the carbon footprint. In his speech, he spoke about the success of Baker Hughes in this direction. “We must continue to invest in available tools, such as digitization, remote operations, and really looking at new models of composites that take away from metals. A great example is, during the pandemic, we were able to do final feasibility testing remotely, for the first time on major equipment installations; 90% of our wells that were drilled, were done remotely, without any person in the field.”

Hydrogen projects are also very promising, Simonelli said. “It is necessary to understand how we can develop this. As a technology company we think we’ll be there to provide the technology, but we need that third element of an ecosystem coming together to enable us to get to the transition,” he concluded.

The banking industry should invest heavily into low-carbon technologies, said Antonio Fallico, President of the Association "Explore Eurasia", Chairman of the Board of Directors of Banca Intesa. According to him, the total investments in the so-called "green" bonds has already exceeded 1 trillion euros. “We, as a financial institution, must have a balanced, but at the same time, environmentally friendly approach regarding our own investments,” he added. Falliko also noted that Russia's energy portfolio is one of the cleanest in the world.

The senior Vice President of ExxonMobil Neil Chapman reminded that his company has been producing and refining hydrocarbons for 130 years. “That's a core part of our business and it will be for a long time. Of course, we are evolving into some of the technologies that you talked about. The key issue is there is certainty on where the world is trying to get to. There is much less certainty on the pace to get there,” he said.

In his opinion, it is important to keep in mind the existing industries, such as oil and gas production and refining while introducing new technologies. “We believe very strongly that the world will be best served by the companies that supply the lowest cost barrels with the lowest greenhouse gas emissions. This is what we are trying to get now,” he concluded.

REPORT "THE NEED FOR STRUCTURAL CHANGES IN THE ECONOMY AND THE FUTURE OF ENERGY" TO I.I. SECHIN SPEECH AT THE XIV EURASIAN ECONOMIC FORUM IN VERONA

PRESENTATION TO THE SPEECH OF I.I. SECHIN, CHIEF EXECUTIVE OFFICER OF ROSNEFT, AT THE XIV EURASIAN ECONOMIC FORUM IN VERONA

Rosneft
Information Division
October 28, 2021

Keywords: ESG