Focus on balance in energy market

Yanna Smith - The second annual Russian Energy Week (REW) opened in Moscow on Wednesday last week and ended on Saturday. The event is used to promote the Russian energy industry and improve international cooperation in energy.

It was attended by more than 6 000 delegates from 70 countries including energy industry leaders from Austria, the United Kingdom, Germany, China, Libya, Saudi Arabia, the United States, and France, among others.

Held under the theme, “Sustainable Energy for a Changing World”, sessions included discussions on sustainable energy and were attended by Saudi energy minister Khalid Falih, Royal Dutch Shell CEO Ben van Beurden, Total CEO Patrick Pouyanne, and Enel CEO Francesco Starace.

According to the Kremlin, Russian president Vladimir Putin held talks with OPEC secretary-general Mohammad Barkindo of Nigeria, and briefly met with Falih.

Challenges

The main challenges faced by the energy sector were discussed by the Russian energy minister Alexander Novak, his counterpart from Qatar Mohammed Sada, Bahraini oil minister Mohamed Khalifa, and Hungarian foreign minister Peter Szijjarto over the course of four days. Szijjarto plans to hold a bilateral meeting with Novak to come to an agreement on the purchase volume of the Russian gas in 2020 under the long-term contract.

In the framework of the REW, the OPEC chief presented the latest OPEC report – the World Oil Outlook (WOO) 2018 – which provided a detailed analysis of various factors affecting the global oil market with a medium- and long-term outlook until 2040.

The Russia–Africa Energy Roundtable looked at the development of Africa and its energy cooperation with Russia, as Russian companies are able to offer vast experience in developing, constructing, and commissioning energy facilities.

According to Putin, Russia is one of the most powerful players on the global energy market being leaders in oil and gas production and export, as well as in terms of power generation and coal mining. It is very important for the country to create a common energy space and a common energy future.

“We believe that progress in global energy, as well as the stable energy security of our entire planet, can only be achieved through global partnership, working in accordance with general rules that are the same for everyone, and, of course, through conducting transparent and constructive dialogue among market players which is not politically motivated but is based on pragmatic considerations and an understanding of shared responsibilities and mutual interests.

“Russia will continue promoting dialogue of oil-producing countries to ensure the stability of the oil market and create conditions for the sustainable development of the sector and implementation of long-term investment plans. Indicatively, the demand for oil will be growing in the foreseeable future, primarily in the Asia-Pacific region. It is also growing in Europe and of course, in America,” he said.

Demand

Accelerated demand for electricity in the world is forecasted for the next 20 years. Experts believe its consumption will double by 2040 while the demand for primary energy – oil, coal, gas and other sources – will grow by about 30%. Trends such as these open up opportunities for increasing both the exports of electricity and its production technology.

The Russian Energy Week was first held in 2017 and serves as a platform for demonstrating the prospects of Russia's fuel and energy industry and exploring the potential of international cooperation in the field.

At that time, OPEC, along with Russia decided to cut oil production to balance the oil price. Currently, the oil price has risen to more than 50% of what was towards the end of 2017. At last year’s session Putin was asked how long he was willing to maintain the cuts. This year, the question to him was how much oil he was going to give the market following his meeting with the OPEC chief.

According to Putin, the goal was to balance the market. “When we agreed, with our friends and colleagues from OPEC, to reduce production, this is exactly what we had in mind. The goal was to reduce excessive reserves and balance the market. After all, this matter is not about the income of oil companies or an opportunity to pocket money, it is to do with the health of the industry.

‘Balance’

“It is necessary to provide resources for investment goals, investment projects. This was the bottom line. If the market is unbalanced this will inevitably lead to a reduction in investment, and eventually create a shortage in the market and trigger a sharp price hike.”

Russia made a commitment to reduce production by 30 000 barrels last year.

“The market is now balanced,” he said, but spoke at length about production challenges in various parts of the world including Libya, north Africa and Venezuela.

“Look what is happening in Libya – the state is destroyed. This is the result of irresponsible policy that is directly affecting the world economy. Therefore, we must work closer with each other, not only in the energy industry but also in the political area so as to prevent such setbacks.”

He added: “As for increasing production – we have already increased it by 400 000 barrels as we agreed with our partners. We can raise it by another 200 000 to 300 000 barrels per day if need be.”