I am the moderator Nobuo Tanaka, former executive director of the iea, International

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Nobuo Tanaka: I am the moderator Nobuo Tanaka, former executive director of the IEA, International 

Energy Agency. I’m very much honored to come back here again this year to moderate a session. We 

will have fast the speak up of Mr Sechin to present the case, but before having that let me iterate that 

issues of oil sector or gas sector now. As you can easily imagine, the oil price went very low, now come 

back a little bit, but still uncertainties of the price is the issue for us. The IEA mentioned about this low 

oil price scenario. It may continue even in 2020s if several preconditions met. One is that OPEC policy of 

maintaining the share rather than the price. In second, the peace in the Middle East somehow managed to 

continue. The third – the resilience of the shale oil in the North America. And the fourth is the slowing 

growth of emerging economies like China and India continue. Without these continuing conditions all 

met, probably IEA’s view is that low price may not sustain too long, we hope that. But today we have 10 

CEOs and chairmen, and let’s have discussions about the future of the oil market. Because IEA 

cautioned, because of the low oil price, that dependency to the Middle East will increase much more. 

And Middle East due to the shortage of revenue, getting less stable, means the country like Japan 

(importer) will depend more and more on Middle East which becomes less and less stable. This is the 

biggest risk, the IEA warning. But to make the different story, that role of Russia is very important as 

non-Middle East supplier. So, now let’s listen to Igor Sechin, the Chairman of the Management Board of 

Rosneft. Please, Mr Sechin. 

Igor Sechin: Dear colleagues, participants and guests of the Summit,  

On behalf of Rosneft, one of the organizers and sponsors of the Forum, I would like to welcome the 

participants of the Summit and wish successful work to all of us. 

Our Summit is different from all other events, including those held within the framework of the Saint 

Petersburg Forum – today it is attended by genuine leaders of the oil and gas business, that carry out 

substantial extensive work in the industry and play the key role in supplying energy to the world 

economy. 

In this regard, sharing our opinions about the situation in the world oil market is especially important.    

Please note that my liability is limited due to deliberative nature of this presentation. 

The current situation at oil market is rather more complex and puzzle-like than what we've seen in the 

period of balanced market.  It can be said that market tools regulating industry functioning have been 

deformed.  The reason for it lies in those notorious sanctions, as well as in reliance on short-term 

financial market instruments and in manipulation with market institutions at the expense of damage for 

long-term relations between consumers and hydrocarbon producers as well as for fundamental 

development factors. Different players are testing the industry and market mechanisms, looking for an 

opportunity to secure their interests, often to the detriment of the fundamentals of its development. 

Even statistics is no longer a reliable benchmark for analysis, since reference points for making both 

strategic and investment decisions are disappearing. 

The market is experiencing unprecedentedly high volatility.  Today, the prices have almost reached the 

level of the year ago, although this January-February, they plummeted down to USD 27/bbl, and a 

number of large investment banks were testing the levels of USD 20 and below, predicting severe 

downturns in the global economy, including a “hard landing” for the Chinese economy and stagnation of 

the economy of the USA. 

Analytical agencies do not contribute to forming rational expectations of the market players. On the 

whole, this is not surprising – the International Energy Agency represents consumers’ interests who were 

happy with low prices; the American Energy Information Administration of the US Department of 

Energy published its forecasts without linking them to price levels at all; the position of OPEC’s 

Secretariat is at odds with comments of its member countries' representatives. Obviously, the issue of 

adequate information and balanced, substantiated market analysis has become one of the most urgent 

ones. 

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In the oil industry, price volatility is projected on a long-term investment cycle of capital expenditures, 

and the ability of oil companies to meet the demand of the global economy. Thus, the decline in oil prices 

and volatility have already resulted in the loss of approximately USD 350 billion in investments, which 

will definitely have its effect in the mid-term.  If previously the industry was based on implementation of 

long investment cycle objectives, now the balance is definitely upset. 

Presently, the oil market has started momentum towards achieving the balance in the mid-term. Our 

expectations in this regard are, for the most part, associated with the year 2017, rather than with the 

second half of this year. Of course, there is a number of uncertainty factors, primarily, pertaining to the 

behavior of certain producers, who have actually assumed the role of regulators in the oil market, as well 

as in the financial sector. At present, a certain positive trend has emerged, but, despite the visible search 

for balance, risk factors are so numerous that we may lose the equilibrium at any time. 

Today, as we move away from the acutest phase of this severe crisis, we can pay more attention to 

analysis and discussion of underlying factors decisive for the industry development, and it is necessary, 

in some sense, “get back to basics” by discussing the relevance of the long-term investment cycle for the 

consumption and the relation between them. 

First of all, demand continues its sustainable growth in emerging economies. We all know relevant GDP 

growth statistics for such rapidly growing economies as China – 6.5% per annum, India – more than 7%, 

Indonesia – 5%, Vietnam - 7%. 

Therefore, in general, we believe that what we hear frequently about threats to development of the global 

economy and of economies driving the energy demand growth is grossly exaggerated. Even in OECD 

counties the decline in demand reversed with the growth reaching 1.1% in 2015. At that, along with this 

potential, the role of alternative energies is presented in a distorted fashion. Not only is it the matter of 

construction of expensive infrastructure, it also entails loss of budget revenues in the countries that 

implement programs aimed at developing this sector. 

I have already mentioned elsewhere that such oil market short-term and mid-term development 

fundamentals as sustainable demand growth, including new growing markets of emerging economies, 

and decline of investment activity in the sector, within the forthcoming 4-5 years should result in a 

dramatic change of the market and its growth after stabilization. 

In the medium-term perspective, a certain shortage of new oil supply will appear. It will hardly be a 

matter of physical deficit, rather, a growing tension in the balance of demand and supply. If the financial 

market feels it in advance and reflects in prices, we will be able to avoid a new turbulence and to resume 

the investment process via ensuring an adequate diversification of liquids supply sources. 

At least, today energy agencies are unanimous about their confidence with regard to the growth and 

consistent recovery of oil prices (in real terms). Thus, a few days ago, I discussed these matters with one 

of the most distinguished global energy expert and analyst Edward Morse, who, in one time, had been the 

first to predict the shale revolution in the USA. Today the Citi Group analytical service headed by him 

gives quite optimistic estimates regarding oil prices in the nearest years – more than USD50 this year, 

about USD60 in 2017, and USD64 in 2018. At the same time, he confirmed that even these price levels 

fail to cover the full cycle costs for many projects that the industry needs, and, therefore, investments into 

such projects involve high risks.  There are also alternative opinions, for example, many financial 

agencies are talking about a potential oil price decline - however, in my opinion, and such estimate may 

be attributed to the attempts to solve the task of creating financial reserves. Everybody pursues own 

interests. It is essential, though, that industry trend expectations should be articulated by industry-related 

agencies, thus helping ensure the necessary coordination and unbiased balance of interests.   

Separately, I would like to note, that this unprecedented price volatility that we've witnessed, has tested 

the very basics of the industry. Events of last several years have shown that in fact the paradigm of oil 

market had changed: for a long time it has been a common belief that OPEC cartel of producers is 

regulating the oil market; then, owing to groundbreaking technologies, a new regulator appeared which is 

the shale oil production in the USA. However, in our view, the new reality lies in the fact that market 

developments are increasingly determined by a number of factors that include availability and quality of 

resources, impressive progress in development and application of cutting-edge technologies of the 

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