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

physical market, plus development of financial instruments and financial technologies, regulators’ 

activities.  A special role belongs to regulators. 

Objective differences in geology and resource base affect the role of certain countries in the world 

market. I would draw your attention to such countries with a unique resource potential as Venezuela, 

where our company is actively operating, and Iran, which has been building up its production since the 

sanctions were lifted. Of course, realization of this potential is currently complicated by a number of 

factors – infrastructural constraints, the amount of the requisite capital, political factors. 

The result of the current crisis, as I see it, is re-estimation of the role, which three main oil producing 

countries are playing now and will play. They possess not only geological resource potential, but also a 

wide range of factors needed to influence markets. So the main players are being crystallized.  These 

countries are Saudi Arabia, the USA and Russia.  Each of them finds a way to meet these challenges, 

basing on its resource and technological possibilities, market structure and peculiarities of political and 

economical decision-making. 

Let us first look at the USA – the country where oil industry has become the driver both for the oil 

market changes that we see today, and the current phase of the technological breakthrough in the 

industry. 

The USA oil industry is one of the oldest in the world, and its onshore conventional resources are mostly 

depleted. Nevertheless, the USA stands apart due to the size of its domestic consumption market, which 

consumes more than 800 million tons per year, therefore, in many respects, the domestic market 

“absorbs” the fluctuations in the production level.  

Nonetheless, future production trends will largely depend on the progress in development of shale 

resources and access to the offshore areas and federal lands – the issue, which is under discussion at the 

political level. 

Anyway, because of the quality of the USA oil resource base, its full utilization will require quite high 

prices, despite the technological achievements. 

Forecasts for US production till 2025 vary significantly 

The prospects of the US shale production depend on intensive development of technologies, cost 

reductions over the entire production chain, and, apparently, the evolving price levels will result in 

stabilization and even recovery of the shale production. However, contrary to expectations of the many, 

this growth will not be explosive, since there is no longer any euphoria about unlimited financing of this 

sector, and a better understanding of risks will lead to a more balanced financial policy. 

Importantly, the US shale industry is commencing to “clear up the debris" resulting from the tight 

situation in a lot of companies that failed to adapt to the market downturn, are heavily indebted and often 

operating at a loss (as of the end of 2015, the long-term debt of the companies in the sector exceeded 

USD350 billion).  The spread of efficiency parameters and performance indicators across the industry is 

extremely wide – as of today, 23% of the most productive wells yield about 70% of shale production, 

while the rest 77% of wells or a significant part of them generate losses. 

Unfortunately, it could be ascertained that at least some of the American industry has found itself in the 

existing situation because of application of “spot”, financial approaches to the real sector.   We believe 

that such approach is unsustainable – the volatility in the financial sector is too high, and long-term 

investment decisions cannot be made on the basis of daily dynamics of price quotations. 

US production forecasts till 2040 vary greatly 

The long-term outlook for the US production deserves our close attention, in particular, because shale 

production in the USA may prove to be a more durable factor that it was thought before. 

Today USA’s energy sector has found itself at the crossroads in view of major differences in its 

development prospects which feature in the programs of Presidential candidates – Senator Hillary Clinton 

and the famous businessman Donald Trump. 

In fact: 

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The Republicans already today are proposing measures aimed at development of domestic oil, gas 

and coal production and exports, while Hillary Clinton suggests enhancing support to renewable 

energies; 

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Trump proposes lifting the ban introduced by President B. Obama on exploration and production of 

hydrocarbons on federal lands, while the Democratic candidate Clinton proposes leaving the same in 

place; 

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Trump’s program contemplates development of market competition among different energy 

products, including renewable ones, while Clinton’s program implies massive multi-billion 

subsidizing, including budgetary subsidies, of such sources as solar energy, with raising its 

generating capacities to 500 GW; 

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Trump talks about doing away with domination of the climatic and environmental agenda, up to and 

including potential withdrawal of the USA from the Paris Climate Agreement, whereas Clinton gives 

priority to such ambitious goals as reduction of greenhouse emissions by 80% by the year 2050. 

The list of essential differences between the two programs can be continued. 

Considering the role played by the American economy, such uncertainties about the development of the 

US oil and gas industry (technological, political, and economic) increase the risks for the global 

economy. 

Like in the USA, where the crisis has necessitated structural reorganization of the shale industry, in Saudi 

Arabia it highlighted the need for change in the oil and gas industry and economy as a whole.  Unlike the 

USA, Saudi Arabia has no sizable domestic consumption market, therefore, the success of the Saudi oil 

and gas industry will depend, among other things, on the Saudis’ ability to enter new consumption 

markets, to create integral partnerships.  This ability has to be tested yet, some questions still remain. 

I would put it more definitely – having caused the shocks to the world market, the American market 

could afford the risks only with Saudi Arabia standing behind its back, with its richest conventional oil 

resource base, which, seemingly, could gain from some new approaches and technologies of the 

American market. But, as a result, this country did not avoid the shocks either. 

In terms of production, Saudi Arabia attempted at coming up with “its own response” to the shale 

revolution, which we have observed in action for the recent two years. This “response” has proved to be 

quite painful for Saudi Arabia as well: the dramatic fall of oil revenues and budget deficit of USD100 

billion in 2015. The Kingdom has already taken serious steps aimed at changing the taxation system and 

pricing policy, but in 2016 the budget deficit will exceed USD85 billion anyway. Recently (I mean 

Vision 2030 initiative) unprecedented reforms have been declared both inside the industry, including 

partial privatization of Saudi Aramco, and tax reforms of the oil industry related thereto, which are aimed 

at achieving market capitalization of the company, and in the economy in general, with the purpose of 

doing away with the “oil dependency” already in the near-term perspective. 

As for privatization of Saudi Aramco, we believe that this process will help substantially improve the 

transparency of the national oil industry, including publicly available data about oil reserves, which have 

not been updated for three decades already (over this period, information about Saudi Arabia’s reserves 

has not changed at all), the economic figures of this country’s major oil resources development. 

Furthermore, material changes in the technological and financial infrastructure of the country’s oil and 

gas sector will be required. 

As for “shifting away from oil dependency” as the goal of the declared in the plan Vision 2030, we know 

from our experience how complicated this path is, even considering such Russia’s advantages as highly 

qualified research talent, advanced positions in a number of spheres of high technology machine 

building, favorable conditions for development of food and processing facilities. We will be watching 

Saudi Arabia’s moving along the chosen path with interest. 

Before discussing how Russia responds to these challenges, I would also like to comment on “cross-

cutting trends” affecting the whole industry. 

Today, a “new technological format” of petroleum industry is being formed,  including entry of 

technologies of fast processing of large arrays of geological data in the industry, which, given 

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