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

visualization and analysis technologies, allows us to speak about a new round in development of the 

industry’s abilities to use the resource potential. 

Considering new prices and technologies development, we see how the role of servicing changes and 

how requirements thereto increase. The services should be at the forefront of mastering new technologies 

and suggest the most efficient solutions to operators. Competition in this sphere grows. In our view, 

cusses will attend only those service companies that take the lead in innovations. 

Forecasts show that transportation and Petrochemistry will continue dominating in liquids consumption 

In future, development of our industry will be more determined by expansion of transportation sector and 

increased demand for petrochemical products, in emerging economies first of all. 

According to forecasts, the gas industry will be growing faster than the oil industry. We are actively 

developing this business and are interested in its growth. Here the drivers are, of course, increased 

importance of gas for the power industry – a fundamental yet a low-margin sector, and growth of 

production and use of “gas liquids” in Petrochemistry. 

It is distinctive for the gas industry to have expanding competition at main export markets and to conduct 

policy of gas "sources and supply routes diversification. Entry of LNG from the USA is among it. In the 

super-low price environment, we face, and have not overcome yet, hazards of “global market decay” and 

impossibility to implement major infrastructural projects. We observe marginality reduction in the 

industry amid evolving medium-price environment. We see the necessity of efficient "Russian gas 

answer" - first of all, meaning providing equal terms at external markets. 

Other energy sectors also keep developing. The nuclear energy sector is an important alternative and 

destination for diversification in power generation. It's a high-tech industry, and in its development we 

see a transit to technological solutions of civil application of atomic technologies. The maturity stage, 

which atomic energy sector has entered, makes it very important to obtain experience of “full cycle 

costs”, which include decommissioning of facilities with expired service life, and further accounting of 

relevant costs related to implementation of new facilities. It is important to find the right place for nuclear 

sector in regional energy balances so that to avoid an additional burden for the consumers from lengthy 

implementation and high CAPEX. 

Extensive discussions are also held on renewable energy, and here we find it critical to achieve progress 

in creation of such important components of renewable energy development as invention of powerful and 

cheap means for electric energy accumulation and storage, development of fuel stations network 

infrastructure, and a number of others including the above-mentioned disappearing budget revenues. 

I would like to draw your attention specifically to information ambiguity in the energy sector and 

necessity to cooperate and communicate for all of its members, since development of efficient regulation 

for global and regional markets falters. I hope that development of interaction, at this Summit of Energy 

Companies as well, will contribute to filling and in some areas fill this gap.

 

As you know, Russia is one of the countries with the largest volumes of oil production and supply to the 

global market.  

As we have seen, major oil producers significantly differ in their resource potential, infrastructure 

availability, technologies and competencies, as well as in structure of their regional supply and demand 

balance. As for supplies to the global market, Russia has important advantages vs. other countries: well-

developed export infrastructure including pipelines, fairly low debt burden, marketing system tested by 

decades and successfully supplemented by long-term contracts, integration in growing eastern and stable 

western markets. This model provides consistency, efficiency and stability of Russian oil exports. 

Another matter of importance is the balance of supply and demand in Russia - given the high level of 

domestic demand; existing capacities allow exports diversified in accordance with directions and 

products. This is what makes the place of Russia in the global petroleum industry very distinct. 

Within last two years, oil industry of Russia has been affected by the global crisis as well. However, this 

negative impact was rather limited, especially if you recall the reaction of many other players. This 

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surprised many observers and analysts, who were not prepared for such development – in the midst of 

upheaval Russian oil industry seemed to be a terra incognita to many observers and analysts, but "as a 

result, taking into account its resource base, the results achieved, market institutions, presence of quality 

market channels, it is becoming a terra fertilis, a fertile land. 

What lies behind of this phenomenon? 

Russia has a huge resource potential and Russian oil projects are cost-efficient even if the oil prices are 

low. 

First, I would mention the scale and high quality of Russian hydrocarbons resources. In addition, well-

developed supply infrastructure, long traditions of industry workers training, and good engineering 

school. Based on these pre-conditions, Russian oil companies ensure one of the lowest in the world levels 

of “per unit” costs of resources development.  For Rosneft today it is 2.1 USD/bbl. 

There are new big promising projects in Russia, allowing us to maintain the oil output and the investment 

level while the majority of foreign public and national companies are cutting their capital costs and are 

forced to re-evaluate their project portfolios due to the lack of attractive investment projects in the 

evolving price environment. 

Russian oil production so far has been developing under an upside case but it is not the limit 

Growth of oil production in Russia was ensured through introduction of new projects that were mostly 

prepared with the governmental support before the crisis. During the economic downturn leading Russian 

oil companies optimize expenditures and do not suspend implementation of these projects. In accordance 

with the base case of the General Plan of Oil Industry Development till 2035, which is under approval 

now, oil production in Russia will remain stable. However, in order to achieve this target, a stimulating 

taxation system is required. This work should be accelerated before discussions of pilot projects result in 

the start of production decline.  

A key parameter determining oil production in Russia is fiscal environment, not oil prices. According to 

the official independent evaluation by Ernst&Young, in 2015, when the average oil price was $51 per 

barrel, Rosneft paid taxes of almost $25 per barrel of oil produced. It is much more (in some cases 4 to 5 

times more) than foreign companies did. It should be noted that these tax payments are fixed as part of 

the so-called ‘big tax maneuver’ that was developed and implemented considering the oil price above 

$100 per barrel. Obviously, it is important to readjust it in accordance with the new reality of medium-

term oil prices. Even more so that literally yesterday we saw the Ministry of Finance’s evaluations of 

risks of further oil prices decline. 

In my opinion, the point of taxation is quite simple:  oil price is $50 per barrel; production cost is $2 per 

barrel. Even if the full cost is a little higher than $10 per barrel – accounting for transportation and other 

costs. Target fiscal system must provide for the stimulus to upstream investment until production cost of 

additional barrel is less than market price for a barrel. If we talk about downstream, cross-subsidization 

within vertically integrated systems cannot be treated as economically appropriate method of business 

operations - all dimensions of company's activities should be economically justified. That is why taxation 

of downstream should also be rational and stimulate investment.    

Two most important sources of oil production: Brownfield and non-conventional resources 

I see significant untapped capacity of the fields in West Siberia, yet I would also like to mention that 

Russian non-conventional resources are the largest in the world and by 1/3 exceed similar resources of 

the USA (according to Goldman Sachs). They include a whole range of geological formations, in 

particular Tyumen, Bazhenov, Domanik, Khadum suites, etc. In order to develop each of them 

efficiently, certain technology modifications are required. In the last years, Russian companies made 

serious progress in those areas. We actively apply multistage hydraulic fracturing, we drill extended 

directional wells. You also know about our joint experience with Exxon when we drilled directional 

wells with a record step-out of more than 12 km. 

For such capital-intensive industries as oil and gas production, it is important to account for multiplier 

effects showing how the investment and operational expenditures occurring here spread out through the 

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