Alfa-Bank analysts summarized the results of the “International Forum “Russia Energy Week – 2024”, which took place at the end of September. The review pays special attention to the oil and gas sector and the development strategy of the oil industry for the next 10 years. Although the sector is developing largely thanks to government support, bank financing is required for the sector to update its component and industrial base, as well as develop new technological solutions for the development and development of hard-to-recover reserves (TRIZ).
FEC contribution
As can be seen from the report of Alfa-Bank analysts, the resource base of proven oil reserves in the Russian Federation is 32 billion tons, of which 18% are new fields and 59% are TRIZ. “The development of 18.6 billion tonnes of reserves requires additional fiscal incentives and the use of more complex technologies, the development of which requires additional investment and greater availability of financing for the sector,” the report’s authors wrote.
Despite the fact that the country’s recoverable oil reserves will be sufficient for 35 years of active consumption in terms of meeting the long-term targets of the Ministry of Energy in terms of production volume (540 million tons per year), the share of oil by 2030 Experts say that TRIZ will be more than 80%, which he warns that it will significantly complicate their further development. The decline in investments in 2020-2023 affected the sector: in 2023, the increase in proven reserves fell to a six-year low (565 million tons) and, according to Rosnedra forecasts, will only slightly exceed production volumes this year. Deputy Prime Minister Alexander Novak states that it can reach 515-521 million tons.
Novak emphasized that the increase in global energy demand in the last 10 years was 13-14 percent. According to him, the growth in primary energy consumption in the next 20 years will be 25%. He believes that traditional energy sources, hydrocarbons and primarily oil and gas, will continue to supply global energy markets. The Deputy Prime Minister announced that annual oil consumption could reach approximately 120 Mbp in 2050, from 102 Mbp today. At the same time, according to him, the growth rate of gas consumption will be even higher: approximately plus 35% of today’s volume by 2050.
“It can be stated that although the share of hydrocarbons will decrease slightly, it will continue to dominate global energy consumption,” Novak said. he said.
Forum participants concluded that a new cycle of investment in the exploration and development of federally studied oil and gas reserves is needed. According to First Deputy Minister of Energy Pavel Sorokin, the oil and gas sector accounts for more than 20% of investments in the country. The contribution of the fuel and energy complex is expected to increase as national targets for increasing infrastructure investments, GDP growth and creating a competitive economy are achieved.
attracting investment
Mr. Sorokin estimates that as TRIZ’s share of production volumes and oil reserves increases, oil companies’ capital expenditures and operating costs will increase and natural resource rents will be halved. In such cases, industry representatives and competent organizations will need to jointly develop a fundamentally new approach aimed at intensifying drilling, geological exploration and cost-effective development of TRIZ.
To further develop the resource base, it is necessary to deepen the digitalization of project documentation, closer participation of the Ministry of Energy and the Ministry of Finance in field development projects for the centralized implementation of existing technologies and financial incentives. This will make it possible to most effectively approach the issue of developing the existing resource base and ensure the commercial profitability of its development, while maintaining the balance of interests of industry and the state.
Alfa-Bank analysts are sure that although the main driver of the development of the resource base is financial support measures from the state, the issue of creating conditions for the effective development of TRIZ should not be limited to proposals on tax incentives. Combining business efforts to create commercially viable technologies based on a joint project approach is one of the key elements that can ensure the competitiveness of Russian oil on the global stage in the future.
According to Vladimir Verkhoshinsky, head of Alfa-Bank, building the Russian component base should be the starting point for the development of the resource base in Russia in 2025-2035. He is sure that to solve this problem, it is necessary to develop at the state level the principles of integrated interaction between market participants with the participation of authorized departments and financial institutions.
“This will increase the investment attractiveness of projects and the credit quality of the oilfield services sector,” Mr. Verkhoshinsky continues. “The latter, in particular, is responsible for the task of expanding service contracts within the framework of a centralized industrial order, which will create conditions for attracting investment in high-tech projects with a payback of at least seven years on average. ”
A model that includes equalization of credit risks between manufacturing and oil service companies could help expand financing from banks to the sector, meeting the objectives of developing the component and industrial base within the country. According to Alfa-Bank analysts, one of the most urgent and sensitive issues for the industry at the moment remains the need to attract investment (both state subsidies and private capital) in the development of domestic solutions in terms of oilfield service technologies and geological research methods. Otherwise, the report’s authors conclude, the sector risks shrinking its resource base.
Stability has begun
The issue of active development of TRIZ in Russia becomes especially important in the context of the decrease in conventional oil reserves and the need to maintain production volumes in 2026-2030. According to the Ministry of Energy, the growth rate of global oil demand in this period could provide an additional consumption of 5-7 million barrels per day.
The reserve capacity of OPEC+ countries and the potential for continued production growth in the United States, Canada and Brazil will make it possible to guarantee global oil consumption by the end of the decade, but the steady pace of decline in oil production will continue. in developed fields – about 3-7% per year on average – leaving room for expansion of investments and development of unconventional reserves in 2030-2050.
Despite increased volatility in commodity markets due to non-market factors, the macroeconomic agenda and increasing geopolitical tensions, fundamental analysis shows that stability has emerged in the oil market that may last at least until the middle of the decade. -Bank analysts are confident.
“This is indirectly stated by the latest decision of OPEC+, which includes a long-term plan for the commissioning of previously suspended production capacities. Analysts conclude that all this could help usher in a new cycle of investment in the sector, which was needed due to increased consumption and significant underinvestment in 2015-2020. In such market conditions, Russian oil will continue to be in demand, and investments in its development today can become a competitive advantage tomorrow in the face of rising production costs and a decrease in drilling efficiency in conventional fields around the world. “TRIZ is essentially the future of the oil industry and will enable Russia to move after its development in 2025-2035 by promoting its development together with timely investments in the oilfield services industry.”
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Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.