Sechin warned about the shortage of oil and gas in the world

The global economy is recovering steadily after the corona crisis, however, in the second half of this year, we can expect a shortage of oil and gas,considers Sechin

The HEAD of Rosneft, Igor Sechin, at the St. Petersburg International Economic Forum (SPIEF-2021) said that in the second part of this year the world risks facing a shortage of oil and gas, RBC correspondent reports.

“The global economy is recovering steadily, business activity is reviving. Thus, the IEA and OPEC expect that oil demand may recover in the next 12 months, while a deficit can be expected in the second half of this year,” he said, adding that there is also a risk of a gas shortage.

Sechin also warned about the consequences of reducing investment in the oil industry due to the actions of "green lobbyists" and called a dangerous precedent for the industry a COURT decision in the Netherlands, which at the end of May ordered Shell's management to take increased obligations to reduce greenhouse gas emissions (should reduce harmful emissions by 45% by 2030 compared to 2019) and reduce investments in traditional business. “An event has occurred that cannot be ignored - the court actually made a corporate decision for management, and this is a new form of risk for the majors. Moreover, the activities of “green” lobbyists will increase the burden on the budgets of individual countries, since accelerated decarbonization will require subsidies and tax breaks,” Sechin said.

But, according to him, humanity underestimates the importance and significance of oil and gas for the global economy. According to Citibank's calculations, the contribution of oil and gas companies to global GDP now for the first time exceeded their share in the total capitalization of the world market, that is, the oil and gas industry creates more value for the world than it receives investment. The world consumes oil, but is not ready to invest in it, the head of Rosneft concluded.

Sechin points out that the risk of a shortage of oil in the world is associated with the demand for a complete abandonment of investments in the oil and gas sector by various "stakeholders", and with the desire of the world's largest giants to increase shareholder value and shareholder income through dividend growth and share buybacks. Because of this pressure, companies refuse to search for and explore new reserves. The world risks facing an acute shortage of oil and gas, he stressed.

In his opinion, we should not talk about the rejection of oil as such, but the rejection of oil from "environmentally dirty projects." To maintain the current level of oil and gas production until 2040, about $17 trillion is required to be invested in the global oil and gas industry, which will amount to about a third of all global energy investments.

Alekperov allowed fluctuations in oil prices "from zero to infinity" Business

According to him, the total loss of the 20 largest public oil and gas companies in the world in 2020 amounted to $33 billion, compared with a profit of $242 billion a year earlier. “The losses of the leading American shale companies are no less significant and in 2020 exceeded $60 billion. Despite the recovery in oil prices that began, the industry was unable to get out of the losses,” the head of Rosneft noted.

As Sechin noted, the reduction in oil and gas production by majors, while at the same time inability to supply sufficient volumes of solar and wind energy to the market, could lead to a new wave of mergers. “Consolidation of majors would increase investments in energy transformation, strengthen their competitive positions and increase investment attractiveness,” he believes.

In March, Lukoil President Vagit Alekperov said that the company sees the risk of a shortage of oil and gas supply on the world oil market in the next five years due to a lack of investment in the extractive industry. “Our industry has been experiencing a shortage of investments for quite a long time. Limited access to capital due to the strong support of the financial sector for energy transformation leads to a reduction in the investment potential of the industry,” Alekperov said.

Novak said about the remaining risks in the oil market Economics

According to him, the lack of funds has become especially evident against the backdrop of the consequences of the covid-19 CORONAVIRUS pandemic . Alekperov warned that underinvestment in the industry could lead to price volatility and adversely affect global economic growth. It is impossible and risky to abandon oil production quickly, he assured.

Deputy Prime Minister Alexander Novak said at SPIEF 2021 that the cessation of investment in new oil production projects could push oil prices up to $200 per barrel. “I can't imagine that investments in new oil projects will stop from tomorrow. Well, what will happen? Oil prices will probably be $200 or gas prices will skyrocket. Volatility will rise,” he said.