18 Jun 2022 10:29

Sechin: Russia with its energy potential and Vostok Oil project will be the 'Noah's Ark of the world economy'

ST. PETERSBURG/MOSCOW. June 18 (Interfax) - Russia is able to meet the world's long-term needs for affordable energy, Rosneft CEO Igor Sechin said at the St. Petersburg International Economic Forum.

"We are already seeing movement towards a new oil market configuration where two price contours are forming: for friendly countries - a fair market price, and for unfriendly countries - a premium on top of the price, which will be used to pay off our costs associated with breach of rules and obligations by our former partners," Sechin said.

"In these conditions it is important to answer the question: where is it the Noah's Ark of the world economy?" he said.

"Russia, with its energy potential and portfolio of first-class projects, such as Vostok Oil, can meet the world's long-term needs for affordable energy resources and, of course, is that very Ark," he said.

Rosneft is already producing oil at the Vankor cluster of fields, which are part of the Vostok Oil project. "A complex exploration program is being carried out successfully, for example, we struck oil on the left bank of the Yenisei River this year when two exploration wells were tested, and an increase in oil reserves of about 100 million tonnes is expected," he said.

"On the whole, the results of geological exploration are many times higher than forecast, which allows us to confidently plan high production levels for many decades with a phased ramp-up to 115 million tonnes of oil in 2033," Sechin said.

"Amid reduced investment in the development of the oil and gas sector, Vostok Oil is the only project in the world that can have a stabilizing effect on the hydrocarbon markets, while having the highest efficiency and [sustainability] indicators," he said. Also, thanks to direct access to the Northern Sea Route's transport artery, the project's exposure to politically unstable pipeline hydrocarbon supply chains is lessened, he said.

"The implementation of this project does not cause any technological or resource difficulties for Rosneft. We have the necessary competencies, knowledge and experience in implementing such projects and 98% of equipment and materials are sourced domestically. Deliveries of pipes and other metal-intensive products are being carried out on schedule under integrated contracts with the largest Russian enterprises," he said.

Sechin said seven Russian Arctic class drilling complexes had been installed and were drilling, five more complexes are being prepared for drilling, and the main technological facilities are being built: the Vankor-Payakha-Sever Bay oil trunk pipeline, the construction of an oil loading terminal is in the active phase, and construction of three out of five berths for the tanker fleet is under way.

"We will be happy to welcome our friends among the participants in the project to build the Noah's Ark of the world economy," Sechin said.

The United States is trying to convince European countries that they will not be left without gas in any scenario where Russian supply is reduced, but there is reason to doubt this, said the CEO of Rosneft.

"Not even such big LNG producers as Australia, Qatar and the United States can boost gas production sharply. Efforts by the States might allow for ramping up production by less than 10% of the volume required to replace Russian gas. So it will be necessary to attract gas from other markets, mainly from Asia in order to meet European demand," he said at an energy discussion during the St. Petersburg International Economic Forum.

"As a result, Europe is already buying LNG destined for developing countries which are unable to compete in price. As far as we know more than 10 LNG cargoes intended for Pakistan under long-term contracts were canceled from October 2021 to June 2022 amid rising demand and prices in Europe, as a result of which the country had to buy gas on the spot market at a much higher price to meet at least some of its needs. This triggered a major energy crisis: due to a lack of fuel, 20% of the generating capacity of country of 220 million was suspended, leaving households and industrial consumers without electricity. Daily power outages in May-June reached 12 hours in cities and 16 hours in rural areas," he said.

"At the same time, demand for lower-cost substitutes is growing and the share of coal in the energy mix is increasing. Coal generation in Europe, which already grew 18% in 2021, might rise more than a third in 2022. There is a real 'coal renaissance,' which in many ways is undermining global efforts to reduce the carbon footprint," he said.

"The rhetoric of Western countries about the need to speed up decarbonization contradicts their own practice - they are calling for a reduction in the carbon footprint in words, while in deeds they are increasing it, and undermining the economies of other countries at the same time," Sechin said.

Global economic crisis gaining momentum

Hydrocarbons market sanctions are speeding up crisis phenomena in the global economy, said the Rosneft CEO.

"We said back in 2018 that the policy of sanctions and ultimatums in the hydrocarbon markets would result in the emergence of a permanent 'sanctions premium' in the price of oil and we mentioned the risks of new price records being set. All of this has now become reality - the global economic crisis is gaining momentum before our very eyes," Sechin said at St. Petersburg International Economic Forum.

"The global crisis as such is not a consequence of the sanctions, but sanctions are of course escalating and accelerating all these crisis phenomena to the maximum. In the understanding of the United States, sanctions are a sort of magic wand to achieve political and economic aims. The U.S. resorts to sanctions without any justification when market mechanisms do not achieve those aims and political opportunities are absent. Sanctions are destroying the previously inviolable institution of contractual obligations, the judicial and legal framework itself, the financial, transport and industrial sectors and, as a result, the social sphere and ultimately the global market itself," he said.

End to green transition

Anti-Russian sanctions have put an end to the "green transition," said Igor Sechin.

"The global crisis of 2008 was not overcome, it was flooded with emission. The opportunities for emission, which seemed limitless, were exhausted sometime in 2020-2021. At the same time, any significant increase in Fed rates means the risk of recession and a sharp rise in the cost of servicing debt, both government and corporate debts, and debts of individuals. Thus, unrestrained dollar emission is the underlying cause of inflation in the United States," Sechin said at the energy discussion during the St. Petersburg International Economic Forum.

He said the inflation multipliers were the accelerated "green transition" - economically senseless and politically motivated, a pandemic and the artificial rupture of supply chains, as well as unprecedented anti-Russian sanctions

"The effective battle against global inflation by hiking rates is futile, as it will lead to the collapse of the financial system. Fed rate hikes are way behind and will remain way behind real inflation," he said.

"In fact, both the 'green revolution' and anti-pandemic measures, and the hybrid war with Russia are, consequently, attempts to organize a shift in the economic and technological order in the interests of the current dominant," he said.

"Empty 'green rhetoric' completely contradicts real practice aimed at finding any sources of hydrocarbons at any cost, instead of Russian ones. In fact, the 'green transition' is no longer needed as a way to manipulate the market when other, cruder and more radical approaches are available, for example assault for the purpose of stealing someone else's property, with the use of violence - "robbery", Article 162 of the Russian Criminal Code," he said.

U.S. baseless accusations

Western countries are imposing sanctions on far-fetched grounds, without proper reasoning, with falsification in their assessment of the actual circumstances, the CEO of Russia's Rosneft said at the St. Petersburg International Economic Forum energy discussion.

"For example, U.S. administration officials have again absolutely baselessly and wrongfully accused our company of supplying Iranian oil to Europe," Igor Sechin said.

"I want to thank the Russian Foreign Ministry for its strong protest against the accusations trumped up by senior U.S. officials," he said.

"It can be said that the concept of the presumption of innocence, introduced in Roman law back in the third century, has now been destroyed - all those against whom sanctions are being declared is guilty from the outset, without any reason, which justifies any illegal actions," he said.

Russia not obstructing BP dividends

BP's announcement that it is pulling out of Russia was unexpected, and not driven by the commercial interests of the British company or its shareholders, said Igor Sechin.

"BP, a former longstanding and trusted partner of Rosneft, officially announced its exit in February this year, despite the fact that the Russian business has brought it $36 billion in revenue since 2003, with only $10 billion in total investments," Sechin said at the St. Petersburg International Economic Forum.

"But for all those statements about unconditional withdrawal from Russia, BP continues to this day to be the largest private shareholder of Rosneft with a stake of 19.75%. BP also continues to own stakes in major joint projects, including Taas-Yuryakh, Kharampurneftegaz, and Yermak Neftegaz. All these actions rather suggest a desire to remain an active participant in the company Rosneft and sit out the unfavorable geopolitical situation without real losses. We are seeing similar actions on the part of some Western majors," he said.

"And yet Russia is not creating obstacles for foreign companies to continue operating, for example, in respect to dividends payable to BP, even against the backdrop of the seizure of Russian gold and foreign exchange reserves and the expropriation of foreign assets belonging to Gazprom. The only restriction imposed by the Russian regulators is that funds are credited to special accounts, which will be done in respect to BP after the shareholders' meeting, and will be a nine-zero amount in foreign currency. But, at the same time, we expect that in the event of attempts to expropriate Russian property, the Russian government will propose symmetrical measures regarding the assets of foreign companies in Russia," he said.

Movement towards increasing settlements in nat'l currencies

The dollar and the euro have lost their status as reliable currencies as it has become obvious that access to them could be limited at any time amid the freezing of Russian gold and foreign exchange reserves, said the CEO of Rosneft.

"The euro's value as a global reserve currency is declining. Rejecting Russian energy resources and lower competitiveness of the European economy have already led to capital flight and the euro falling against the dollar by 8%, from 1.13 at the beginning of the year to 1.04 at present. Indeed, by banning trade relations with Russia, Europe has limited the circulation of its own currency, reducing its appeal for international settlements," Sechin said at the energy discussion during the St. Petersburg International Economic Forum.

"It is necessary to move more boldly and quickly towards increasing the share of settlements in national currencies, increasing the volume of mutual trade and commodity supplies, intensifying contacts between national banks and strengthening the integration of national payment systems of various countries," he said.

"The catchphrase of the year - deleverage - is getting out of debt. If money used to flow from one market to another, now everything except hydrocarbons is simultaneously on the decline - even gold, traditionally used for reserves. The dollar is growing as a last resort. Moreover, it is growing against the backdrop of systemic inflation in the United States. That is, the United States at the moment is the main beneficiary of the crisis due to capital inflows and dollar's growth. At the same time, against the backdrop of the inevitable growth of rates, the cost of servicing the huge American debt is growing. And in the short term there will be recession and stagflation," he said.

"We are already seeing the start of a recession. The U.S. S&P 500 has fallen 23% since the beginning of the year," Sechin said.

"The single global market is dead. All previous institutions and mechanisms for its regulation operate in non-economic mode, in fact, in war mode," he said.

"In these conditions it is impossible to overestimate Russia's role in the emergence of a new configuration for markets and new institutions for interaction by countries seeking independence from diktat and the arbitrary nature of sanctions," he said.