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October 5, 2017

‘Russian Fuel and Energy Industry: National Interests and Global Trends’ plenary session held during REW

The ‘Russian Fuel and Energy Industry: National Interests and Global Trends’ plenary session was held as part of REW 2017. The discussion featured Minister of Energy of the Russian Federation Alexander Novak, Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia Khalid A. Al-Falih, Gazprom Neft Chairman of the Management Board and CEO Alexander Dyukov, IHS Markit Vice Chairman Daniel Yergin, Rosatom Director General Alexey Likhachev, Fortum Corporation President and CEO Pekka Lundmark, and NOVATEK Chairman of the Management Board and Member of the Board of Directors Leonid Mikhelson. CNBC Anchor Geoff Cutmore moderated the conversation.

Commenting on the results of the agreement to reduce oil production, the Russian minister of energy said that “we are achieving the goals that were outlined in the deal with OPEC”. “We are seeing a return on investment in the industry, and the market is gradually balancing. The agreement on limitation involves 24 countries, which account for 55 million barrels of oil production per day. Trust has emerged between our countries, and we would be happy to involve other participants”, Alexander Novak said.

The minister said that Russian companies are participating in the pact on a voluntary basis. “It’s important for us to reduce volatility. And companies understand that participation in the transaction is promising in terms of balancing the market and the reliability of the industry’s development prospects”, Novak explained.

Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia Khalid A. Al-Falih also offered high praise for the results of the deal to reduce production. “The coalition of 24 countries has breathed life into OPEC. The success of the efforts is evident. We are seeing a steady decline in inventories. Demand is characterized by healthy indicators around the world”, Al-Falih stressed.

Gazprom Neft CEO Alexander Dyukov agreed that the agreement to reduce oil production has added stability. “We have been living in a situation of low prices since 2014. The Russian Federation’s tax system allows us to be effective at low prices. Over the past three years, we have increased hydrocarbon output by 8%. The decision to switch to the excess profits tax will provide an additional boost to the oil and gas industry”, Alexander Dyukov said.

IHS Markit Vice Chairman Daniel Yergin noted that it will take time to restore the market. Commenting on the threat that shale oil poses to the market, he noted that shale production currently makes up no more than 5% of the market.

As for the gas industry, NOVATEK Chairman of the Management Board Leonid Mikhelson said that gas consumption around the world has increased by 20% and LNG consumption by 70% over the past ten years, adding that forecasts for gas production growth can be revised upwards. “New LNG consumption markets are being formed, in particular in APR countries. We are implementing the first major Arctic project Yamal LNG whose first phase will be launched this year. The huge resource base in the Arctic zone has the potential to produce more than 100 million tonnes of LNG”, Leonid Mikhelson said.

Fortum Corporation CEO Pekka Lundmark agreed that gas production will grow and added that the transition of generation from coal to gas will reduce harmful emissions by about 50%.

Commenting on the electricity market, Rosatom CEO Alexey Likhachev said that demand for electricity would triple by the 2040s. “In the future, nuclear power will be even more in demand. Nuclear power makes up 18% of power generation in the Russian Federation”, he said.

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