Leonid Fyadun predicted a dramatic rise in oil prices
Oil consumption will be stable until 2030, followed by a sharp decline in consumption in Europe, and from 2035 also in China and the United States. This was stated by Vice President of Lukoil Leonid Fyadun on Friday at a presentation of prospects for global energy development until 2050.
But current oil projects, according to the top manager, are not enough to meet oil demand. “The industry is heavily underinvested. Underinvestment in the oil industry could lead to a dramatic rise in prices, ”he was quoted as saying by Interfax.
At the same time, the presentation of “Lukoil” presented by Fyadun shows that in any of the scenarios the price of a barrel by 2050 will exceed $ 100. There are three of them: “Evolution”, “Equilibrium” and “Transformation”. According to the first, oil will rise to $ 128 per barrel. taking into account inflation and the introduction of quotas on greenhouse gas emissions. The second to $ 197, the third to $ 380. In the latter case, oil, gas and coal together will account for less than a third of the world’s energy balance (in the first two 63 percent and 48 percent respectively), and almost 70 percent will be nuclear energy and renewables, including hydropower and biomass.
The document emphasizes that the coronavirus pandemic and the energy crisis of 2021 “demonstrated the importance of ensuring the stability of fossil fuel supplies.”
Igor Sechin, Rosneft’s CEO, also spoke at the St. Petersburg International Economic Forum in June 2021 about the dangers of underinvestment in the hydrocarbon industry amid high demand. According to him, only to maintain the current level of production it is necessary to invest about $ 17 trillion by 2040. At the same time, stakeholders are required to completely abandon investments in the oil and gas sector, he said. “Too fast energy transition, which is called for by some environmentalists and politicians, firstly, requires the introduction of renewable energy sources (RES) at unrealistically high rates, and secondly, faces the problem of storage, reliability and stability of generation,” Sechin warned.
Lukoil’s presentation also says that the world community is facing a serious challenge today: on the one hand, it is necessary to provide the growing population of the Earth with affordable energy, on the other – to reduce greenhouse gas emissions to combat global warming. “Achieving carbon neutrality will require colossal investments in the energy sector in amounts several times the size of investments in recent years. The need to ensure the return of these investments will increase the cost of energy for consumers, ”the company believes.
At the same time, according to Fedun, over the next year the price of oil will be in a comfortable for both producers and consumers corridors of $ 60-80 per barrel. Fyadun also said that Lukoil will take serious steps to reduce the carbon footprint. In particular, the company plans to increase the share of gas in the portfolio to 30% by 2031 and will invest about $ 15 billion in renewable energy in the next 10 years. This will allow the company to achieve carbon neutrality by 2050.
The head of the assets of BCS World of Investment Vitaly Gramadin draws attention to the speculative forecasts with a planning horizon of 30 years, as the situation in the oil market is constantly changing. He reminded that 2-3 years ago the demand for oil was projected to fall sharply from 2022 due to the use of electric vehicles. But now these forecasts are not relevant, he told “Vedomosti”. “At the same time, the share of RES in the global energy balance should grow. The only question is whether consumers are ready to pay for it, ”Hramadin concluded.
Sergei Grishunin, head of the NRA’s rating service, adds that the amount of debt available to oil companies will be reduced due to the reluctance of large banks, which are under pressure from the climate agenda, to lend to hydrocarbon projects. Because of this, global players will begin to experience problems with funding new projects, he said. “In this regard, Lukoil’s forecast of $ 100 per barrel looks quite feasible,” he told Vedomosti.
According to senior analyst at Alfa-Bank Nikita Blakhin, the price of oil, even conservative estimates, will exceed $ 90 per barrel by 2027. At the same time, the estimate of $ 380 per barrel Grishunin considers inflated. “Such a price will make the mass transition of the world economy to alternative energy sources necessary,” he said.
Even with the successful completion of the energy transition by 2050 and the complete abandonment of the use of hydrocarbons as fuel, sustainable demand for oil will remain in the field of petrochemistry, says Blahin. According to the expert, in this case, oil may become more narrow, but at the same time more premium, and hence more expensive resource. The green course, Blahin continues, will reduce the commissioning of new production capacity, which at some point will lead to an avalanche of supply in the market. But the demand for crude oil from the chemical industry will remain at least at current levels, and may even increase due to the ongoing development of this industry, he said.