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Current oil prices lead to US shale oil production recovery — Rosneft CEO

June 16, 18:57 UTC+3
Shale production in the US depend on intensive development of technologies, reduction of costs throughout the whole production chain
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© EPA/SERGEI ILNITSKY

ST.PETERSBURG, June 16. /TASS/. The current oil prices will lead to recovery of shale oil production in US, Rosneft CEO Igor Sechin said speaking at a summit of oil and gas companies during the St. Petersburg International Economic Forum (SPIEF).

"The prospects of shale production in the US depend on intensive development of technologies, reduction of costs throughout the whole production chain. The price levels that are being formed now lead to stabilization and even recovery. However, it will not be an explosive growth as many expect, because the euphoria of unrestricted funding for this sector is no longer here and a better understanding of the risks will lead to a more balanced financial policy," he said.

According to Sechin, the dynamics of the future production will be determined by "the progress in the development of oil shale reserves and access to the offshore reserves and federal lands". This is "an issue that is under discussion at the political level."

Oil prices

Sechin noted that stable growth of developing economies’ demand and declining investment activity in the industry will result in oil prices hike in coming 4-5 years.

"Such fundamental bases of oil markets development in near term and midterm as stable dynamic of the demand growth, particularly on new growing markets of emerging economies, and declining investment activity in the sector should result in a profound change in the market situation and its growth after stabilization in the next 4-5 years," Sechin said.

Shortage of new oil offer 

According to Sechin, certain shortage of the new oil offer may appear in midterm.

"A certain shortage of the new oil offer will surface in the midterm. This will hardly be a physical deficit but more likely this will be a greater strain of the demand and offer balance. If the financial market feels it and responds in terms of prices, then we will be able to avoid turbulence and restore the investment process, supporting required diversification level of liquid hydrocarbons offer sources," Sechin said.

Oil price decline losses

Sechin noted that price volatility in the oil sector affects the long investment cycle of capital investments, lower oil prices and volatility have led to the loss of about $350 bln of investments.

He was speaking at the summit of power companies held in the framework of the St. Petersburg International Economic Forum.

According to Sechin, it will certainly have an impact in the medium term.

"Decline in oil prices and volatility have already caused the loss of about $350 bln of investments that will have an impact in the medium term. If earlier the implementation of tasks of the long-term investment cycle was the foundation of the sector now the balance has been violated," he said.

Rosneft proved reserves

Sechin said that proved reserves of Rosneft totaling 29.8 bln barrels of oil will support development of the company within 20 years timeframe even without the resource base expansion.

"We believe maximal prospects in the nearest decade are linked to efficient use of our unique resource base of conventional oil, particularly in brownfield areas in the West Siberia. Rosneft’s proved reserves amount to 29.8 bln barrels and they support our development within 20 years timeframe even without expansion of the said base," Sechin said.

Rosneft and BP joint venture

According to Sechin, Rosneft and BP will set up Ermak joint venture with investments totaling $300 mln for exploration and analysis of geological information.

"We have announced the deal with BP within the Forum framework today. This is a bright example of creating Ermak JV, with $300 mln to be invested within its framework into analysis of geological information and exploration alone," Sechin said.

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