Welcome Adress to Participants of FT Commodities Global ... · Price drop leads to reduction of...
Transcript of Welcome Adress to Participants of FT Commodities Global ... · Price drop leads to reduction of...
Welcome Adress to Participants
of FT Commodities Global Summit 2016
Lausanne, April 12, 2016
Chairman of the Management Board of Rosneft Oil Company
I. I. Sechin
Information herein has been prepared by the Company. The presented conclusions are based on the general information collected as of the date
hereof and can be amended without any additional notice. The Company relies on the information obtained from the sources which it deems
credible; however, it does not guarantee its accuracy or completeness.
These materials contain statements about future events and explanations representing a forecast of such events. Any assertion in these materials
that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors,
which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. We assume no obligations to update the forward-looking statements contained herein to
reflect actual results, changes in assumptions or changes in factors affecting such statements.
This presentation does not constitute an offer to sell, or any solicitation of any offer to subscribe for or purchase any securities. It is understood that
nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information herein should not for any
purpose be deemed complete, accurate or impartial. The information herein in subject to verification, final formatting and modification. The contents
hereof has not been verified by the Company. Accordingly, we did not and do not give on behalf of the Company, its shareholders, directors,
officers or employees or any other person, any representations or warranties, either explicitly expressed or implied, as to the accuracy,
completeness or objectivity of information or opinions contained in it. None of the directors of the Company, its shareholders, officers or employees
or any other persons accepts any liability for any loss of any kind that may arise from any use of this presentation or its contents or otherwise
arising in connection therewith.
Disclaimer
3
Oil & Petroleum Products Remain Largest Commodity Market
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
2001 2005 2008 2011 2015
$ trn.
Coal Gas Petroleum products Oil
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
2001 2005 2008 2011 2015
$ trn.
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
2001 2005 2008 2011 2015
$ trn.- 49%
2000 to 2011, value of global energy exports exceeded aggregate export of metals and food.
In 2015 the share of oil and petroleum products commodities markets reduced by only 10% despite sharp reduction in
prices
Energy export Export of metals Export of food products
Sources: UNCTAD; IMF
4
Oil remains the most important Commodity on financial
markets
Sources: CFTC; NYMEX; Bloomberg; calculation of B.Bernanke.
0
5
10
15
20
25
30
Oil Gold Crops Othermetals
$ bln. 2014 2015
20
40
60
80
100
120
80
90
100
110
120
130
09.2
01
4
11.2
01
4
01.2
01
5
03.2
01
5
05.2
01
5
07.2
01
5
09.2
01
5
11.2
01
5
01.2
01
6
03.2
01
6
S&P 500 Brent (right)
Jan 1, 2014. =100
High correlation in 2016 is due
to effect of the “third factor” –
global economy concerns
Average value of long positions on NYMEX market Brent and S&P 500 oil prices
5
Super-cycle’s raw materials prices were supported by weak
dollar
* - accepting oil price elasticity at dollar per unit rate.
Sources: US Bureau of Labor Statistics; Bloomberg; calculation of B.Bernanke and J.Hamilton
+20
-19
+67-55
0
20
40
60
80
100
120
Price increase2001-2011/12
Price declineJune 2014 - Dec 2015
$/bbl.
Dollar rate Other factors
0
20
40
60
80
100
120
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
$/bbl.
Brent Brent adjusted to CPI Brent adjusted to CPI and USD
$16
$22
$35
US inflation:
USD rate:
Other factors:
Share of dollar rate in oil price changes: calculation of
B.BernankeBrent oil prices
Weakening of dollar rate* complemented about 30% in oil price increase in 2002-2008.
According to calculations of B.Bernanke, the share of dollar rate in declining oil prices in 2014-15 also amounts to
about $20.
6
Volatility on oil market is significantly higher than on other
commodity and finance markets
Source: Bloomberg
In Q1 2016 oil price volatility exceeded volatility of S&P500 index 3 times.
Implied volatility of WTI (OVX) and S&P 500 (VIX) index
0
10
20
30
40
50
60
70
80
90
2013 2014 2015 2016
OVX VIX
7
Price drop leads to reduction of drilling and investments
Sources: Rosneft, World Energy Outlook 2013, World Energy Outlook 2015, JPMorgan
Volume of commissioning new fields and estimated volume of depletion to decline rate
Current increase of oil supply is caused by increased production at already existing fields
Delaying the launch of new projects can seriously affect supply in 3-5 years.
Reduction of capital investment also can lead to growth of the rate of depletion of existing fields, as the cost of
increase of oil recovery rate and drilling additional wells on existing fields lead to their faster depletion.
0
2
4
6
8
10
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16E
mln.bbl/day
OPEC non-OPEC US tight oil Canada oil sands Depletion
Even short-term crisis in 2009 resulted in the
accelerated decline rate and reduction in the
number of commissioning new fields
Expected decline in
commissioning new fields
in 2016
8
Current surplus and threat of deficit around 2020
Sources: EIA, IEA, OPEC
IEA expects stable deficit of supply for 4 years after reaching balance in 2017.
Consensus global demand growth rate expected to stabilize at 1,5% /year.
Forecast on Balance between LHC supply and demand in
IEA reviewGlobal oil demand growth rates
2%
3%
4%
5%
6%
7%
8%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
IEA
OPEC
EIA
forecast
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
90
92
94
96
98
100
102
104
2015 2016 2017 2018 2019 2020 2021
mln. bbl/daymln. bbl/day
Difference (2)-(1) (right)
Demand (1)
Supply (2)
9Source:: Rosneft based on EIA data
If oil prices remain at the level of $35/bbl, then year-end 2016 USA shale production is estimated to be 3,7 mln bbl/day
only
Stabilization of shale production in the USA requires an oil price of not less than $50/bbl.
2,0
2,5
3,0
3,5
4,0
4,5
5,0
5,5
6,0
01.2
01
4
05.2
01
4
09.2
01
4
01.2
01
5
05.2
01
5
09.2
01
5
01.2
01
6
05.2
01
6
09.2
01
6
01.2
01
7
05.2
01
7
09.2
01
7
01.2
01
8
05.2
01
8
09.2
01
8
Actural production
Expected production
mln.bbl/dayForecast
$35/bbl.
$45/bbl.
Annual average production on the US shale formations
in 2016 Average monthly production on the US shale formations
$50/bbl.
$55/bbl.
$60/bbl.
5,30
4,40 4,40 4,50 4,50 4,50
0,90 0,90 0,90 0,80 0,80
0
1
2
3
4
5
6
2015 2016($35/bbl)
2016($40/bbl)
2016($45/bbl)
2016($50/bbl)
2016($55/bbl)
Actual Forecast on production Reduction
mln.bbl/day
Prospects of shale oil production in the USA for 2016-2018
10
Technology development leads to reduced costs and
increased performance
Sources: EIA; IHS
Technology improvements related to drillingTechnology improvements related to well
completion
Increased
performanceDecreased cost
Increased
performance
Decreased
costs
• Longer laterals
(nearly a three-fold
increase over the
past decade )
• Better geosteering
to stay in higher
producing areas
• Increased
drilling rates
• Minimal casing
and liner
• Multi-pad drilling
• Increased amount
of proppant –
superfracs
• Number and
position of frack
stages
• Shift to Hybrid
(cross-link and slick
water) fluid systems
• Faster fracking
operations
• Lower proppant
prices
11
Problems of assessing historical data further complicate
forecasting
Source: Institute for Energy and Finance (IEF) based on EIA data
Energy agencies in their 2015 reviews failed to measure the size of the global market imbalance, and merely updated
their assessments to the price levels observed several months ago
USA crude oil production at the end of 2016 was revised during the last 5 months by 10%. Assessments of «actuals»
were also revised.
Forecast and assessment of misbalance (demand
minus supply) in 2015 in STEO reviews and Brent
prices
Forecasts on crude oil production in the USA in
monthly EIA reviews, Nov 15 – Mar 16
20
30
40
50
60
70
80
90
100
110
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
01 2
01
5
02 2
015
03 2
01
5
04 2
01
5
05 2
01
5
06 2
01
5
07 2
01
5
08 2
01
5
09 2
01
5
10 2
01
5
11 2
01
5
12 2
01
5
01 2
01
6
02 2
016
03 2
01
6
$/bbl.mln.bbl/day
Date of STEO issue
Imbalance in 2015
Brenth - 4 months lag (right)
8,92
8,84
8,51
8,34
8,1
8,3
8,5
8,7
8,9
9,1
9,3
9,5
09 2
01
5
10 2
01
5
11 2
01
5
12 2
01
5
01 2
01
6
02 2
01
6
03 2
01
6
04 2
01
6
05 2
01
6
06 2
01
6
07 2
01
6
08 2
01
6
09 2
01
6
10 2
01
6
11 2
01
6
12 2
01
6
mln.bbl/day
STEO, Nov.15
STEO, Dec.15
STEO, Jan.16
STEO, Feb.16
STEO, March.16
Actual data
12.04.2016
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