Certain information in this report constitutes forward looking statements. This information may relate to future events, including the Company’s view on the prospects and trends of the global hydrocarbons market. All information other than information of historical fact is forward looking information.
Future
challenges
and
developments
in
the
industry
In the last few years, the global energy market has witnessed major changes that have made everybody reconsider the oil industry’s future prospects: increasingly large macroeconomics risks, drops in oil prices, stricter environmental policies, greater competition in an oversupplied market and sluggish economies in developed countries are only some of the challenges we face today.
Oil consumption growth will largely depend on the health of the global economy, whose sustainable growth is required for a rise in global oil demand. Also, future rates of oil demand will depend on whether developing countries, specifically China and India, are capable of maintaining sufficient economic growth amid risks.
Although oil is used in a vast number of industries, its key source of demand is still the transportation sector. In the midst of electric vehicles gaining popularity, experts are trying to determine whether oil will maintain its position as the most widely used source of energy in the foreseeable future.
The world’s total urban population will increase by more than 1.1 billion over the 2016-2030 period. Asian countries will account for about 60% of the increase in urban population.
Global economic growth
The global economic growth will slow gradually.
Global vehicle fleet
By 2030 China will become world's number one in terms of passenger car fleet. By 2030 the global road vehicle fleet will increase by 1.1 billion vehicles, with India and China accounting for half of that figure. Conventional vehicles with internal combustion engines will still dominate the global car feet despite a higher share of electric-powered vehicles. Electric vehicles will help to improve the fuel efficiency of the global car feet and will constrain the growth of fuel prices.
Climate change policy impact on the development of global energy
The Paris Agreement sets ambitious goals for the global community, and the world will therefore face significant issues implementing it. The agreement will greatly influence the power generation sector, wherein the share of coal-fired generation will be significantly reduced. The rise of renewables will not significantly affect the global oil demand, since oil accounts for a minor share of the power generation fuel mix.
World demand for liquid hydrocarbons by sector
The rise in oil demand will happen in all sectors except power generation. The transportation sector will still be the key driver of the global oil demand through 2030.
The industrial sector is second in oil consumption after the transportation sector, and petrochemicals account for about a half of it. Asian countries promote positive growth dynamics in petrochemicals. Given the assumptions we made concerning the GDP growth, one should anticipate this trend will continue in the future.
The oil industry is now facing a challenge not only to meet the increasingly high demand, but to also make up for the natural production decline at mature fields by developing new reserves.
Even if the global demand stops growing, additional investments will be required to offset the production decline.
According to our estimates, by 2030 some additional 39 MB/D or 40% of the current production will be required from new projects.
Through 2030 the key drivers of conventional oil production by the OPEC members will be Iran and Iraq.
By 2030 the demand for new high-cost projects will be 29 mb/d.
With the oil price at 80 USD/BBL the industry will be able to deliver enough supply to meet the growing demand.
The global oil market is very complex and exposed to multiple factors that are hard to predict which is why analysts often fail at predicting oil prices. The most critical factors include investment cycles, geopolitical conflicts and the situation on global financial markets. Without OPEC’s regulatory function, the oil market will experience a high price volatility.
Most of the petroleum product consumption growth will be in the developing Asian-Pacific countries, primarily India and China.
The tightening of fuel quality standards for maritime transport is likely to result in an additional drop in demand for fuel oil.
The rate of commissioning of new refining projects in the next five years will exceed the global oil demand growth.
Starting in 2008 Europe shut down almost 3 MB/D of its refining capacity.
The competition in the EU market will be tighter, thus leading to an adverse impact on the profitability of European oil refining.
Greenfield projects scheduled through 2030 fail to make up for the natural decline of production at brownfields.
ORF increasing to 44% would result in roughly 4 BLN tons of addition to Russia's recoverable reserves. In addition to improving the ORF at existing fields, Russia has a vast potential in terms of development of hard-to-recover and unconventional oil reserves.
The tax system parameters are constantly changing, which adversely affects the investment climate in the industry. If retained, the existing taxation system will cause the domestic oil production to decline starting in 2019.
As a result of deterioration of macroeconomic conditions in Russia the prospects of the Russian car market have to be reviewed.
As the Russian economy recovers, motor fuel consumption will rise again.
Despite the companies' revision of their plans to commission new refining capacities in Russia, the surplus of light petroleum products is expected to grow.
