布什沃夫 维塔拉, 能源战略协会
Release Date: 2009-05-04
The economic situation in Russia is changing very quickly, and nobody knows what is going to happen to the price of oil… What are your predictions as Director of the Institute for Energy Strategy of Russia?Back in 2006, we predicted that by mid-2008 the price of the barrel of oil would reach a peak of US$140 and, at the time, no one believed us, but it did reach US$140 a barrel in 2008. Then, when it was at that level, everybody started saying that it would reach a price of US$200 or even US$250, but in 2006 we had already predicted that after reaching 140, the price would go down… and, again, no one believed us! Now our prognosis says that in 2010, the price will rise again to 120-140 and now no one believes us… yet again!
What made you think back then that the price would shoot up and makes you think right now that it will go back up again? What factors do you take into account carrying out such prognosis?
The factors are very simple: to start with, the OPEC stopped influencing oil prices in 2003; now, the decisive factor is the flow of money from the financial market to the oil futures market. The money was looking for the best bets. This explains the price rise from 2003 to 2008; this is the first factor. The second factor is that across the world there is a cyclic development: a fall follows a rise and the tempo is subject to its own rhythm. The periods between peaks and falls are about 11 years: the peak years were 1979, 1990, 2001, and next peak is expected in 2011; the uplift of 2008 was its final rehearsal. Also, the current crisis is also merely a rehearsal.
In a market with a lot of demand, the price goes up. Right now there’s less demand for oil and gas, as industrial production is lower. Is the price not influenced by that factor, demand and supply?
This factor is important for the formation of a basic trend: for example, when in 2001 the Chinese economy started to grow quickly, everybody agreed that there would be a great demand for oil and expected a rise of demand for oil. Of course, the market is always sustained by these expectations. Demand was never in deficiency, but expectations were always high… It’s a psychological factor.
If this is the case, how will the current psychology of the market influence the prices? Everybody is keeping their money safe, not risking investing, cutting down, reducing costs… etc.
It’s a difficult question; answers vary. The International Energy Agency predicts possible growth up to US$200 per barrel. Because today the oil producing countries are not investing in production, so a shortage of oil is expected. So, the question is: what shortage are you talking about when the demand for oil has fallen and will not grow sooner than the world economy recovers which will happen in two years from now? That means that oil shortage is not the reason for the expected growth of prices. As we see it, the amount of money in the world did not change; everyone is holding it back, every one is being cautious, but soon countries will have to spend it and there’s no choice but to go to the oil and gas sector, again, everywhere, not just in Russia.
So, taking into account your forecast of the price going up, what will be its impact on your formulation of the energy strategy of Russia?
We are finishing the strategy now, but my opinion about high price volatility and the opinion of the Ministry of Energy vary: according to the Ministry, you need to show a tendency and not volatility – this is where we disagree. They want us to include in the strategy an average line… But world oil prices do not have a direct impact on the amount of production and export of energy resources from Russia.
But, as Russian companies need to develop their resource base in Russia, don’t they need an expensive oil to raise money for that?
It does affect them but less that one would expect…
Going back to your differences of approach between the Ministry of Energy and your Institute, what do you think Russia’s strategy must be and how does the Ministry see this strategy up to 2030?
Of course, the position of the Ministry is that macroeconomic forecasts are determined by the Ministry of Economic Development. So, all forecasts were made externally by the Ministry of Economic Development and were imposed on us. For us, world oil prices and dynamics of the growth of GDP are all external factors based on forecasts by the Ministry of Economic Development. All our attempts to explain that our forecasts were different were ignored because the energy strategy is part of the economic strategy. Officially, we couldn’t consider other indicators, and we couldn’t prove the Ministry of Economic Development that their prognosis is wrong and ours is right!
Has the strategy been fixed? What are the main lines of this strategy? And what are the general differences between the new and the previous strategy?
The Energy Strategy of Russia for the year 2020 was approved in 2003. The new strategy, which is currently under elaboration, runs till 2030. On the one hand, they have a lot in common: we must be more effective and efficient in the use Russia’s natural resources to improve the living standards of the population. The previous strategy was based on intensive development of the sector - growth of production volumes, consumption and export; the new strategy is innovation-oriented, with the share of fuel and energy sector reduced from 30% to 18% by means of developing industries with low power consumption: refining, machine-building, production of construction materials, services.
We’ve had a very interesting conversation with Mr. Kershenbaum about the level of technology and education in Russia and its correlations with development of the resource base in very challenging conditions like the Arctic shelf or East Siberia. He said that, without cooperation with foreign companies who have been investing in innovations for over 20 years, Russia will find it hard to develop these areas. What do you think is the role of international cooperation?
I disagree. If we use only foreign equipment and technologies – which might be better than Russian – it will kill the domestic industry.
So, what is the strategy there to innovate?
The strategy is that the Russian fuel and energy complex should demand these technologies and developments from the Russian industry and the industry, having a guaranteed market with high requirements towards new equipment, will have no choice but to produce better equipment. Help from international countries is by all means necessary to renovate our industry but not for replacing our equipment with foreign equipment.
So, in your view there could be ‘intellectual’ cooperation to develop new systems that raise efficiency, because as we understand, one of the problems of the industry is low efficiency of equipment that entails ineffective production and lower profits…
Yes and no. For instance, Russian equipment like metal pipes used in oil and gas industry has been operating during 40 years and the accident rate was not very high. When we started buying pipes and their accessories from abroad, it turned out that foreign equipment was not as durable. Accident rates and corrosion of Russian equipment is lower than that of foreign equipment, so it would be wrong to switch completely to foreign equipment.
What is clear is that Russian oil and gas industry needs money to modernize; where will it come from? Can the Russian companies raise enough money right now? Will it come from the State..?
There are multiple sources. Five years ago Russian oil and gas companies were constructing at the expense of loans; today the accumulated credit arrears are extremely huge, lending conditions are tougher. Unfortunately, there are a lot of companies in such stringent credit conditions…
Who will survive?
They will survive. Many companies are being subsidized by the State, both directly and indirectly. For instance, Gazprom has US$100 billion debt, and of course the State will not leave it on its own. The State will have to help it. But there are many other companies in the same situation of Gazprom. Mr. Chubais, sold RAO UES (former electricity monopoly), sold it to the international markets and raised US$11 billion dollars, but today in the conditions of the financial crisis, their value is zero, there are no investments, it’s impossible to put them into real production and the State will have to help the energy complex to develop. Of course the credit policies of the companies are being revised. Companies first of all focus on the funds they have and rely on the State from the Reserve Fund, but some projects will have to be cancelled or postponed.
A lot of companies are asking for the State to introduce a new tax regime to carry on with modernization. Is this taken into consideration in the energy strategy that you have been drafting?
If the State introduces considerable tax reduction, there will be nothing to cover the budget with: 50% of budget is taken from oil and gas, so the State is maneuvering. One of the possible options is to introduce excess profit tax instead of oil and gas extraction tax. If you have profits you should give it back, if all your profits are reinvested in innovations for the company, you shouldn’t. Also, customs regulations should react quicker to the changes of the world oil prices and modify taxation within 2 weeks and not within a month, as it is right now. However, such position of cutting the period has both advocates and opponents.
The new strategy should envisage the changes of the last quarter of 2008 and the beginning of 2009 and a strategic solution for 2020-2030. The basic strategy was drafted in September, 2008, when industry was still developing well, whereas today, after all the recent changes, it is expected that 2009-2012 will be a stagnation period; afterwards the industry will reach the rate that it had in the last quarter of 2008, and by 2020-2030 the industry will reach absolute production rate as considered in the initial strategy.
The lines of development that the Ministry of Economic Development lays as a basis are average rates that give room for possible deviations. As Viktor Khristenko, the former Minister of Energy, says, strategy is ideology and figures; ideology does not change and figures can be corrected. We fully agree with that and practice proves that it is true.
Thank you Mr. Bushuev for talking to us!
| Company: | 能源战略协会 |
| Position: | 总监 |
| Country: | 俄罗斯 |