Expert in oil and gas market Mikhail Krutikhin, partner of RusEnergy consulting company, said in an interview Anews.com why oil prices won’t grow up, about Alexei Miller in the role of “postman” and why Russia and Norway differently ordered their natural wealth.
“No prices will be around $80 or $100 a barrel for a long time we will not see”
— Standard question you get asked most often is known as hydrocarbon analyst: what will happen to the oil market?
— The demand for it will grow very slowly. Slowing Chinese economy. And there is a suspicion that to slow down she will be stronger and stronger. Not growing the consumption in Europe.
It is necessary to consider American shale oil, in which case even a small price increase turbulent flow will return to the market. In addition, market players such as Iran, increasing oil production in Iraq. We can expect that pressure on prices will persist.
When we are a year and a half ago, predicted that within two years approximately, the average price will be $45 per barrel, we believed only two years in advance. But in several meetings of international experts I was surprised to learn that their predictions about the same rates apply for 10 years – until 2025. So we can expect that oil will remain cheap, no prices around $80 or $100 a barrel we’ve not yet see.
“It’s the cut of budgetary funds, I would say”
— At the beginning of “zero” oil companies in Russia was much more. This made the industry more efficient and more transparent?
— There were not only more. We had a very normal private oil and gas company, from Yukos, TNK-BP, Bashneft, Udmurtneft, ITERA. Sibneft can remember… but Now in Russia the state monsters who shockingly managed.
It is not the political will. Let’s be honest. This is pure corruption.
What is the state-owned company, controlled by officials? How it works? Become places for “political will” in quotes useless projects. From confusing pipelines to the exploitation of oil reserves in Venezuela. Absolutely unprofitable, costly. After officials placed the contracts for works, supply of equipment among the friends. Friends have put forward estimates 3 times more than it should be. Hence the average cost of kilometer of pipelines in Russia is 3 times more compared to other.
After that all losses are written off, as the company builds a state. Who will be there to care? Is possible to write everything off. This cut of budgetary funds, I would say. That’s what state-owned companies, especially of this size.
“The President receives from the incompetent to the instructions and carries them back to Gazprom”
— If to speak about “Gazprom”, one of the pointless and very expensive projects called “Power of Siberia”…
— For not less than four years, economists and planners “Gazprom” resisted making a final investment decision on this project, since all the calculations had shown that even at relatively high energy prices, this project will never pay off. And now gas prices have dropped from the expected $300 per thousand cubic meters, as counted at the signing of the so-called contract with China to $130 per thousand cubic meters in this region. So none of what the project’s profitability.
But the government has twisted arms “to Gazprom” and forced to make an investment decision absolutely not economic, unprofitable to the project.
— As the head of “Gazprom” Alexei Miller to twist arms?
— I must say that Miller I have several times called “the postman”. This head, which, in principle, any strategic decisions on the company does not accept. He has a specific task — it is up to leadership in the person of the President conveys absolutely untrue reports about the company and unrealistic prospects of gas market development. In response he receives from the President incompetent to the instructions and carries them back to Gazprom that they are implemented.
Fortunately, many of these guidelines are either ignored or just forgotten. And Gazprom still has the ability to operate in spite of such wise leadership, and in some cases even achieves success.
But unfortunately, the instructions to speed up the investment decisions on non-profit projects is a huge burden for the company.
Well, here is a look. Built a gas pipeline Sakhalin-Khabarovsk – Vladivostok, which from the beginning was useless at one end there is no gas from the other end there is no market. Has been investment decision about the construction of the Vladivostok liquefaction plant of natural gas. Thank God the project didn’t go anywhere. Spent money on design work, feasibility studies and so on, and finally realized that economically it is a complete failure. It turns out that the money go there, but the point of this project is zero.
“Miller, if he opens his mouth, definitely says something stupid”
— How do you see the prospects of exporting gas to Europe?
— Well, according to Miller, who, if opens his mouth, it definitely says something stupid, then Europe will need 200 billion cubic meters a year of Russian gas than it currently receives. This is a totally unrealistic figure. I think that Gazprom will be able to sell into Europe in about 29-30% of the total balance of gas consumption in the European Union. But this total will not be so great. Probably, by 2025 it will be about 160 billion cubic meters a year. No more.
Here we will have a price war. And very serious. Now the market goes more and more additional volumes of liquefied natural gas. Now the market of this product is approximately 330 million tonnes a year. And in three years will be added 150-160 million will enter the market a lot of projects in Australia, in USA, in Canada, there will be Iranians, one of our projects is the Yamal LNG project, other countries.
That is, in the market there is a excess supply of liquefied natural gas. And since all these projects are still operational, and they already invested a major investment and need to something brought to its shareholders, then the gas will go on the market at a price below cost.
Europe will become something… there is an expression of sink market, the market kitchen sink, which drained all the unnecessary. And Europe will be a giant dumping on the price of gas. There are researchers who expect the price of gas in Europe in the amount of $108-110 per thousand cubic meters.
Our gas will have on the market and to compete with the Americans, and Arabs, and with others who will throw gas at a very low price. To compete would be very difficult, because the price at which it is possible to implement the gas and still be profitable for Gazprom is now approximately $150.
“Then for two or three years will be a complete collapse”
– All economists say “the government will have to make a choice”, “the President has to liberalize the market.” He seems unwilling to do. What will happen next?
– Here we touch a very big themes – the fate of the Russian economy. Now she is at a crossroads. A group of economists, which formed the government, prepares the programme in which many elements of the development gasiewska the way of mobilization of the economy.
We recently discussed the forecasts with these economists. They say, “We inevitably come to adopt these proposals, as there is a possibility that glazewski steps for two or three months or six months will lead to a revival in the economy, then within two or three years will be a complete collapse, and the country’s leadership will be forced to make decisions on the economy to free market economy and to cooperation with investors from abroad. Otherwise full of Khan”.
– It turns out that it all comes down to one version of events — the difference is, sooner or later he will start?
– Well, Yes. There is hope. Unfortunately, it will not be a voluntary decision initiated cooperation with external normal civilized world, and enforced, when collapse.
“Raw materials appendage – it is a raw materials appendage. Where to go?”
– By the way, civilized countries can be themselves and not to us because of the wave of refugees and other calamities associated with Islamic fundamentalism.
Is a different issue. Speaking about the Russian economy, it is 2.5% of the world. Seamlessly into the microscope. We still think we are a great power. We are on site very large, but the population, on the development of this area, technology is unlikely. Well, a raw materials appendage – it is a raw materials appendage. Where to go? Not developed.
Here’s the Norwegians discovered oil and gas on the continental shelf at about the same time as us. In addition to dried cod in Portugal they don’t sell. And now it is the pioneer of breakthrough new technologies. Not only oil and gas. It is an advanced country, technologically advanced, socialist. All is quite another. They have used their discovery of oil and gas to benefit the population and future development.
We parasitized on diamonds, ore, wood, primary metals processing. In General, all that in raw form can be exported.
“The psychology of most people was, of course, purely schizophrenic”
– Judging by the history of the Russian state, it was almost always…
– The fact that the population never felt the creative force is not felt by the taxpayer. The king had wealth, which he distributed among his subjects as Nicholas II wrote in the questionnaire of the population census: “the owner of land Russian”. And then the Soviet power was divided up, we know how.
Here is the psychology of most people was, of course, purely schizophrenic. Cloven consciousness. On the one hand, it was thought that this power needs some goods to give (no one knew that these benefits created by their labour). On the other hand there was an understanding that this is a completely alien power and goods belong to her and not the man, and he needs it to Rob at every turn. That is, the benefit to receive, and to steal everything that badly lies.
In such an uncreative environment to create an effective state? A phrase made famous by Margaret Thatcher: “there is No state money is taxpayer money”, is absolutely alien to our wide audience. They do not feel the taxpayers and do not understand that when the country’s leadership is spending money on a stupid idea or some war, that is money taken from their pockets and budgets of their families.
– Panama offshore “friends of Putin” also shows the attitude of the people towards corruption. They condemn, but themselves would not mind if they had the chance.
– Yes. Absolutely other psychology. If in countries with a Protestant psychology people feel outrage at the violations of social and economic injustice, we have it, roughly speaking, jealousy, “Why him, and not for me”. This mass psychology existed for a century in Russia, unfortunately…
