Increasing Energy Efficiency for Secure Energy Supplies · Why exploration program is so important? Two important indicators: 1. Annual production 2. ... Reserves Replacement Ratio

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Increasing Energy Efficiency for Secure Energy Supplies

UNECE, June 3-5, 2009

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Oil and gas in a modern world

Source: Korzhubaev,presentation at RAEN,April 2008

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More than 75 % of oil and 40 % gas cross international borders

Russia: more than 70 % of oil production and 30 % of gas production are delivered to the world market

International character of the oil and gas supply

Source: Korzhubaev,presentation at RAEN,April 2008

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Global energy consumption

0

50

100

150

200

250

300

350

13000 B.C. - 1900 1900 - 1970 1971 - 2007

Bill

ion

t oe

Global energy consumption

Old Stone AgeSource: Korzhubaev,presentation at RAEN,April 2008

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Growth of the global energy demand

Source: IEA WEO 2005, base scenario

GasGasOilOil

1971 2003 2030

3 341

6 029

9 488

Global demand (mill tonn o.e.)

EuropeUSA

EuropeUSA

6

Source: Energy security forums,Kuala Lumpur, London, New York2008

Energy security challenge: Global Consumption

Governments face the challenge of making long-term decisions and investments in a time of great uncertainty that is only exacerbated by the financial crisis

For businesses, any disruption to the power supply can be hugely damaging—one need only look at the blackout of 2003 that brought chaos to several states of the US for a very real example of the potential risks

Consumers are also increasingly aware of what energy security means to them, in terms of what they spend on their fuel bills and how much it costs them to fill up at the gas station

Physical security: how vulnerable are local supplies to interruptions? Do we have adequate diversity, back-up, storage and emergency planning?

Global Oil and Gas Reserve Base

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Global Oil Reserves

Global oil reserves

0,911,11,21,51,71,722,2

3,43,7

4,95,45,5

911,5

1314

15,518,9

36,3

0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0

SudanAzerbaijan

Norway AngolaAlgeria

BrasilMexico

QatarChina

CanadaUSA

NigeriaLibya

KazakhstanRussia

VenezuelaUAE

KuwaitIraqIran

Saudi ArabiaB

illio

n to

nes

Potential resources of the RussianArctic shelf – 30 Billion tones

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Global Gas Reserves

1,81,91,92,42,52,62,62,92,933,2

4,34,55,25,96,1

7,125,4

28,147,7

0,0 10,0 20,0 30,0 40,0 50,0 60,0

KuwaitUzbekistan

EgyptChina

MalaysiaAustralia

IndonesiaTurkmenistan

NorwayKazakhstan

IraqVenezuela

AlgeriaNigeria

USAUAE

Saudi ArabiaQatar

IranRussia

Trill

ion

CM

Global gas reserves

Potential resources of the RussianArctic shelf – 70 Trillion CM

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Global Petroleum Reserves

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Potential resources of the RussianArctic shelf – 100 Billion TOE

Source: Y. Makogon, Journal of Petroleum Science and Engineering, 56 (2007)

World Primary Energy Substitution

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Russia: petroleum Industry – a leading sector of the economics

Petroleum Industry:

Biggest part of GDP

Highest return on investment

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Russia's oil production until 2030 by regions

Russia's oil production forecast

0

100

200

300

400

500

600

700

2010 2015 2020 2025 2030

Ann

ual p

rodu

ctio

n, m

illio

n to

nes

Far East East Siberia West Siberia European part

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Russia's gas production until 2030 by regions

Russia's gas production forecast

0100200300400500600700800900

1000

2010 2015 2020 2025 2030

Ann

ual p

rodu

ctio

n, b

illio

n cu

b m

Far East East Siberia West Siberia European part

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Stagnation of the industry due to lack of investment potential

Source: Ministry of Energy, Rosneft

Two possible developments during the next 5-years (2009-2013):No solutions to the investment challenges: oil production falls down to 450 million ton by 2013 (5-year plan)With solutions: oil production growth up to 511 million ton by 2013

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Rational use of associated gas – need for a state policy in increasing energy efficiency

Explanations

Limited access to gas transport systemUndeveloped infrastructure for utilization of associated gas

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Annual economic loss due to associated gas flaring amount to $ 750 million (gas price $50/1000 m3)

New regions – challenges in project development

Arctic offshore fields

Severe climate conditionsPresence of iceHigh costLong distance export of oil and gas – additional heavy costLack of technology, competence and experience in offshore field developmentDeficit of qualified personnelEnvironmental risks, not yet fully understoodEnergency response time

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Russian Arctic Offshore – Exploration status

Number of exploration wells

0

1000

2000

3000

4000

5000

6000

Russia total North Sea

Exploration coverage, km/km2

0

1

2

3

4

5

Russia total North Sea

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Keeping the energy balance: RRR

Why exploration program is so important?Two important indicators:

1. Annual production

2. Reserves base

Production is always constrained: p=k·R

However, we are interested in production growth: pn=(1+a)·pn-1

Then Reserves Replacement Ratio (RRR) is:

RRR =S/P= 1+a/[k*(1+a)] ≈ 1+a/k

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RRR for gas

0,00

0,50

1,00

1,50

2,00

2,50

3,00

1991 1993 1995 1997 1999 2001 2002 2003 2004

Reserves Replacement Ratio for oil and gas (Russia)RRR for oil

0,00

0,50

1,00

1,50

2,00

2,50

1991 1993 1995 1997 1999 2001 2002 2003 2004

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Keeping the energy balance: RRR

Arctic shelf development – a long term strategic task

Source: Rosneft

21

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Russian Arctic Offshore –investment requirements

[Kommersant, April 21, 2008]. Rosneft … is to develop Russian shelf together with Gazprom, has estimated the required investments: they will run to $ 2.64 trillion until 2050.

This is 2.5 times Russia’s 2007 GDP.

Bogdanchikov (Rosneft CEO) says $ 680 billion will have to be invested in geological prospecting, and $ 1.96 trillion in development.

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Primary Energy Consumption


24


25


26


27


28


29

World Primary Energy Consumption

30

31

Forecast of the financial support of R&D activities (per cent of GDP)

9

R&D financing, % of GDP

0,00,51,01,52,02,53,03,54,0

USA Japan EC 27 China India Russia

Per

cent

of G

DP

1995 2000 2005 2020Source: A. Dynkin,presentation at RAEN,April 2008

Investments in Upstream R&D by oil majors

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CompanyInvestments in

R&D,$ million

Investments in Upstream R&D,

$ million

% of total R&D

investments

Part of R&D of cost of oil and gas production,

$/t.o.e. (2005)ExxonMobil 712 214 30 1,04BP 502 251 50 1,25RD Shell 588 294 50 1,67ConocoPhillips 125 63 50 0,79Chevron 316 158 50 1,24TOTAL 841 421 50 3,44ENI 254 127 50 1,46Statoil 165 149 90 2,58Repsol 78 71 90 1,26Petrobras 399 359 90 3,22PetroChina 396 198 50 1,42Sinopec 278 139 50 3,20CNOOC 50 50 100 2,35Rosneft 16 14 90 0,17Lukoil 22 20 90 0,20TNK-BP 18 16 90 0,20

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Energy Efficiency

Energy Consumption (Key Performance) Indicators and Sustainable Development

Specific Energy ConsumptionEnergy Consumption per GDPHuman Development Index


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Specific Energy Consumption

02468

1012

Aze

rbai

jan

Kaz

akha

stan

Nor

way

Rus

sia

Turk

men

ista

n

Uzb

ekis

tan

Ukr

aine

Glo

bal S

EC

Toe/

capi

ta


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Specific Energy Consumption

0,0

0,2

0,4

0,6

0,8

1,0

Aze

rbai

jan

Kaz

akha

stan

Nor

way

Rus

sia

Turk

men

ista

n

Uzb

ekis

tan

Ukr

aine

Glo

bal S

EC

Toe/

$ 1

000

GD

P

Human Development Index as Complex KPI

0,6

0,7

0,8

0,9

1

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Year

HD

I, fra

ctio

n

Azerbaijan

Kazakhstan

Russia

Turkmenistan

Uzbekistan

Ukraine

Norway

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


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Conclusions

Fossil fuels (oil, gas and coal) will continue to play a key role in global primary energy consumption in a long term forecastReserve base should be maintained to ensure sustainable production, energy supply and energy consumptionStable and predictable laws and regulations to attract foreign participants / investorsTransfer of international competence and experience to local subcontractorsStable access to market outlets

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Conclusions

Where to invest?– Upstream: exploration– Upstream: technology development– Downstream: energy efficiency

UN Economic Commission for Europe (UNECE) should have a closer look into the energy efficiency in oil and gas projectsMore meaningful KPIs A better (more attractive) investment climate should be established to engage investors into the energy efficiency R&D projects International policy for increasing the energy efficiency

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Our Common Task

To conduct a sustainable development that ”meets the needs of the present generation without compromising the ability of the future generations to meet their own needs”

(Brundtland Commission report, 1987)

Thank you!

Prof. Anatoly ZolotukhinE-mail: [email protected]/Fax: +7 499 135 75 16

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Increasing Energy Efficiency for Secure Energy Supplies · Why exploration program is so important? Two important indicators: 1. Annual production 2. ... Reserves Replacement Ratio