russian energy: investment opportunities -...
TRANSCRIPT
Russian Energy: investment opportunities
Alexey Teksler First Deputy Minister of Energy
of the Russian Federation
М А К Е Т
MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
2017
2 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
RUSSIA – one of the most attractive Emerging Market for investments
MACRO
• FXstabilization
•Recoveringeconomy
•Deceleratinginflation
•Decreasinginterestrates
RUSSIAN OIL
• Lowcostoil&largereserves
• Flexibletaxation
•Cheapvaluation
•Highdividendsandhealthyleverage
RUSSIAN GAS
•Vastmonetizablereserves
•MostcompetitivesuppliertoEurope
• EmergingsuppliertoAsia
• SignificantLNGpotential
RUSSIAN RENEWABLE ENERGY
• FavorableRESregulation
•Ownadvancedtechnologies
•Potentialfortechnologicalcooperation
•RussiasignedParisagreementin2016
3 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Economic growth is back
After recession in 2015 Russian economy has adapted to new reality and is set to grow: Aftera2.8%declinein2015theeconomyiscurrentlyrecovering,withGDPgrowth-0.2%in2016andexpected+2%in2017
Stabilizing FXConsistent monetary policy and oil price recovery helps to stabilize FX and improves predictability. Predictablecentralbankpolicy,slowinginflationandimprovingcommoditymarketsaremakingtheroublemorestable
Inflation is lowInflation reached historical lows. Determinedpolicyfromthegovernmentstabilizingmarketsbroughtinflationdownto5,4%y/yinDecember.(CBRtargetof4%)
Russian economy – on the way to recovery
$
$
4 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
KEY TRENDS RUSSIA`S STRATEGIC POSITIONING
Economic growth significantly increases energy demand in developing countries
Russiaisgeographicallywellpositionedtowardsmarketsthatwilldriveenergydemandinthefuture
Gas is aggressively substituting coal in global fuel mix
Russiahasthelargest commercialreserves of natural gas(~20trillionm3)
Global warming concerns affect energy policy
Russia’s energy mix is among the «greenest» among the world’s top economies with the share of gas and renewables standing at over 50 % and 20 % respectively
Russian energy sector is well positioned to help the world overcome future energy challenges
5 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russian oil breakeven price is one of the lowest in the world
• LowoilpricebreakevenenablesRussianproducerstogeneratepositiveFCFeveninthecurrentoilpriceenvironment
• BreakevenofunconventionaloilfellsignificantlyoverthepastfewyearsmakingRussiaoneofthemostcompetitiveoilproducerintheWorld
Russian breakeven price (BEP) remains among the lowest in the world
Unconventional oil in Russia remains attractive
0
10
20
30
40
50
60
70
80
90
5 000 10 000 15 000 20 000 25 000 30 000
Brea
keve
n (U
S$/b
l)
Cumulative peak oil production (kbopd)
Saudi
IraqIran
Russia
North Sea
Brazil SantosRoW DW
Angola DW
CanadaHeavy Oil
Argentina ShaleUS GoM
US Shale
RoW Onshore
Nigeria DW
20
30
40
50
60
70
80
90
100
110
120
Russia 2015Avg BEPof US$44/bbl
US Shale
RussianUnconventionals
Russia 2013Avg BEP of US$95/bbl
5000 40 00035 00030 00025 00020 000
Cumulative peak production, kbls/d
Brea
keve
n, U
S$/b
bl
15 00010 0000
Source:GoldmanSachs
6 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russia enjoys attractive positioning on the global cost curve
Biofuels20
Proccessing Gain20
Other NGLs20
Saudi Arabia39 Iran
42Russia
41
Onshore OPEC57
Iraq39
Conventional US (lower 48)68 Onshore
non-OPEC57
ShallowwaterOPEC
78
Deepwaternon-OPEC
86Shallow water
non-OPEC72
US (lower 48)tight oil
64
Canada(oil sands)
91
Deepwater OPEC 89
Oil Shale95
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101
103
105
107
mmbd
$/bb
l
GTL65
Global cost curve
7 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russian upstream profitability is supported by low and stable production costs
•Russianoilindustryenjoyslowproductioncostscomparedtootheroilproducers,notaccountingfortheMiddleEastproducers
• LiftingcostswerestableduringthelastdecadepointingtotheefficiencyofRussianoilcompanies
Finding and development costs by region Russian lifting cost progression supported by localization and currency devaluation
QatarSaudiArabia
RussianFederation
VenezuelaCanadaUnitedStates
Europe 0
2
4
6
8
10
12
14
Capex/bbl
$/bb
l
Opex/bbl(incl/transportation)
LUKOIL
GazpromneftBashneft
Rosneft
0
2
4
6
8
10
$/bb
l
Average weighted
3Q161Q163Q151Q153Q141Q143Q131Q133Q121Q123Q111Q113Q101Q103Q091Q093Q081Q083Q071Q07
8 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russian gas is competitive in Europe
• Inaweakgrowingdemandenvironment,gainofmarketshareofoneimportermeansalossofmarketsharebysomeoneelse
•Gazpromhasthesparecapacityandlowcostbasetocompeteformarketshare
Full-cycle commercial breakeven cost curve
0
2
4
6
8
10
50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 950
NetherlandsIranLibya
Algeria
Other EuropeUK base$/
mcf
bcm
Norway base Russia legacyIraq
UK new
Azerbaijan (SD II)
Norway new
Russia new
Source:CreditSuisse
9 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
0
1500
3000
Prel
ude
FLN
G
Ango
la L
NG
Snoh
vit
Whe
atst
one
LNG
Gorg
on
Petro
nas
FLN
G 1
QCL
NG
Trai
n 2
Plut
o
Petro
nas
FLN
G 2
Icht
hys
Yam
al L
NG
US$
/mm
tpa
Russian LNG projects – looking beyond pipelines
• TheSakhalin-2projectisthefirstonstreamLNGprojectinRussiawithtotalcapacityof10,8mlnt
• YamalLNG(Novatek)iswellontrackandthefirsttrainshouldbelaunchedinOctoberthisyear
• TheProjectconsistsofconstructionofthreetrainswithanoutputcapacityofaround16.5mlntonsperyear
• ThetwogiantgascondensatefieldsintheremoteGydanpeninsula,SalmanovskoyeandGeofizicheskoyeshouldbethenextpotentialsourceofLNGproductionforArcticLNG
LNG project implementation costs to first gas
Russian LNG production prospects
0
25
50
75
100
32.3
57.362.3
80.0
16.321.8
27.3
10.8
2035E2022E2021E2020E2019E2018E2017E2016
Other probable projectsVladivostok LNGBaltiyskiy LNGYamal LNGCurrent Capacity
mln
tons
10 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russian electricity sector
Electricity consumption Capacity additions
+18.1 (+1.7%)
1037.5 1031.31040.4 1036.4
1054.5
20162015201420132012actual
TWh
6289.8
4019.2
7597.0
4852.5 4293.9
3575
.1
1926
.5
4969
.6
2952
.8
1792
.5
2714
.7
2092
.7
2627
.4
1899
.7
2501
.4
20162015201420132012actual
additions through CSC (thermoelectric power plants)other additions
MW
• ElectricityconsumptionandproductioninRussiahasgrownby1.7%and2.1%respectivelyin2016
•Duringnexttwentyyearselectricityproductionisexpectedtogrowbyanother30-38%drivenbyinternalconsumptionandexportopportunities
• Capacitysupplycontracts(CSC)introducedbyRussiangovernmenthaveprovedthemselvesasaneffectiveinvestmentsupportmeasureprovidinginvestorswithastablereturnandleadingtonewcapacitiesbeinginstalledeveryyearthatinitsturncreatesroomfordecommissioningobsoleteones
11 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russian Energy Strategy implies renewable capacity increase
•Shareofrenewableswillincreaseinpowerbalanceupto2,5%by2024fromlessthan1%in2016
•Additional5.9GWofrenewablecapacityarebeingselectedthroughauctionsduringthesameperiod
• 899MWofwind,55MWofsolarand305MWofsmall-scaleHPPcapacitiesaretobeauctionedinthecomingyears
Installed renewable capacity in 2016 Renewable capacity selected for construction through auctions
21%
12%
0.13%4%4%
59%
Solar
Wind
Biogas
GPP
Small-scale HPP
Biomass
2.4 GW
0
500
1000
1500
2000
2500
3000
335
399 505280
520
55
21 50
50
305
105 51 35610
1651
899
Municipal solid waste
Solar
Small-scale HPP
Wind
To beauctioned
20172016201520142013
SolarMunicipal solid waste
Small-scale HPPWind
MW
12 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russian renewables offer favorable environment for investors
Effective regulatory and financial framework: Examples of Success:
Renewable capacity additions
0
20
40
60
80
100
120
140
35.0
90.0
57.070.0
2017E20162015
SolarWind
MW
•Wholesaleelectricitypowermarketcapacitysupplycontracts(CSC)whichhaveprovedthemselveseffectiveinconventionalgenerationguaranteestableROIforinvestorsinrenewables
•Regulatedtariffsatretailelectricitymarketsprovideforrenewableelectricitytradeatspecialpricesinisolatedareas
•Nearly130MWofsolarpowercapacityhavebeeninstalledduring2015-2016
• 125MWofrenewablepowercapacity–90MWfromsolarand35MWfromwind–expectedtobeinstalledthisyear
•HevelSolarcompanyin2017havemodernizeditssolarcellfactoryonthebasisofitsowndevelopedheterojunctiontechnologythatprovidesfor22-24%cellefficiencyandraisedfactorycellproductioncapacityfrom100to160MWayearwithapotentialoffurtherincreaseupto470MWayear
•During2016-2017majorplayerssuchasRosatom,Rosnano,FortumandEnelenteredthewindpowersectorusingCSCwithstrategiesaimedatequipmentmanufacturingsetupinRussia
13 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Constant technological development of Russian energy sector is the top priority
COALOIL AND GAS ELECTRIC ENERGY RENEWABLE ENERGY
• Increaseinoilrecoveryratio
• Technologicalsolutionsfortightoilandoffshoreoilproduction
• LNGproductionandtransportation
• Technologicalconcepts«smartoilwell»and«smartoilfield»
• Petrochemicalsegmentdevelopment
• Newtechnologicalsolutionsforundergroundminingmethod
• Newtechnologicalsolutionsforcoalupgrading
• Productionofhydrophobicpeatbrickswithhighvalueadded
• Smartgrids
• «Energynet»concept
• Computerizedprotectionandmanagementsystemsforelectricpowersubstation
• Newtechnologicalsolutionsforelectricandelectronicmachinery
• Newtechnologicalsolutionsforconstructionmaterials,includingcomposite
• Newtechnologicalsolutionsforcablemanufacturing
• Hightemperaturesuperconductivity
• Newtechnologicalsolutionsforsmallscaledistributedgenerationbasedonrenewableenergy
• Newtechnologicalsolutionsforphotoelectrictransducer
• Newtechnologicalsolutionsfornetworkstorage
• Hydrogenenergetics
KEY PRIORITIES FOR TECHNOLOGICAL DEVELOPMENT OF RUSSIAN ENERGY SECTOR
14 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russia already enjoys considerable interest from foreign long term investors
PROJECT INVESTORS DESCRIPTION
Gaspipelines:
Nord Stream 1&2
NS 1 Russian: GazpromForeign:BASF/Wintershall,E.ON,Gasuine,ENGIE
AnoffshorenaturalgaspipelinefromVyborg(Russia)toGreifswald(Germany)since2011Yearlycapacity—55blnm3
NS 2 Russian: GazpromForeign: E.ON,Shell,BASF/Wintershall,OMV,ENGIE
ExpansionofNordStream,fromUst-Luga(Russia)toGreifswald(Germany),yearlycapacity–55blnm3
Operationsareplannedtostartin2019
LNGprojects:
Sakhalin 2Yamal LNG
Sakhalin 2 Russian: GazpromForeign:Shell,Mitsui,Mitsubishi
OilandgasdevelopmentinSakhalinIslandsince1994Outputcapacity—9,6mlntperyear,5mlnadditionalcapacityisplannedtorunin2018
Yamal LNG Russian: NovatekForeign: Total,CNPC,SilkRoadFund
LocatedontheYamalPeninsula,abovetheArcticCircleOutputcapacity—16.5milliontofLNGOperationsareplannedtostartin2017
Oildevelopment:
Investment projects
Investment projects Foreign: Shell,BP,Total,ExxonMobil,ONCGVidesh
BPhasseveralprojectsinRussiawithRosneftTotalwithZarubezhneftoperateKharyagafieldandalsootheroilprojectsinRussiaONCGVideshownsVankorneftcompany(alsoownedbyRosneft)
Powergeneration:
Huadian Teninskaya plantInvestment projects
HT Plant Russian: TGC-2Foreign: ChinaHuadianCorporation
Gas-steamcombinedcycleplantlocatedinYaroslavlPlannedcapacity–450MWh
Investment projects Foreign: Enel,Uniper,Fortum
Enelowns56%ofEnelRussiawhichmanages9,4GWofpowercapacityinRussiaUniperowns82%ofUnipro(11,2GWinRussia)Fortumowns29,5%ofTGC-1(4,2GWofpower,10,1heatcapacityinRussia)
15 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
In particular, a number of successful projects with Italian investors
PROJECT INVESTORS DESCRIPTION
Enel Russia electricity plants and renewable energy
Foreign:Enel(marketcapitalization-48bln,revenue–75blneuro)
• Enelowns56%ofEnelRussiawhichmanages9,4GWofpowercapacity,2,4GWofheatcapacityinRussia
• EnelRussiaisalsoconstructingwindturbineswithacapacityof291MW,whichshouldstartoperationsin2020-2021(withinvestmentsof400mlneuro)
Plants:
Transneft Oil PumpsRussian Electric Motors
TOP Russian: Transneft,KonarForeign:TermomecanicaPompe
• TransneftOilPumpswasestablishedin2016forthepurposeoflocalizationofproductionofhorizontalandverticalpumpsandunitslocatedinChelyabinsk
• Plannedproductionconsistsof180pumpsperyear
REM Russian: Transneft,KonarForeign: NidecASI
• Operationsareplannedtostartin2018
• Plannedoutputofelectricmotorsis300,capacityofeachmotorcanreach8000kW
Gaspipelines:
Blue StreamNorth Stream
BS Russian: GazpromForeign: Eni
• GaspipelinebetweenRussiaandTurkey(396km)since2003
NS Russian: GazpromForeign: SaipemEnergyServices
• AnoffshorenaturalgaspipelinefromVyborg(Russia)toGreifswald(Germany)since2011
• Yearlycapacity–55blnm3
Oil projects Russian: RosneftForeign: Eni
• EnihasseveralprojectswithRosneft,inparticular,offshorefieldsinRussia
HeliVert JV Russian: Rosneft,RussianHelicoptersForeign: Leonardo-Finmeccanica
• Agreementinvolvesdeliveryof150coptersfromHeliVerttoRosneftuntil2025
• LocalizationlevelofproductioninRussiaisplannedtoreach70%
MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
THANK YOU FOR YOUR ATTENTION!
Ministry of Energy of the Russian FederationCenter for Energy ResearchCentral Dispatching Department of the Fuel and Energy Complex (CDU TEK)
18 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russia demonstrates steady growth in liquids, gas, coal and energy production
323.5
584.0
258.4
518.1
654.5
354.6
1054.0
20122000
862.8
534.2
635.5
2015
1049.9
374.0
2015
547.5
640.2
1071.8
385.7
2016
2016
526.7
641.9
359.0
2014
1047.4
20142012
523.4
668.2
352.1
2013
1045.0
20132000
12,4%
17,7%
5,3%
4,3%
Share of global, 2016
RussiaSaudi ArabiaUSAIraqChina
USARussiaIranQatarCanada
56
ChinaIndiaUSAAustraliaIndonesiaRussia
123
3
6
41
2
4
5
ChinaUSAIndiaJapanRussia
2
1
1 1
2
23
3
3 4
4
4
5
5
5
12345
12345
5
3
12 4
WORLD RANK
1
2WORLD RANK
66
55
WORLD RANK
WORLD RANK
Crude oil production and condensate recovery
Gas production
Coal production
Electricity generation
mln
tonn
esbc
mm
ln to
nnes
bln
kWh
19 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Oil and gas condensate production is growing, as well as oil exports, drilling activity and upstream investments
Oil and gas condensate production
Upstream capital expenditures of oil majors
Liquids exports Drilling
Growth in oil reserves
450
500
550
600
518.1 523.4 526.7 534.2547.5
20162015201420132012actual
+13.3 (+2.5%)+13.3 (+2.5%)
mnt
0
10
20
30
40
27.7 28.125.6
17.6 18.0
20162015201420132012
+0.4 (+2.3%)
actual
$ bl
n
0
100
200
300
400
239.7 235.0 221.3 241.8 254.2
20162015201420132012
+12.4 (+5.1%)
actualm
nt0
8000
16000
24000
32000
40000
20293 21262 1982522168
24857
894 914 994 819 932
20162015201420132012
Production drilling
Exploration drilling
+2689 (+12.1%)+2689 (+12.1%)+113 (+13.8%)+113 (+13.8%)
actual
th. m
eter
s
500
570
640
710
780
850
742.0713.4
775.9
726.0
574.8
20162015201420132012actual
-151.2 (-20.8%)
mnt
20 MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION
Ministry of Energy of the Russian Federation, Center for Energy Research, CDU TEK
Russian gas production keeps stable while gas exports is growing
Gas production
Gas consumption as motor fuel
Gas exports (incl. LNG) Domestic gas supplies*
Russian territory covered by infrastructure for gas supply
450
500
550
600
650
700
654.5668.2
641.9 635.5 640.2
20162015201420132012actual
+4.7 (+0.7%)+4.7 (+0.7%)
bcm
+16.1 (+8.4%)
100
140
180
220
260
186.2203.3
181.1192.5
208.6
20162015201420132012actual
bcm
300
350
400
450
500
550
460.0 456.9 458.4 444.3 456.7
20162015201420132012actual
+12.4 (+2.8%)+12.4 (+2.8%)
bcm
*Includingextraction(injection)from(to)undergroundstorages
+51 (+10.5%)+51 (+10.5%)
0
175
350
525
700
390 400453 487
538
20162015201420132012actual
bcm
60%
65%
70%
64.4%65.1% 65.4%
66.2%67.2%
20162015201420132012
+1.0 п.п.
actual