This interesting document is not directly related to Kazakhstan, even though the year mentioned is almost sacred for us. The report contains a wide range of information about the prospects for the extraction and refining of the sources of energy, consuming different types of energy, development of alternative energy sources, etc. Some of the information gives reasons to re-assess some of the viewpoints held commonly in our country. People can see the report on the website of the company. Here we present an interview with Scott Nauman, Head of the Division of Economics and Energy of the Department of Corporate Planning of “ExxonMobil”. He presented the report in Kazakhstan, and has extensive expertise within the oil industry.
- I suppose that my first question is the most important for Kazakhstan, and not only within the energy issue: how would you assess the prospects of changes of oil prices on the world market? The report doesn’t address this question.
- This question is asked by everybody and everywhere. Actually, we don’t include it in our report, but I’ll answer. As for any other product, the prices for oil can fluctuate up or down. The prices we have observed during recent years are in the higher part of the cycle. However, when prices have been high for a long time, experts expect them to remain high for a foreseeable period.
- But as you said, the prices have been on the higher level of the cycle for a long time. Could this mean that there is a totally new situation on the market for hydrocarbons, which doesn’t comply with the fluctuation rule?
- There are many reasons for the prices of hydrocarbons to be high. The first reason is the small difference between the volumes of oil consumption and total extraction capacity. It hasn’t been so small in the entire history of the oil industry. Currently, daily consumption of oil is 85 million barrels, while the reserve extraction capacity is only about 1 million barrels. In the past the reserve capacity has never been less than 4 or 5 million barrels. The second reason is the rapid economic growth in China and India. Nobody expected such a pace from them. Today we cannot say that there is a shortage of oil, but we have reached the point where spare extraction capacity is very low. Naturally, in this kind of situation geopolitical factors become important. The events in Venezuela and Iran disturb the energy market, because buyers and sellers know that spare extraction capacity is very low. However, the situation is not too bad, as new deposits are being developed in Russia, Angola and Kazakhstan. And prices will reduce while the “comfort zone” increases.
- In recent years, there has been many discussions in the international press about the total hydrocarbon reserves left. Some say that they will last for several decades, others say for a century. In any case, it seems that the oil-based energy industry is approaching its end.
- This question is discussed by many people now. I’d like to start by saying that my whole career in the oil industry has been spent developing oil deposits. There are some experts who say that humanity will soon come to the point where oil reserves are almost completely depleted. Because such viewpoints are often covered by the media, I’ve conducted a detailed research of their theory. It is actually quite simple. It is based on the logic that once half of the world’s reserves of oil are depleted, the peak of extraction will be over and extraction will decline. So far the oil industry has extracted about 1 trillion barrels, or 140 million tons, and the amount of known reserves left is roughly the same. However, the latter facts are not true. In reality the known reserves left in the ground are only a fraction of the reserves that will be extracted in the future. There are many potential deposits in the world, where successful seismic tests and trial drilling have been carried out. The volumes of such reserves are unknown, and haven’t been classified as proven reserves. Nevertheless, we can be sure that there is oil. Besides, my opponents, when calculating the reserves in the ground, only use the extractable part of the reserves, but with technological development the share of extractable oil from a deposit increases. Thus, the possibility of increasing the amount of extractable oil from existing deposits is ignored. Finally, the third weakness of such experts is that they are pessimistic about the possibility of discovering new deposits, and this pessimism is groundless. I think it is explained by the fact that the supporters of the pessimistic view don’t have the data on the regions where we expect to make future discoveries. They are the Middle East, Russia and the Caspian region. They don’t have the data because few seismic studies were carried out there. Moreover, the supporters of the view of exhausted resources in their long-term assessments don’t take into account heavy oil, bitumen sands and shale oil – all of this is now being introduced to the process of extraction of hydrocarbons. If we accumulate these known and potential sources, even pessimistic forecasts say that the volume of the resources is the equivalent of about 4 trillion barrels of oil. Then we can say that we haven’t come anywhere near exhausting half of hydrocarbon resources of the world. By the way, such theories are disproved every year, and they are appearing less often in the media of the USA. Maybe people are tired of those forecasts, or they understood that the forecasts are wrong.
- During the Soviet era and even today, the belief that the USA preserves its own oil resources and saves it for the future as a strategic reserve, while currently relying on the imports of relatively cheap oil, is widespread in our country. Is it true?
- I’d say it is the opposite. The USA doesn’t save anything for the future and leads an aggressive development of its deposits; as a result, its resources are significantly depleted. That’s why imports are increasing, and the future of this problem is discussed. There are some politicians in the USA who suggest ensuring energy self-sufficiency of the country, but it is impossible. Our economy is too big to be self-sufficient in energy.
- At the recent EU summit, the USA announced that it plans to bring its share of energy from renewable sources to 20% by 2020. Taking into account your report and what you’ve just said, it seems to be impossible.
- Yes, we don’t think this task is possible, and we have communicated our point of view to the government of the USA. Achieving this goal heavily depends on the development of the latest technologies, which are not available today. And we think they will not appear within the stated time period. Thus, I’d call the plan a triumph of hope over expectation.
- However, this problem is given a lot of attention in Europe. Development of the energy industry, based on alternative and renewable sources, has even become a part of government policy in countries such as Germany.
- True, the attention in Europe is highly focused on using renewable sources of energy. Speaking objectively, the majority of the European demand for energy is met by the use of extracted resources. The share of alternative sources is very small. Besides, there is a classification issue; in Europe, unlike in the USA, energy from hydroelectric power stations is also considered to be renewable. I think the capacities of this source are limited. Of course, people can develop the wind-based and solar-based energy production for local users. The same applies to other alternative sources of energy. But it would require a systematic support from the governments, including imposing the requirement that some share of the energy produced must come from renewable sources. Hence, many energy producing companies are confused now and don’t know how to achieve it. What is happening in the USA doesn’t differ very much from what is happening in Europe; only the pace is different. I am from Texas, which has favorable conditions for developing wind-based energy production. However, it is important to find the appropriate area. Today, all of the appropriate areas are occupied and the prospects of growth of this sector are exhausted. If we use less appropriate geographical areas, the cost of this type of energy increases. Our company is not against alternatives sources of energy, as the idea of using them is good and it should be done; we just remind people that these sources have their limitations that don’t allow this sector to solve all the problems. Future development of alternative sources of energy will greatly depend on what price people will be willing to pay for it. Government support is very important for the sector, but even if it is provided and there is a booming development of the sector, by 2030 it will meet only 1% of the world energy demand.
- What about the dangers of carbon dioxide emission?
- There are other things to do in order to reduce the emission. However, we cannot do anything with the gas that is already in the atmosphere. We should remember that economic development will bring an increase of its volume in the air; saying the opposite is unrealistic. Our position is as follows: it is impossible to eliminate such emissions completely, but there are actions that can reduce it. We think that the time has come for politicians to consider the problem more seriously. Combining the economic growth of the world with a reduction of emissions is one of the most complicated problems of our days.
- In the forecast of “ExxonMobile” on the development of the world energy industry until 2030 nothing is said about the prospects of Kazakhstan as a supplier of hydrocarbon resources. Our republic is not mentioned separately, the report only refers to the Caspian region. Why?
- Our company works all over the world and we have our own regional classification. We refer to this part of the world as the Russia – Caspian region. By “Caspian region” we mean three countries bordering the Caspian Sea excepting Russia and Iran. In the region we observe the growth of extraction and the growth of supplies to the world markets. Of course, we also consider each of the countries separately, but we don’t reflect this level of detail in the global forecast. I wouldn’t like to rank the countries by their oil richness. There are no doubts that Kazakhstan is given a significant role in these rankings.
- Speaking of the energy prospects of Kazakhstan, I cannot leave out the following question: what is the future of Kashagan? Why has the deposit, which was presented by the media as one of the largest, not being developed for such a long time? Is it true that its complexity is so unique?
- I had the experience of working in Kashagan, Tengiz and Karachaganak. I can say that Kashagan is one of the most complex deposits in the world. And almost the same applies to the other two. As their development continues, more technological problems appear.