Energy Transition: Abandon Hope, All Ye Who Enter Here

In his speech, Igor Sechin paid much attention to the issue of the “energy transition,” which, despite the enormous efforts of its apologists, seems to be failing. The huge investments made in the development of alternative energy sources have failed to displace “fossil fuels” from the global energy balance, and the “green transition” strategy itself is unable to guarantee neither availability, nor sustainability, nor stability of energy supplies.

The Rosneft President emphasized the need to develop new approaches to the crucial issue of energy security in the world, which in the conditions of the new multipolar world should take into account the interests of all mankind, while protecting the interests of the majority of the population represented by developing countries.

Proponents of the accelerated “energy transition” concept unfoundedly claim that fossil fuels (oil, gas, and coal) are the main “polluters” of the environment and the “culprit” of carbon dioxide emissions into the Earth’s atmosphere. According to the Rosneft president, “there is no scientific evidence of a link between emissions and climate change.”

Many well-known scientists agree that climatic cycles on Earth develop according to objective laws inherent in any cosmic body, which are influenced by such fundamental factors as the state of the atmosphere, solar activity and the distance between the Sun and the Earth’s orbit, the tilt angle, the position of other planets in relation to the Earth, and many other factors. “The Earth’s climate is changing, among other things, due to changes in the shape of the Earth’s orbit and changes in the tilt and direction of our planet’s rotation axis. These factors are subject to cyclical changes, named after Serbian geophysicist and astronomer Milutin Milankovic, who first understood how cosmic periods affect and change the Earth’s climate,” emphasized Sechin, according to whom the current concept of the green transition imposed by the West on the rest of the world increasingly resembles “the nine circles of hell” described by Dante in his Divine Comedy.

“According to a number of authoritative scientists,” Sechin continued, “including, for example, Nobel Prize winner in physics John Clauser, the main reason for the Earth’s climate change is the natural mechanisms of the planet’s self-regulation, rather than the human factor.”

In his speech, the Rosneft president also recalled the research conducted in 1976 by future Nobel Prize winner in physics, Soviet academician Pyotr Kapitsa, who, based on fundamental physical principles, such as the law of conservation of energy, predicted the possibility of “a global crisis that could hit energy production due to the inefficiency of all types of alternative energy sources.”

Kapitsa argued that the key characteristic of any type of energy is its stream density. By this parameter, such fossil fuels as oil (provides 195 W/m²) and gas (482 W/m²) are far ahead of solar energy (6.6 W/m²) and wind energy (1.8 W/m²), both of which, among other disadvantages, have an uneven or, to put it in more scientific terms, stochastic nature of energy generation.

In this regard, Igor Sechin emphasized that from the studies available at the moment, hydrogen is considered to be the most promising type of “clean” fuel. However, there is still no commercially feasible production technology, logistics, and, most importantly, sales markets for it. It is also necessary to take into account the low efficiency so far due to the fact that during hydrogen production the energy consumption spent for electrolysis is greater than the amount of energy obtained at the output. Thus, alternative energy sources are not yet able to ensure neither the reliability of supply, nor optimum technical and economic performance.

Those who support the “anthropogenic factor” theory as the primary cause of global warming present the energy transition as the salvation of the entire world, but this is an illusion. Now, when we have already accumulated some experience in energy transition, it is clear that neither its goal, nor the corresponding preparation for it have been elaborated in accordance with the tasks and needs of mankind, such as infrastructure, financing, supply of raw materials, and availability of supporting technology.

According to the head of Rosneft, despite nearly 10 trillion US dollars invested in the energy transition over the past two decades worldwide, “alternative energy sources have failed to replace traditional fuels. Today, wind and solar power provide less than 5% of the world’s energy production, and electric vehicles account for about 3%.”

Over the same period, oil, gas, and coal consumption grew by a total of 35%, while their combined share of the global energy mix remained unchanged. Moreover, oil and coal consumption and the use of gas for electricity generation will set a new record in 2023. “The green transition is not secured by cost-effective sources, and its implementation is an illusion, which leads to withdrawal of investments from conventional energy. This means that eventually there will be neither,” emphasized Igor Sechin, the company’s CEO.

The figures that characterize the cost of implementing the green transition agenda speak for themselves: by 2030, the global spendings on climate change will need to be about $9 trillion per year, which is 5 times the amount spent in 2023. This number is nearly 10% of global GDP and more than 3 times the annual investment in global energy. It is also equivalent to the combined GDP of France, the UK, and Italy. In total, meeting the Paris Agreement targets by 2050 will require more than 270 trillion dollars of investments.

In addition, implementing “the climate agenda will require creating a new type of infrastructure, as has been the case many times before, when in the 19th century increasing coal production required huge investments in mines, canals, and railroads; developing the oil industry in the 20th century required wells, pipelines, and refineries; and generating power required constructing power plants and developing a sophisticated power transmission network system.”

According to the Rosneft president, the fundamental concept of the energy transition is to strengthen the “unipolar” model of the world order: “Such concept of energy transition is based on the discrimination against the entire world. Even the interests of allies can be sacrificed at any moment. As a Russian saying goes, ‘friendship is friendship, but we keep our tobacco apart,’” Sechin said. All this was fully manifested in implementing the project of the so-called “rescue” of Europe from its imaginary dependence on Russian energy resources. In fact, by sacrificing its energy security, the EU also gave up its sovereignty.

Having reduced its purchases of Russian energy, the European Union spent in 2021-2023 more than $630 billion on gas imports from other countries.

This value is:

– comparable to Europe’s total gas spending over the previous eight years;

– close to the European investments into green energy over the same period;

– comparable to the GDP of Sweden and Poland;

– and almost four times the combined GDP of the Baltic states.

And for the first time in many decades, Sechin emphasized, Europe is facing a new reality – Europeans have become poorer. “Despite government subsidies, the household gas prices in Europe almost doubled between 2021 and 2023. High energy costs are forcing European households to reduce gas consumption by unprecedented volumes: as a result of the price shock, the gas demand in household and commercial sectors of Europe dropped by more than 20% in the past two years and continues its decline this year. As a result, for the first time in decades, Europe is facing a new reality – Europeans have become poorer”, stated Rosneft CEO.

This means that Europe is meeting its emissions reduction targets by directly cutting energy consumption and slowing down the economic growth. “The continuation of such policy may eventually destroy the European industry. As we all know, the lowest energy consumption is in the graveyard,” Sechin said.

According to the Rosneft president, the so-called green transition is nothing but the construction of green neocolonialism against developing countries. “In expert estimates, within the period from 1990 to 2015 alone, the ‘resource drain’ from developing countries to developed countries exceeded $240 trillion,” Sechin noted.

Energy transition, or rather the announced program of energy transition, is a powerful alias sanction barrier for 88% of the world’s population, i.e. for all those who are not part of the “golden billion.” These are essentially undeclared sanctions, which are applied nonetheless.

“The overall energy shortages, which resulted from the energy transition and a wide range of direct sanctions and unfair competition, have driven the market off balance,” Rosneft’s CEO stressed. For example, the illegal sanctions imposed by the US since 2016 against Venezuela, Iran, and Russia have affected a total of nearly 18 million bpd of oil production and helped the US capture a significant share of the market. As a result of these policies, energy resources have turned into US’s principal export commodity.

As far as Russia is concerned, the White House has openly announced a goal to reduce Russia’s oil export revenues. “In essence, this means the shake-out of Russian oil maritime exports from the world market,” Sechin emphasized.

This policy of Washington destabilizes the market and increases its volatility. Given the current standing of the market and its operating conditions, US companies have chosen to consolidate the industry, whereas majors such as Exxon and Chevron are carrying out merger deals with other producers and increasing their own production capacity in order to secure higher profits and dividends. And production growth remains behind the scenes, as it requires capital expenditures that must be supported by high prices.

The volume of transactions and acquisitions in the US oil and gas sector last year reached $200 billion. Over the past two years, the five largest Western oil and gas companies have spent a record $220 billion on payouts to their shareholders, which is 30% more than their investments over the same period.

The oil reserves, being created by Western and Middle Eastern oil companies, may portend major and imminent changes in the global energy market situation. The four key OPEC members – Saudi Arabia, UAE, Kuwait, and Iraq – already have significant spare production capacity of around 5.6 million bpd, which is equivalent to 13% of current OPEC+ production. “The presence of such phantom barrels that can have a large-scale impact on the market will offset the impact of the voluntary production cuts undertaken by major OPEC members. This is also shown by market quotations that went down after the recent decision by the ministers of the member countries,” emphasized the head of Rosneft.

Despite this, the budgets of most OPEC+ member countries are able to withstand a possible drop in oil prices, which could be partially or fully offset by an increase in supply. In theory, for the Russian oil industry, a price decrease can mean the possibility of removing all restrictions related to price cap.

Europeans are already noticing that their countries’ climate policies are hitting their own pockets, driving up energy, real estate, transportation, and food prices. As a result, Europe’s green agenda bill will soon exceed half a trillion euros, and this figure is far from final. According to the German Chamber of Commerce and Industry, the management of more than half of the companies in Germany have a negative attitude towards the energy transition.

Some EU countries, such as Germany, France, Belgium, Sweden, and others, are already willing to reconsider their approach to meeting the goals of the so-called Green Pact for Europe. And the World Bank, in a recent report, pushed the deadline for achieving the green transition goals ten years further, to 2060. We are convinced that the emission targets will be revised many more times.

In this regard, Sechn recalled that “Shell has abandoned its goal of reducing emissions by 45% by 2035 and plans to cut staff in its climate change divisions.”

Strategic investors are also starting to become disillusioned with the green transition. A well-known investment fund, Blackrock, being the largest financial market operator and a green transition apologist, having planted its representatives directly into the White House administration – such as Brian Deese, director of the National Economic Council, Adewale Adeyemo, first deputy secretary of the US Treasury, and Mike Pyle, counselor to the US vice president – has sought other applications for its investments. It is also heavily investing in the US defense industry. Its investments in the five largest defense industry companies alone exceed $20 billion, which were originally intended for the green transition.

The energy transition should be well-balanced and focused on addressing the interests of the majority that will ensure the growth of energy consumption in the coming years, i.e. developing countries. Indeed, it is the developed countries, representing a minority of the world’s population today, that are responsible for the most emissions and air pollution.

Here are just a few facts:

• developed countries account for 65% of the cumulative emissions produced over the last 200 years;
• the world’s 10% wealthiest population is responsible for half of all CO₂ emissions;
• the world’s 1% wealthiest population accounts for twice as much carbon dioxide emissions as the poorest 50% of the world’s population;
• and the entire African continent produces less than 4% of the world’s emissions.

In addition, to achieve global energy security, energy sources must be sufficient, affordable, and reliable. “Today’s consumers,” Sechin noted, “are concerned not only about emissions, but also about the security of energy supply from new sources, as well as the reliability and convenience of using new technologies. Unfortunately, the current green transition strategy does not address these needs.”

The Rosneft CEO chose electric transportation topics as an example that perfectly illustrates the enormous challenges that the energy transition faces. According to Sechin, “it is obvious that, contrary to optimistic forecasts, they are not a panacea for all environmental challenges. Demand for electric vehicles is slowing down worldwide, despite unprecedented efforts to support this industry on the part of the governments.”

Revision of electric vehicle subsidy policies demonstrates the lack of planning and the haste, with which Western countries initially approached vehicle electrification. While they succeeded in attracting buyers with high subsidies a few years ago, Western governments are now planning to impose taxes on electric vehicles to plug budget holes. The International Energy Agency (IEA) estimates that by 2035, the shift to electric vehicles could result in a $110 billion shortfall in motor fuel taxes, which are allocated to maintain roads and improve transportation infrastructure.

“Over the past decade,” Sechin said, “Western technology giants have worked hard to demonize fossil fuels, shut down power plants that provide reliable electricity supplies, and promote unreliable renewable energy.” However, as the massive energy crises in California and Texas have shown, neither solar batteries, nor wind farms can replace conventional electricity.

Thanks to years of aggressive PR campaigns and lobbying efforts, renewable energy has displaced a large amount of reliable power generation facilities from the North American energy market. As a result, large parts of the United States and Canada are now at risk of power shortages.

Now, these very same technology giants are reaping the fruits of their labors. The growing demand for electricity on the part of data centers (DCs) can no longer be supported using existing capacity. While global electricity consumption in this segment barely grew until 2019, it has doubled over the last four years. Investment bank Goldman Sachs estimates that global power consumption by data centers may grow two and a half times by 2030 per 1000 terawatt-hours, which is equal to the combined power consumption of Germany and France.

In addition, Widespread introduction of artificial intelligence will further accelerate the growth of energy consumption. It now takes 10 times more electricity for a ChatGPT to process a single query compared to a Google search engine. The current boom of artificial intelligence requires a separate analysis. “The current boom in artificial intelligence,” Sechin noted, “requires a separate reflection. It should be taken into account that artificial intelligence will increasingly use data from the degrading information environment, where everyone has the right to express his or her opinion, even if it is the opinion of a madman.”

We should not forget that the introduction of new technologies as part of the energy transition requires huge investments. At that, the IEA predicts that on the way to achieving carbon neutrality by 2030, production of copper will need to be increased by almost 1.5 times, nickel and cobalt by 2 times, and lithium by more than 4 times. This could put further pressure on land, water, and resources in developing countries, where most of the mineral deposits, critical to the green transition, are located.

In addition to the challenges of mining two critical metals for the energy transition – lithium and cobalt – it is worth mentioning separately copper, the consumption of which, excluding the green agenda, will exceed 900 million tons by 2050. Furthermore, another 500 million tons will be needed to electrify the global vehicle fleet (apart from other energy transition targets). Thus, cumulative copper consumption by 2050 could double the amount of copper produced in all of human history. It also exceeds by 60% all recoverable reserves available today.

In Igor Sechin’s view, “increasing oil consumption is a way to fight poverty. Developing countries will provide growth in energy demand.” The gap in energy consumption between poor and rich countries is striking. Thus, for example, the per capita consumption in India, which accounts for about 20% of the global population, is eleven times lower than in the United States. Overall, in the so-called G7 countries that account for less than 10% of the global population, energy consumption per capita is almost three times higher than the global average.

“I would like to remind you,” Sechin noted, “that it is in the developing countries of Asia and Africa that we are witnessing the greatest population growth and, as a consequence, a rapid increase in the need for energy resources.” Obviously, in this situation, a reduction in global consumption of fossil resources would automatically mean that the problem of hunger and energy poverty would not only persist, but also worsen.

“Thus, aggressive promotion of the ‘green agenda’ actually means declaring an energy war on the majority of the world’s population,” emphasized the head of Rosneft, according to whom “overcoming energy inequality is impossible without reliable supplies of oil and gas.”

Those advocating a complete ban on fossil fuels, or even a phased withdrawal from them, would benefit from reflecting on the role of oil in the world today. After all, in addition to manufacturing of petroleum products, oil is used for the production of a huge number of day-to-day goods, without which the life of modern humans can no longer be imagined.

Giving up oil will also mean giving up the modern way of life. Conversely, for many countries, increased oil consumption means access to the benefits of civilization.

It is not surprising that global oil demand continues to grow despite the expectations of the so-called “oil peak.” I believe that OPEC’s forecast paints quite a realistic picture of the global energy industry’s future. According to this forecast, oil demand will grow by nearly 20% to reach 116 million bpd by 2045, and oil will continue to account for about 30% of the global energy mix.

Developing countries will be the main drivers of oil consumption in the coming decades. By 2030, demand growth in this group of countries is expected to account for 95% of global consumption growth in aggregate. The highest growth in oil demand is expected in Asian countries, which are Russia’s main trading partners.

India’s economy has made significant strides in recent years. Since 2010, energy demand has grown by 45%, making the country the third largest energy consumer in the world. Over the next five years, India is projected to continue its strong economic momentum and become one of the top three largest economies in the world with a GDP of $5 trillion, and by 2050 it will overtake the USA in terms of the economy size. India’s end-use energy consumption is set to grow by 90% by 2050, becoming one of the fastest growth rates in the world.

Despite the increasing sanctions pressure, Russia is retaining its role as one of the leaders in the global energy sector. Taking into account the influencing factors, Russia continues to implement its energy development potential and strengthen its position in the global energy market.

Recently, the President of the Russian Federation Vladimir Putin emphasized the importance of reorienting Russian exports to the APR.

I would like to remind you that the turnaround of Russian energy exports to Asia-Pacific markets began with the construction of the ESPO pipeline and investments in India’s oil and gas sector long before the European markets were closed to our country. At the moment, the Asia-Pacific region accounts for more than 80% of Russian oil exports, and it is already evident that the reorientation of supplies has fully justified itself.

In this context, a special mention should be made of the development of the Northern Sea Route project, a new transportation artery that will connect the powerful resource base of the Russian North with the markets of developing countries. This project will give energy consumers in Asia access to the richest resources of the Arctic shelf and Siberia. “Let me remind you,” emphasized Sechin, “that as of today, 10% of the world’s oil and 25% of its natural gas is produced in the Arctic. At the same time, 80% of the global Arctic oil and gas reserves are concentrated in the Russian Arctic.”

According to Igor Sechin, one of the reasons for the gradual de-dollarization of the global financial architecture was the use of the dollar as an instrument of pressure and manipulation. “Since 2001, the dollar’s share in international foreign currency and gold reserves has fallen from 71% to 58%. The crisis of confidence in the US dollar as a reserve currency has caused central banks in developing countries to favor other protective assets, including gold. As a result, its share in foreign exchange reserves has almost doubled over the past ten years,” said the head of Rosneft.

Trading in national currencies and development of alternative payment systems are prerequisites for the continuation of Russian oil exports. Significant progress has already been made in this direction: over the past two years, the share of the ruble in export payments has more than tripled and exceeded 40%.

“I would also like to point out,” Sechin said, “the growing role of friendly currencies in the global trade. China’s recent success in using yuan is a good illustration of de-dollarization. For example, in September last year, yuan overtook euro for the first time in trade settlements made via the SWIFT system.”

Now that the failure of the green transition concept is evident, we have to develop a new strategy for a reliable and secure energy supply tailored to the needs of developing countries.

The Russian oil industry is self-sufficient in terms of resource base and technologies and is capable of meeting the challenges it faces. “I would like to say,” emphasized the head of Rosneft, “that we have no doubts about the ability of the Russian energy complex to provide the required volume of energy resources for Russian consumers, and nothing will prevent us from fulfilling our contractual obligations to all our partners.”

And to conclude his keynote address, Igor Sechin quoted the words of the outstanding Chinese philosopher Confucius, who said: “Where patience ends, endurance begins.”

If you would like to download the presentation of Mr. Igor Sechin’s speech (PDF in English), from Pluralia site, please follow the link