Oil consumption is forecast to increase 40 percent in 20 years. Most growth in demand is coming from BRIC countries.

Over two thousand top executives of the global energy industry, renowned scientists, and members of the academia gathered in Houston in early March (March 7-11, 2011) for the 30 anniversary CERA Week conference. This year’s CERA Week conference featured many senior-level company officials and political leaders, including presidents George W. Bush and Bill Clinton. Among other attendees at the conference were Steve Ballmer, Chief Executive Officer of Microsoft Corporation, Robert Dudley, Chief Executive of BP, Andrew Gould, Chairman and Chief Executive Officer of Schlumberger Ltd., Jeffrey Henley, Chairman of Oracle Corporation, as well as many others.

A number of major oil and gas companies from Russia sent delegations to CERA Week this year. Among the participants, there were senior members of management from Gazprom, Gazprom Neft, Lukoil, and Rosneft. The president of Lukoil Vagit Alekperov was one of the keynote speakers on the first working day of the conference. 

The increase in the price of oil, prompted by social upheavals in the Middle East and Northern Africa, set the tone for the global forum, and panelists spoke at length about sustaining supply and augmenting production. Discussions about the massive oil spill in the Gulf of Mexico were also on the agenda.

The participants of the conference seemed to be concerned about the rapid rise in the price of petroleum products that took place after the economic crisis.

The topic of starting new production in underexplored regions of the world in order to fill global demand also received great attention at the conference. One oil executive after another talked about the dramatic increases in the consumption of energy in the world in the next three decades. While the development of new hard-to-reach reserves now seems to be almost inevitable, the dangers in such oil-recovery operations has now become all too apparent, after the Macondo well spill in the Gulf of Mexico in 2011.

Robert Dudley of British Petroleum spoke at CERA Week in what was the first international conference presentation of the oil giant’s CEO after the accident. Talking to the audience, the petroleum executive emphasized the commitment of BP to compensate the victims of the Gulf oil spill. In the words of Mr. Dudley, British Petroleum has now learned to handle risks with greater care.     

According to Robert Dudley, the company instituted precautionary measures to address the threat of a major blowout at any location on the planet where BP has active operations. Mr. Dudley further said that it would be the company’s policy not to drill a new well, unless the emergency response apparatus at that location is on standby. Talking in general terms, Mr. Dudley said that every company in the industry working in difficult environments should enhance its safety protocols.     

At the present time, British Petroleum is making plans for a joint project with Rosneft to develop the Arctic shelf. BP also has the controlling stake in a new deep-water operation in the Gulf of Mexico that will be the first to receive the U.S. government’s permit after the 2010 disaster.  

According to industry analysts, the world needs to produce more oil because of significant increases in demand that are imminent. Estimates show that over the course of the next 20 years, demand is going to increase by 40 percent.

Industry analysts at CERA Week attributed the high price for crude oil today to the unrest in the Middle Eastern and North African countries. That region of the world accounts for 40 percent of global production. Delegates from the countries of the Fertile Crescent attending CERA Week noted that social instability in the region will persist and may even spread. At the same time, it is often difficult to predict the influence of such developments on the price of oil.        

At the same time, there currently does not seem to be a shortage of supplies. On the contrary, it’s the dynamics of world demand that has everyone worried. OPEC is now preparing to organize a special session to recommend significant output increases. 

Another main theme at CERA Week was the rise of the new emergent economies in China, Russia, India, and Brazil. The inescapable conclusion is that even if stability returns to Egypt, Lybia, and the rest of the Middle Eastern region, the growth in demand propagated by developing economies will prompt oil companies to increase their production substantially.  

Vagit Alekperov’s keynote address

One of the main keynote speakers of CERA Week this year was Lukoil’s president Vagit Alekperov. Mr. Alekperov said Russia’s investment climate is not chilly, despite the dismantling of Yukos. Alekperov made his comments in a speech during dinner on March 8, 2011, the opening day of the conference.

Dan Yergin, CERA’s chairman, asked Alekperov what advice he could give to international oil companies pondering a Russian investment. Mr. Alekperov said many companies are destined to invest in Russia because of huge reserves. “Even large oil companies like Lukoil can’t do it all themselves. Be stubborn. Be insistent. Look for good partners.”

While speaking at the conference, Vagit Alekperov, presented his new book The Oil of Russia: Past, Present, and Future.

“By means of this book I hope at least partially to bridge the information gap existing in the West on this significant page in the history of Russia. For this reason the English version of the first edition of the book was published. This book does not lay claim to “discover America” in terms of the facts mentioned in it. It is aimed at analyzing the processes that have been ongoing for several centuries and making an attempt to forecast the development of this backbone industry of our country,” Vagit Alekperov said.

The introduction to this book was written by Jim Mulva, Chairman and CEO of ConocoPhillips.

The first chapter of the book, entitled The “Black Gold” of the Russian Empire, contains historical sketches about the establishment and the development of the Russian oil industry from the ancient times up to the end of 1917.

The second chapter, named “The Oil of the Soviet Country”, touches upon the developmental stages of the Soviet oil industry within the period of 1918 to 1991.

The third chapter, called “The Oil of New Russia”, reflects on the current state of the Russian oil and gas industry, describing the transition from the authoritarian command and administrative management system of the economy to the free market system.

It characterizes the privatization processes in the industry at the initial stage of the market transformations and the creation of the Russian vertically integrated oil and gas companies.

The Russian version of the book is expected to be published by the end of this year.