Roseneft is the leader of Russia’s petroleum industry and the world’s largest publicly traded petroleum company. Company’s main activities include prospecting and exploration of hydrocarbon deposits, oil, gas and gas-condensate production, upstream offshore projects, processing, as well as oil, gas, and product marketing in Russia and abroad.
The Company is included in the list of strategic companies and organizations of Russia. Company’s largest shareholder (50.00000001% of the equity) is JSC ROSNEFTEGAZ, fully owned by the Russian Government, while BP holds 19.75% of shares, QHG Shares Pte. Ltd. holds 19.5% of shares, one share belongs to the state represented by Federal Agency for State Property Management, whereas the remaining shares are free floating.(see Shareholding Structure).
Roseneft key objectives are the reserve replacement ratio at a minimum level of 100%, effective production at brownfield, and production increase through the development of greenfield, creation of new production clusters on the shelf, development of technologies, and implementation of high-level project management practices, monetization of gas reserves and competitive production growth, optimal configuration of the refineries and maximization of profits in distribution. Company’s successful performance in 2015 is evidence of the efficiency of the applied strategy and the significance of our priorities. All this makes it possible to rely on Roseneft sustainable development in the future to benefit its shareholders.
Business Geography
Roseneft is a global energy company with major assets located in Russia and a diversified portfolio in promising regions of international oil and gas sector, including Venezuela, Ecuador, Cuba, Canada, the USA, Brazil, Norway, Germany, Italy, Algeria, Mongolia, China, Vietnam, Turkmenistan, Belarus, Ukraine, and UAE.
Roseneft geography in Exploration and Production business segment encompasses all the key oil and gas regions of Russia, including Western and Eastern Siberia, Volga-and Ural Regions, Far East, Timan-Pechora, Krasnodar Region and the shelf of Russian seas, including Arctic shelf, as well as promising regions abroad, including Latin America and South-Eastern Asia.
Roseneft is a leader in oil refining in Russia. The Company owns 10 major refineries (including 50% share in Slavneft-YaNOS) and several mini-refineries in Russia. In Germany Roseneft holds shares in four refineries with the capacity of 11.5 million tons (in terms of the Company share). Oil processing in Belarus is carried out under a refining processing agreement at Mozyrsky Refinery with an indirect ownership interest of 21%. Distribution network encompasses 59 regions in Russia, as well as countries of the near abroad.
Resource Base
In 2015, Roseneft reaffirmed its leadership among other world’s public oil companies in terms of proven hydrocarbon reserves and hydrocarbon resource base.
As of December 31, 2015, the proven hydrocarbon reserves of Roseneft approximated 34.5 bln boe (about 4.7 bln toe) based on the findings of an audit conducted by DeGolyer & MacNaughton using the SEC (U.S. Securities and Exchange Commission) classification providing for the evaluation through the end of profitable field development. Hydrocarbon liquids (oil, condensate, and NGL) and gas reserves approximated 24.7 bln bbl (3.3 bln t and 56.8 tcf (1.6 tcm) respectively.
The hydrocarbon reserves replacement in 2015, was 124 % according to SEC classification. Hydrocarbon (59 mmtoe). According to SEC, Roseneft proven hydrocarbon reserves in 2015 were sufficient for 19 years of production.
According to PRMS (Petroleum Resources Management System), 1P hydrocarbon reserves as of December 31, 2015 amounted to 43 bln boe (5.8 bln toe), including 29.8 bln bbl (4.0 bln t) of hydrocarbon liquids (oil, condensate, and NGL) and 76.3 tcf (2.2 tcm) of gas; 2Р reserves were 76.2 bln boe (10.3 bln toe), including 53.7 bln bbl (7.2 bln t) of hydrocarbon liquids (oil, condensate, and NGL) and 130.3 tcf (3.7 tcm) of gas; 3Р reserves amounted to 108.6 bln boe (14.7 bln toe), including 79.5 bln bbl (10.7 bln t) of hydrocarbon liquids (oil, condensate, and NGL) and 169 tcf (4.8 tcm) of gas. The total 3P reserves grew by 2 % in 2015.
Exploration
Roseneft is the biggest public company in the world in terms of reserves and production. Adding reserves is one of the Company’s key priorities. Roseneft holds a leading position in the development of the Russian continental offshore fields. Roseneft reiterated its leadership in resource base amount and efficiency of exploration in 2015. The Company conducted exploration in all Russian extracting regions, including the Russian Far East, East and West Siberia, Volga-Urals region, Timan Pechora, and South of Russia.
Based on the 2015 results, АВС1 reserves replacement amounted to 429 mmtoe, including an increase in reserves via exploration (oil and gas condensate) — 146 mmt, gas — 159 bcm. Reserves replacement ratio reached 168%. The result of onshore exploration in the Russian Federation was the discovery of seven fields and 117 new deposits including the projects developed with partners.
2015 exploration program was performed at a high quality level with 50 exploration wells completed and 119,000 m drilled. The exploration success rate reached 84 % (record high for the last five years). 2D seismic surveys were completed across over 2,000 linear km (+ 70 % YOY) and 3D seismic surveys covered over 6,000 sq. km.
Oil and Gas Production
Roseneft is the largest oil and gas company in Russia and the world’s largest holder of hydrocarbon reserves and hydrocarbon liquids producer among other public oil and gas companies. Adding reserves is one of the Company’s key priorities. Roseneft’s share in oil production approximates 40% in the Russian Federation and exceeds 5% globally. The Company set another record in hydrocarbon production of more than 254 mmtoe in 2015. That achievement was also driven by the implementation of our large-scale strategy to develop our own high-tech services division in order to guarantee fulfillment of production plans and create a competitive environment in terms of pricing and quality of the services. Crude oil and hydrocarbon liquid production was at 202.8 mmt in 2015.
The Company continues to stabilize its production in mature fields. In 2015, it completed large-scale optimization of the current systems in order to improve the efficiency of field reserve production in West Siberia by shifting from conventional directional drilling to drilling of horizontal wells with multi-stage fracturing (MSF HW). This technology significantly improves well productivity, reserves recovey ratio, reduces the well stock, and increases project feasibility. MSF HW is actively used at five consolidated brownfields of the Company, including Yuganskneftegaz, Purneftegaz, Samotlorneftegaz, Nyaganneftegaz, and Varyeganneftegaz. About 50% of the developed reserves at the aforementioned subsidiaries were started up driven by the use of MSF HW. The approaches and technologies used by Rosneft during the development of its fields in West Siberia secured its leadership in new well launching efficiency.
The Company increased its production drilling rate by 36 % to 6.9 million m in 2015 and started up 1839 new wells (+15 % YOY).
The rates of well stock rebuild by sidetracking also increased. In 2015, over 1000 wells were rebuilt that way which was more than 44 % above the 2014 level. That helped the Company to additionally produce more than 2.6 mmt of oil (+15 % YOY). Rosneft keeps its accelerating introduction of more efficient options for new well completion. In 2015, the implementation of horizontal wells with multi-stage fracturing increased by more than 30 % yearover-year. The number of horizontal wells increased by more than 24% to 555 wells, making up 30 % of the total number of completed wells.
Roseneft robustly reinforces its positions in the Russian gas market, having increased gas production by 10% to 62.5 bcm in 2015 driven by increase in natural gas production by JSC Rospan International and growth of associated petroleum gas volumes produced in the Northern Chaivo field by JSC RN-Shelf Far East, intensification of gas production in the Tarasovskoye field by RN-Purneftegaz LLC and an increase in the transportation volumes of refined gas to the unified gas supply system of the Vankor field of JSC Vankroneft.
Refining
The Company has the largest oil refining capacities in Russia. The volumes processed at its refineries in the Russian Federation amounted to 84.7 mmt in 2015, being the best level for the Company in the current demand conditions and oil/petroleum product price environment. However, the yield of light petroleum products grew from 54.8 % in 2014 to 55.3 % in 2015, and convertion rate from 65.3 % in 2014 to 66.5 % in 2015 driven by higher vacuum gasol production and optimization of secondary processes.
Large-scale investments to upgrades of our refineries supported compliance with the requirements of the Technical Regulations of the Customs Union with all Roseneft’s refineries converted to the production of Euro-5 gasoline and diesel fuels for the Russian market.
The Company also produces petrochemical products at JSC Angarsk Polymer Plant (APP) and JSC Novokuibyshevsk Petrochemical Company (NPC) in Russia. In 2015, the Angarsk Polymer Plant processed 660 thousand tons of feedstock and produced 441 thousand tons of high margin petrochemical products (products with high added value). The main products are highdensity polyethylene, propylene, and butylene-butadiene fraction. Since the takeover on March 2015 and through the end of the year, the processing capacity at Novokuibyshevsk Petrochemical Company was 0.97 mmt, and the output totaled to 0.85 mmt. The NPC produces a wide range of petrochemical products. The key petrochemical products are tert-amyl methyl ether, technical synthetic phenol, technical synthetic ethyl alcohol, acetone, liquefied petroleum gas for domestic consumption and other LPG, phenolic resin, paratertiary butylphenol, etc.
Roseneft is actively developing production of oils. The basic production sites are Novokuibyshevsk Oils and Additives Plant, oils production facility of the Angarsk Petrochemical Company, Moscow Plant Nefteprodukt and oil plant OOO RN-Lubricants, Ryazan, as well as the refinery of OAO Slavneft-YANOS (ownership interest). The summary capacity of these enterprises exceeds 700 thousand tons per year in commodities, specifically, it makes up over 500 thousand tons of oils per year.
The Company structure also comprises Neftegorsky and Otradnensky gas treatment plants in Samara region, summary capacity whereof makes up 1.8 bcm of gas per year. In 2015, the Neftegorsk GPP and Otradnensky GPP processed 410 and 257 mcm of APG respectively. At present, the Company is implementing a comprehensive upgrade program at its gas processing facilities. The scope of the program includes revamp and replacement of worn-out equipment with contemporary packaged units that will allow an improvement in operating efficiency and increase the level of automation.
Export Terminals
A distinctive feature of Roseneft is its own export terminals in Tuapse, De-Kastri, Nakhodka, which make the Company export operations much more efficient, improve the planning process and help to optimize costs. At this time, Roseneft is implementing comprehensive expansion and modernization programs at its terminals to ensure that their capacity meets the future export needs.
Retail Network
One of Roseneft's strategic objectives is to increase direct sales of its products to end consumers. With that in view, the Company consistently develops its retail network.
The primary objective of the Company retail activity is to increase sales of high quality products with high added value directly to end consumer. For that purpose, Roseneft is expanding its retail network, primarily in strategically important regions, consistently increasing the number of retail sites featuring stores, cafes, car washes and service stations.
As of December 31, 2015, the retail network of the Company included 2,557 own and leased filling stations, including 194 filling stations in Ukraine, Belarus, Abkhazia and Kirgizia. In total, own and leased sites had 1,819 shops, 691 cafes and 174 car washes. At 80 filling stations, there were small repair and car maintenance services.
Roseneft is also a leader in the Russian jet fuel market with a market share of around 32%. The Company sells jet fuel through 20 fueling sites controlled by the Company and 19 partner fueling sites.
Corporate Governance
The main factors enhancing the investment appeal and improving the economic activities of the Company are its compliance with the highest corporate governance standards and maximum information transparency.
Roseneft’s development strategy includes both increasing the Company shareholder value and attaining the highest corporate governance standards. The Company strongly believes that those two goals are inter-related. Commitment to transparent and responsible business management is extremely important for gaining Investor confidence and ensuring that all Company shareholders get a maximum long-term return on their Investorsment.
Roseneft governance system is based on corporate governance principles and standards recognized by the global economic community and designed to ensure the Company sustainable development, economic efficiency, and Investorsment attractiveness.
Roseneft Charter provides four-level system of governance bodies, which complies with Russian legislation for public companies.
Roseneft supreme governing body is the General Shareholders’ Meeting. The Board of Directors performs the Company’s strategic management on behalf and in the best interests of shareholders. Roseneft day-to-day operations are managed by the sole executive body and collective executive body. Executive bodies report to the Board of Directors and the General Shareholders’ Meeting.
Roseneft constantly monitors the efficiency of the governance system, and holds activities to improve corporate governance in view of the changing economic environment as well as in compliance with applicable legislation and regulatory requirements.
Environmental Safety
Environmental mission of the Company — efficient management of the Company’s operations impact on our environment to preserve it for the present and future generations.
Environmental safety and environment protection are among the top priorities of Rosneft. In order to achieve the best performance in this area, the Company is continuously improving its approaches to environmental management and increases the scale of environmental measures and the necessary costs of environmental protection.
The Company’s investments to environment protection (including related ones) amounted to RUB 44.7 bln which is by 65 % more than in 2012. Rosneft total environment protection costs made RUB 71.6 bln.
In 2015, the Rosneft Board of Directors approved the Company Policy for environment protection setting the key tasks and principles.
Science and Innovation
Roseneft is a leader in the process of high-quality modernization and innovative changes in the Russian oil and gas industry. The Company is focusing its efforts on developing the intellectual and technological potential of the industry based on a powerful foundation of Russia’s petroleum academic school – one of the best in the world – and in partnership with leading international oil and gas companies.
Continuous growth of the Company’s technological potential is stipulated by the 2011-2015 Innovative Development Program (approved by the Board of Directors on April 01, 2011, Minutes No. 34). The document meets the requirements of regulatory, planning, and policy documents at the national, regional and corporate levels. Its targets and goals contribute to the performance of the Roseneft Long-Term Development Program.
The program consists of the following blocks:
- targeted innovation projects;
- targeted programs for modernization and increasing production efficiency;
- measures to improve innovation activity.
Innovative projects of the Program are focused on the following business lines:
- Geology and difficult oil production,
- Gas production and processing,
- Offshore exploration,
- Oil refining and petrochemicals,
- IT and management solutions.
Roseneft’s innovative activities are aimed at the development and implementation of the newest technologies to achieve the following objectives:
- Upstream segment:
- replenishment of hydrocarbon reserves at the level of at least 100% of the current production;
- increase of hydrocarbon recovery rates on new deposits, development of systematic measures to increase oil and gas yield on existing fields;
- efficient use of associated gas (95 %);
- development of technologies for cost-effective involvement of unconventional and hard-to-recover hydrocarbon reserves in the development.
- Downstream segment:
- increase of the degree of oil refining;
- introduction of new technologies for processing heavy residues and oil and gas chemistry;
- development of its own catalysts (import substitution).
In 2015 the Company started updating its Innovative Development Program for 2016-2020 according to the Directives of the Government of the Russian Federation No. DM-P36-6057 of August 09, 2014 and No. DM-P36-7563 of November 07, 2015, and due to the termination timelines of the current Program performance (2011-2015).
In 2015, the innovation expenses of the Company amounted to RUB 116.9 bln while R&D costs amounted to RUB 36 bln. All the planned activities for 2015 were fulfilled.
In 2015, growth of patent activity was continued and special attention was paid to the implementation of R&D results and securing intellectual property rights. As a result of the implementation of targeted innovation projects in 2015, the Company filed 69 applications for security documents including five abroad.
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