Production and Development

Rosneft’s production and development units operate in the traditional hydrocarbon-bearing regions of Russia, such as West Siberia, Southern Russia, and Central Russia, as well as in the new and increasingly promising oil and gas provinces of the Russian Far East, East Siberia, and Timan-Pechora.

In 2007, Rosneft became the largest oil producer in Russia. The Company’s output¹ totaled 740 mln. barrels (101.2 mln. tonnes) of crude oil and gas condensate, and 15.7 bcm. of gas, up 27.0% and 15.6%, respectively, compared to 2006. This significant increase in output was driven by Rosneft’s new acquisitions and sustained organic growth. The share of assets acquired in 2006—2007 in Rosneft’s total output growth was 119 mln. barrels (16.3 mln. tonnes) of crude oil and 1.2 bcm. of gas, while the organic increase in hydrocarbon production equaled 6.6%.

The accelerated organic growth was achieved primarily through continued development of new reserves, significant expansion of operating well stock, improvement of well design and construction techniques, and optimization of production control systems. Consistent application of enhanced oil recovery methods at mature fields was also central to the Company’s strong performance. In 2007, most of Rosneft’s organic growth in production was attributable to Yuganskneftegaz fields and Sakhalin-1.

In 2007, Rosneft became the first Russian oil company to hit a landmark annual crude production of 100 mln. tonnes (more than 2 mln. barrels per day). The Company’s major upstream units, Yuganskneftegaz and Purneftegaz in West Siberia, and Severnaya Neft in Timan-Pechora, collectively accounted for more than 74% of total crude oil output.

In 2007, Rosneft was particularly focused on increasing production drilling, which rose to 2,611 thousand m. The Company commissioned 648 new oil production wells, more than a twofold increase compared to the previous year. The new production oil wells contributed about 77 mln. barrels (10.5 mln. tonnes) of oil and gas condensate in 2007.

The average flow rate of new oil wells was 713 barrels (97.5 tonnes) per day, close to the previous-year figure. Net of effects from the newly acquired assets, this indicator reached 740 barrels (101.1 tonnes) per day, a 3.6% growth over 2006, which was mainly attributable to further improvement of well design and construction techniques.

The average flow rate of all operating oil wells inched down to 94 barrels (12.8 tonnes) per day, which was explained by lower well efficiency at the newly acquired enterprises. In 2007, Rosneft’s average oil flow rate, net of effects from the 2007 acquisitions, increased by 6% to 116 barrels (15.8 tonnes) per day.

Upstream production and operating expenses were USD 3.48 per barrel in 2007 (USD 2.83 in the prior year). Upstream production and operating expenses, excluding Sakhalin-1, Tomskneft, and Samaraneftegaz, amounted to USD 2.94 per barrel of crude oil produced. These expenses grew mainly as a result of increased volume and cost of geotechnical operations, higher electricity tariffs, and the real ruble appreciation against the US dollar.

Key Indicators

¹ — Including production of subsidiaries and Rosneft’s share in affiliates.