Research and Innovation

Rosneft’s Corporate Scientific Research Complex consists of a Corporate Research & Development Center and 10 regional R&D institutes, of which seven specialize in exploration and production, and three in refining and marketing. The Corporate Scientific Research Complex provides R&D support and organizes use of technology throughout the Company’s production chain.

Exploration

R&D in exploration is focused on technologies that reduce geological risks and enable greater accuracy in detection of promising structures. For this purpose, in 2008, the Company made extensive use of sedimentological and regional modeling: specialized IT programs were acquired, 17 specialists from the Corporate Research & Development Center underwent appropriate training, and five projects were carried out.

Seismic centers with a total of more than 50 specialists were set up within the R&D institutes, and a seismic information bank was created at the R&D subsidiary, LLC KrasnoyarskNIPIneft. As a result, the Company was able to carry out in-house interpretation of 70% of its 2D and 3D seismic data, which matches rates at other leading international oil companies.

Use of sedimentation models and standardized storage of seismic data and geophysical core information should increase success rates in exploration by 20%.

Proposals were prepared in 2008 for licensing of 34 blocks on the shelves of the Black Sea, the Sea of Chukotka and the Eastern Siberian Sea. Rosneft also carried out an assessment and ranking of 12 regions in Eastern Siberia by the potential of their license areas.

Development

The Corporate Research & Development Center carried out 14 projects in 2008 for the application of new technologies at the field development stage (compared with nine such projects in 2007). Rosneft mobilizes specialists from the parent company, subsidiaries and corporate institutes, and also calls in international experts to facilitate work on these projects.

The Company continued to use an integrated approach to implementation of field development projects during 2008, constructing unified models that take account of all aspects of development (formation, wells, surface infrastructure, and economic calculations). A total of 10 such integrated projects were carried out in 2008 at the Company’s most important fields (compared with five projects in 2007). The positive effect from creation of unified projects is confirmed by significant improvement in key economic indicators for field development.

Use of algorithms and software, designed in-house, enabled selection of optimal development systems for major fields such as Priobskoye, Malobalykskoye, Prirazlomnoye, and others.

This integrated approach to field development, with the application of new technologies, gave an increase of 3.5 percentage points in the average-weighted oil recovery ratio relative to original oil-in-place in the period from 2005 to 2008, representing an extra 1.5 bln boe of recoverable reserves. A further 366 th. bbl of daily crude oil output was added thanks to implementation of a comprehensive management system for base production.

Various measures were carried out in 2008 to improve efficiency of drilling and well completion, including:

• a system for control and management of well construction was introduced at several subsidiaries (Vankorneft, RN-Yuganskneftegaz, and RNSakhalinmorneftegaz);
• a specialized center was set up to provide geological support during well construction, which will facilitate development of complex fields;
• work was underway to establish a project engineering center for well construction and recovery (using resources of RN-SamaraNIPIneft and other regional R&D centers). The purpose is to ensure that documentation for well construction and recovery is prepared to the highest standards, and to provide engineering and scientific support for well drilling and completion.

Overall, the Company tested and implemented 44 innovative techniques at 696 wells during 2008. For instance, spatial geonavigation (a periscope probe) was used for the first time in Russia at the Odoptu offshore field (Sakhalin Region) to achieve particularly large horizontal displacement in a horizontal well section. Increase in effective horizontal length gave an extra 585 bbl of daily crude production.

Company R&D provided support for the drilling of 128 sidetracks during 2008.

Production

Rosneft continued installation of its Total Production Management System (TPMSYS™) in 2008, enabling Company specialists to optimize operations at any well using geophysical data and complete information about the well construction, current operating parameters, and equipment used. The RN-Production computer system, which is based on TPMSYS™, has been installed at 900 workstations at Company subsidiaries.

Engineering support for complex geological and technical wellwork was provided at more than 370 wells during 2008. Support activities included:

• optimizing operation of production wells;
• standardizing and optimizing operation of injection wells;
• developing a system for dynamic analysis of operation of injection wells (PPD-online).

Effect from installation of TPMSYS™ in 2008 was equivalent to 31 mln bbl of additional crude production (85,000 bpd).

Development of algorithms and software for the flood management system, and use of up-to-date methods for production planning and management enabled a 12% increase in well potential and a 15% lowering of operating costs. It also enabled an increase in crude output at main wells by 366 th. bbl per day in the period from 2006 to 2008.

Tomskneft alone achieved 0.7 mln bbl of additional crude output in 2008 thanks to scientific and engineering support with use of enhanced recovery methods.

Company subsidiaries also successfully tested new machinery and equipment in 2008. In particular, new units for electric-centrifugal pumps (low-load submersible motors) increased the average life of the pumps by 70% and a slow-start device for high-voltage electric motors gave a 50% increase in motor reliability and service life.