History of Rosneft
The companies, which are now affiliated with Rosneft first appeared in the late 19th century. In 1889 Russian entrepreneurs started oil-field exploration in Sakhalin.
State oil production and refining enterprise Rosneft was founded in April 1993. More than 250 industrial enterprises and organizations, as well as oil and gas fields developed in the Soviet times, were placed into trust of this new government enterprise. Fuel and energy sector enterprises and associated public sector enterprises were consolidated into vertically integrated companies on the model of the world’s major corporations. OJSC Rosneft was established in accordance with the Russian Government Decree ¹971, issued 29 September 1995.
In 1998 Russia’s economic crisis presented signiﬁcant ﬁnancial and operational challenges for Rosneft, including a production decline due to a severely depleted resource base, low capacity utilization at reﬁneries, and a fall in retail sales. Highly depreciated equipment and outdated technology also put obstacles in the way of Company development.
As far back as in 2000 (for the first time since 1998 financial crisis) Rosneft, however, managed to increase production. In 2001, although world and domestic oil prices fell, the Company has significantly improved its operating performance. Year-on-year growth exceeded 10%. Company’s Board of Directors adopted the development strategy of Rosneft, which provides development of geologic exploration, production of hydrocarbons, refining capacity development, and entry into new markets. As part of Sakhalin-1 project commercial hydrocarbon reserves have been discovered. Rosneft was the first Russian company (since 1998 financial crisis) to place an issue of Eurobonds. The further Company development was still questionable, as it couldn’t increase production and refining at the cost of available oil fields and refineries.
The Company has been increasing assets and expanding its international activity since 2002 to 2004. In 2002 Rosneft received a license to develop the Kaygansko-Vasyukansky block (Sakhalin-5 project), as well as Veninsky block (Sakhalin-3 project) in 2003. Rosneft acquired Severnaya Neft company, which greatly strengthened its positions in Timano-Pechora. The Company purchased Anglo-Siberian Oil Company, which owned the license to develop the Vankor field in Eastern Siberia.
In 2004 Igor Sechin was named Chairman of the Board of Directors of Rosneft. This has become the turning point in the Company’s history. Thanks to support from Chairman of the Board of Directors and cooperation with the key shareholder, which is the government, the Company has rapidly improved corporate management efficiency, carried out works aimed at consolidation of oil producing and refining assets, enhanced fiscal discipline. It has made Rosneft the leading Russian oil company in oil and gas production stream in 2005. As a result, in July of 2006 the Company conducted the Initial Public Offering on the London Stock Exchange. The offering raised USD 10.7 billion - the largest IPO completed to date in oil and gas industry, in Russia and the fifth largest ever worldwide. Such global energy companies as BP, Petronas, and CNPC gave credence to the Company acquiring major minority shareholding. In addition to it, about 150 thousand of Russian individuals became shareholders of Rosneft.
In 2009 Rosneft launched commercial production at Vankor, the largest field in Eastern Siberia. Due to effective field development Vankor has become the largest production project in modern history of Russian oil industry, and one of the world's top ten oil and gas projects.
Rosneft ranks first in the rating of Russia’s Most Transparent Companies by Standard & Poor’s. The Company demonstrated stable performance amid the global financial crisis, and continued to generate free cash flow and reduce net debt while preserving financing of strategic projects.
In 2010 Rosneft initiates new refining projects (a petrochemical plant in the Far East and a Tianjin refinery in China). Rosneft acquired stakes in four refineries in Germany, thanks to which total refining capacities of the Company increased more than 20% to 61.6 million tons. Rosneft maintained its leadership position in oil production growth among Russian and foreign competitors. The Company achieves record financial results, and net debt is cut back to its level in 2006. Rosneft had the highest incremental oil production rate among Russian companies in 2010. Vankorneft became second largest oil and gas producer company of Rosneft group.
In 2011 the Company continued to actively replace its reserve base. Rosneft received two licenses following the discovery of deposits – for the Baykalovsk deposit in the Krasnoyarsk region and the Buzerovsk deposit in the Samara region. The Company also received two certificates confirming the discovery of the Lisovsky deposit and the Sanarskoye deposit in the Irkutsk region. Another deposit in the same region has been discovered at the Danilovsk license block with light oil flowing to the surface at well 71. Innovative methods and upgraded exploration technologies were instrumental in making these discoveries possible in the face of extremely challenging geological conditions.
The Company's another priority strategy was to increase the oil recovery rate at mature deposits and deposits with heavy tight oil. For instance, a comprehensive program of exploration and reserve replacement at mature deposits controlled by Krasnodarneftegaz, Stavropolneftegaz and Grozneftegaz is in the works. As of mid-2011, the Company’s projected oil recovery rate stood at 38 percent which is significantly higher than the industry average.
23 May 2012 Rosneft's board has voted to appoint Igor Sechin as President of the Company. Rosneft announced its strategic priorities: industrial safety and environmental protection, refinery modernization, field development and oil production increase.
From May 2012 till present, Igor Sechin is Rosneft President and Chairman of the Management Board.
The key event for Rosneft in 2012 was reaching binding agreements to acquire a 100% stake in TNK-BP. “Full consolidation of this highly efficient company with its quality assets will make Rosneft the largest publicly traded oil company in the world, increase the scale of its gas business, and optimize supply and marketing channels,” Sechin said.
Separate course of Rosneft development is represented by agreements with leading global power generating companies for shelf development.
In 2012 an agreement was signed as part of strategic cooperation between Rosneft and ExxonMobil concerning pilot development of tight oil reserves at the Bazhenov and Achimov formations in Western Siberia. ExxonMobil will provide financing of up to $300 million. The two companies also agreed on participation by ExxonMobil in the Arctic Research and Design Center for Offshore Developments.
The agreements were signed with Statoil for creation of a joint venture (JV) to work at Rosneft areas in the Sea of Okhotsk and the Barents Sea, and for joint work to assess hard-to-recover oil reserves at Company fields in West Siberia and Stavropol Territory.
An agreement was signed with Eni for creation of a JV to develop license areas on the Russian shelf of the Barents and Black Seas. Eni will fully finance geological exploration work and will reimburse most historical costs.
A transaction was completed for creation of a JV on the basis of Itera for the production and sale of gas. Consolidated proved and probable reserves of the JV under PRMS classification are 427 bcm of gas and 25.8 million tons of liquid hydrocarbons.
The General Meeting of Shareholders voted to pay RUB 78.5 bln (25% of IFRS net income) as dividends for 2011. Dividends per share were RUB 7.53, which is nearly three times more than in 2010.
At the XVII St. Petersburg International Economic Forum, which gathered representatives of global political and business elites, Rosneft signed record number of agreements economically viable both for the Company and the country.
2013 was a record and pivotal year for Rosneft – both in the sense of our high operational and financial achievements, and in terms of delivery on our strategic initiatives that set the pace for the development of our Company and the industry as a whole for decades to come. Our Company completed a number of key acquisitions, producing the aggregate synergetic effect in excess of RUB 27 bln. Much work was done in the reporting period to successfully integrate into the Rosneft perimeter the acquired assets of TNK-BP, ITERA Oil and Gas Company LLC and OJSC Sibneftegaz. These efforts have brought Rosneft to the position of the world’s largest public oil and gas company.
Over 2013, Rosneft Group grew notably more active in its international projects. At the same time, the Company was active in developing the export path in 2013 including advanced business development formats such as prepaid long-term contracts. Thus, the long-term oil supply agreement with the China National Petroleum Corporation they signed in 2013 for a period of 25 years with a total price of USD 270 bln was unprecedented in the global business practice.
Efficient exploration activities received investments of RUB 38 billion in 2013. As a result of the completed program of exploration activity, 6 fields and 70 new deposits were discovered. Liquids production reached a record high of 4 196 thousand barrels per day, hydrocarbon reserves additions through efficient exploration activities was 250 mln tons, with lifting costs remaining at $4.3/bbl, which is the best per unit level among the world’s public oil companies. Gas production grew more than twofold against the backdrop of expanding our Company’s gas market footprint. Based on the reporting period outcomes, Rosneft became Russia’s third largest gas producer.
Besides, Rosneft, jointly with its strategic partners – ExxonMobil, Eni and Statoil – undertook an unprecedented offshore exploration program in the Arctic. It included, first of all, the entire complex of scientific hydrological and meteorological studies, analysis of ice conditions, exploration and appraisal.
Based on 2013 results, Rosneft demonstrated record financial performance, notwithstanding the deteriorating macroeconomic environment. In 2013, the dividend amount was increased to RUB 85 billion, and RUB 2.7 trillion was paid to the budget of the Russian Federation, which reasserts our Company’s status of Russia’s largest taxpayer.