History

Rosneft was one of the last vertically integrated oil companies to emerge from the reorganization and large-scale privatization of Russia’s oil industry in the years following the dissolution of the Soviet Union.

Initially, Rosneft was established in 1993 as a state enterprise on the basis of assets previously held by Rosneftegaz, the successor to the USSR Ministry of Oil and Gas. In 1995, a Russian government decree transformed Rosneft into an open joint stock company (OJSC).

From 1995 to 1998, Rosneft’s management changed constantly and as a result its assets were left largely unmanaged. Oil production fell and oil refining collapsed to just one third of production capacity.

The turnaround

In October 1998, the Russian government decided to strengthen the Company’s management so that Rosneft could once again become a key player on the Russian energy market. The government appointed the Company’s current president, Sergey Bogdanchikov.

The new management team under Bogdanchikov immediately began to implement bold plans which ultimately lifted the Company out of the crisis.

As a result, Rosneft had become profitable again by 2000, and from then on, the Company began a new period of strong growth, with average annual oil production increases of over 11%.

Growth strategy

Improved management, consolidation of existing and newly acquired assets, strengthened financial discipline and deepened scientific and technical integration all led to a significant increase in the efficient use of resources and allowed the Company to adopt a program of growth and expanded production.

In just four years, Rosneft increased its oil output sharply from 98.56 million barrels (13.47 million tonnes) in 2000 to 148.26 million barrels (20.27 million tonnes) in 2004.

In 2001, the Company became Russia’s official representative on projects with Production Sharing Agreements (PSA). In 2002, Rosneft expanded its international activity by taking part in a project in Algeria, and in 2003, it began producing oil at the Aday block near the Caspian Sea in Western Kazakhstan. In 2005, Rosneft became a participant in the PSA to develop the Kurmangazy structure on the Caspian shelf in Kazakhstan.

Rosneft is rigorously implementing its strategy of acquiring new assets in Russia, with a particular focus on the geological characteristics of the fields and efficient transport.

Among the key assets acquired in recent years are Selkupneftegaz, which was purchased in 2000, Severnaya Neft and the Veninsky block on Sakhalin-3, both of which were purchased in 2003, and the Anglo-Siberian Oil Company, which was acquired in 2003 and which owns the license to develop the Vankor field in Eastern Siberia.

In December 2004, the Company acquired a controlling share in Yuganskneftegaz, one of the largest oil-producing enterprises in Russia. The acquisition of this asset, along with the significant growth of its own production, ensured further growth for Rosneft. As a result, in 2005, the Company became the second-largest producer of oil and gas in Russia, with an average daily output of 1.69 million barrels of oil equivalent.

At the beginning of 2005, Rosneft won an auction for the license to the Vorgamusur block in the Timano-Pechora oil province, which will ensure the continued growth of Severnaya Neft, whose production facilities are just 80 kilometers away.

At the end of 2005, Rosneft announced its acquisition of a 25.94% stake in Verkhnechonskneftegaz. The Company later supplemented this purchase with the acquisition of an exploration license to the East Sugdinsky block.

New acquisitions will help the Company to achieve its stated goal of transforming Eastern Siberia into one of the most modern bases in Russia for oil and gas production.

In April 2006, Rosneft announced plans to consolidate 12 subsidiaries engaged in exploration and production, as well as in the refining and sale of oil and petroleum products. The consolidation program was completed in October of the same year and resulted in increased management efficiency and transparency.

In July 2006, Rosneft conducted one of the largest and most successful IPOs in global financial history after placing nearly 15% of its shares on stock exchanges in London and Moscow. The Company’s offering raised USD 10.7 billion.

In 2007, Rosneft acquired major upstream assets in various regions of Russia (Samaraneftegaz, East Siberian Oil and Gas Company, and a 50% stake in Tomskneft) with total proved reserves of about 1.5 bln. barrels of oil equivalent and a crude output of more than 15 mln. tonnes (110 mln. barrels) per year. The Company also acquired five major refineries (Kuibyshev, Novokuibyshevsk, Syzran, Angarsk, and Achinsk), thus increasing its aggregate refining capacity to more than 55 mln. tonnes (400 mln. barrels) per year. In addition, Rosneft’s retail network grew 2.5 times to about 1,700 stations.

Due to the new acquisitions and impressive organic growth, in 2007, Rosneft posted the best operating and financial performance since its establishment. The Company became the leader in terms of crude oil production, accounting for more than 20% of the Russian total, ranked first in terms of total refining capacity, and operated the second largest national retail network.