Gas Strategy

Rosneft is among the largest independent gas producers in Russia, with gas output currently accounting for about 10% of its total hydrocarbon production. Gas business is becoming increasingly important to Rosneft as the Company has excellent prospects to build on its significant undeveloped gas reserves, which is further supported by the growing gas prices. Rosneft’s potential on a gas production exceeds 55 bln cubic meters a year. Rosneft’s gas production growth is only limited by the access to Gazprom’s transportation system and Gazprom’s ability to procure gas on the domestic market (Rosneft can not export natural gas as Gazprom holds export monopoly, and the capacity of the domestic market is limited) – those two issues are currently being discussed with Gazprom.

As of year-end 2010, the Company’s proved gas reserves under PRMS classification totaled 791 bcm, with only less than one-quarter of these being developed. Approximately 70% of Rosneft’s proved gas reserves are located in Western Siberia, primarily in the Yamal-Nenets Autonomous District, and 50% of proved gas reserves are concentrated at the Kharampurskoye field.

Rosneft is implementing an integrated gas strategy, which covers both onshore and offshore gas fields. The main onshore project is the massive Kharampurskoye field in Western Siberia. Gas produced at this field and within other onshore projects is planned to be sold to Gazprom and domestic end-users. Sakhalin-1 in the Russian Far East is Rosneft’s key offshore gas project, where gas production has been underway since late 2005. The Company also performs full-scale exploration activities within its prospective offshore projects — Sakhalin-3 and Sakhalin-5.

Another strategic priority of the Company’s gas strategy is improving the utilization of associated petroleum gas. The Company made progress in 2010 in its program for increasing rates of associated gas utilization. The first section of a gas treatment unit with annual capacity of 600 mln cubic meters was installed at the Priobskoye field to supply the Priobskaya Gas-turbine Power Station. Completion of Compressor Station ¹2 with 1 bln cubic meter capacity is scheduled in 2011 at the part of the field on the right bank of the Ob river, and the second section of the gas treatment unit is also planned to be built in 2011. These projects should be completed by December 2011, and will increase the rate of associated gas utilization at the Priobskoye field to 95%, compared with 58% in 2010.

The gas utilization program also envisages using comprehensive mechanisms of the United Nations’ Kyoto Protocol. Work continued during 2010 on installation of infrastructure for associated gas use at the Kharampurskaya field group and the Komsomolskoye field in Yamal-Nenets Autonomous District. The work is being carried out in accordance with agreements on sale of Emission Reduction Units (ERUs)¹ reached in 2008 between Rosneft, the World Bank and Carbon Trade & Finance SICAR S.A. (a joint venture between Dresdner Bank and OJSC Gazprombank). The projects obtained an important approval in 2010 from the Russian Ministry of Economic Development.

In 2010, the Company’s total gas production was 12.34 bcm. 

¹ ERUs are sold in accordance with the Kyoto Protocol. The Company can sell carbon gas ERUs, obtained from reduction of flaring of associated gas (as a result of measures to increase associated gas utilization).