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Gas Business

Rosneft is the second largest gas producer in the Russian Federation and the first among independent producers. The company produces gas using its several dozen subsidiaries and joint ventures in Western and Eastern Siberia, Central Russia, in the south of the European part of Russia, the Far East, and also in Vietnam and Venezuela. Every year the gas segment is becoming increasingly important for the Company. In 2016, gas production by PJSC NK Rosneft was 67.1 billion cubic meters (21% in total hydrocarbon production). The strategic goal of PJSC NK Rosneft  in gas business development is a long-term increase in the Company's shareholder value due to the growth in gas production volume ensured by a highly efficient long-term sales portfolio. To achieve this, the Company is working on the following key strategic areas:

  • Development of the existing resource base and effective implementation of gas projects.

The recoverable gas reserves of PJSC NK Rosneft as of January 1, 2018 according to the Russian classification (АВ1С1+В2С2) are 7.9 trillion cubic meters.  The Company's resource base allows us to steadily increase gas production. The main production growth centers in the coming years are the Rospan, Kharampurskoye and Beregovoye fields, the Kynsko-Chaselsky group of fields.

Rospan. One of the main assets that include the Novo-Urengoysky and East-Urengoysky license areas, with the total reserves of natural gas of about 1 trillion cubic meters and liquid hydrocarbons of more than 200 million toe. Gas production will reach 19 billion cubic meters per year in the medium term.

Beregovoye field (Sibneftegaz JSC). In 2016, production volume at the field exceeded 9.7 billion cubic meters, the potential for its expansion is being enhanced.

The Kharampurskoye deposit and the Kinsky-Chaselsky group have a total gas reserves of about 1.2 trillion cu. m and as they are commissioned, it will provide a significant increase in production volumes.

Also, the company plans to significantly increase the utilization of associated petroleum gas with a 95% level of its useful utilization. In the future, PJSC NK Rosneft plans to produce 100 billion cubic meters of gas per year, while the Company's resource potential allows for a further increase in production volumes.

  • Development of LNG production and access to the world LNG market. Creation of the necessary competencies for the implementation of Arctic LNG projects.

The company possesses enormous resources of hydrocarbons on the Russian shelf, a significant part of which is made up of natural gas. Rosneft's gas resources on the Russian shelf are around 21.4 trillion cubic meters. Shelf fields are difficult to access, and their connection to the Unified Gas Supply System is impractical from the economy point of view. Therefore, the most effective method for monetizing these natural gas resources is their liquefaction and sale in export markets.

In particular, to monetize the gas of the Sakhalin-1 project and the gas of offshore fields belonging to PJSC NK Rosnefnear Sakhalin, it is planned to implement the Far Eastern LNG project under the Production Sharing Agreement (PSA) of the Sakhalin-1 project. The project provides for the construction of a LNG plant in the Russian Far East with a capacity of 5 million tons per year, as well as a seaport for LNG shipment having associated gas transportation infrastructure. The reserves of Rosneft in the area, as well as the reserves of the Sakhalin-1 consortium will be the resource base for the plant.

Another promising project of the Company is the Pechora LNG project. The project envisages the creation of a new gas production center in the Nenets Autonomous District, the construction of an LNG plant and supporting infrastructure. At present, a package of pre-design work is being carried out to clarify the technical solutions, costs and schedule of the project.

In the future, it is planned to carry out an extensive exploration program at the licensed sites of the Company on the shelf of the Sea of Okhotsk and the Arctic, to transfer gas resources to reserves and subsequent development of new LNG production centers.

  • Increasing the efficiency of the monetization of associated gas and associated liquid fractions by expanding the presence of gas in the value chain, developing gas processing, gas chemistry and further processing of NGL and LPG to sell products with a high added value.

PJSC NK Rosneft systematically increases the efficiency of monetization of gas and liquid fractions thanks to the development of gas processing. Western Siberia is a promising region for the development of gas processing. The capacity of the East-Urengoy gas and condensate treatment plant in the Yamal-Nenets Autonomous District will amount up to 5 million tons per year of stabilized condensate and 1.3 million tons per year of propane-butane mixture. In addition, projects are under way to increase the effectiveness of monetization of APG and liquid products in the Yugansk area.

  • Taking the leading position in terms of gas supply in the Russian market among independent gas producers through the development of trading competencies and working with consumers.

Rosneft plans to take a 20% share in the Russian gas market. To this end, the Company  has significantly expanded in recent years and continues to expand the geography of supply, which already covers the regions from Krasnodar to Sakhalin. At the same time, the Company continues to optimize its portfolio of gas supply contracts in order to increase the efficiency of gas sales and reduce the risks of implementing new production projects. PJSC NK Rosneft actively uses the opportunities of exchange gas trading on the St. Petersburg International Commodity Exchange. In addition, the Company is considering the possibility to develop a marketing network for compressed natural gas as a motor fuel.

  • Realization of gas potential of fields located in the East of Russia

The company continues to develop new gas production centers based on its continental assets in the East of Russia - in the Republic of Sakha (Yakutia), in the Irkutsk region and the Krasnoyarsk Territory, which will allow it to enter new gas markets, and in the long term, subject to changes in the state gas exportation policy, will create prerequisites for export supplies to the APR countries.

To achieve these objectives, the Company, inter alia, attracts international partners in large projects with a gas component in the east of Russia:

- In 2016, PJSC NK Rosneft and a consortium of Indian companies closed the deal to sell a 29.9% share in Taas-Yuryakh Neftegazodobycha LLC. Earlier in 2015, a 20% share in this asset was acquired by BP.

- In 2017, the Company and Beijing Gas Group Company Limited, which is one of the largest distributors of natural gas in China, closed the deal to sell a 20% stake in  Verkhnechonskneftegaz PJSC and signed an agreement on cooperation in the gas business.

  • Active introduction of advanced technologies on the basis of world and domestic experience in gas extraction, processing, gas chemistry, transportation and sales.

The development of the Company's gas business will be based on the use of advanced technologies in the field of gas production and processing. To carry out this task, development, economic evaluation and implementation of technologies in the areas of development of hard-to-recover gas reserves, large, medium, and low-tonnage gas liquefaction, gas-to-liquid conversion are underway.

  • Contribution to increase the openness and  efficiency of the Russian gas market.

The company takes an active part to transform the conditions in which the natural gas market functions and works at all sites, including federal executive bodies, the sectoral and expert community, in the following areas:

- ensuring fair competition conditions, including transparent and economically sound gas pricing and rate setting for gas transportation and storage services;

- stage-by-stage liberalization of gas exportation;

- development of exchange mechanisms for gas trading in the domestic market;

- ensuring non-discriminatory access of independent gas producers to main gas pipelines;

- development of the gas engine fuel market.