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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 in several dozen subsidiaries and joint ventures in Western and Eastern Siberia, Central Russia, in the Southern European part of Russia, the Far East, and in Vietnam and Venezuela. Every year, the gas segment is becoming increasingly significant for the Company. In 2016, Rosneft’s gas production totaled 67.1 billion cubic meters (21% in total hydrocarbon production). Rosneft’s strategic objective in gas business development is the long-term increase of the Company's shareholder value with the growing gas production ensured by a highly efficient long-term sales portfolio. To achieve this objective, the Company is working on the following key strategic areas:

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

As of January 01, 2017, Rosneft’s recoverable gas reserves, according to the Russian classification (АВС1 + С2), amount to 7.6 trillion cubic meters. The Company resource base allows to sustain the increasing gas production. The principal centers of production growth in the coming years are the Rospan, Kharampur and Beregovoe fields, and the Kynsko-Chaselskaya group of fields.

Rospan. One of the key assets, including the Novo-Urengoy and East-Urengoisky licensed areas, with total reserves of natural gas of approx. 1 trillion cubic meters and over 200 million TOE of liquid hydrocarbons. In the med-term perspective, the annual gas production will reach 19 billion cubic meters.

Beregovoe field (JSC Sibneftegaz). In 2016, the field production exceeded 9.7 billion cubic meters, the potential for its expansion is being developed.

Kharampur field and Kynsko-Chaselsky group have a total gas reserve of appox. 1.2 trillion cubic meters, as they develop production, a significant increase in production is expected.

A significant increase in the associated petroleum gas usage up to 95% of its capacity utilization is planned. Rosneft plans to develop gas production to 100 billion cubic meters per year, while the Company's resource potential allows for a further increase in production.

  • Development of LNG production and entering the global LNG market. Creation of the required 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 natural gas. Rosneft’s gas resources on the Russian shelf amount to about 22.7 trillion cubic meters. The shelf deposits are difficult to access, and their connection to the Unified Gas Supply System is economically impractical. Therefore, the most efficient method of monetizing such natural gas resources is their liquefaction and sale in export markets.

In particular, in order to monetize the gas in Sakhalin-1 Project and the gas of Rosneft’s own offshore fields in the vicinity of island Sakhalin, the Far Eastern LNG Project is to be implemented under the Production Sharing Agreement (PSA) of Sakhalin-1 Project. The project provides for the construction of a LNG plant in the Russian Far East with the annual capacity of 5 million ton, as well as a sea terminal for LNG shipments and associated gas transportation infrastructure. The resource base for the plant will comprise Rosneft’s reserves in the region and those of the Sakhalin-1 consortium.

Another promising Company project is the Pechora LNG project. The project includes the creation of a new gas production center in the Nenets Autonomous District; the construction of an LNG plant and associated infrastructure. At present, pre-design works are being performed to adjust the project technical solutions, costs and schedules.

Further plans include an extensive exploration program at the Company licensed areas on the shelf of the Sea of Okhotsk and the Arctic aimed at converting gas resources to reserves and subsequent development of new LNG production centers.

  • Increasing the monetization efficiency of the associated gas and associated liquid fractions by expanding the gas segment in the value chain, developing gas processing, gas-to-chemicals and further processing of broad fractions of light hydrocarbons and LPG for the products sale with high added value.

Rosneft systematically increases the monetization efficiency of gas and liquid fractions through the development of gas processing. Western Siberia is a promising region for developing gas processing. The capacity of the East-Urengoi plant for complex gas treatment and condensate preparation in the Yamal-Nenets Autonomous District will amount to 5 million ton per year of stable condensate and 1.3 million ton per year of propane-butane mixture (commercial propane/butane mix). Other current projects aim to increase the monetization efficiency of APG and liquid products in the Yugansk region.

  • Taking the leading position in gas supplies to the Russian market among independent gas producers through the development of trading competencies and work with consumers.

Rosneft plans to take a 20% share in the Russian gas market. In order to achieve this objective, the Company has recently significantly expanded and continues to expand the supply geography, already covering the regions from Krasnodar to Sakhalin. At the same time, the Company continues optimizing the portfolio of gas supply contracts in order to increase the efficiency of gas sales and reduce the risks of implementing new production projects. Rosneft actively exploits the opportunities of exchange trading in gas at the St. Petersburg International Commodity Exchange. The Company is now considering perspective development of a marketing network for compressed natural gas as motor fuel.

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

The Company continues developing new gas production centers based on its continental assets in the East of Russia: in the Republic of Sakha (Yakutia), in Irkutsk Region and Krasnoyarsk Territory, which will allow the Company to enter new gas markets, and provided the state policy on gas exports is amended, it will create prerequisites for organizing gas export to the APR countries.

In order to achieve these objectives, the Company also involves international partners in large projects with a gas component in the East of Russia:

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

- In 2017, the Company and Beijing Gas Group Company Limited - one of the largest distributors of natural gas in China, finalized the deal to sell a 20% share in PJSC Verkhnechonskneftegaz and signed a Partnership Agreement for the gas business.

  • Active implementation of advanced technologies based on the international and domestic experience in gas production, processing, chemical production, transportation and sales.

The development of the Company's gas business will be based on the application of advanced gas production and processing technologies. In order to achieve these objectives, the Company focuses on the development, economic evaluation and implementation of development technologies for the hard-to-recover gas reserves, large-, medium- and low-scale gas liquefaction, gas-to-liquid conversion.

  • Contributing to the enhancement of openness and efficiency of the Russian gas market.

The Company actively participates in the transformation of the functioning conditions of the natural gas market and works at all sites, including federal executive authorities, industry and expert community, in the following areas:

  • ensuring conditions of fair competition, including transparent and economically viable gas pricing and tariffing for gas transportation and storage services;
  • stage-by-stage liberalization of gas exports;
  • development of exchange mechanisms for gas trading in the domestic market;
  • preventing discrimination in the access of independent gas producers to major gas pipelines;
  • development of the market for gas engine fuel.