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05 November 2019

Hydrocarbon production

Hydrocarbon production in 9M 2019 amounted to 5.78 mmboed (213.1 mmtoe over the period), exceeding 9M 2018 level by 0.6%. In Q3 2019 average daily hydrocarbon production amounted to 5.74 mmboed (71.3 mmtoe over the period), demonstrating growth of 0.5% QoQ.

9M 2019 liquids production amounted to 4.67 mmbpd (172.2 mmt over the period), exceeding average daily production volume of 9M 2018 by 0.9%. Production growth was driven by active development of new large projects (Yurubcheno-Tokhomskoye, Srednebotuobinskoye, Kondinskoye, Russkoye, East-Messoyakha fields) along with production volume ramp-up at brownfields (Samaraneftegaz, RN-Nyaganneftegaz, Varyaganneftegaz). In the reporting quarter the average daily liquids production amounted to 4.66 mmbpd (57.9 mmt over the period), increasing by 0.9% QoQ and decreasing by 1.4% YoY. The increase QoQ is mainly attributable to the removal of constraints on the intake of oil into the Transneft trunk pipeline system. The reduction YoY is caused by the effect of OPEC+ Agreement restrictions easing in Q3 2018.

9M 2019 gas production amounted to 49.73 bcm including 16.30 bcm in Q3 2019, which corresponds to 9M 2018 and Q2 2019 levels (with immaterial deviation).

All-time record at RN-Yuganskneftegaz

After removal of the unilateral restrictions on the intake of crude oil into the trunk pipeline system the Company’s largest asset, RN-Yuganskneftegaz, promptly realized the accumulated production potential and set an all-time record of daily crude production of 198,008 t (or 1,466 kbpd) in Summer 2019. This is the highest ever production level reached during the asset’s operating history since 1964, which exceeds the previous record set in October 2018 (197,478 t or 1,462 kbpd) by more than 500 t. RN-Yuganskneftegaz implements cutting-edge technologies to engage low permeability reservoirs into active development along with increasing the oil recovery rate on brownfields.

Development drilling and new wells commissioning

In Q3 2019 development drilling footage amounted to 2.6 mln m, reaching 7.8 mln m in 9M 2019. The share of in-house drilling footage is traditionally maintained at above 50%. The Company focuses on construction of hi-tech wells, which ensure more efficient reservoir development and enhanced oil recovery compared to directional wells drilling.

As of 9M 2019 the number of new wells commissioned amounted to 2.2 th. units. New horizontal wells commissioning increased by 4% compared to 9M 2018 level, while their share in the total number of newly commissioned wells grew by 10 p.p. YoY to 56%. At the same time production per horizontal well increased by 18% YoY and exceeded 7 th. t per well, which is over 2 times higher than the directional wells level. The number of newly commissioned horizontal wells with multistage hydrofracturing reached 748 in the reporting period, which represents 34% of the total number of new wells commissioned in 9M 2019.

Upstream modern technologies implementation

As part of developing its technological potential the Company proceeds with implementation and rollout of modern technologies, which facilitate expansion in the productive formations coverage, increase the oil flow rate, well and infrastructure construction volumes optimization. More than 100 multilateral wells were commissioned at Vankor cluster fields. The total length of the horizontal wellbore of the longest one exceeds 5 th. m. In 2019 the peak initial oil flow rate was registered at Suzun field and amounted to 690 tpd. It is planned to drill over 50 multilateral wells in total at the cluster in 2019. Moreover, 5 Fishbone technology multilateral wells with initial oil flow rate of 600 tpd were commissioned at Sorovskoye field at RN-Yuganskneftegaz.

RN-Purneftegaz has implemented a modern technology that improves wells productivity and extends their production period. The technology is based on the application of targeted gas-dynamic influence on the bottom-hole formation zone. According to the results of pilot tests, the volume of additional oil production at four directional wells amounted to 1.5 th. t since the first well launch in early February 2019.

New upstream projects

The Company is the leader of Russian oil industry in launching greenfields. Since 2016 large greenfields Suzunskoye, Vostochno-Messoyakhskoye, Yurubcheno-Tokhomskoye, Kondinskoye, Tagulskoye, Russkoye, Kuyumbinskoye fields, 2nd stage of Srednebotuobinskoye field, Zapadno-Erguinskoye field have been launched. In 9M 2019 the Company’s share in total hydrocarbon production at the abovementioned new assets amounted to 14.4 mmtoe (390 kboepd), 5.2 mmtoe (421 kboepd) of which was produced in Q3 2019. Their share in Rosneft’s Q3 2019 total liquids production exceeded 7%.

The project to develop Erguinsky cluster is in progress with Kondinskoye and Zapadno-Erguinskoye fields launched as part of the project. In Q3 2019, Rosneft started development drilling at the third field of the Erguinsky cluster – Chaprovskoye. By the end of the year, it is planned to drill 14 production wells. In total, 18 drilling rigs will be involved in projects of the Erguinsky cluster in 2019. The use of high-tech equipment, which proved itself during pilot tests at the Kondinskoye field, will provide an opportunity to reduce well construction period and increase oil production.

In the fulfillment of the task from President of the Russian Federation to load the Northern Sea Route, the Company is setting up a base for execution of a large-scale hydrocarbon production project that will allow to implement a complex development program for a new oil and gas province in the north of the Krasnoyarsk Territory (the Vostok Oil project, which includes license areas of the Payakha group of fields and Taimyr Peninsula, assets of Yermak Neftegaz LLC, Zapadno-Irkinsky license area and other assets). In cooperation with partners Rosneft plans to set up a global scale unique cluster of hydrocarbon production in the region. In October 2019, the right to use the Zapadno-Irkinsky license area with C2 reserves of 12 mln t of oil and 813 mln t of oil equivalent resources was obtained.

Egyptian offshore Zohr field development is continued. In August 2019, 5 months ahead of schedule, gas production at the field reached its design capacity of 76 mmcm per day (100% of the project) due to the launch of the second pipeline connecting the offshore infrastructure of the field with the onshore gas processing complex. Since the project was launched (December 2017), 13 production wells, 8 gas processing lines, 4 offshore pipelines and an offshore control platform were commissioned. 9M 2019 gas production amounted to 17.5 bcm (3.1 bcm in the Company’s share).

Geological exploration works

During 9M 2019 1.9 th. linear km of 2D and 7.4 th. sq. km of 3D onshore seismic works were conducted in Russia, 89 exploration and appraisal wells were tested with a 90% success rate. As a result of geological exploration 70 new deposits and 19 new fields were discovered with AB1C1+B2C2 hydrocarbon reserves amounting to c. 282 mmtoe. Taking into consideration the large scale of seismic operations carried out in the strategic regions of presence, the Company continues to process and interpret the previously obtained significant amount of seismic data, the results of which will be used for further exploration and appraisal drilling.

During 9M 2019 0.3 th. linear km of offshore 2D seismic works were conducted in the area of the Caspian Sea and the Sea of Japan along with 2.3 th. sq. km of offshore 3D seismic works in the area of the Kara Sea and the Sea of Okhotsk. A geological expedition was carried out on Sakhalin Island in order to update geological models of the offshore license areas.

Oil refining

9M 2019 oil refining throughput at the Company’s refineries amounted to 81.9 mmt. In 3Q 2019 oil refining throughput increased by 20.5% QoQ and reached 30.1 mmt. 9M 2019 oil refining throughput at the Company’s refineries in Russia was at 74.6 mmt (27.2 mmt in Q3 2019). 9M 2019 throughput reduction at the Company’s refineries in Russia amounted to 2.6% YoY and was caused by equipment maintenance works and units optimization in the context of the current petroleum products demand. Oil refining throughput at the Company’s refineries in Germany in the period of 9M 2019 amounted to 7.2 mmt (2.77 in Q3 2019). The refining throughput level in Germany was affected by reduction in the PCK Raffinerie refinery utilization rate in May-June due to the temporary restrictions on the oil intake into the trunk pipeline system by Transneft along with repairs at PCK Raffinerie GmbH and Bayernoil Raffineriegesellschaft GmbH refineries.

Refining depth in Q3 2019 increased to 75.4%, light products yield amounted to 57.2%. The results are caused by completion of scheduled equipment maintenance works and units optimization in the context of the current petroleum products demand.

Motor fuels assortment expansion

The Company continues to expand the assortment of motor fuels. The Bashneft refining complex has begun the full-scale production of high-octane AI-100 gasoline using its own technology. The new product launch became possible due to the realization of the Ufa refining complex modernization program as part of the Rosneft-2022 strategy. Komsomolsk refinery started production of low sulphur marine fuel RMLS that complies with IMO 2020 requirements.

In-house catalysts production

Rosneft devotes significant attention to in-house production of refining catalysts. This is a key aspect of securing the technological sustainability of the Company’s refining segment and reduction of exposure to foreign technologies. RN-Kat, a company specializing in catalyst production, conducted commercial testing of the first batch of catalysts for hydrotreating processes at the Ufa group of refineries. This allows for production of diesel fuel in accordance with Euro 5 standards. This is the first hydrotreatment catalyst for the Russian oil refining industry, which is capable of fully substituting foreign alternatives. The tests have shown that the in-house designed catalyst allows for diesel fuel production that complies with all modern technical requirements. The catalyst is on par with the best global alternatives and surpasses them in certain characteristics.

Crude oil and petroleum products supplies

In 9M 2019 the international crude oil supplies to non-CIS countries amounted to 102.8 mmt including 35.2 mmt in Q3 2019. The Company continues diversification of foreign crude supply channels. In the reporting quarter crude supplies in the Eastern direction amounted 19.3 mmt.

Over 9M 2019 the Company sold 82.5 mmt of petroleum products, of which 38.2% were sold on the domestic market (including sales of bunker fuel to end-users). Over the same period motor fuels supplies to the domestic market increased by 7.7% YoY and amounted to 22.4 mmt (8.4 mmt in Q3 2019).

Rosneft actively trades on the St. Petersburg International Mercantile Exchange. In 3Q 2019 the Company exceeded the quotas for exchange-traded motor fuel sales volumes by more than 2 times.

Retail business

In 9M 2019 petroleum products sales via retail channels increased by 10% YoY and by 6% in Q3 2019 vs. Q3 2018 level. 9M 2019 revenue from non-fuel sales on filling stations increased by 3% YoY, mainly due to continued improvement of product mix policy and food offer.

The number of participants in "Family Team" and "BP CLUB" loyalty programs has continued to increase. As of the reporting quarter-end 13.2 mln active participants were involved. A virtual loyalty card, which doesn’t require a plastic card, was launched for individual participants in the loyalty programs.

As part of the Company’s retail business digitalization, a mobile application for purchasing fuel in B2C segment was developed in association with Tinkoff Bank. The service is currently being tested at BP’s multi-purpose filling station in the Moscow region, it is planned to launch the service in a pilot testing mode by the end of 2019.

In July 2019 the Company completed acquisition of 100% shares in companies of “Petersburg Fuel Company” group. As a result of the deal, the Company expanded its presence in the key regions, having increased its network of filling stations by 141 units, to 3,081 as of the end of September 2019.

International operations

Rosneft Deutschland, a Rosneft subsidiary, being among the largest wholesale suppliers of petroleum products in Germany continues to develop the customer base. Particularly, a number of contracts were signed with airline companies in Germany to fuel air carriers in airports of Munich and Berlin.


Key operating results for Q3 and 9M 2019:

 Q319Q219QoQQ318YoY9M   199M ‘18YoY
Hydrocarbon production   (kboepd) 5,740 5,710 0.5% 5,826 (1.5)% 5,783 5,747 0.6%
Liquids   production (mmt) 57.88 56.71 2.1% 58.68 (1.4)% 172.21 170.68 0.9%
Gas   production (bcm) 16.30 16.31 (0.1)% 16.62 (1.9)% 49.73 49.95 (0.4)%
APG utilization rate 74.8% 76.7% (1.9) p.p. 83.6% (8.8) p.p. 77.9% 84.5% (6.6) p.p.
Development drilling (km)* 2,627 2,689 (2.3)% 3,258 (19.4)% 7,811 9,225 (15.3)%
2D seismic (linear km)* 362 718 (49.6)% 325 11.4% 2,145 5,087 (57.8)%
3D seismic (sq. km)* 3,978 1,708 >100% 1,699 >100% 9,737 8,285 17.5%
Oil refining (mmt) 30.07 24.96 20.5% 29.82 0.8% 81.90 85.51 (4.2)%
At   Russian refineries 27.22 22.87 19.0% 26.77 1.7% 74.59 76.55 (2.6)%
Outside   Russia 2.85 2.09 36.4% 3.05 (6.6)% 7.31 8.96 (18.4)%
Refining depth 75.4% 74.8% 0.6 p.p. 75.4% - 74.9% 75.2% (0.3) p.p.
Product output in Russia   (mmt) 26.31 22.09 19.1% 25.82 1.9% 72.06 73.93 (2.5)%
Gasoline 4.03 3.66 10.1% 4.01 0.5% 11.52 11.25 2.4%
Naphta 1.57 1.18 33.1% 1.64 (4.3)% 4.04 4.72 (14.4)%
Diesel fuel** 8.82 7.46 18.2% 8.81 0.1% 24.40 25.21 (3.2)%
Fuel   oil 6.28 5.37 16.9% 6.17 1.8% 17.47 17.69 (1.2)%
Kerosene 1.01 0.83 21.7% 1.07 (5.6)% 2.63 2.76 (4.7)%
Petrochemicals 0.30 0.39 (23.1)% 0.31 (3.2)% 1.12 1.15 (2.6)%
Other 4.30 3.20 34.4% 3.81 12.9% 10.88 11.15 (2.4)%
Product output outside Russia   (mmt) 2.99 2.20 35.9% 3.10 (3.5)% 7.69 9.09 (15.4)%
Light products yield 57.2% 58.4% (1.2) p.p. 58.4% (1.2) p.p. 57.9% 58.2% (0.3) p.p.
Sales volumes
Crude   oil (mmt) 39.1 38.8 0.7% 32.3 21.1% 113.4 94.8 19.6%
International   sales to non-CIS 35.2 35.7 (1.4)% 28.8 22.2% 102.8 84.1 22.2%
International   sales to CIS 2.4 1.9 25.5% 2.1 14.3% 6.5 6.5 -
Domestic   market 1.5 1.2 24.7% 1.4 7.1% 4.1 4.2 (2.3)%
Petroleum products (mmt) 30.7 24.2 26.9% 29.8 3.0% 82.5 85.5 (3.5)%
International   sales to non-CIS 17.4 12.8 35.9% 16.9 3.0% 46.1 50.6 (8.9)%
International   sales to CIS 0.9 1.0 (10.0)% 1.1 (18.2)% 2.9 3.0 (3.3)%
Domestic   market 11.6 9.5 22.1% 10.9 6.4% 31.1 29.6 5.1%
Sales   of bunker fuel to end-users 0.8 0.9 (1.7)% 0.9 (11.1)% 2.4 2.3 4.3%
Petrochemical   products (mmt) 0.5 0.7 (18.3)% 0.6 (16.7)% 1.9 2.1 (9.5)%
International   sales 0.2 0.2 - 0.2 - 0.7 0.8 (12.5)%
Domestic   market 0.3 0.5 (13.4)% 0.4 (9.3)% 1.2 1.3 (7.7)%
Gas   (bcm) 15.05 15.55 (3.2)% 14.61 3.0% 47.67 45.56 4.6%
* According to management data
** Including marine fuel

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November 5, 2019

These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.