1.6. Competitive analysis

6.13 BLN BOE


5.4 %


Upstream (hydrocarbons exploration
and production)

Rosneft is the largest oil and gas company in Russia and the world’s largest holder of hydrocarbon reserves and hydrocarbon liquids producer among other public oil and gas companies. As at December 31, 2015, the proven hydrocarbon reserves of Rosneft approximated 34465 million barrels of oil equivalent (about 4654 MTOE) based on the findings of the audit conducted by DeGolyer & MacNaughton using the SEC (U.S. Securities and Exchange Commission) classification providing for the evaluation through the end of the profitable field development. Rosneft hydrocarbon reserves increased by 488 million barrels of oil equivalent (59 MTOE). The growth of reserves was achieved despite a significant reduction in benchmark oil prices.

The proven hydrocarbon reserves replacement ratio according to SEC classification amounted to 124 % (the ratio is based on metric units). According to SEC, Rosneft proven hydrocarbon reserves in 2015 were sufficient for 19 years.

Rosneft leads with volumes and organic growth of reserves among other public oil and gas companies in Russia and abroad by traditionally demonstrating high performance of its prospecting efforts.

Rostneft’s growth of hydrocarbon production in 2015 in anticipation of launching new projects in 2016–2018 amounted to 1 % (the growth of hydrocarbon production of its international peers in 2014 before the active launch of new projects was as follows: ExxonMobil (-4.5 %), Shell (-3.7 %), BP (-2.4 %), Chevron (-1 %), and Statoil (+0.6 %)). After the launch of new projects and production growth in new fields in 2015, international oil and gas companies demonstrate a production growth from 2 % (Chevron) to 5 % (Statoil).

Rosneft takes robust efforts to start commercial production in new large fields in East and West Siberia between 2016 and 2020, including Suzunskoye, Tagulskoye, Lodochnoye, Urubcheno-Tokhomskoye, Russkoye, Kharampur (gas deposits) and Kynsko-Chaselskoye license area. During the development of the aforementioned fields, the Company plans to use new drilling technologies (including drilling of horizontal wells) that have proven to be, efficient at the Company’s producing fields, allowing mid-term development of significant oil and gas reserves, hard-to-recover reserves.

Against the backdrop of the global growth of production and use of gas as the greenest fossil fuel, Rosneft continues to expand the gas share in its asset portfolio and in hydrocarbon production volumes (above 20 %), gradually closing the gap with major international companies (30-50 %).

Downstream (refinery and sales)

Rosneft is the largest oil and gas refining company in the Russian Federation. Over recent years refinery operations of the Company were focused on covering market demand in quality oil products with support from continuing performance of modernization prorgam. In 2015, the Company completed transition to the production of Euro-5 fuels for the domestic market in line with the requirements of Technical Rules of Procedure.

Rosneft is an active player in the oil and petroleum product market in and outside Russia. Crude oil is mainly exported and supplied to own refineries in the Russian Federation and abroad. Crude oil is exported to European, APR and CIS countries, sold in the international market and supplied for refining to the own refineries in the Russian Federation and abroad. The Company is consistently expanding its export volumes under long-term contracts, including oil supplies under contracts with CNPC and direct contracts to Europe. The Company’s main competitors in Russian oil export are Russian vertically integrated companies including LUKOIL, Surgutneftegaz, and Gazprom Neft. There is no direct competition in oil export since all Russian producers have their own export schedule for oil transport outside the Russian customs zone based on equal access to the main oil pipeline system and sea port terminals. The main competitors supplying other crude oil grades in the export market are such international and national oil companies as Shell, ВР, ExxonMobil, Chevron, Total, Statoil, Saudi Aramco, NIOC, and others. Oil sales to third parties in the domestic market are insignificant, and oil is mainly refined at Rosneft’s own refineries.

According to CDU TEK Rosneft share in the wholesales motor gasoline and diesel fuel market of the Russian Federation made 27 % and 30 % respectively in 2015.

Rosneft has the largest retail chain (2363 gas stations) across Russia. Petroleum products in the domestic market are sold in all federal districts of the Russian Federation. The Company has sufficient own and engaged infrastructure for oil products procurement (oil bases, filling stations) with account for regional markets capacity and consumer demand. Rosneft trademark is one of the most recognizable in the market in the regions where the Company operates and is associated with decent fuel quality at gas stations which is highly important to remain competitive.

Oil and oil products are exported to European, APR and CIS countries. The Company’s presence is being expanded on the back of oil refining at Ruhr Oel refineries in Germany. The Company’s main competitors exporting Russian oil are such Russian vertically integrated companies as LUKOIL, Surgutneftegaz, and Gazprom Neft. The main competitors supplying oil products to the export market are such international and national oil companies like Shell, ВР, ExxonMobil, Chevron, Total, Statoil, Saudi Aramco, NIOC, and others.

Operational and financial performance

Amid continuing oil price reduction, Rosneft demonstrated strong operational, financial, and investment management performance in 2015.

It managed to cut its USD CAPEX in USD terms by 30% y/y while global peers reduced spending by 15 - 20%.

Highly efficient investment in exploration and production helped the Company to maintain oil production and increase gas output by 10 % with the lowest unit CAPEX level in the peer group.

Rosneft has long been a leader in the oil industry in terms of lifting cost. In 2015, the Company almost returned to the 2011 production cost level after successfully integrating new assets acquired in 2013.

With global oil prices decreasing by almost half in 2015, Rosneft minimized the decline in its unit free cash flow by optimizing the capital program structure, maximizing its operational profits, and efficiently managing its working capital. Therefore, it maintained its leadership among Russian and international companies in this respect and dividend pay out in full.