As the largest retail network in the Russian Federation, Rosneft’s retail business covered 66 regions of Russia in 2018. The Company possesses the widest geographical coverage and holds a leading position in most of its regions of operation. The Company also has retail networks in Abkhazia, Belarus, and Kyrgyzstan. Rosneft’s brand of filling stations is one of the most widely recognized both in name and fuel quality within Russia.
As at 31 December 2018, the Company’s existing network of own and leased filling stations comprised 2,963 stations, including 66 filling stations in Abkhazia, Kyrgyzstan, and the Republic of Belarus, and housing 1,933 shops. As at 31 December 2018, the Company had 138 oil depots with a combined capacity of 2.1 mmcm and approximately one thousand of gasoline tanker trucks in operation.
Petroleum product retail sales amounted to 13.8 mmt in 2018, constituting a 16% year-on-year increase with petroleum product sales per filling station averaging 12.8 tonnes per day.
Initiatives within the Company’s retail business development strategy entailed the following:
- the membership of the Family Team and BP-Club loyalty programs continued to grow; as of 31 December 2018, 10.3 million people in 58 regions of the Russian Federation were enlisted;
- a pilot project was implemented to launch a virtual card at Rosneft and BP filling stations (for the Family Team and BP Club loyalty programs);
- a virtual fuel card for B2B segment was launched into commercial service in the Moscow Region;
- the Company won the Product of the Year award for new Pulsar fuel nominated as the Most Popular New Product of the Year in Fuel category;
- the Company brought to the domestic market a new high-octane fuel Pulsar 100, AI-95 Euro-6 motor gasoline with improved environmental and performance characteristics and a new line of fuel with ACTIVE technology;
- in the course of rebranding of the TNK filling stations, the exterior and shops of 230 stations were completely upgraded;
- the Company expands the offering of filling station cafés by creating self-service areas (coffee corners) and installing modules for making hot dogs. Currently, the network houses 1,138 full-format cafés, and coffee is offered at 2,352 filling stations/oil depots, and hot dogs at 1,275 filling stations/oil depots. The Company is continuing an Active Sales program, with sales targets of key product categories set for each oil depot;
- as part of expanding the range of cafés at the federal level, a hot drink line has been brought in;
- the first new-style small-size filling station under BP brand has been opened. This new-style filling station, being a rebranded TNK station, has been opened on the Federal Highway М-5 Moscow–Ryazan. This filling station features the concept of “Wild Bean Café - a single customer service area”. Two-thirds of the store’s space is taken by a café, which serves not only snacks for the road (key “to go” offering) but also full-scale breakfasts and lunches;
- the product offering has been optimized across the entire network; there is also a range of products under its own brand, which spurred the income growth in the following categories: water - by 7%, wet wipes - by 28, and granola bars - by 39%;
- to pursue fuel quality control, over 8 thousand inspections using own mobile laboratories have been conducted at filling stations and oil depots in 47 constituent entities of the Russian Federation;
- the control system for filling stations designed to prevent unauthorized entry has been improved, which significantly reduced the risks of fraud, and increased the fuel filling accuracy and customer’s confidence in the absence of underfilling.
Small-scale wholesale distribution of petroleum products at regional oil depots totaled 6.6 mmt in 2018, up 1.4% year-on-year. The drivers behind the growth of sales are as follows:
- active customer attraction policies;
- rasing the number of supplies to the government customers according to the results of tendering and being a single supplier;
- exchange sales development. In 2018, 23 Rosneft Group Subsidiaries from 34 regions of the Russian Federation traded motor fuels at the St. Petersburg International Mercantile Exchange (JSC SPIMEX);
- development of a long-term contracting program in 23 regions of the Russian Federation.
In November 2018, the Company signed an Agreement on measures to stabilize and develop the domestic market for petroleum products; the obligations under the Agreement have been fully fulfilled.
Improvements in Retail Business Efficiency
The focus in 2018 was on the phased 100% automation of measurements of all product flows, as well as introduction of a system for preservation of petroleum products in the oil products supply company. In 2018, 24 oil depots were equipped with automatic filling systems for gasoline tanker trucks and 46 oil depots - with automated in-tank measurement systems. The measurement and accounting automation at key oil depots is 95%, at regional depots - 29%, which covers over 70% of material flows.
The main priorities for ensuring sustainable demand and leading customer loyalty in the Company’s retail and small wholesale network are:
- implementation of a risk-based fuel quality management system across the entire supply chain (from refinery to consumer);
- consistent efforts to counter unfair participants in the fuel market;
- introduction of an electronic system on gasoline tanker trucks for guaranteed delivery of petroleum products in terms of quantity and quality.
Fuel consumption for own operational needs was reduced by 3% year-on-year in volume terms.
Initiatives were continued to improve the Company’s retail business efficiency, including optimizing operating costs of filling stations and oil depots, and administrative costs. In 2018, operating costs decreased by 3% year-on-year, on a comparable basis. Despite the increase in sales by 16%, which leads to an increase in the variable costs of storage and transportation, there are still cost savings. Within efforts to improve the efficiency of its oil depot facilities in 2018, the Company closed five poorly performing oil depots that were not up to technical and operational standards. The Company has also reduced its operating costs through optimizing the logistics of direct petroleum product supplies by utilizing gasoline tanker trucks from refineries for direct supplies and scheduled upgrading its tanker fleets, with direct supply volumes in 2018 increasing by 20% year-on-year.
Aircraft Refueling Business
The sales of jet fuel in 2018 increased by 6% year-on-year and amounted to 3.5 mmt, also due to the growth in passenger traffic in the Russian Federation.
Break-down of Consumers in 2018:
- 2.3 mmt – airlines and refueling complexes (+11% year-on-year);
- 1.2 mmt – bulk sales, including exchange trading (0.5 mmt).
Domestically, jet fuel is sold through a network of refueling facilities controlled by Rosneft in 18 airports, and third-party refueling facilities in 19 airports. The Company also sells jet fuel at six airports in Germany, Georgia, and Mongolia.
The Company’s main customers are Aeroflot, S7, Ural Airlines, Pegas Group, Volga-Dnepr Group, Utair Group, Yamal, NordStar, Turkish Airlines, and Lufthansa.
Rosneft’s bunkering business covers all major Russian sea and river ports and a number of foreign destinations. Bunker fuel sales in 2018 increased by 10.7% year-on-year to 3.1 mmt, driven by the successful cooperation in the Far Eastern ports with major foreign consumers - operators of transcontinental container lines.
Breakdown of sales in 2018: – 2.5 mmt (80%) to foreign shipowners, – 0.6 mmt (20%) domestically.
In 2018, a number of initiatives were implemented to maintain and expand the Company’s presence in the bunkering market, including:
- bunkering volumes in the Kaliningrad port increased from 18 to 46 thousand tonnes, and in the Caucasus port - from 53 to 76 thousand tonnes;
- the Komsomolsk Refinery launched the production of DMF III marine distillate fuel with new quality characteristics. During the year, the sales totaled 31 thousand tonnes;
- long-term contracts were concluded with the key domestic consumers, i.e. FSUE Rosmorport, LLC Russian Fishery, and FSBI Marine Rescue Service.
In anticipation of entry from 1 January 2020 restrictions MARPOL (International Convention pollution prevention environment) by content sulfur in marine fuel by the Company working on options for setting for the production of low-sulfur species fuels to ensure supplies like on the inner and outer bunker markets.
Breakdown of sales by the bunkering business in 2018:
Bitumen Products Sales
The sales of bitumen materials in 2018 amounted to 2.6 mmt. Furthermore, in 2018 the Company increased the bitumen production and sales according to new GOST. Sales for 2018 amounted to 0.6 mmt, which is significantly higher year-on-year (0.03 mmt).
Domestic sales accounted for 95% of the Company’s total sales of bitumen products during the reporting period.
Rosneft is developing the production and sales of an innovative polymer-modified bitumen (PMB), which substantially improves road surface quality. In 2018, PMB sales rose 84% year-on-year to 76 thousand tonnes.
The Company’s total sales of oils in 2018 amounted to 1,006 thousand tonnes, including 652 thousand tonnes sold in the domestic market (65% of total volume).
In the reporting period, premium lubricant sales amounted to 84 thousand tonnes, up 21% year-on-year.
In 2018, the volume of lubricants shipments to end consumers on direct contracts increased by 32 thousand tonnes (+ 25%) year-on-year.