Message from Rosneft’s Chief Executive Officer, Chairman of the Management Board
Igor Sechin Chairman of the Management Board and Chief Executive Officer
2019 has been a successful year for the Company. We kept working consistently towards our 2022 strategic goals approved by the Board of Directors
Dear shareholders and investors,
2019 has been a successful year for the Company. We consistently worked to implement the Rosneft-2022 Strategy approved by the Board of Directors and delivered strong results across a variety of business lines, which helped us cement our leadership in the energy market.
Notwithstanding the existing OPEC+ arrangement and limitations on oil intake by Transneft’s trunk pipelines, we managed to maintain hydrocarbon production at a record high of 285.3 mmtoe, with the average daily output standing at 5.8 mmboe.
These strong results were due to the launch of greenfield projects, sustained production at brownfields and the use of cutting-edge technologies. At Bashneft's Ilishevskoye field, we piloted Digital Field, the industry's unique information system covering all key oil production and logistics processes. This project is expected to have an annual economic impact of some RUB 1 bln on Bashneft alone, and will be further rolled out to other assets.
In the reporting year, we also carried on with the cluster development of our fields. In June, we put on stream the Zapadno-Erginskoye field (Erginsky cluster) and started infrastructure development and preparations for commercial production at the Severo-Danilovskoye oil and gas condensate field, the first of four fields in the Danilovsky cluster.
Another important milestone was the start of developing a new oil and gas province on the Taimyr Peninsular in Northern Russia, as part of the Vostok-Oil project. Its reserve base amounts to nearly 5 bt of crude oil. The key advantage of this project, which we plan to develop together with partners, is its close proximity to the unique Northern Sea Route. This will enable us to supply crude oil to both Europe and Asia, while also increasing cargo flow along the Northern Sea Route in line with the instructions of the Russian President. Going forward, we plan to create a new word-class cluster unmatched anywhere else.
In 2019, oil refining volumes amounted to 110 mmt, with more than 10 mmt attributable to the Company’s foreign refineries. These volumes were sufficient to meet the domestic demand and honour our commitments with respect to stable and secure supply of petroleum products. Wholesale shipments of motor fuels grew almost 4% year-on-year, coming close to 30 mmt. On the exchange, we sold 2.3 times more motor gasoline and twice as much diesel fuel as required by the Government. Domestic retail sales of motor fuels went up 6% compared to 2018.
On a separate note, we started producing the first hydrotreating catalysts capable of fully replacing similar foreign products to reduce the dependence of the Russian refining industry on imported technologies. Industrial tests on the first batch of these catalysts proved to be a success.
Our Rosneft–2022 Strategy efforts have already yielded tangible results, which is best illustrated by stronger financials, in particular net income and dividends. In 2019, our net income attributable to shareholders increased by 29% to RUB 708 bln. Our revenue went up by 5.3% to a record high of RUB 8.7 trln, while operating profit before depreciation and amortisation grew by 1.2% to RUB 2.1 trln. In 2019 our free cash flow amounted to RUR 884 bn, remaining in the positive territory for nearly eight years running.
These achievements gave a boost to our market capitalisation, which increased by 17% in 2019 and by over 44% since the launch of the Strategy. This proves that we are on the right path.
We confirmed our role as Russia's largest taxpayer and a systemically important company, with contributions to the national budget coming close to RUB 3.6 trln over the year. Maximising shareholder returns is a key priority for the Company’s management. For the full year, our dividends reached an all-time high of roughly RUB 283 bln (up 25% year-on-year), with nearly RUB 141 bln attributable to the Russian Government.
We are successfully developing our trading business. In 2019, we opened an office in Singapore to trade in oil and petroleum products. The new division has already delivered impressive results, with feedstock supplies to Asian countries in 2019 reaching 79.7 mmt. We are strengthening our efforts in the traditional sales markets, too. In 2019, we signed contracts to supply up to 12 mmt and 15.1 mmt of oil to Poland and the Czech Republic, respectively.
In the past 20 years Rosneft became one of the global energy leaders and the largest publicly-traded company in the world by production and reserves volumes. Our employees received awards from the Government for their outstanding achievements and contribution to the national economy. I am confident that this high-level recognition will help us strengthen our position both in the Russian and international markets.