Market Overview and Competitive Landscape

Competitive analysis

Hydrocarbon Exploration and Production

Rosneft is the largest oil and gas company in Russia and a leader in terms of reserves and hydrocarbon liquid production among global peers whose shares or depositary receipts trade on international stock exchanges. Resource sustainability, including the size of reserves, reserves-to-production ratio and efficient reserves management, is one of the key investment highlights of an oil and gas company.

For many years, we have been steadily building up our reserves of commercially recoverable hydrocarbons. This was possible thanks to our consistent efforts to increase production from brownfields and launch new fields and prospects, as well as to our successful exploration operations. We pay special attention to exploration and sustainable reserves growth at the existing licence areas, with resource base integration and expansion being key focus areas at our new assets.

42,018 mmboe Proved hydrocarbon reserves (SEC)

Under the SEC (U.S. Securities and Exchange Commission) classification, Rosneft’s proved hydrocarbon reserves totalled 42,018 mmboe (5,678 mmtoe) as at 31 December 2019. Compared to the end of 2018, our hydrocarbon reserves grew by 587 mmboe (81 mmtoe), or 1%. We engaged DeGolyer & MacNaughton to conduct a life-of-field audit of the reserves.

As at the year-end, Rosneft’s SEC-proved reserve life exceeded 20 years, and the SEC-proved organic reserve replacement ratio stood at 129% in 2019 and 163% in 2017–2019.

Reserve Replacement and F&D Costs
Reserve Replacement and F&D Costs
Source: company reports.
Global oil production
Sources: company reports; Wood Mackenzie (Gazprom).

For several years now, Rosneft has surpassed the world's public oil and gas majors in terms of SEC-proved reserve replacement ratio. At the same time, we boast high exploration and production efficiency and maintain traditionally low finding and development costs.

As at 31 December 2019, the Company’s reserves under the PRMS (Petroleum Resources Management System) standards, according to DeGolyer & MacNaughton, totalled 47,289 mmboe (6,400 mmtoe) in the 1P category, 84,926 mmboe (11,504 mmtoe) in the 2P category, and 125,296 mmboe (16,976 mmtoe) in the 3P category. In 2019, total 3P reserves grew by over 4 bboe (550 mmtoe).

Reserves-to-production ratio (SEC) in 2019, yearsIncluding affiliates. PetroChina data for 2018 does not include affiliates.
Source: company reports.
Organic reserves growth (SEC), bboeIncluding affiliates. PetroChina data for 2016–2018 does not include affiliates.
Organic reserves growth (SEC), bboe
Source: company reports.

An upward revision of reserves estimates and the full replacement of hydrocarbon production in 2019 were due to successful exploration and production drilling and the use of advanced recovery enhancement techniques to extract hard-to-recover reserves, among others. The key contributors to the reserves base were the fields of RN-Yuganskneftegaz, RN-Nyaganneftegaz, and Varyeganneftegaz along with assets in Eastern Siberia.

For years, Rosneft has invariably maintained a high reserve replacement ratio (reserve replacement cost in 2017–2019 was USD 0.3 per boe). In 2020–2022, we intend to replace no less than 100% of our hydrocarbon production. The Company also plans to fast-track the development of new reserves by reducing preparation timelines, accelerate viability-based resources to reserves conversion, and make exploration drilling in Russia more successful.

77,566 kbpd global oil production in 2019

The Company accounts for 41% of the total oil production of Russia and for approximately 6% of the global oil output. On top of that, we boast the highest 10-year average production growth among peers.

Rosneft is Russia’s leading petroleum company in terms of launching new projects. In 2016, we put on stream a number of large fields, including Suzunskoye, Yurubcheno-Tokhomskoye, Kondinskoye, Tagulskoye, Russkoye, Srednebotuobinskoye (Phase 2), Zapadno-Erginskoye, Vostochno-Messoyakhskoye and Kuyumbinskoye. We also made great progress in developing RN-Yuganskneftegaz mature fields, our key asset, and the fields of Samaraneftegaz, RN-Nyaganneftegaz and Varyeganneftegaz. At Samotlor, we optimised production decline rates. In the medium term, we plan to enhance production from mature fields and develop new high-potential oil and gas projects, including the Vankor, Erginsky and Danilovsky clusters, Rospan, Kharampurskoye and Severo-Komsomolskoye fields to increase the output through organic growth.

Oil and gas condensate production in Russia, mmb per day
Oil and gas condensate production in Russia, mmb per day
Source: CDU TEK
Hydrocarbon production in 2019, mmboe per day
Hydrocarbon production in 2019, mmboe per day
Source: company reports for 2019.

In furtherance of the Russian President's instruction to increase the cargo flow along the Northern Sea Route, we are preparing for a large-scale hydrocarbon production project, which will set the stage for a comprehensive development of the new oil and gas province in the Krasnoyarsk Territory’s north (Vostok-Oil project). Together with our partners, we will build a unique world-class oil and gas cluster in this location.

To ensure production growth in the long run, we create an optimal portfolio of major greenfield projects, while also using advanced production technologies at our existing fields. Technology advance is a key focus area of the Rosneft–2022 Strategy and a powerful driving force behind our competitiveness.

To develop our technological capabilities, we keep rolling out cutting-edge techniques that help expand the pay zone coverage, increase flow rates, and optimise well and infrastructure construction. As part of our digitalisation efforts, we launched the Digital Field information system covering all key oil production and logistics processes at the Ilishevskoye field in the Republic of Bashkortostan. The expertise gained in the course of the pilot project will be rolled out at all of our fields. RN-UfaNIPIneft, part of Rosneft's research and design cluster, developed the first commercial software suite for geomechanical modelling of drilling operations – RN-Sigma. It enables the Company’s engineers to capitalise on wider applications of geomechanical calculations for borehole stability and reduce the risk of complications while drilling directional and horizontal wells.

Pursuant to our plans to diversify our portfolio of production assets and implement international upstream projects, we are expanding production outside Russia. In particular, we keep developing production blocks in Iraqi Kurdistan under the Production Sharing Agreements signed in October 2017. In the first quarter of 2019, we piloted production at Block 11 of the Bejil field. By taking part in the development of the unique Zohr field together with Eni (a 50% stake) and BP (a 10% stake) – global energy majors and our strategic partners – we were able to promptly step up gas production abroad and penetrate the Egyptian market with a view to further strengthening our foothold both in the country and the entire region. June 2018 saw Mubadala Petroleum join the project. The field was put on stream in December 2017, and in August 2019, five months ahead of schedule, it reached the full design capacity of 76 mmcm per day.

Average production growth for ten years, %
Rosneft 9.3%
PetroChina 2.7%
Shell 1.6%
Chevron 1.3%
Petrobras 0.9%
Gazprom 0.6%
ExxonMobil 0.1
BP -0.6%
Sources: company reports; Wood Mackenzie (Gazprom).