Market Overview and Competitive Landscape

Operational and Financial Efficiency

The reporting year was marked by a number of events that had a significant impact on the Company's production volumes, including the extension of OPEC+ agreement, as well as the incident with high levels of organic chlorides found in Transneft’s network in April, leading to major failures in trunk pipeline operation. In spite of that, high efficiency and rational allocation of exploration and production capex in 2019 ensured a balanced output growth through new projects and stimulating production at mature fields.

Rosneft is highly efficient in its exploration and production operations and maintains traditionally low finding and development costs. Rosneft's average F&D costs over the last five years stood at USD 4.56 per barrel, while the RRR of SEC1P reserves in 2014–2018 reached 151%.

Low unit production costs is yet another indicator of Rosneft’s operational efficiency. In the reporting period, we maintained undisputed leadership in production costs in Russia through the use of most suitable technologies and stringent cost controls. Rosneft's current operating costs per barrel are significantly lower than those of international majors, and 15–25% lower than the lifting costs of Russian peers. This gap could be bigger if we factored in temporary decrease or slowdown of growth in the costs of Russian competitors in 2018–2019 due to the shutdown of low-margin wells and limited production at mature fields in Russia, and increased production at greenfields with tax breaks, while the production is limited by OPEC+ decisions.

Over many years, Rosneft has demonstrated a positive free cash flow, which makes us stand out among most competitors, whose performance tends to be highly volatile and sometimes negative as a result of asset acquisition or at the start of investment projects. In 2018–2019, Rosneft was in the middle of the investment cycle and bore considerable capital expenditures for construction and launch of new projects, and still demonstrated unit free cash flow of USD 6–8 per boe.

Unit capex in exploration and productionPetrobras unit capex in exploration and capex in Brasil, USD /boe
Unit capex in exploration and production, USD/boe
Unit productionPetrobras data, unit capex in Brazil, USD /boe
Unit production, USD/boe
Free cash flow 2017–2019, comparative analysis (majors) in USD /boePer boe of liquid hydrocarbons production, including subsidiaries
Free cash flow 2017–2019, comparative analysis (majors) in USD /boe