Performance Results

Gas Business

Rospan and Kharampur are major gas projects viewed as the top contributors to the Company's near-term hydrocarbon production growth.

The Company is developing vast gas reserves in Western and Eastern Siberia and holds a unique licence portfolio for hydrocarbon development on the Russian continental shelf. As at 1 January 2020, АВ1С1+В2С2 recoverable gas reserves were estimated at 7.7 tcm.

Rosneft produces gas through more than 35 subsidiaries and joint ventures in Western and Eastern Siberia, Central Russia, the south of European Russia, the Russian Far East, as well as in Egypt, Vietnam, and Canada.

19 %
share of gas in the Company’s total hydrocarbon production in 2019
67.0 bcm
total gas production in 2019CGTU – comprehensive gas treatment unit.

Rosneft’s strategic goal for gas business development is to consistently grow its shareholder value through increased gas output supported by a high-performance long-term sales portfolio.


Gas Business
Strategic Objectives of the Gas Business

The following objectives have been set in the Rosneft–2022 Strategy for the gas business:

  • Deliver the key gas production projects, including Rospan and Kharampur, on schedule and within budget, thereby raising annual output to more than 100 bcm.
  • Improve the gas sales economics in Russia through such measures as promoting a favourable regulatory environment, including equal access to infrastructure and customers.
  • Improve the Company's technological base for production and expand its technological competence to support:
    • the development of the Turonian deposit;
    • the production of liquid petroleum gas (LPG) and natural gas liquids (NGL);
    • increased APG utilisation, including through the development of captive power generation and petrochemicals;
    • in the longer term, gas reserve monetisation in Eastern Siberia and the Russian Far East, including through petrochemicals development;
    • LNG production and exports.

In December 2019, the Company's Board of Directors reviewed the progress against the Rosneft–2022 Strategy in 2019 and confirmed the previously approved strategic objectives and targets for the gas business.

Meeting the strategic gas business objectives will increase Rosneft’s free cash flow in 2020–2022 and the Company’s long-term shareholder value while also securing a 20% share in the Russian gas market.

Achievements in Gas Business Development

Achievements in Gas Business Development

  • Construction of key facilities at Rospan is in its final phase:
    • core process equipment for the CGTUCGTU – comprehensive gas treatment unit. in the Vostochno-Urengoysky licence area installed;
    • major construction and installation operations completed to prepare the oil treatment unit for launch;
    • six out of seven gas turbine units launched to cover the electricity demand of all first-stage facilities;
    • the Korotchaevo railway terminal almost completed.
  • Construction of key facilities at Kharampurneftegaz is in the active phase:
    •  construction and installation continues at the gas treatment unit, gas shipment pipeline, power facilities, and other infrastructure;
    • 57 out of 61 project wells drilled;
    • geological data research and collection continues for the first well put into pilot operation at the Turonian deposit.
  • The Zohr joint offshore development project in Egypt reached its full design capacity of 76 mmcm per day ahead of schedule. Since the project was launched in December 2017, 13 production wells, eight gas treatment trains, four subsea pipelines, and an offshore management platform had been commissioned.
  • A unique process was developed to produce gas from the low-permeability reservoirs of the Berezovskaya suite. The distinctive feature of the technology is that it allows fissure logging while drilling. The logging results can be used to identify the optimal layout of hydraulic fracturing ports, contributing to more effective development of such fields. A patent application has been filed.
  • For the first time in Russia, a reserve estimation at Kharampur resulted in the Berezovskaya suite reserves being successfully proved to the State Commission for Mineral Reserves (GKZ) and approved by the Federal Subsoil Resources Management Agency (Rosnedra).
  • Under the Far Eastern LNG project, the Sakhalin-1 consortium decided to proceed to the stage of front-end engineering design (FEED) and initiate competitive contractor selection.
  • In August, Rosneft signed cooperation agreements with Mozambique’s National Petroleum Institute (INP) and state oil and gas company ENH. Under these agreements, Rosneft will have the right to study the available geological information to assess the potential of onshore and offshore blocks in Mozambique.
  • At the St Petersburg International Economic Forum, Rosneft and Rostec signed an agreement to support the gas motor fuel market. The parties agreed to upgrade Rosneft’s filling stations with liquefied natural gas (LNG) and compressed natural gas (CNG) equipment.
Gas Production

Performance in the Reporting Year 

In 2019, Rosneft’s gas production both in Russia and abroad totalled 66.95Recovered gas volume excluding flared gas and gas used in liquid hydrocarbons production. bcm, including 32.77 bcm of natural gas and 34.18 bcm of associated petroleum gas. The Company’s international projects, mostly in Egypt, Vietnam and Venezuela, accounted for 4.97 bcm of the total gas output, including 4.90 bcm of natural gas, while its domestic output stood at 61.98 bcm. Some of the Russian gas was processed into liquid hydrocarbons. In 2019, the Company’s gas output in Russia, including the gas processed into liquid hydrocarbons, totalled 62.36 bcm.

Gas production was almost flat vs 2018.

8.5 %
share in Russia’s total gas production
Gas Production by Region
Gas Production by Region
Gas Production in Key Regions of Operation in Russia and Abroad, bcm

Rosneft’s largest gas-producing region is Western Siberia, which contributed 47.01 bcm, or 70%, of the total gas output in 2019, including 24.27 bcm of natural gas produced mainly by Sibneftegaz, Rospan International, Purgaz and RN-Purneftegaz and 22.74 bcm of associated petroleum gas produced mainly by Samotlorneftegaz, RN-Yuganskneftegaz, Varyeganneftegaz and RN-Purneftegaz.

In Eastern Siberia, gas was produced at the Vankor group of fields, the region's largest. Output there amounted to 5.94 bcm of associated petroleum gas and 1.57 bcm of natural gas.

In the Russian Far East, Rosneft mainly produced associated petroleum and natural gas from onshore fields and on the shelf off Sakhalin, with RN-Shelf-Far East accounting for the bulk of the 2.95 bcm gas production in 2019.

In the Volga-Urals Region, gas was primarily produced from the fields operated by Orenburgneft, Samaraneftegaz and Bashneft-Dobycha. Output there amounted to 2.2 bcm.

In Southern Russia, the Company's key gas asset is RN-Krasnodarneftegaz, which produces both natural and associated petroleum gas. The region brought in 2.07 bcm in 2019.

International projects, mainly the Zohr offshore field in Egypt, produced 4.97 bcm. Our operations in Vietnam and Canada also contributed.

Key Assets and Promising Projects of the Company's Gas Business

In line with its approved strategy, the Company focuses on high-ROI projects. Our key priority is to launch such projects within budget and on schedule, so that we can produce more than 100 bcm of gas annually by 2022 and increase the share of gas in total hydrocarbon production.

Rospan

The launch of Rospan, the largest gas project in the Company’s portfolio, is key to achieving the mentioned objectives. The full-scale development of Rospan International's fields will be the primary source of near-term growth for both gas and other hydrocarbon production.

Total recoverable reserves (AB1C1+B2C2) as at 1 January 2020:

  • 912 bcm of gas
  • 169 mmt of gas condensate and crude oil

Mid-term annual production outlook:

  • over 21 bcm of gas
  • over 5 mmt of gas condensate and crude oil
  • up to 1.3 mmt of industrial propane/butane mixture

At the end of 2019, construction of key facilities was in its final phase:

  • core process equipment installed as part of the CGTU's first start-up complex in the Vostochno-Urengoysky licence area, key installation and testing tasks completed on the process pipelines;
  • major construction and installation operations completed on the oil treatment unit, core process equipment being prepared for hot commissioning;
  • six out of seven gas turbine units launched at the Vostochno-Urengoysky licence block's gas turbine power plant;
  • at the Korotchaevo railway terminal, most of the installation completed on the process pipelines and shut-off and control valves.

Russian and foreign cutting-edge technologies ensure more efficient production at Rospan. For the first time in the Company's history, two horizontal wells were drilled in 2019 using multi-stage hydraulic fracturing and the HiWAY technique to enable production from reservoir edges and speed up the overall development, effectively boosting technical gas recovery by 2.1%.

Plans

Completion and launch in 2020.


Kharampur

Also vital to Rosneft’s gas business is the project it runs together with BP at the Kharampurskoye field. Its objectives include conventional gas production from the Cenomanian deposit and the pilot and then full-scale development of the Turonian deposit. The Company has the expertise and experience to deliver such complex projects efficiently.

As at 1 January 2020, the field's АВ1С1+В2С2 recoverable natural gas reserves, including the Turonian deposit, were close to 1 tcm.

Once it reaches the design capacity, annual gas production is expected to be around 11 bcm, with a potential to expand to 25 bcm later.

In 2019, construction of key facilities remained in the active phase:

  • construction and installation at the gas treatment unit involved placing foundation piles, pouring concrete, and assembling steelwork;
  • construction and installation progressed at the gas shipment pipeline, with drilling started for the second Vasseyakha River crossing;
  • 57 out of 61 project wells were drilled;
  • geological data research and collection continued for a well put into pilot operation at the Turonian deposit;
  • gas well cluster engineering facilities and feeder roads were completed; construction of gas gathering networks and fit-up of well pads and power facilities continued.

Plans

The near-term plans include:

  • completion of gas production infrastructure for the Cenomanian deposit;
  • completion of key facilities (the gas treatment unit, gas shipment pipeline, etc.);
  • completion of the feasibility study for the full-scale development of the Turonian deposit and proceeding to the FEED stage.

The project launch is scheduled for 2021.

Research was also in progress at the Kharampurskoye field to study the geological structure and production potential of the Berezovskaya suite's low-permeability gas reservoirs. The Company has developed methodologies and techniques to explore the suite’s reserves and estimate its resource potential. In 2019, a comprehensive estimation at Kharampur resulted in its Berezovskaya suite's reserves being, for the first time in Russia, approved to the State Commission for Mineral Reserves (GKZ) and protected by Rosnedra.

In 2019, we also finalised our unique method of gas production from the Berezovskaya suite. The distinctive feature of this technology is that it allows fissure logging while drilling. The logging results can be used to identify the optimal layout of hydraulic fracturing ports, contributing to more effective development of the Kharampurskoye field. A patent application has been filed.


Sibneftegaz

This is our biggest gas-producing asset for the moment.

It produced 11.4 bcm of natural gas in 2019, with the cumulative gas output reaching 125 bcm by the year end.

As at 1 January 2020, its АВ1С1+В2С2 recoverable reserves amounted to 532 bcm of gas and 31 mmt of gas, crude oil and gas condensate.

In 2019:

  • production drilling continued;
  • essential production facilities under construction included:
    • a gas and condensate treatment unit and related infrastructure for the development of the Beregovoye field’s lower horizons;
    • a booster compressor station at the Beregovoye field.

Plans

The facilities are to be launched in 2020.

Thanks to production maintenance projects at the existing fields and the non-capital-intensive development of the Beregovoye field’s lower horizons, annual gas output in the period until 2022 is expected to exceed 15 bcm.


Other Projects

In 2019, Rosneft continued to develop prospective gas production centres at its existing fields in Eastern Siberia and the Republic of Sakha (Yakutia).

Verkhnechonskneftegaz

Rosneft and Beijing Enterprises Group Company LimitedBeijing Enterprises Group Company Limited holds a 20% stake in Verkhnechonskneftegaz. were jointly exploring the Verkhnechonskoye oil and gas condensate field in the Irkutsk Region. The project will involve establishing a new gas production centre and building transport infrastructure. Our strategic partnership with Beijing Enterprises Group Company Limited is expected to open up new opportunities for monetising gas reserves in Eastern Russia.

Taas-Yuryakh

In the Republic of Sakha, Rosneft, BP and an Indian consortium consisting of Oil India Limited, Indian Oil Corporation Limited and Bharat PetroResources Limited continued to develop the Srednebotuobinskoye oil and gas condensate field,which in a long term is set to become a basis for a major gas production project.

Kynsko-Chaselsky licence area

In the long term, we plan to use the infrastructure of the Kynsko-Chaselsky licence area to create a new gas production centre in the south-east of the Yamal-Nenets Autonomous Area. This will include the development of seven previously acquired licence areas and, in the longer run, the adjacent areas in the eastern part of what is open acreage today.

The project’s expected annual output is 15.7 bcm, with a potential to grow to 19 bcm later. In 2019, the key design solutions were fully developed for its first stage, which targets an annual output of up to 8.7 bcm. Engineering surveys and the work on design documentation are to start in 2020.

1. Rospan
2. Sibneftegaz
3. Kharampurneftegaz

4. Kynsko-Chaselskoye Neftegaz
5. Vankor group
6. RN-Purneftegaz
7. RN-Yuganskneftegaz
8. Samotlorneftegaz
9. Varyeganneftegaz
10. RN-Nyaganneftegaz

11. RN-Krasnodarneftegaz
12. Orenburgneft
13. Bashneft-Dobycha
14. Bashneft-Polyus
15. Minkhovskoye
16. Yurubcheno-Tokhomskaya group
17. Agaleevsky license area
18. Verkhnechonskneftegaz
19. Taas-Yuryakh Neftegazodobycha
20. Bratskekogaz

21. RN-Shelf-Far East, RN-Sakhalinmorneftegaz, Sakhalin-1
22. Far Eastern LNG (as part of Sakhalin-1)
23. Otradnensky and Neftegorsky GPPs in the Samara Region
24. Buzulukskoye GPP in the Orenburg Region
25. Shkapovskoye and Tuimazinskoye GPPs
26. RN-YuganskGazPererabotka

Gas Processing and Better APG Utilisation

Our APG utilisation programme helps reduce the environmental footprint and address environmental issues in the producing regions by utilising associated petroleum gas.

In 2019, the Company's APG utilisation rate, including fields under development and greenfield projects at early stages of development, stood at 77.8%, or 6 p.p. lower than a year ago. If fields at early stages of development are excluded, the rate was 89.3%.

The Company continued its full-scale efforts to improve utilisation and completed 23 APG facilities.

To further develop our gas processing capabilities, we worked on a project to build the Maisky gas processing complex in Western Siberia. In 2019, positive opinions of the Main Department of State Expert Evaluation were obtained after completing engineering surveys and drafting design and cost estimate documents.

In 2019, the Company's APG utilisation rateExcluding fields at early stages of development. stood at
89.3 %
LNG Projects

The Company is involved in the Far Eastern LNG project as a member of the Sakhalin-1 consortium to monetise the natural gas reserves of the Russian Far East. In 2019, the project’s shareholders defined the marketing strategy and decided to proceed to the FEED stage. Competitive contractor selection process was initiated, with designing and planning done for the early preparations to commence on the LNG plant site in 2020.

International Gas Business Development

Expanding into gas markets abroad and becoming a global player in the world's LNG market are among Rosneft's priorities. The Company’s involvement in international gas projects will ensure a significant and cost-effective increase in natural gas reserves and a balanced risk profile of its asset portfolio.

INTERNATIONAL GAS ASSETS

Egypt: a 30% stake in the unique project to develop the Zohr field together with Eni, BP, Mubadala, and Egypt’s state oil and gas company EGAS.

Vietnam: a 35% stake in Block 06.1 as the operator (current stage: natural gas and gas condensate production), a 100% stake in Block 05.3/11 (current stage: exploration), and a 32.67% stake in the Nam Con Son gas pipeline.

Brazil: a 100 % stake in Solimões Basin blocks as the operator (current stage: exploration).

Mozambique: a 20% stake in three offshore blocks (А5-В, Z5-C and Z5-D) with a potential for large gas discoveries (current stage: exploration).

Latvia: a 10% stake in AS Latvijas Gaze, a major natural gas supplier in the Baltic markets.

International Gas Business Development