Investment Programme in 2019
Rosneft’s 2019+ investment programme was approved as part of the 2019–2020 Business Plan at the Board of Directors meeting held on 20 December 2018 (Minutes No. 12 dated 20 December 2018).
The investment programme comprises high-quality projects across all business segments. These projects seek to help the Company deliver on its strategic goals, including an increase in profitability, hydrocarbon production growth, reserves addition, launching projects on time and on budget, enhancing operational and investment efficiency, and minimising the environmental footprint.
We rank, optimise and balance our portfolio against the criteria established for all business lines to incorporate high-potential cost-effective projects with minimum risk exposure.
We also have portfolio management tools at our disposal to promptly respond to macroeconomic changes. Rosneft maintains its organic capex at ca. RUB 0.9 trln per year.
A slight year-on-year decrease is mainly due to drilling optimisation driven by a strategic increase in the share of better-performing horizontal wells at mature fields, and the balancing of the capex profile for new projects to take into account the extended OPEC+ production quotas.
Despite our extensive investment programme, we retain leadership in terms of exploration and production unit capex, which amounted toUSD 6.1 per boe in 2019. At the same time, we deliver on our targets of hydrocarbon production growth and continue to optimise our investment portfolio.
In 2019, Exploration and Production accounted for ca. 91% of our investments, including 6% going to gas projects, and 8% to Refining, Commerce and Logistics.
Over 92% of our investments are concentrated in Russia, with ca. 20% attributable to projects in Eastern Siberia and the Far East.
In 2019, Exploration and Production capex totalled RUB 773 bln. These investments are aimed at maintaining and developing mature and new oil and gas assets to meet the strategic goals of ramping up production to 250 mmt of liquid hydrocarbons and over 100 bcm of gas by 2022 and achieving a reserve replacement ratio of at least 100%.
In 2019, capital investments in mature onshore and offshore fields generating a stable positive cash flow amounted to ca. RUB 440 bln, or over 50% of the Company’s capex.
Thanks to the commissioning and full-scale development of major and new offshore and onshore projects, we are well-positioned to increase and replace oil production at mature fields with high-value added competitive barrels. We use the industry's best management practices to implement our projects.
In 2019, our capex on major and new onshore and offshore projects amounted to ca. RUB 270 bln, or around 32% of total investments.
In the reporting year, the share of international projects in our total hydrocarbon output approached 14%, with further growth possible depending on exploration results.
International projects, especially those on priority markets, account for about 7% of all our investments. They primarily focus on establishing partnerships to share risks, co-finance expenditures and maximise the efficiency through technology exchange.
In 2019, Refining, Сommerce and Logistics capex totalled RUB 67 bln.
Investments in Refining, Сommerce and Logistics focus on highly cost-efficient projects to construct and upgrade process units and facilities at refineries, expansion of oil depots, marine terminals and aircraft refuelling facilities (used by the civil aviation and the Ministry of Defence), continued efforts in import substitution of catalysts and additives, and the programme to maintain existing capacities.
Current priority areas are the construction of hydrocracking and cat cracking facilities along with efficiency improvement. We expect these projects to give a boost to our refining margins, light product yield and the output of high-quality petroleum products.
Our investment process hinges on the following key principles and objectives:
- focus on the UN Sustainable Development Goals (SDGs) in line with our strategy to help achieve meaningful progress in addressing global economic, social and environmental challenges;
- honouring the Company’s strong social responsibility commitments as regards health, safety and environment, quality of life for employees and their families, support of education, and contribution to the social and economic development of local communities;
- consistent improvement of Rosneft’s performance across all business lines through an in-depth analysis of investment needs, bolstering the knowledge and expertise of investment managers, and business project monitoring;
- robust business growth by investing in competitive and high value-added projects, increasing investment returns, consistently optimising the project portfolio, and mitigating investment risks;
- strengthening investment discipline through comprehensive project screening and improving relevant identification and classification processes.
Rosneft's investment management process is integrated with all related processes, including strategic and business planning, budgeting, reporting and financial control, project management and corporate governance. It covers the following areas:
- discipline and responsibility: business projects are approved through decision-making delegation within the permitted limits as per the investment mandate following a regulated comprehensive due diligence;
- investment decision-making: sound investment decisions, shorter periods of approval and review of investment memoranda, responsibility of investment project owners and supervisors for compliance with timelines, budget, efficiency and performance criteria;
- monitoring and control: regular and robust project monitoring at all levels, change management process; automated control of investment decision availability when assuming financial obligations (the two-key principle) at all stages of project planning and implementation;
- portfolio analysis: building a balanced portfolio of projects and flexible management; comprehensive project ranking and optimisation based on established criteria, the strategy and current priorities; use of scenario analysis tools;
- IT development and automation: automating the investment project management and processes to keep track of target, actual and projected metrics by project.