Operational and financial efficiency
The reporting year was marked by a number of developments that had a material impact on the whole oil and gas industry. The most significant change that negatively affected the balance of hydrocarbon supply and demand was a decrease in consumption caused by the COVID-19–related restrictions. The OPEC+ cut accord resulted in supply constraints, which together with partially improving demand brought about a recovery in prices by late 2020. However, plummeting oil prices in 2020 led to a significant fall in oil and gas operating profits, prompting companies to review their mid- and long-term price forecasts, increasing write-offs, and pushing net income into a negative territory.
Amid the uncertainty and volatility in the global oil market, Rosneft demonstrated high exploration and production efficiency, while maintaining traditionally low finding and development costs and staying committed to the long-term organic growth of its hydrocarbon production. Our F&D costs over the last five years averaged USD 4.75 per barrel, with the RRR of 1P reserves (under SEC classification) in 2016–2020 rising from 151% to 156%.
Low unit production costs are yet another indicator of Rosneft’s operational efficiency. In the reporting period, we retained an undisputed leadership in production costs in Russia thanks to optimal technologies and stringent cost control. Rosneft's current operating costs per barrel are significantly lower than those of international majors, and 15–30% lower than the lifting costs of Russian peers.
Over many years, Rosneft has demonstrated a positive free cash flow, which makes us stand out among most competitors, whose free cashflow performance tends to be highly volatile and sometimes negative during periods that follow asset acquisition or at the start of investment projects.