Investment Program in 2020
Rosneft 2020 investment program was approved as part of the 2020–2021 Business Plan by the Board of Directors meeting held on the 19th of December, 2019 (Minutes No. 11 dated December 23, 2019). The Board of Directors approved the updated 2020 investment program June 29, 2019 (Minutes No. 2 dated June 29, 2020).
Actual CAPEX 2020 totalled R
Given the current macroeconomic environment, the Company took a number of steps over the year to optimise its investment portfolio, maintain financial stability and lay a strong foundation for its strategic initiatives.
This resulted in a more than 20% reduction of investments vs the initial plan (ca. 8% year-on-year), with investment efficiency targets achieved.
We ranked our investment projects by return given the Company strategic objectives. The portfolio optimisation allowed us to postpone the least profitable and long-term projects while carrying on with the pre-investment study. With portfolio management tools at our disposal, we can promptly respond to market changes and restore our investment activities in case the macroeconomic environment improves.
Our investment program seeks to achieve key strategic goals, including increase in profitability, enhancing operational and investment efficiency, launching projects on time and on budget, and minimising the environmental footprint.
Over 96% of our investments are concentrated in Russia, with ca. 20% attributable to projects in Eastern Siberia and the Far East. In 2020, Upstream accounted for ca. 90% of our investments, including 4% spent on gas projects, and 7% for Downstream.
In 2020, Upstream capex totalled RUB 706 bln. These investments help us maintain and develop mature and new oil and gas assets to meet the strategic goals related to production and reserve replacement. In 2020, capital investments in mature onshore and offshore fields amounted to ca. RUB 390 bln, or 50% of the Company capex.
Capital investments in major and new projects exceeded RUB 275 bln, or 35% of the capex. We use the industry best management practices to implement our projects.
We retain leadership in terms of exploration and production unit capex, which amounted to USD 5.5 per boe in 2020, while also delivering on our hydrocarbon production targets.
In 2020 Downstream capex totalled RUB 53 bln.
Investments focused on completing highly cost-efficient projects to construct and upgrade production units and facilities at refineries, construction and reconstruction of oil depots and airport refueling complexes, continued development of catalysts and additives business, and further implementation of existing capacities maintenance program.
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:
Our investment activities help us ensure commitment to the following strategic priorities:
- sustainable business growth driven by investments in competitive and high value-added projects and portfolio optimisation;
- increasing efficiency across all business streams through an in-depth analysis of investment needs, efficient decision-making and project implementation, monitoring and control throughout the project life cycle;
- strengthening investment discipline by ensuring better project identification, classification, thorough project analysis and efficient decision-making process reliant on delegation of authority;
- honouring social responsibility principles regarding occupational safety and environmental protection;
- focus on the UN Sustainable Development Goals (SDGs) to help achieve progress in ing global economic, social and environmental challenges, including those related to carbon management (see )
Rosneft investment governance 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 project analysis process.
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 thorough project monitoring at all levels, change management process; IT-based control of investment decision availability when assuming financial obligations (the two-key principle) at all stages of project planning and implementation.
Portfolio analysis: composing a balanced portfolio of the Company's projects and flexible management, relying on principles of comprehensive project ranking and optimisation based on a list of criteria depending on the Company’s development strategy and priorities, use of tools for portfolio scenario analysis.
IT tools: automating investment project management, including the support of investment decision making, economic analysis and portfolio management.