Rosneft: Operating Results for 9M 2017 – Production Up 9.7%

Rosneft’s hydrocarbon production reached 70.5 mmtoe in Q3 2017 (5.67 mmboed) and 210.8 mmtoe in 9M 2017 (5.72 mmboed). Growth was at 0.7% QoQ and at 9.3% YoY.

• 9M 2017 AVERAGE DAILY HYDROCARBON PRODUCTION ROSE BY 9.7% TO 5.72 MMBOEPD
• 9M 2017 LIQUIDS PRODUCTION INCREASED BY 11.0% YoY
• 9M 2017 GAS PRODUCTION WAS UP BY 3.1% TO 50.86 BCM

Average daily liquids production amounted to 4.57 mmboed in Q3 2017 and remained almost unchanged QoQ despite the pressure from external limitations imposed on the Russian oil companies. The organic production dynamics remained positive YoY, while the output increased by 10.1%, taking into account the acquisitions.

The average daily liquids production grew by 11.4% (0.8% taking into account Bashneft operating performance from January 2016).

The Company continued the implementation of the approved operating plans. 9M 2017 development drilling rose by 26% YoY to 8.8 mln m, with a ~60% share of in-house drilling services in the total meterage drilled. The number of the commissioned new wells increased by 19% YoY to 2.3 th. wells with a 34% horizontal wells share.

In August, RN-Yuganskneftegaz drilled more than 600 th. meters, achieving the highest monthly level among the Russian companies. This record was set thanks to using the modern drilling technologies, including rotary steerable systems, replacement of standard wireline test with logging while drilling, and also with a technical support of wells drilling and completion in real time. These significant efforts of RN-Yuganskneftegaz resulted in the average daily liquids production increase by 6.2% in Q3 2017 and by 3.6% in 9M 2017 YoY, reaching the maximum production level for last 30 years.

On the back of the drilling activity improvement, the average daily production at such large mature West Siberian assets as RN-Nyaganneftegaz (+3.4%) and Varyoganneftegaz (+2.7%) also increased. Mainly this was driven by the existing tax incentives for the fields with low-permeability reservoirs.

In pursuance of the Company’s strategy to develop a sustainable technological advantage in exploration and production, the first commercial simulator of hydraulic fracturing in Eurasia, RN-GRID, was set up. This import-substituting development will ensure the Company’s technological independence in computer modelling and higher efficiency of hydraulic fracking operations.

In October, the Russian Ministry of Finance introduced a bill to provide the investment incentives to the Company’s Samotlor field in the form of MET annual reduction in the amount of RUB 35 bn for 10 years. The introduction of these tax incentives will fully unlock the resource potential of the Samotlor field, intensifying the operating activity, which would also improve the employment in the region.

The Company has started the commercial development of two fields at the Tyamkinsky Hub of the Uvat project: Severo-Tyamkinsky and Severo-Tamarginsky. In August the first oil was produced and filling of the oil pipeline started, at the Kosukhinskoye field, followed by the commissioning of the drilled development wells. As of 01.01.2017, АВ1С1+В2С2 recoverable reserves of the abovementioned fields were at 53 mmt of oil. The field development will be conducted with applying the modern  technologies.

Major new projects such as Suzun and Messoyakhaneftegaz are being developed fully in line with the plan. The Company’s crude oil production share from these fields was more than 4 mmt for 9M17. The development drilling program at the projects were under way, the construction of the second stage of OTF at Suzun field and expansion of the CPF oil treatment facilities at the East Messoyakha field were in progress.

In September, the Company started comprehensive technological testing of the oil treatment and the transportation facilities at the Yurubcheno-Tokhomskoye field: the construction and installation works were completed at the oil treatment facility with the design capacity of 2.5 mmtpa and at the custody transfer station and the oil pipeline, 10 well pads and related infrastructure were under construction. The field’s cumulative production amounted to 0.3 mmt of oil at the end of Q3 2017. The crude oil output is expected at 0.8 mmt this year.

As part of the first stage of the Kondinskoye field commercial development, the construction of the custody transfer terminal was completed, the development drilling was finished at seven well pads, the construction and installation and commissioning works were completed at the 1st start-up complex for the main facilities, the CPF-custody transfer terminal pipeline (68 km) and other facilities that ensured the timely commissioning of the field scheduled for Q4 2017.

In Q3 2017, the gas production reached 16.66 bcm, demonstrating 3.5% YoY growth. In 9M 2017, the Company increased gas output by 3.1% YoY to 50.86 bcm. This was driven by the following key factors: the acquisition of Bashneft assets in Q4 2016, launching new wells at  Varyoganneftegaz in 2017 and an increase in gas delivery volumes through Tyumen compressor station after its reconstruction, launching the new wells and flow rates optimization at the existing wells at Sibneftegaz.

In 9M 2017, ~6 th. km of onshore 2D and ~7.4 th. sq. km of onshore 3D seismic surveys were conducted in Russia, exceeding the 9M 2016 levels by 2.4 times and 25% respectively. 80 exploration wells were tested with a 86% success rate. 40 new deposits and 19 new fields were discovered with АВ1С1+B2С2 reserves at 34 mmtoe.

Based on the drilling results of the first exploratory well Centralno-Olginskaya 1 at Khatangsky license area in the Laptev Sea on the Eastern Arctic shelf, the State Reserves Commission in October 2017 confirmed the discovery of Centralno-Olginskoye field with more than 80 mmt of oil recoverable reserves (C1+C2).

During 9M 2017, 32.3 th. linear km of 2D seismic surveys was conducted on the shelf at the license areas of the Laptev, Kara, Chukchi, East Siberian, and Japanese Seas, and 4.8 th. sq. km of 3D seismic – at the license areas of the Pechora and Okhotsk Seas, which exceeds the 9M 2016 results by 47% and by 2.8 times respectively. Engineering and geological surveys are underway in the Barents, Kara and Black Seas.

In Q3 2017, two geological expeditions were successfully conducted: in the area of East Taimyr and the Northern flank of the Khatanga Bay, as well as in the southeastern part of Sakhalin Island. The results obtained are used for specifying the hydrocarbon potential of the adjacent sections of the Laptev and the Okhotsk Sea shelf, and for reducing the geological risks for all elements of petroleum systems.