ROSNEFT OIL COMPANY (ROSN)
OPERATING RESULTS FOR 4Q AND 12M 2020
In December 2020, the Company's Board of Directors reviewed Rosneft Carbon Management Plan for the period until 2035, which provides a long-term framework for the Company's development in the context of the transition to a low-carbon economy. The main objectives of the Plan are to prevent greenhouse gas emissions in the amount of 20 mmt of CO2 equivalent (Scope 1 and 2), reduce the intensity of emissions in oil and gas production by 30% (Scope 1 and 2), achieve methane emissions intensity below 0.25% and zero routine flaring of associated gas by 2035. The implementation of the Plan will strengthen Rosneft position as one of the leaders of the global energy market under conditions of the energy transition process and allow for maximum monetization of the Company's proven reserves.
In 2020, the Strategy and Sustainable Development Committee of the Board of Directors reviewed the Concept of the Company's Environmental Development for the period until 2030, which defines the main principles of environmental protection and contributes to the achievement of the UN Sustainable Development Goals, as well as the Russian national environmental goals for the period until 2030.
Caring for employees and their health, fulfilling their professional and personal potential, creating decent working and living conditions form a strategic prerequisite for the Company's successful development, which relevance increased in 2020 amid the pandemic.
The Company has an integrated pandemic emergency response system. Employees undergo regular testing, with the number of tests exceeding 683 th. As of the end of 2020, the Company acquired over 38.7 mln units of personal protective equipment, over 6.5 mln liters of disinfectant for offices and workplaces treatment. Psychological support hotline is in place and receiving calls. Strict compliance with sanitary and hygienic requirements, development of remote communication forms including contactless payment service, and building widespread awareness of the disease prevention methods ensure the safety of the Company's employees and customers of the corporate retail network.
In 2020, for the fourth year in a row, Rosneft and the Company's subsidiaries won the competition held by the Ministry of Energy of the Russian Federation and were recognized as the best socially oriented company in the Russian oil and gas industry. As part of the Rosneft-2022 strategy, the Company implements a number of significant social initiatives, including the "Modern Medicine", "Active Longevity", "Affordable Housing" and other programs.
The Company continues to enhance the level of HSE performance, guided by the principle of "zero" tolerance for violations of imposed rules by employees of the Company and contractors. Thus, thanks to the implementation of measures to prevent major accidents and mitigate their consequences, in 2020, the number of major accidents related to the safety of technological processes decreased at the Company's subsidiaries. A decrease in the number of technological safety events PSE-1 by 9% and PSE-2 by 25% YoY testifies this statement.
Environmental protection measures continue to be among the Company's priorities. Thus, in 2020, the Company consistently improved the quality of its water resources through the construction and reconstruction of water treatment facilities at the largest oil refineries in the Samara Region, the Republic of Bashkortostan, and Saratov.
The Company's activities in the field of sustainable development are highly appraised internationally. In December 2020, FTSE Russell, a part of the London Stock Exchange, confirmed that the Company continues to be a constituent in the FTSE4Good Index Series with strong environmental, social and governance performance, and transparency in information disclosure. In 2020, Rosneft significantly improved its FTSE Russell Social Score, which takes into account the corporate performance in the areas of human rights, support of indigenous people, labour standards, health and safety.
4Q 2020 liquids production amounted to 3.98 mmbpd (49.46 mmt), up by 1.9% QoQ, amid the easing of production cuts under the OPEC+ Agreement. 2020 liquids production amounted to 4.14 mmbpd (204.5 mmt), down by 11.4% YoY, against the backdrop of fulfilling the government's directives to limit production in line with the OPEC+ Agreement.
Having participated in previous production cuts, Rosneft acquired significant technological experience, which allows to ensure efficient and prompt well stock management. The Company systemically uses the following tools: limiting the flow rates without well suspension, intermittent well operations, and optimized well-work program at the producing well stock. This approach allows for flexible management of production capability and prompt production increase, if needed.
In Q4 2020, gas production amounted to 16.08 bcm, having increased by 7.5% QoQ. The production increased primarily due to planned preventive repairs performed in Q3 2020, seasonal growth in demand in the autumn and winter period, and an increase in associated petroleum gas production caused by the easing of production cuts under the OPEC+ Agreement. In 2020, gas production comprised 62.83 bcm, a 6.2% decline YoY. The main reasons of these dynamics are a decrease in associated petroleum gas production amid the fulfilment of the government's directive to cut crude oil production in Russia, as well as a decline in gas demand amid the COVID-19 pandemic.
As a result, 4Q 2020 hydrocarbon production amounted to 5.05 mmboed (62.7 mmtoe), a 3.1% increase QoQ. 2020 average daily hydrocarbon production constituted 5.19 mmboed (256.2 mmtoe), a 10.4% decrease YoY.
Development drilling and new wells commissioning
In 2020, development drilling footage reached 10.9 mln m, having increased by 9.1% YoY. The share of in-house drilling footage is traditionally maintained at the level of not less than 50%.
In October 2020, RN-Yuganskneftegaz, the Company's largest production subsidiary, set a new industry daily drilling footage record of 27,542 m per day. This figure is 414 m per day higher than the previous record set in July 2017. The new milestone was achieved with a smaller number of drilling rigs, while the efficiency of operations increased by more than 6%. The subsidiary is consistently striving to minimize non-productive work time. Round-the-clock monitoring and control of each well construction process prevents unscheduled downtime and ensures a high level of operations safety.
In 2020, the number of newly commissioned wells amounted to 2.6 th. units. The number of the most efficient new horizontal wells amounted to 1.8 th. units, up by 5.8% YoY. The Company has been continuously increasing the number to horizontal wells that reached 68% of the total number of newly commissioned wells in 2020, which is 11 p.p. higher YoY. In 2020 the share of newly commissioned horizontal wells with multistage hydrofracturing amounted to 1.1 th. units, while their share in the total number of wells commissioned over the period reached 44% (+10 p.p. YoY). Unit production per horizontal well overpasses the indicator for directional wells by more than 2.6 times.
Implementation of modern technologies in the upstream
Amid production cuts under the OPEC+ Agreement, the Company continues to develop its key assets, focusing on the development and implementation of new technologies, including digitalization, which improves the efficiency of field development and saves costs. Rosneft considers technological leadership as one of the key factors ensuring competitive edge in the oil market.
In October 2020, RN-Yuganskneftegaz performed 600 hydraulic fracturing operations, which is a record monthly indicator. Thus, one hydrofracing fleet accounted for 25 operations, which is 22% higher than average. RN-Yuganskneftegaz performs about 5,000 hydraulic fracturing operations annually. Multistage hydrofracturing (up to 20 stages) including in the intervals of horizontal sections, is used to increase the area of productive formations coverage. Reserves of low-permeability reservoirs are brought into development through the application of hydrofracturing technology.
Intelligent well completion systems fitted with oil inflow control devices have been successfully used in Severo-Komsomolskoye field. This helps minimize potential geological risks. Advanced technologies also enable extended-reach well drilling with the step-out up to 2 km. In 2020, the record was set with the longest horizontal section (2,404 m) among single-bore horizontal wells drilled by the Company onshore.
Rosneft and the Siberian Federal University specialists developed the technology of production of environmentally friendly drilling fluids based on seed oils and containing biodegradable components. Drilling fluids of the high environmental standard can be used in the development of the fields with the fragile ecosystem in the Far North, including those of the Vostok Oil project.
Upstream projects development
In 2020, the Company continued to develop its production projects in accordance with the previously announced plans.
As part of the implementation of the Erginsky cluster project, in Q3 2020 the Company launched full-scale development of the Erginsky license area, a key asset of the cluster. Development drilling with 9 drilling rigs, construction of infrastructure facilities, intra-field pipelines and power lines are underway in the license area. The equipment for the first start-up complex of the oil treatment and transportation facility has been delivered and is currently under installation. The first start-up complex is to be launched in Q1 2021. Production in the fields of the cluster in the reporting period amounted to 22.0 mmbbl (~3 mmt over the period).
In Q4 2020, the Company launched the Severo-Danilovskoye field, as part of the Danilovsky oil and gas production cluster development project. Pipeline deliveries of crude oil from the field to Verkhnechonskoye field started once the hydraulic tests had been completed. In order to ensure the rational use of associated petroleum gas, a mobile power center is operated at the field. Development drilling, construction of well pads, infrastructure facilities and motor roads are underway. Construction and installation of oil treatment and transportation facilities started. In the reporting period, production at the fields of the cluster reached 1.93 mmbbl (0.3 mmt over the period).
In 2020, the Company's share in total liquids production at the large greenfields launched since 2016 (including Erginsky license area and Severo-Danilovskoye field) amounted to 19.9 mmt (403 kbpd), which is 4.8% higher YoY. 4Q 2020 liquids production at these greenfields amounted to 5.23 mmt (421 kbpd), accounting for 10.6% of the total liquids production.
The Company continues the development drilling, preparatory, construction and installation work at the Lodochnoye and Severo-Komsomolskoye fields. As part of the pilot commercial development, 2020 production at the fields increased by 23% YoY and amounted to 9.87 mmbbl (1.33 mmt over the period).
Rosneft continues to actively implement its key gas projects. At the Rospan project, the Company completed the construction of the key facilities of the first start-up complex of the gas and condensate processing facility. Start-up and commissioning works are at the final stage to ensure the first marketable gas from the project to be produced in Q1 2021. The second start-up complex is under construction; its launch is expected in Q3 2021.
In 2020, the works under the project of the development of Cenomanian and pilot production of Turonian gas deposits of the Kharampur field were carried out in accordance with the schedule. As of the end of 2020, the completion of construction and installation work at the key project's facility, Gas Processing Unit, exceeded 40%.
Pursuant to the task of the President of the Russian Federation to load the Northern Sea Route, the Company continues the implementation of a comprehensive development program for a new oil and gas province in the north of the Krasnoyarsk Region as part of the transformational Vostok Oil project. The investment incentives for the infrastructure development allowed for the development of an efficient economic model and the start of the project implementation in 2020. Exploration and appraisal activities resulted in the discovery in Q4 2020 of Zapadno-Irkinskoye field with over 500 mmt of С1+С2 recoverable oil reserves and 138 bcm of solution gas reserves. Location for priority well pads for production drilling was defined; a site for oil gathering and treatment facilities is under construction. Design and survey work for construction of a trunk pipeline (770 km long) and a port in the Sever Bay were completed.
According to DeGolyer&MacNaughton audit results, the resource base of the project is 6 bln t of liquid hydrocarbons. The Company plans to ensure cargo traffic via the Northern Sea Route of up to 30 mmt by 2024.
Pursuant to the Federal Law No. 340-FZ of 15.10.2020 on the introduction of incentives for Priobskoye license area (LA), on January 28, 2021 the Company signed an Investment Agreement on the incentives for oil production at Priobskoye LA with the Russian Ministry of Finance and the Ministry of Natural Resources. The provision of tax deduction for MET for Priobskoye license area totaling Rub 460 bln from 01.01.2021 will be a source of additional investment to develop oil production in the area; it will deliver additional production of more than 70 mmt in 2021-2030 through maintaining and increasing the drilling volumes in the future.
In 2020, the Company conducted about 1,000 linear km of 2D and 4,500 sq. km of 3D seismic works on the Russian on-shore, and tested 110 exploration and appraisal wells with an 84.5% success rate.
2,800 sq. km of 3D seismic works were conducted offshore in the waters of the Kara and Pechora seas. Exploration and appraisal drilling in the shelf of the Kara Sea resulted in discovering 2 new unique arctic fields (the gas field named in honour of Zhukov and the gas condensate field named in honour of Rokossovsky) with the total reserves of 1.3 tcm of gas and 55 mmt of condensate. The comprehensive drilling program implemented by Rosneft in the Kara Sea, confirmed high oil and gas bearing capacity of the structures studied and allowed the Company to form a new oil and gas cluster in the area, including three discovered fields with total recoverable reserves of over 1.7 tcm of gas and 185 mmt of oil and condensate. More than 30 prospects were discovered in total in the three Vostochno-Prinovozemelskiy areas of the Kara Sea.
As a result of geological exploration, in 2020, Rosneft discovered 208 new deposits and 19 new fields with АВ1С1+B2С2 hydrocarbon reserves exceeding 2 bln toe.
According to the results of the hydrocarbon reserves audit conducted by DeGolyer & MacNaughton, Rosneft's SEC proved hydrocarbon reserves as of December 31, 2020 amounted to 39 bln boe (5.2 bln toe). An organic proved hydrocarbon reserves replacement ratio amounted to 151%, a replacement ratio for operating assets amounted to 138%. According to the PRMS classification as of December 31, 2020, 1Р, 2P and 3P hydrocarbon reserves stood at 43.5 bln boe (5.9 bln toe), 83.8 bln boe (11.3 bln toe), and 126.2 bln boe (17.0 bln toe), respectively.
In Q4 2020, oil refining throughput at the Company's Russian refineries increased by 2.4% QoQ to 23.1 mmt against a backdrop of rising demand for petroleum products. In 2020, 93.0 mmt were processed, which is a 7.1% decline YoY. A drop in the refining volumes was due to the optimization of refineries utilization rate based on the actual demand for petroleum products in the context of low refining margins amid the COVID-19 pandemic.
In Q4 2020, oil refining throughput at the refineries in Germany amounted to 2.8 mmt, a 6.5% decline QoQ. These dynamics were mainly attributed to the repeated lockdown in Germany due to the COVID-19 pandemic followed by a drop in the demand for petroleum products. In 2020, 11.0 mmt of oil were processed at the refineries in Germany, which is a 9.6% increase YoY. The growth was mainly attributed to the reduced throughput at PCK Raffinerie GmbH refinery in 2019 caused by the presence of organochlorine compounds in the oil supplied through the Druzhba pipeline, as well as the turnaround maintenance at PCK Raffinerie GmbH refinery in 2019.
As a result, in Q4 2020, the total refining throughput of the Company reached 25.8 mmt, which is a 1.3% increase QoQ. At the same time, the refining depth was 73.6%, while the light products yield amounted to 56.4%. The 2020 refining throughput of the Company amounted to 104.0 mmt, which is a 5.7% lower YoY. The refining depth increased by 0.1 p.p. to 74.5%, while the light products yield amounted to 57.1%.
In 2020, Komsomolsk Refinery upgraded the crude vacuum distillation unit with the capacity of 2.5 mmt per year. In the course of the upgrade internals were replaced in two towers of the unit. The products produced are a feedstock for subsequent secondary refining processes. The measures taken will increase the light products yield and the production of fuels with improved environmental performance.
In November 2020, Ryazan Oil Refining Company introduced a unified information system for product quality control. New technological solutions implemented on the basis of a single laboratory complex will help optimize the product quality control. Automation of the product quality control will reduce decision-making time and increase the stability of marketable products output.
In November 2020, Saratov Refinery started the production of diesel fuel with a new Russian-made additive RN-DDP-2401. The new additive has high consumer properties, which are superior to their imported counterparts in a number of indicators. The additive significantly improves the cold filtering plugging point indicator in inter-season and winter diesel fuels, and maintains their performance properties during storage at low temperatures.
Development of catalysts production
In November 2020, Ryazan Oil Refining Company converted another catalytic reforming unit to catalyst produced in-house. It is the fourth catalytic reforming unit out of five units at Ryazan Petrochemical Company, where Russian catalysts have successfully substituted expensive imported analogs. Catalysts produced at Angarsk Plant of Catalysts and Organic Synthesis have high performance characteristics in terms of catalyst yield from hydrocarbon feedstock, and operational stability.
In 4Q 2020, Rosneft commenced the industrial use of an in-house hydrotreatment catalyst. In October 2020, a commercial batch of the catalyst was applied at the diesel hydrotreater unit 24/7-2bl. of Ryazan Oil Refining Company. Earlier, a commercial testing of the catalyst produced by RN-Kat, a company specializing in catalyst production, was successfully conducted at the refineries of Ufa Group. This is the first hydrotreating catalyst for the Russian oil refining industry capable of fully substituting foreign alternatives for production of Euro-5 ultra-low-sulfur diesel fuel with the content of sulfur of less than 10 ppm.
In 2020, scientists of the Rosneft United Research and Development Centre developed innovative catalysts for production of winter and arctic grades of diesel fuel. The catalysts are based on noble metals and their key feature is the ability to process high-sulfur feedstock to produce ultra-low sulfur fuels.
In Q4 2020, the pilot production unit of NCP produced the first commercial batch of isodeparaffinization catalysts for diesel fuel intended for production of winter and arctic diesel fuel without pore point depressants at Kuibyshev Refinery.
Crude oil and petroleum products sales
In Q4 2020, the international crude oil supplies to non-CIS countries amounted to 23.8 mmt, a 1.2% increase QoQ. Crude supplies in eastwards amounted to 13.4 mmt, or 56.3% of the total international crude oil supplies to non-CIS countries. In Q4 2020, the volume of crude oil export from Russia to non-CIS countries constituted 22.1 mmt, with the share of crude oil supplies under contracts with a validity period of one year or longer exceeding 90% of the indicated volume. In 2020, oil supplies to non-CIS countries amounted to 109.1 mmt, while the volume of crude oil export from Russia to non-CIS countries was 96.0 mmt.
In 4Q 2020, the Company sold 24.7 mmt of petroleum products, which is a 2.5% increase QoQ. Petroleum products export from Russia amounted to 11.4 mmt, which is a 20.0% increase QoQ. The share of petroleum products supplies under contracts with a validity period of one year or longer exceeded 90% of the indicated volume. In 2020, the Company sold 101.3 mmt of petroleum products, which is a 9.6% decline YoY. Sales of petroleum products to non-CIS countries dropped by 8.4% YoY and amounted to 58.7 mmt. In 2020, the volume of petroleum products exported from Russia to non-CIS countries constituted 46.0 mmt, domestic sales of petroleum products amounted to 37.2 mmt, and petroleum products sales in CIS countries amounted to 3.5 mmt.
In 2020, the Company continued to actively trade on the St. Petersburg International Mercantile Exchange, consistently meeting the needs of the domestic market of the Russian Federation. In Q4 2020, the Company exceeded the required quotas for exchange-traded motor fuel sales by 3 times.
In 2020, in the territorial waters of the Russian Federation, a total of 1,584 th. t of bunker fuel, including 1,343 th. t of low-sulfur marine fuels fully complying with the MARPOL regulations, was supplied to end-consumers, namely domestic and foreign ship owners. More than 46% of this volume accounted for low-sulfur residual marine fuel RMLS 40 (621 th. t). A total of 284 th. t of marine fuel, including 130 th. t of marine fuel with sulfur content of up to 0.5%, was sold in foreign ports.
As of the end of 2020, the Company's retail network comprised 3,057 filling stations and complexes, including 2,996 filling stations and complexes in the Russian Federation.
In 2020, the Company ensured uninterrupted operation of filling stations and complexes, maintaining high standards of retail network customer service. All the necessary measures were taken to protect the health of personnel and customers of retail sites.
In Q4 2020, despite the resumption of a number of restrictive measures related to the spread of the coronavirus infection, the Company's retail business demonstrated stable performance. Thus, the volume of retail sales in H2 2020 exceeded the level of H1 2020 by 17%. The Company continued to work actively with corporate customers, the volume of sales to which in Q4 2020 almost reached the level of Q4 2019, preceding the introduction of restrictive measures.
In Q4 2020, the Company started introducing and piloting the following services: postal terminals in partnership with OZON were installed, a pilot project for contactless car washing (robotic car wash) was implemented at a number of BP multi-purpose filling stations, testing began of the demand for banking and insurance services among clients of the filing stations in the Moscow Region. Within the framework of the development of 'kiosk-at-filling station' and 'café-at-filling complex' formats in the Moscow Region, in Q4 2020 a pilot project was implemented to launch seven facilities (kiosks/stores with cafes) under "Zerno" brand.
The Company has also been consistently developing the services for contactless remote payment service for fuel and related products through the Yandex.Fuel, Yandex.Navigator, and Yandex.Maps mobile applications. As of the end of Q4 2020, about 1,500 filling stations were connected to the contactless fuel payment service, while contactless food payment service was available at 50 BP multi-purpose filling stations. As of the end of Q4 2020, 1.7 mln virtual loyalty cards were issued, which is a 20% increase QoQ.
As part of the development of the branded fuel retail supplies, in Q4 2020 the sale of branded gasoline Pulsar-95 started in the Khabarovsk Region. As of the end of 2020, Pulsar gasolines have been sold in 33 regions of Russia at more than 1,100 filling stations.
In Q4 2020, two fast-charging stations for electric cars were installed at Rosneft's filling complexes in the Khabarovsk Region as part of cooperation with RusHydro.
In October 2020, the Board of Directors of Nayara Energy Limited, in which Rosneft holds a 49.13% stake, made a final investment decision on the implementation of the first stage of Vadinar Refinery Development Project in India. The first stage involves organization of petrochemical production, including construction of new units capable of producing up to 450,000 t of polypropylene per year by 2023, and entry into the Indian petrochemical market.
Rosneft Deutschland GmbH, a Rosneft subsidiary, started supplies of two new grades of its own polymer-modified bitumen product (PMB), Alfabit, to Switzerland. New Alfabit grades have enhanced performance properties such as higher elastic recovery value (30% higher than classic PMB grades), and an expanded plasticity range to ensure resistance of the road pavement to temperature fluctuations.
Key operating results for 4Q and 12M 2020:
* According to management data
 Including the drilling of Universitetskaya well.
 With account for acquisitions/disposals, including fuel gas.
 Ratios are calculated in metric units.
 Including disposals within the comparable perimeter.
EQS News ID:
End of Announcement
EQS News Service