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MD&A / Operational Data and Analysis

ANALYSIS OF OPERATING RESULTS

Exploration Drilling and Discoveries


2012

2011

Change, %

Consolidated subsidiaries

Exploration drilling ('000 meters) 64 63 1.6
Exploration wells drilled 21 25 (16.0)
New fields discovered 2 4
New reservoirs discovered 39 23

Equity associates

Exploration drilling ('000 meters) 65 63 3.2
Exploration wells drilled 23 27 (14.8)
New reservoirs discovered 6 16

2012 results:

  • Two new fields discovered: Severo-Romanovskoye in YNAO and Yuzhno-Shinginskoye in the Tomsk region.
  • 39 new reservoirs discovered, mostly in the Yeti-Purovskoye (14) and Vingapurovskoye (7) fields.

Exploration drilling (‘000 meters)

Source: Company data

Exploration wells drilled

Source: Company data

New reservoirs discovered

Source: Company data

Oil and Gas Reserves


Gazprom Neft

Share in equity associates

Total

Slavneft

Tomskneft

SPD

Sever-Energy

Messoyakha
neftegaz

Proved Reserves (December 31, 2010) 5,280 926 616 250 455 7,526
Production (267) (69) (43) (31) (410)
Revision of previous estimates 339 84 89 15 355 883
Purchases of licenses 320 320
Proved Reserves (December 31, 2011) 5,672 940 663 234 810 8,319
Production (284) (68) (43) (28) (3) (426)
Revision of previous estimates 515 70 18 39 338 979
Purchases of licenses 1 1
Proved Reserves (December 31, 2012) 5,904 942 638 244 1,145 8,873
Total Group probable reserves 3,872 1,457 409 96 704 355 6,893
Total Group possible reserves 2,529 1,285 389 71 795 489 5,559

Total reflects 49.9% ownership of Slavneft, 50% of Tomskneft, Salym Petroleum Development
and Messoyakhaneftegaz and 25.5% of SeverEnergia.

  • The Company’s proved reserves as of December 31, 2012 totaled 5,904 MMboe, including 4,824 MMbbl of crude oil and 6,476 bcf of gas.
  • Including shares in equity associates, proved reserves were 8,873 MMboe as of December 31, 2012, including 6,782 MMbbl of crude oil and 12,545 bcf of gas.
  • Proved reserves figures do not include reserve volumes related to the Company’s Serbian subsidiary, NIS, as there are limitations on disclosure of such information in Serbia.
  • Reserve estimates are made by DeGolyer and MacNaughton on the basis of the standards of the Society of Petroleum Engineers (SPE) Petroleum Reserves Management System (PRMS).
  • The PRMS reserves figures provided in the table differ from those reported in the supplementary information on oil and gas activities included with our consolidated financial statements. Oil and gas reserves reported in the supplementary information are prepared using definitions provided by the US Securities and Exchange Commission (SEC), which require the use of a 12-month average of the price on the first day of the month for each month within the reporting period. The PRMS reserves in the above table use management’s best estimate of future crude oil and natural gas prices.

Production Drilling


2012

2011

Change, %

Consolidated subsidiaries

Production drilling ('000 meters) 2,516 2,254 11.6
New production wells 690 735 (6.1)
Average well flow (tonnes per day) 14.34 15.26 (6.0)
Watercut, % 83.93 83.63 0.4 pp
Equity associates
Production drilling ('000 meters) 1,518 1,611 (5.7)
New production wells 401 487 (17.7)

The Group has been reorienting its drilling toward horizontal wells, which are more complex than vertical wells, but deliver greater yields. As a result the number of new production wells decreased 6.1% year-on-year.

Production


2012

2011

Change, %

Crude oil

MLN TONNES

Noyabrskneftegaz 15.49 16.30 (5.0)
Yugra 11.39 10.19 11.8
Gazprom Neft 1.07 1.41 (24.1)
Orenburg 1.10 0.19 478.9
Others 2.60 2.30 13.0

CRUDE OIL Production in Russia

31.65 30.39 4.1

Crude oil production outside Russia (NIS)

1.22 1.13 8.0

CRUDE OIL Production by consolidated subsidiaries

32.87 31.52 4.3

Share in Slavneft

8.93 9.04 (1.2)

Share in Tomskneft

5.11 5.18 (1.4)

Share in Salym Petroleum Development (SPD)

3.81 4.23 (9.9)

Share in SeverEnergia (SE)

0.06

Total share in CRUDE OIL production of equity associates

17.91 18.45 (2.9)

Total crude oil production

MMtonnes

50.78 49.97 1.6

MMbbl

373.64 368.27 1.5
Gas

BILLION CUBIC METERS

Noyabrskneftegaz 7.32 6.88 6.4
Yugra 0.08 0.08

Gazprom Neft

0.07 0.08 (12.5)

Orenburg

1.12 0.23 387.0
Others 0.13 0.05 160.0

GAS Production in Russia

8.72 7.32 19.1

Gas production outside Russia (NIS)

0.56 0.54 3.7

GAS Production by consolidated subsidiaries

9.28 7.86 18.1

Share in Slavneft

0.42 0.43 (2.3)

Share in Tomskneft

0.84 0.72 16.7

Share in Salym Petroleum Development (SPD)

0.13 0.05 160.0

Share in SeverEnergia (SE)

0.45

Total share in GAS production of equity associates

1.84 1.20 53.3

Total gas production

11.12 9.06 22.7

Total hydrocarbon production by consolidated subsidiaries (MMtoe)

40.32 37.86 6.5

Total hydrocarbon production by equity associates (MMtoe)

19.39 19.41 (0.1)

Total hydrocarbon production:

MMtoe

59.71 57.27 4.3

MMboe

439.02 421.64 4.1

Daily hydrocarbon production (MMboepd)

1.20 1.16 3.8
  • Daily hydrocarbon production increased 3.8% year-on-year.
  • Group oil production increased 1.6% year-on-year, primarily as a result of continued growth at the Priobskoye field, increased activities to improve yields and the acquisition of the Orenburg assets. Increased watercut at the West-Salym field resulted in a 9.9% year-on-year decline in oil production at SPD.
  • Group gas production increased 22.7% year-on-year, mainly as a result of new production sources (Orenburg assets, Samburgskoe oilfield at SeverEnergia) and a gas utilization program. The increase achieved at SPD was the result of the installation of a new gas processing plant.
  • Increased trading in crude oil resulted in higher crude oil purchases, which rose 48.5% year-on-year.

Crude Oil Purchases


2012

2011

Change, %

Crude oil purchases, Russia

7,82

5,77

35,5

Crude oil purchases, international

3,24

1,68

92,9

Total crude oil purchases

11,06

7,45

48,5

Refining, mn tonnes


2012

2011

Change, %

Omsk

20.95 19.95 5.0

Moscow

10.67 10.80 (1.2)

Share in Yaroslavl

7.64 7.39 3.4

Refining throughput in Russia

39.26 38.14 2.9

Pancevo and Novi Sad

2.14 2.35 (8.9)

Share in Mozyr

1.94

Total refining throughput

43.34 40.49 7.0

Production of petroleum products

Gasoline

8.96 8.10 10.6

Below Euro-2

0.40 0.44 (9.1)

Euro-2

0.76 0.14 442.9

Euro-3

2.24 6.65 (66.3)

Euro-4

3.46 0.82 322.0

Euro-5

2.10 0.05 4,100.0

Naphtha

1.30 1.15 13.0
Diesel 11.51 11.49 0.2

Below Euro-2

0.74 4.46 (83.4)

Euro-2

4.89 2.45 99.6

Euro-3

1.30 0.95 36.8

Euro-4

1.96 2.12 (7.5)

Euro-5

2.62 1.51 73.5

Fuel oil

8.78 8.34 5.3

Jet fuel

2.67 2.57 3.9

Other

7.79 6.69 16.4

Total production

41.01 38.34 7.0
  • Refining throughput grew 7.0% year-on-year due to increased production at the Mozyr refinery, growing demand, higher effective capacity following the removal of logistical bottlenecks, and differences in refinery maintenance schedules. The 8.9% reduction in refining throughput at Pancevo and Novi Sad was planned in response to changing local market conditions.
  • Production of Euro-4 and Euro-5 gasoline and Euro-5 diesel fuel increased year-on-year as a result of production capacity modernization.
  • Production of Euro-2 gasoline increased year-on-year due to maintenance of the catalytic cracking unit in July and scheduled maintenance of the primary refining unit between September-November at the Moscow refinery.
  • Fuel oil production grew 5.3% year-on-year due to increased refining throughput at Omsk and Yaroslavl.

Refining

Source: Company data

Production of petroleum products

Source: Company data

International Purchases of Petroleum Products


2012

2011

Change, %

RUB million

MMtonnes

RUB million

MMtonnes

RUB million

MMtonnes

Naphtha 3,518 0.12 2,382 0.09 47.7 33.3

Diesel

28,411 0.93 15,830 0.54 79.5 72.2

Fuel oil

2,438 0.12 2,804 0.13 (13.1) (7.7)

Jet fuel

7,102 0.20 4,266 0.14 66.5 42.9
Other 811 0.01 546 0.02 48.5 (50.0)
Total 42,280 1.38 25,828 0.92 63.7 50.0

Purchases on international markets increased 50.0% year-on-year due to an improved market environment and increased trading activity.

Petroleum Products Purchases in the CIS


2012

2011

Change,%

RUB million

MMtonnes

RUB million

MMtonnes

RUB million

MMtonnes

High octane gasoline

1,374 0.04 4,377 0.22 (68.6) (81.8)

Low octane gasoline

850 0.05
Diesel 1,045 0.03 3,800 0.17 (72.5) (82.4)

Other

660 0.04 475 0.01 38.9 300.0

Total

3,079 0.11 9,502 0.45 (67.6) (75.6)

Purchases in CIS decreased 75.6% year-on-year due to an increase in supply of our own products as a result of a higher refining throughput at Mozyr.

Domestic Purchases of Petroleum Products


2012

2011

Change,%

RUB million

MMtonnes

RUB million

MMtonnes

RUB million

MMtonnes

High octane gasoline

23,469 0.91 22,625 1.00 3.7 (9.0)

Low octane gasoline

252 0.01

Diesel

5,562 0.21 6,688 0.34 (16.8) (38.2)

Fuel oil

4,565 0.26 3,248 0.26 40.5 -

Jet fuel

8,081 0.34 4,172 0.20 93.7 70.0
Other 3,145 0.13 2,747 0.12 14.5 8.3
Total 44,822 1.85 39,732 1.93 12.8 (4.1)

Domestic purchases declined 4.1% year-on-year mostly due to a higher refining throughput.

Products Marketing


2012

2011

Change, %

Active retail stations

(units)

In Russia

1,060 1,043 1.6

In CIS

205 202 1.5

In Eastern Europe

344 425 (19.1)

Total retail stations (as at the end of the period)

1,609 1,670 (3.7)

Average daily sales per retail site in Russia (tonnes per day)

17.7 14.2 24.1

Sales volume through premium channels

MLN TONNES

Gasoline and Diesel

17.74 15.65 13.4

Jet

2.07 1.64 26.2
Bunkering 2.45 2.15 14.0

Lubricants

0.15 0.12 25.0

Total sales volume through premium channels

22.41 19.56 14.6
  • The total number of active retail stations decreased by 3.7% year-on-year primarily as a result of retail network optimization in Eastern Europe.
  • Average daily sales per retail site in Russia increased 24.1% year-on-year due to higher domestic demand for petroleum products and the successful results of our rebranding campaign, new promotions and customer loyalty program.
  • Sales volumes through premium channels increased 14.6% year-on-year due to:
    • Growing jet fuel market, expanding jet fuel network in Russia (and abroad) and new airline customers;
    • Growing bunkering market in the Far East, new long-term contracts with Russian and foreign shipping companies; and
    • Expansion into new lubricants markets (Turkey, Northern Europe) and entrance into new customer segments.

TOOLS:

Compared to 2011
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