of the Management Board,
OJSC Gazprom Neft
Dear shareholders, investors & partners
The past year, 2012, was another record year for Gazprom Neft with the Company demonstrating growth in all business lines. Production grew by over 4%, refining by 7%, and average petroleum product sales per filling station by almost a quarter. External factors, such as global oil prices, ruble-to-dollar exchange rates, and the new 60/66 tax regime have undoubtedly had a positive impact on Gazprom Neft’s performance. At the same time, I am confident that efforts by the Company's employees have had an equally important impact.
Over the last year we have continued to consolidate our assets in the Orenburg region, a relatively new area of operations for Gazprom Neft. Gas production was launched at the SeverEnergia fields in the Yamal-Nenets Autonomous District, while oil production at the Priobskoye field in the Khanty-Mansiysk Autonomous District is growing. The Messoyakhskoye field in the northern part of the Yamal-Nenets Autonomous District produced its first oil, and in 2012 Gazprom Neft received a license for another major field in that area, Novoportovskoye. The Company is continuing its international expansion after extending its range of oil exploration and production projects outside Russia, particularly in the Middle East. Gazprom Neft is closely monitoring the emergence of new technologies in the market to pinpoint optimal solutions for its operations. We are currently industry leaders in terms of volume of multistage hydraulic fracturing, despite having only started using this process one year ago. Thanks to the implementation of new approaches to optimize our drilling processes we are now able to access complex oil territories and have successfully added over eight million tonnes of hard-to-recover oil reserves to our development programme. By 2015 our hard-to-recover reserves program will add another 60 million tonnes of reserves to oir development portfolio.
The past year became another year of financia and production records for the Company. Gazprom Neft is implementing new major projects: last year the first oil was produced by the Novoportovskoye and Messoyakhskoye fields in the Yamal-Nenets Autonomous District, oil production was launched in Venezuela, and we are actively implementing our hard-torecover reserves development program. All of the Company’s refineries switched over to the production of Euro-4 and Euro-5 fuels – earlier than required by the State technical regulations. The next step in refinery modernization will be increasing the refining depth and the yield of light petroleum products. As a result, our refineries will be equipped according to the most up-to-date Western standards. As such, in the petroleum products segment, we have already partially achieved some of the objectives set our in our 2020 strategy. Gazprom Neft holds a leading position on Russia's retail market by volumes handled per retail filling station. All this enables us to set for ourselves longer-term goals, and this year we plan to outline development guidelines through 2025.
In the past year we have also made significant advances in oil refining. The quality of fuel produced by our refineries met to Euro-4 and Euro-5 in 2012, and in 2013 we will be in a position to switch over to the production of the lowest-emission petroleum products, Euro-5, two years ahead of the deadline set by the State technical regulations. In 2012 Gazprom Neft became the largest supplier of light petroleum products in the domestic market. Having completed the first stage of refinery modernization aimed at improving the quality of petroleum products, we are proceeding to the next stage which will focus on increasing refining depth and further enhancing the efficiency of our refining operations.
The Company is increasing fuel sales through its filling stations with an average daily fuel volume handled per filling station having reached 17.7 tonnes during the year, which represents the best performance in Russia. Petroleum product sales through premium high-margin distribution channels, such as filling stations, bunkering and aircraft refueling, grew 15% in 2012. This strong performance was due to the expansion of our sales network, the company’s entry into new markets, the successful implementation of rebranding and loyalty programs, as well as an effective advertising campaign.
The strength of our financial performance in 2012 reflects our successful developments in the year across all business lines. As a result of our efforts we have already reached some of our key performance indicator targets as set out in our 2020 development strategy. On the back of this success we will start to develop our 2025 strategy and set new targets.