Total production by OJSC Gazprom Neft rose by 4.3% in 2012, to 59.7 million tonnes of oil equivalent. Oil-equivalent production growth has been achieved thanks to recently purchased (in 2011-2012) production assets (CJSC Gazprom Neft Orenburg, LLC Technology Research Center, OJSC Yuzhuralneftegaz, and LLC Zhivoy Istok), and highly efficient interventions at Western Siberian fields. The Company’s total production growth from newly purchased assets has been 1.6 million tonnes of oil equivalent.

In 2012, the Company’s subsidiaries conducted a total of 2,611 interventions, of which 1,453 were intended to increase crude oil production and 1,149 were intended to maintain base production. This resulted in producing 252 thousand tonnes more than in the 2012 Business Plan; additional crude oil production due to the above actions totaled 4.693 million tonnes.

The subsidiary resource base is characterized by a deteriorating structure of remaining reserves as the majority of high-yielding fields entered into the advanced development phase, bringing some lagging fields into development. Efficiency improvements in reserves development are possible with horizontal drilling.

By the end of 2012, the Company’s performance stock of oil production wells (not including affiliates) had risen by 582 to a total of 7,859 wells.

In 2012, drilling in more complex (from a geological point of view) deposits occurred where horizontal drilling technologies and multilateral wells were utilized.

Excluding activities by affiliated companies, Gazprom Neft commissioned 690 wells during the reporting year, of which 87 were horizontal wells (compared with 61 in the Business Plan, that is, 43% above plan). Multi-stage fracturing was utilized for 29 horizontal wells located in drilling areas with low porosity and permeability, which resulted in a peak yield of 92 tonnes per day. In addition, five dual wells were completed in 2012.

This increase in the number of new wells reflects the expansion of the production drilling program to 2,516 thousand meters, 262 thousand meters above the Business Plan, including through a 3-fold increase in drilling horizontal wells (total drilling distance of 315.6 thousand meters).

The plan for 2013 is to drill 625 new wells with a target yield of 29.4 tonnes per day. This will include 144 horizontal wells and applying the multi-stage fracturing technique at 75 wells, which is 65% higher that the actual horizontal drilling in 2012. Most of the drilling will be performed at the Priobskoye, Vyngapurskoye, Vyngayakhskoye, Sugmutskoye, Zimneye, Shinginskoye, Archinskoye, Zapadno-Luginetskoye, Umseyskoye, Yety-Purovskoye and Romanovskoye fields.

The rates of hydrocarbon output growth in the coming years will remain at 4% to 5%.

This performance is to be achieved by phased commissioning of explored oil fields belonging to OJSC Gazprom Neft, thanks to the commissioning of the Yamal fields and the resource base expansion through commissioning oil fields on the balance sheets of other companies within the Group.

The main challenge for the next two or three years will be the updating of the Group’s hydrocarbon production strategy by boosting operations on a depleted resource base.

Plans for 2013 to 2015 include further projects to bring 60 million tonnes of hard-to-recover reserves into production. More than 250 million tonnes of hard-to-recover reserves will be included in a program for test-mode development.

HYDROCARBON PRODUCTION, MILLION TONNES OF OIL EQUIVALENT

Source: Company data