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Strategic Review / Growth Drivers

Growth Drivers

Broadening the Resource Base

GAZPROM NEFT’S TOTAL PROVEN AND PROBABLE HYDROCARBON RESERVES TOTALED 2,128 MILLION TONNES OF OIL EQUIVALENT.

The reserves replacement ratio for Gazprom Neft reserves in proven and probable hydrocarbons was 438%.

Significant changes in hydrocarbon reserves were due to:

  • the acquisition of the Novoportovskoye, Baleykinskoye and Yuzhno-Kinyaminskoye fields with total reserves of 455.8 million tonnes of oil equivalent;
  • the production, writing-off and sale of a share of assets;
  • the re-evaluation of Group reserves (+128 million tonnes of oil equivalent).
>20 years Number of years of production from proven hydrocarbon reserves 214 % Rate of proven reserve organic replacement 83 % Exploration drilling success rate

CHANGES IN PROVEN HYDROCARBON RESERVES ACCORDING TO PRMS-SPE CLASSIFICATION, MILLION TONNES OF OIL EQUIVALENT

GAZPROM NEFT ACQUIRES THE NOVOPORTOVSKOYE FIELD

Gazprom Neft has acquired the Novoportovskoye field as part of the Company’s strategy to develop a number of OJSC Gazprom oil assets.

OJSC Gazprom Neft has already been operating the field for a number of years. In 2012, the Company successfully tested the first production well drilled at Novoportovskoye. Commencement of year-round commercial oil production at the field is scheduled for 2014.

Next year, three horizontal wells will be drilled at Novoportovskoye‘s second field cluster.

Increasing Hydrocarbon Production

In 2012, GAZPROM NEFT HAD THE HIGHEST HYDROCARBON PRODUCTION GROWTH RATE AMONG RUSSIAN-BASED OIL PRODUCERS. THE COMPANY SUCCEEDED IN ACHIEVING INDUSTRY-LEADING CRUDE OIL PRODUCTION BY EXCEEDING ITS WELL COMMISSIONING TARGET BY 10% AND ORGANIZING AN EFFICIENT FORMATION PRESSURE SYSTEM.

The Company’s subsidiaries performed above target due to the drilling of new horizontal wells, including multi-stage fracturing, and the use of effective techniques to expand production. The increase in marketable gas supply was due to both the successful implementation of the production project at the Muravlenkovskoye field and projects for utilizing associated gas. Of these, the main project was the Noyabrsky Integrated Project, which completed its initial phase in October 2012.

60 million tonnes Number of tonnes of hard-torecover hydrocarbon reserves scheduled for development between 2013 and 2015 7,859 wells Performance stock of oil production wells totaled 2012 95 % Targets for the utilization of associated gas between 2013 and 2015

HYDROCARBON PRODUCTION, million tonnes of oil equivalent

GAZPROM NEFT KHANTOS – LEADER IN PRODUCTION GROWTH RATES

LLC Gazprom Neft Khantos is the industry leader in terms of production growth rates. Intensive development at the Priobskoye field, operated by Gazprom Neft Khantos, began in 2004 and, by 2008, the field was already producing more than 23% of Gazprom Neft’s total output. In 2012, the output accounted for 35.6% of crude oil production from the Company’s fields. Company output totaled 12.3 million tonnes, a 12.0% increase on figures for 2011. Priobskoye is a key asset that will play a strategic role in the Company’s future growth.

Developing Oil Refining in Russia

GAZPROM NEFT IS A TOP PERFORMER IN CRUDE OIL REFINING GROWTH RATES AMONG RUSSIAN COMPANIES. TODAY, GAZPROM NEFT’S PRODUCTION UNITS ARE AHEAD OF SCHEDULE TO SWITCH OVER TO NEW PRODUCTS THAT COMPLY WITH INTERNATIONAL QUALITY STANDARDS AND ARE SIGNIFICANTLY MORE ENVIRONMENTALLY-FRIENDLY.

Since 2009, the Company has been implementing a large-scale refinery modernization program. The first results of the refinery modernization program have significantly increased the proportion of Euro-4 and Euro-5 motor fuels in the Company’s product mix. In future, the Company will focus on expanding its facilities for deep crude oil refining and high-octane component production.

88.8 % Oil refining depth at the Omsk Refinery 41.1 million tonnes Installed production capacity of Russian-based Refinery Companies 5.6 million tonnes Output of Euro-4 and Euro-5 petrols at Group-owned refineries

PRODUCTION OF PETROLEUM PRODUCTS, MILLION TONNES

GLOBAL RECOGNITION FOR THE OMSK REFINERY MODERNIZATION

In 2012, the World Refinery Association (WRA) acknowledged the OJSC Gazprom Neft-Omsk Refinery as the best in Russia and CIS countries, praising projects implemented by the Omsk refinery under its modernization program to 2020.

Products from the Omsk Refinery, once again, won Russia’s 100 Best Products contest: honorary certificates were awarded to Super Euro-98 automotive gasoline and BND 90/130 viscous construction bitumen; other products won special prizes in the industrial and technology products category.

Increasing Access to Refining Facilities Outside Russia

IN ADDITION TO CRUDE OIL REFINING IN RUSSIA, THE COMPANY HAS ACCESS TO REFINING FA CILITIES BELONGING TO NIS A. D. NOVY SAD IN SERBIA, ALONG WITH THE FOLLOWING BELARUSIAN REFINERIES (UNDER THE SAME PROCESSING CONTRACTS): OJSC MOZYR REFINERY AND OJSC NAFTAN.

By the end of 2016, the Company plans to have implemented a project to construct a base oil production unit. The company has nearly finished designing a NIS refinery development program that will run until 2022, resulting in the configuration for a petroleum residue recycling facility at the Panchevo refinery. The NIS refineries treated a total of 2.1 million tonnes of crude oil in 2012. Crude oil refining at OJSC Mozyr Refinery in 2012 totaled 1.6 million tonnes of oil.

100 % Level of Serbian market demand that can be satisfied by NIS capacity 7.3 million tonnes per annum Maximum capacity of the NIS refinery EURO-5 100% of products made by NIS meet the requirements of Euro-5

CRUDE OIL PRODUCTION AND REFINING BY REFINERIES OUTSIDE RUSSIA, MILLION TONNES

NIS REFINERY MODERNIZATION

An upgrade program implemented at the NIS refinery in Panchevo in November 2012 included the commissioning of a mild hydrocracking / diesel hydrotreatment (MHC/DHT) facility, hydrogen generation unit and black sulphuric acid regeneration unit. Construction of the facility allowed production to be switched over to high-octane gasolines and diesel fuels that meet Euro-5 standards.

Growing Automotive Fuel Sales in Russia and the CIS

IN 2012 GAZPROM NEFT STRENGTHENED ITS POSITION IN THE PETROCHEM RETAIL MARKET, BECOMING THE LARGEST SUPPLIER OF LIGHT PETROLEUM PRODUCTS IN THE RUSSIAN MARKET WITH A SHARE OF 21.6%.

Having its own nationwide brand, that is highly recognizable and trusted for its product quality, is instrumental in achieving one of the Company’s strategic goals – to become the market leader for sales of petroleum products in Russia.

Going the Same Way, a loyalty program launched by the Company in 2010, has become a highly effective tool for increasing sales volumes and brand confidence.

3.2 million Number of members of the Going the Same Way federal loyalty program 17.7 tonnes Average daily sales per filling station in Russia 29 % Share of G-95 petrol in Ai-95 sales in filling stations offering branded fuel

AUTOMOTIVE FUEL SALES THROUGH THE COMPANY’S FILLING STATION CHAIN IN RUSSIA & THE CIS

G-DRIVE PREMIUM-CLASS MOTOR FUEL

A compound of active additives which feature in the next generation of G-Drive fuel provides specialized protection of the engine fuel system, increased engine performance and improved accelerating power. This new formula of active additives uses the latest components, developed by leading engine efficiency experts.

The successful promotion of the G-Drive premium motor fuel has been a major factor in the diversification of the branded fuel market. A pilot project for selling G-Diesel branded diesel fuel was launched in 2012.

Expanding the Filling Station Network

DEVELOPING RETAIL PETROLEUM PRODUCTS IS A KEY BUSINESS LINE FOR THE COMPANY. HAVING ITS OWN HIGHLY RECOGNIZABLE AND TRUSTED NATIONWIDE BRAND IS INSTRUMENTAL IN ACHIEVING ONE OF THE COMPANY’S STRATEGIC GOALS – TO BECOME THE MARKET LEADER FOR SALES OF OIL PRODUCTS IN RUSSIA.

Over four years (2009-2012), the Company has built 95 new filling stations, refitted 255 and re-branded 552. In 2012, the Company focused mainly on G-Drive petrol promotion. From now on, the Company plans to place greater emphasis on the following products: branded fuels, cafés and goods under its own trademarks.

27 Number of Russian regions with filling stations from the Company’s chain +33 % Growth in retail sales of petroleum products +49 % Revenue growth from selling associated products and services

COMPANY’S FILLING STATION CHAIN

GAZPROM NEFT FILLING STATIONS BEGIN WORK IN THE UKRAINE

The Company has entered Ukraine’s petroleum product retail market through a franchising scheme. By the end of 2012, there were four Gazprom Neft branded filling stations operating along the Kiev- Odessa Route. Fuel to Gazprom Neft filling stations in the Ukraine is supplied by the Mozyr Refinery. All filling stations meet the Gazprom Neft chain standards and comply with Company retail brand guidelines.

Gazprom Neft’s specialists carry out regular audits of Ukrainebased filling stations operating in the franchising scheme, checking fuel quality and the level of service at filling stations, as well as the compliance of Ukrainian stations with the high operational standards of the corporate retail network.

Growing Sales Through Premium Business Segments

THE COMPANY IS THE MARKET LEADER IN AVIATION FUEL BUNKERING AND SALES AND, AS AN OILS MANUFACTUER, IS ABLE TO COMPETE COMPETITIVEY ON THE GLOBAL MARKET.

The Company’s strategy for its premium business segments incorporates both strengthening positions in the domestic market and expanding geographically into Europe, the Middle East and Asia, and other regions.

The ambitious strategic plans are based on internal company infrastructure development, technological leadership and geographical expansion.

2.5 million tonnes Ship fuel sales, 2012 2.07 million tonnes Aircraft fuel sales, 2012 149,000 tonnes Packaged oil sales, 2012

SALES OF PETROLEUM PRODUCTS THROUGH PREMIUM BUSINESS SEGMENTS, MILLION TONNES

GAZPROM NEFT BUYS ITS FIRST FUEL TANKER FOR OPERATIONS IN PRIMORIYE

Gazprom Neft Marine Bunker, which operates the Company’s bunkering business, has bought its first fuel tanker for operations in the marine ports of the Primoriye Territory. The vessel has been named Gazprom Neft-Nord West.

The fuel tanker, built in 2012, is designed for unrestricted navigation and meets the requirements of all international shipping conventions. The vessel has a maximum capacity of 6,800 tonnes.

Improving Production Performance

THE INTRODUCTION OF UP-TO-DATE TECHNOLOGIES AT ALL PHASES – FROM GEOLOGICAL EXPLORATION TO OIL REFINING AND PETROLEUM PRODUCT SALES – DRIVES GROWTH IN PRODUCTION AND REFINING AND IMPROVES PRODUCTION PERFORMANCE.

One of the factors behind the Company’s consistent, industry-leading performance in terms of efficiency is its ability to create and make the best use of the latest technical solutions and technologies.

Gazprom Neft is continuously developing innovative in-house pilot projects, interacting with major research institutions and actively implementing new technologies. Plans for 2013 to 2020 include the investment of over RUB 15 billion to develop innovations in exploration and production, and up to RUB 450 million for R&D activities in oil refining and petrochemical production by 2015.

15 billion RUB Investment in innovative exploration and production from 2012 to 2020 50 % Target percentage of oil produced using new technologies by 2020 450 million RUB Amount of annual R&D investment for oil refining and petrochemical production until 2015
GAZPROM NEFT HAS IDENTIFIED THE MAIN LINES OF BUSINESS THAT REQUIRE INNOVATIVE SOLUTIONS AND ARE OF HIGH PRIORITY

Gazprom Neft has identified that innovative solutions are required as a priority for the long-term development of exploration and production, and has shaped an enlarged portfolio of innovative projects, which are already underway.

For the oil refining and petrochemical production businesses, principles and key indicators for innovative activities have been determined in logistics, refining and sales. Objectives to develop innovative technologies in petroleum refining and petrochem production have also been set.

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