13 Nov 2020 07:00
OPERATING RESULTS FOR 3Q AND 9M 2020
· 9M 2020 LIQUIDS PRODUCTION AMOUNTED TO 4.19 MMBPD UNDER THE NEW OPEC+ AGREEMENT
· 9M 2020 GAS PRODUCTION CONSTITUED 46.75 BCM
· CONTINUED DEVELOPMENT OF THE KEY PRODUCTION ASSETS WITH EMPHASIS ON THE NEW TECHNOLOGIES APPLICATION
· 3Q 2020 REFINING THROUGHPUT AT THE COMPANY'S REFINERIES INCREASED BY 6.1% QOQ TO 25.5 MMT
· 3Q 2020 REFINING DEPTH INCREASED TO 75.7%, LIGHT PRODUCTS YIELD ROSE TO 58.4%
ESG
In 3Q 2020, the Company started drafting the Carbon Management Plan 2035, which will provide a long-term framework for the Company's development in the context of transitioning to the low carbon economy, including management of climate risks and identification of opportunities related to future energy demand. The plan implementation will be instrumental in strengthening Rosneft's leading position in the global energy market in the context of the energy transition process and the maximum monetization of the Company's proven reserves.
High environmental safety standards are an integral part of Rosneft's corporate culture. In 3Q 2020, the Company commenced testing of the unique biological agent for cleaning the northern seas. The technology is based upon the application of natural psychrophiles (low-temperature bacteria) that use hydrocarbons as their feedstock.
In 3Q 2020, Rosneft presented its Public Statement regarding human rights and the Declaration on Human Rights for interacting with suppliers of goods, works and services. The Company respects and upholds human rights and freedoms in accordance with the Universal Declaration of Human Rights, Social Charter for Russian Business, universally recognized standards of human rights and freedoms, the applicable law of the Russian Federation and other countries of the Company's presence.
People's health and safety are Rosneft's top priority. The Company has an integrated pandemic emergency response system. Employees undergo regular testing, with the number of tests exceeding 560 th. As of the end of October 2020, the Company has acquired over 29.3 mln units of personal protective equipment, over 5.8 mln liters of disinfectant for offices and workplaces treatment. Psychological support hotline is in place and receiving calls.
Hydrocarbon production
3Q 2020 liquids production amounted to 3.91 mmbpd (48.51 mmt), down by 3.2% QoQ against the backdrop of higher production levels in April prior to enactment of the new OPEC+ Agreement. 9M 2020 liquids production amounted to 4.19 mmbpd (155.0 mmt), which is a 10.3% decline YoY due to larger production cuts under the new OPEC+ Agreement and the consequences of the COVID-19 pandemic.
To secure the compliance with obligations to restrain crude oil production under the new OPEC+ Agreement, the Company systemically uses tools that ensure efficient well stock management, including limiting the flow rates without well suspension, intermittent well operations, and optimized wellwork program at the producing well stock. This approach allows for flexible management of production capability and prompt production increase, if needed. Thus, after easing the restrictions under the OPEC+ Agreement, the Company promptly ramped up some of its production volumes, increasing the average daily production by over 6% already in early August compared to July.
3Q 2020 gas production amounted to 14.96 bcm which is 1.3% lower QoQ mainly due to the scheduled preventive equipment maintenance. 9M 2020 production amounted to 46.75 bcm, a 6.0% decrease YoY. The main reasons for the decline are a decrease in associated petroleum gas production due to oil production cuts in accordance with the new OPEC+ Agreement, as well as a decline in gas demand amid the COVID-19 pandemic.
As a result, 3Q 2020 hydrocarbon production amounted to 4.90 mmboed (60.8 mmtoe), a 3% decrease QoQ. 9M 2020 average daily hydrocarbon production constituted 5.23 mmboed (193.5 mmtoe), a 9.5% decrease YoY.
Development drilling and new wells commissioning
3Q 2020 development drilling footage exceeded 3 mln m (+15.9% QoQ), reaching 7.9 mln m in 9M 2020 (+1.2% YoY). The share of in-house drilling footage is traditionally maintained at more than 50%. As part of Rosneft-2022 strategy implementation, the Company continues to focus on the construction of cutting-edge wells, which ensure greater efficiency in reserve development and enhanced oil recovery rate compared to directional well drilling.
In August 2020, RN-Yuganskneftegaz achieved another record in commercial drilling speed of two-string horizontal wells: 15,698 th. m per rig/month. Commercial drilling speed increased by 47% compared to 2015 level.
The number of newly commissioned wells reached 1.8 th. units in 9M 2020. The number of the most efficient new horizontal wells amounted to 1.2 th. units, a 1% increase YoY. The Company has been continuously increasing the number to horizontal wells that reached 70% of the total number of newly commissioned wells in 9M 2020, which is 14 p.p. higher YoY. The share of newly commissioned horizontal wells with multistage hydrofracturing amounted to 775 units in 9M 2020, while their share in the total number of wells commissioned over the period reached 43% (+9 p.p. YoY). Unit production per horizontal well overpasses the indicator for directional wells by more than 2.5 times.
Application of modern technologies in upstream
Acting within restrictions imposed by the OPEC+ Agreement, the Company continues to develop its key assets and focuses on the development and application of new technologies, including digitalization, which improves 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 3Q 2020, the Company launched a pilot project to develop hard-to-recover reserves of the Preobrazhensky horizon of the Verkhnechonskoye oil and gas condensate field. The horizon with initial recoverable reserves of over 28 mmt of oil is characterized by extremely low permeability of the reservoir. In August 2020, the first two wells of different designs were commissioned - drain hole completion and horizontal completion with multi-stage fracking. During the drilling, the Company used a set of geophysical studies of wells, which made it possible to determine formation properties and saturation in real time and to correct the direction of drilling, if necessary. The initial flow rates of the wells were 113 and 51 t per day.
Rosneft's specialists have developed a technology for processing 3D seismic data, which offers new opportunities for developing hard-to-recover hydrocarbon reserves. The innovation helps to reliably explore fields with carbonate reservoirs, that form at least 20% of the Company's recoverable reserves, and to increase the drilling efficiency of this type of fields by 5% on average, and will also allow for an increase in the volume of recoverable hydrocarbons in the future. The technology is already actively used at the Company's Yurubcheno-Tokhomskoye and Kuyumbinskoye fields in Eastern Siberia.
The Company is developing the Vendian and Riphean deposits, distinguished by a complex geological structure, as part of the development of the Yurubcheno-Tokhomskoye field. The Vendian sediments lie on the surface of the planet's oldest productive Riphean sediments, which are more than 1 bln years old. In August 2020, extraction from the Vendian deposits started by drilling a development well with an initial production rate of 149 t of oil per day. The recoverable oil is ultra-light with small amounts of sulfur and hydrogen sulfide, tar and paraffins.
In the reporting period, the Company completed construction of a unique for Riphean deposits downhole splitter with four horizontal wellbores was completed. The total length of the well is 5,280 m, while the horizontal section is 2,220 m. The star-up oil production rate was 281.5 t per day, which manifold exceeds the new wells average performance across Russia. Due to the application of an innovative method of seismic-geological analysis, the Company achieved a 99% drilling efficiency. The new approach makes it possible to design a well as accurately as possible, and to successfully predict multiple tectonic faults for the optimal placement of a production well stock.
Upstream projects development
The Company continues development of its production projects in accordance with the previously announced plans.
As part of the implementation of the Erginsky cluster project, the Company launched full-scale development of the Erginsky license area, a key asset of the cluster. A pressure pipeline to transport oil to the Priobskoye field was commissioned in late August 2020 and commercial oil shipping to the Transneft pipeline system started. Development drilling at 10 well pads, construction of infrastructure facilities, infield pipelines and electric power transmission lines are underway. 9M 2020 production at the cluster's fields increased by 1.1% YoY and reached 15.2 mmbbl (2.1 mmt over the period).
In 9M 2020, the Company's share in total liquids production at the large greenfields launched since 2016 (including Erginsky license area) amounted to 14.54 mmt (393 kbpd), which is 3.8% higher YoY. 3Q 2020 production of liquid hydrocarbons at these greenfields amounted to 4.87 mmt (392 kbpd), accounting for 10% of the total liquids production.
As part of the Danilovsky oil and gas production cluster development project, preparations continue for the launch of the Severo-Danilovsky field in 2020. In order to efficiently use associated petroleum gas (APG), a 4 MW mobile power unit was commissioned at the field, which will be the main source of energy until the completion of the 31 MW gas turbine power station. After the launch of the power plant, the field will be fully supplied with electricity generated from APG. The welding of the oil pipeline to the Verkhnechonskoye field is completed, preparatory work for hydraulic tests is underway. Construction of pads, infrastructure facilities and motor roads is in progress.
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, 9M 2020 production at the fields increased by 38% YoY and amounted to 7.5 mmbbl (1.02 mmt over the period).
Construction of key production facilities of the Rospan infrastructure was at the final stage as of the end of 3Q 2020. The completion status of the 1st start-up complex is 96%, "no load" pre-commissioning operations are ongoing. The intention is to start loaded pre-commissioning operations in the near future. The project is planned to produce its first gas in 2020. The designed daily capacity is expected to be reached in 2021.
Geological exploration
The Company conducted ~1,000 linear km of 2D and almost 4,000 sq. km of 3D seismic works in 9M 2020 on the Russian on-shore, and tested 79 exploration and appraisal wells with an 83.5% success rate. 1,900 sq. km of 3D seismic works were conducted offshore in the waters of the Kara and Okhotsk seas.
As a result of geological exploration, Rosneft discovered 46 new deposits and 6 new fields with АВ1С1+B2С2 hydrocarbon reserves amounting to 50 mmtoe.
In late September 2020, a unique expedition started to the area of the Severnaya Zemlya islands to drill shallow (up to 120 m) stratigraphic wells. The main objective of the project is core sampling, which serves as a direct source of geological information required to determine the age, composition and formation conditions of sedimentary cover rocks in the study areas of the Arctic shelf. These studies are of great scientific importance, including the understanding of the geological structure of the Russian Arctic and the assessing of the oil and gas potential of the North Kara Basin.
Oil refining
In 3Q 2020, the Company refined 22.5 mmt of oil at its refineries in Russia, which is 4.8% higher QoQ. In 9M 2020, 70.0 mmt were processed, which is 6.2% lower YoY. The reduction in refining volumes results from the optimization of refinery utilization taking into account the current demand for petroleum products as well as low refining margin amid the COVID-19 pandemic.
In 3Q 2020, oil refining throughput at the Company's refineries in Germany amounted to 2.9 mmt, a 17.1% rise YoY, which was mainly attributed to the increase in demand for petroleum products in Germany once the restrictive measures associated with the COVID-19 pandemic had been lifted. In 9M 2020, 8.2 mmt were processed at the refineries in Germany, which is 14.2% higher YoY. The increase resulted from the decreased refining volumes at PCK Raffinerie GmbH Refinery in 2019 due to the presence of organochlorine compounds in oil supplied through the Druzhba pipeline as well as to the turnaround maintenance at PCK Raffinerie GmbH Refinery in 9M 2019.
As a result, 3Q 2020 refining throughput at the Company's refineries amounted to 25.5 mmt, a 6.1% increase QoQ. Moreover, the refining depth increased by 0.5 p.p. to 75.7%, and light products yield increased by 2.1 p.p. and constituted 58.4%. 9M 2020 refining throughput amounted to 78.2 mmt, a 4.5% decrease YoY.
Crude oil and petroleum products sales
In 9M 2020, international sales to non-CIS countries amounted to 85.3 mmt of crude oil, which is 17.0% lower YoY. In 3Q 2020, this indicator reached 23.5 mmt, including sales via Asian distribution channel which amounted to 13.0 mmt, or 55.3% of the total international non-CIS sales. 9M 2020 crude exports from Russia to non-CIS countries constituted 73.9 mmt, а 11.0% decrease YoY. 3Q 2020 crude exports from Russia to non-CIS countries amounted to 21.7, while the share of crude oil supplies under contracts with a validity period of one year or longer constituted ~90% of the indicated volume.
In 9M 2020, the Company sold 76.8 mmt of petroleum products, which is 6.9% lower YoY, including 21.4 mmt of petroleum products sold in 3Q 2020. 9M 2020 international non-CIS sales of petroleum products decreased by 3.0% YoY and constituted 44.7 mmt. Petroleum products exports from Russia to non-CIS countries amounted to 34.6 mmt, a 2.1% increase YoY, including 9.5 mmt of petroleum products exported in 3Q 2020. The share of petroleum products supplies under agreements with a validity period of one year or longer exceeded 90% of the indicated volume. 9M 2020 domestic sales of petroleum products amounted to 28.0 mmt, while sales in CIS countries constituted 2.7 mmt.
The Company continues to actively trade at the Saint Petersburg International Mercantile Exchange, consistently meeting the needs of the domestic market of the Russian Federation. In 3Q 2020, the Company exceeded the required quotas for motor fuel sales by 3 times. In September 2020, RN-Bunker, the Company's subsidiary, started selling marine fuel at the exchange.
In 9M 2020, the Company supplied 1,209 th. tons of marine fuel to end consumers, namely domestic and foreign ship-owners, including 1,031 th. tons of low sulphur marine fuel fully compliant with the requirements of MARPOL. The low-sulfur residual marine fuel RMLS 40 accounted for more than 47% of this volume (486 th. tons)
9M 2020 production of bituminous materials at Rosneft's refineries increased by 11% (0.2 mmt) YoY to 2.4 mmt.
In the reporting period, Rosneft Deutschland GmbH, Rosneft's subsidiary, launched into-plane fueling service in the airport of Stuttgart, Germany.
Retail business
In the reporting period, the Company continued to increase its petroleum products sales. 3Q 2020 retail sales volume recovered to the level preceding the introduction of restrictive measures related to the spread of coronavirus infection, and exceeded 1Q and 2Q 2020 figures by 14% and 28%, respectively.
All the stores and cafes at the Company's filling stations continue to operate in strict accordance with the recommendations of Rospotrebnadzor for preventive and disinfection measures.
To maintain and develop sales during the pandemic, the Company is constantly improving services to provide social distancing and minimize contacts. Thus, the development of contactless payment for fuel and associated goods using the Yandex.Fuel, Yandex.Navigator and Yandex.Maps applications is in progress. The service is already available to customers at 1,268 filling stations in the key regions of the Company's presence, including floating filling stations in Saint Petersburg. 1.4 mln virtual loyalty cards were issued as of the 3Q 2020 end, an 24% increase QoQ.
The Company implemented a pilot project to install terminals at the filling stations for the customers to collect their orders from the largest online stores in the Moscow region. The possibility to expand the service to other regions of the Company's retail business presence is being considered.
As of the reporting quarter end, the Company's retail network comprised 3,056 filling stations and complexes, 2,993 of which are located in 66 constituent entities of the Russian Federation.
Key operating results for 3Q and 9M 2020:
3Q'20 | Q2'20 | QoQ | Q3'19 | YoY | 9M'20 | 9M'19 | YoY | |
Hydrocarbon production (kboepd) | 4,898 | 5,051 | (3.0)% | 5,740 | (14.7)% | 5,232 | 5,783 | (9.5)% |
Liquids,production,(mmt) | 48.51 | 49.56 | (2.1)% | 57.88 | (16.2)% | 155.05 | 172.21 | (10.0)% |
Gas,production,(bcm) | 14.96 | 15.16 | (1.3)% | 16.30 | (8.2)% | 46.75 | 49.73 | (6.0)% |
Development,drilling,(th.,m)* | 3,056 | 2,636 | 15.9% | 2,627 | 16.3% | 7,906 | 7,811 | 1.2% |
2D,seismic,(linear,km)* | 803 | 56 | >100% | 362 | >100% | 971 | 2,145 | |
3D,seismic,(sq.,km)* | 2,549 | 837 | >100% | 3,978 | (35.9)% | 5,898 | 9,737 | (39.4)% |
Oil,refining,(mmt) | 25.46 | 24.00 | 6.1% | 30.07 | (15.3)% | 78.18 | 81.90 | (4.5)% |
Russian,refineries | 22.52 | 21.49 | 4.8% | 27.22 | (17.3)% | 69.96 | 74.59 | (6.2)% |
Outside,Russia | 2.94 | 2.51 | 17.1% | 2.85 | 3.2% | 8.22 | 7.31 | 12.4% |
Refining,depth | 75.7% | 75.2% | 0.5 p.p. | 75.4% | 0.3 p.p. | 74.8% | 74.9% | (0.1) p.p. |
Petroleum,product,output,in,Russia,(mmt) | 21.76 | 20.93 | 4.0% | 26.31 | (17.3)% | 67.76 | 72.06 | (6.0)% |
Gasoline | 3.70 | 2.66 | 39.1% | 4.03 | (8.2)% | 9.94 | 11.52 | (13.7)% |
Naphtha | 1.25 | 1.44 | (13.2)% | 1.57 | (20.4)% | 4.30 | 4.04 | 6.4% |
Diesel fuel** | 7.33 | 7.19 | 1.9% | 8.82 | (16.9)% | 23.02 | 24.40 | (5.7)% |
Fuel,oil | 5.10 | 5.00 | 2.0% | 6.28 | (18.8)% | 16.46 | 17.47 | (5.8)% |
Kerosene | 0.71 | 0.62 | 14.5% | 1.01 | (29.7)% | 2.10 | 2.63 | (20.2)% |
Petrochemicals | 0.29 | 0.39 | (25.6)% | 0.30 | (3.3)% | 1.11 | 1.12 | (0.9)% |
Other | 3.38 | 3.63 | (6.9)% | 4.30 | (21.4)% | 10.83 | 10.88 | (0.5)% |
Petroleum products output outside Russia (mmt) | 3.06 | 2.54 | 20.5% | 2.99 | 2.3% | 8.53 | 7.69 | 10.9% |
Light products yield | 58.4% | 56.3% | 2.1 p.p. | 57.2% | 1.2 p.p. | 57.3% | 57.9% | (0.6) p.p. |
Crude oil sales (mmt) | 26.7 | 29.1 | (8.2)% | 39.1 | (31.7)% | 93.2 | 113.4 | (17.8)% |
International sales to non-CIS | 23.5 | 25.8 | (8.8)% | 35.2 | (33.2)% | 85.3 | 102.8 | (17.0)% |
International,sales,to,CIS | 1.9 | 2.0 | (4.7)% | 2.4 | (20.8)% | 3.9 | 6.5 | (39.9)% |
Domestic,sales | 1.3 | 1.3 | 0.0% | 1.5 | (13.3)% | 4.0 | 4.1 | (2.6)% |
Petroleum products sales (mmt) | 24.1 | 24.3 | (0.8)% | 30.7 | (21.5)% | 76.8 | 82.5 | (6.9)% |
International sales to non-CIS | 12.5 | 14.8 | (15.5)% | 17.4 | (28.2)% | 44.7 | 46.1 | (3.0)% |
International sales to CIS | 0.8 | 1.0 | (20.0)% | 0.9 | (11.1)% | 2.7 | 2.9 | (6.9)% |
Domestic sales | 10.3 | 8.0 | 28.8% | 11.6 | (11.2)% | 28.0 | 31.1 | (10.0)% |
Sales of bunker fuel to end-users | 0.5 | 0.5 | 6.8% | 0.8 | (37.5)% | 1.4 | 2.4 | (41.7)% |
Petrochemical products sales (mmt) | 0.6 | 0.5 | 0.0% | 0.5 | 0.0% | 1.8 | 1.9 | (5.3)% |
International,sales | 0.2 | 0.2 | (9.9)% | 0.2 | (5.9)% | 0.6 | 0.7 | (14.3)% |
Domestic,sales | 0.4 | 0.3 | 0.0% | 0.3 | 0.0% | 1.2 | 1.2 | 0.0% |
Gas sales (bcm) | 13.18 | 13.06 | 0.9% | 15.05 | (12.4)% | 41.15 | 45.72 | (10.0)% |
* According to management data
** Including marine fuel