Government-owned OJSC Rosneft is the largest oil-producing company in Russia. Vertically integrated, Rosneft has both upstream and downstream presence in every region where oil extraction takes place. The company was formed as the result of the privatization of Russia’s oil industry in 1993.      

Two years ago Rosneft purchased practically all of the assets of Yukos, including 2 production fields and 5 refineries, for USD 7 billion during an auction organized by the government. Following the purchase of Yukos facilities, Rosneft became the largest oil company in the country for production, as well as refining.

The company’s takeover maneuvers resulted in increased indebtedness. In order to fund the purchase of Yukos assets, Rosneft took out USD 22 billion in loans from international banking institutions. Rosneft paid down the balances due on its loans to 21 billion. The company planned to repay another USD 7 billion in 2009.  

Despite high levels of debt, Rosneft’s financial situation is stable. The company experienced significant increases in revenues as a consequence of the management’s measures aimed at reducing costs, rising production levels, and sky-rocketing oil prices in 2008. Rosneft reported a record income of USD 11.1 billion for the previous year. By comparison, the company’s profits in 2007 were 71.5 percent less, only USD 6.5 billion. Rosneft’s total revenues for 2008 increased by 40 percent reaching USD 69 billion.

The company’s most significant production fields are in west and east Siberia, the Far East, as well as south and center Russia. Rosneft’s non-producing fields that are considered to have substantial reserves are located in west Siberia and the Far East, Sakhalin and Kamchatka in particular.

During the course of 2008 Rosneft also reported a 2.8 percent increase in confirmed hydrocarbon reserves. In terms of confirmed oil reserves, Rosneft is currently the leader among all oil-producing companies in the world that are listed on public stock exchanges. The company had 22.3 billion barrels of oil-equivalent at the end of last year. Crude oil reserves totaled 17.7 billion barrels, and gas reserves totaled 784 billion cubic meters.  

The reserve replacement ratio for Rosneft was 172 percent in 2008. The replacement ratio for oil was 123 percent. The life of the reserves was estimated at 23 to 26 years for crude oil. The life of natural gas reserves was calculated at 65 years.  

A new trend in Rosneft’s business development is the rising importance of gas production. The company’s business model had already undergone some changes even before the incorporation of Yukos assets as a result of the acquisition of a controlling share of stock of Yuganskneftegaz in 2004. The price tag for the Yuganskneftegaz purchase was USD 9.4 billion.

Rosneft’s crude oil production for 2008 was reported at 774 million barrels, a figure that represented a 4.6 increase compared to the previous year. Production declined on year-on-year basis in the last quarter of 2008, owing to Rosneft’s sale of a 50-percent interest in Tomskneft in the fourth quarter of 2007. The exploration of the Vankor field was also delayed.

Rosneft advanced its strategic goals with the acquisition of Yukos assets, increasing production of crude oil and natural gas. The new assets will affect Rosneft’s further development in terms of both the benefits derived from the use of the new resources and the financing procured to facilitate the acquisition.

Among the company’s main targets in the near future is the continuation of efforts to increase production at oilfields controlled by Yuganskneftegaz. In 2007, Yuganskneftegaz increased production to almost 442 million barrels, accounting for nearly 60 percent of Rosneft’s totals. Rosneft’s central focus for boosting gas production is Purneftegaz.

The company’s strategy is focused on the Siberian region, where the Vankor oilfield is about to enter production. The company’s joint project with TNK-BP in Irkutsk region, the exploration of Verkhnechonsk, is also viewed as promising. Rosneft had intentions to invest USD 2.7 billion in the Siberian region throughout 2009. The company’s long-range goals include Sakhalin exploration.

In order to achieve the targets for increasing gas production, Rosneft plans to negotiate sales agreements with Gazprom.

Aside from significant acquisitions, Rosneft’s development in the recent years occurred along the lines of cutting costs, integrating new technologies, and diversifying the company’s asset portfolio.  

The company’s sale of half of the shares of stock of Tomskneft to Gazprom resulted in gains to Rosneft of USD 1.75 billion.

Rosneft’s strong market position and its large hydrocarbon reserves allow the company to stand as a reliable suppliers of oil, petroleum products, and natural gas domestically and internationally – to countries of Europe and Asia. Rosneft’s status as a government-owned enterprise, while making the company vulnerable to pricing issues on the internal market, does not present substantial concerns for international operations.      

Contact information:

OJSC Rosneft Oil Company
26/1 Sofiyskaya Embankment
115998 Moscow

Tel: +7 495 7774444
Fax: +7 495 7774444
www.rosneft.com