Generating new sources of business growth

Generating new sources of business growth

Gazprom Neft’s development strategy in the period after 2020 will focus on generating new sources of business growth, efficient development of mature fields, maintaining leadership in operating efficiency and achieving maximum returns on investment in order to ensure significant shareholder value growth and secure the Company’s sustainable development through to 2025.

DEVELOPING THE RUSSIAN ARCTIC SHELF

PRIRAZLOMNAYA PLATFORM:

DEVELOPING THE RUSSIAN ARCTIC SHELF

JSC Gazprom has commenced oil production at the Prirazlomnoye field – the first project in Russia’s history to open up the resources of the Arctic Shelf – where work has begun on establishing a major hydrocarbon production centre. JSC Gazprom Neft is the operator in this project, and LLC Gazprom Neft Shelf is the licence holder.

WHY IS IT IMPORTANT?

Success in developing Arctic fields over the coming decades will to a significant extent determine the outlook for the expansion of the Russian oil and gas sector as a whole.

The Prirazlomnoye oil field is located 60 kilometres from the coast in the Pechora Sea. Recoverable oil reserves are 74.4 million tonnes, and the planned production level is approximately 6 million tonnes per year (which will be achieved after 2020). The first oil from the Prirazlomnoye field was dispatched in the first quarter of 2014, and total production of at least 300,000 tonnes of oil is planned for the year.

The Prirazlomnaya offshore ice-resistant stationary platform has all the facilities necessary to perform all production processes directly at the field – drilling, extraction, storage, processing, and offloading of crude oil. This is the first time that hydrocarbon production on the Arctic Shelf has been carried out from a stationary platform.

The Prirazlomnaya platform is a unique platform designed and built to order for Gazprom in Russia. Designed to operate under extreme environmental and climate conditions, the platform meets the most stringent safety requirements, and is capable of withstanding maximum ice loads. Special alloys that are resistant to corrosion, low temperatures, high humidity, and the aggressive marine environment were used in its construction. The platform is firmly secured on the seafloor by its own weight (506,000 tonnes including the rock berm built to protect it from scouring).

Gazprom holds 30 field licences in the Russian Arctic shelf. All operations in the region are conducted in line with the Company’s programme for hydrocarbon resources exploitation in the Russian Federation shelf until 2030.

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Setting new goals

2025 DEVELOPMENT STRATEGY:

Setting new goals

The Gazprom Neft Board of Directors has approved the Company’s 2025 Development Strategy. The 2025 strategy uses the 2020 strategy as its foundation, taking into account both the changing industry environment and the state of the global economy. The document outlines the Company’s goals in key business areas, such as hydrocarbon production, refining, and sales. The 2025 Development Strategy reinforces the Company’s commitment to continue focusing on increased shareholder value.

WHY IS IT IMPORTANT?

The new strategy outlines the processes required to create a firm foundation, allowing the Company to become the industry leader in refining yield, to significantly increase shareholder value and to secure the sustainable development of Gazprom Neft through to 2025.

“Gazprom Neft remains one of the most efficient players in Russia’s oil industry and aims to maintain this position in the future. The 2025 Strategy outlines Gazprom Neft’s business goals and challenges, and establishes a firm foundation for future growth and geographical expansion. It envisions the Company becoming the industry leader in refining yield, significantly increasing shareholder value and securing the sustainable development of Gazprom Neft through to 2025,” said Alexey Miller, Chairman of the Gazprom Neft Board of Directors.

Hydrocarbon production, million TOE per year

Refining yield

Fuel retail sales through filling station chain in Russia and the CIS, Mtpa

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IMPLEMENTING INNOVATIVE TECHNOLOGIES

INCREASE OIL YIELD AND DEVELOP HARD TO RECOVER RESERVES

IMPLEMENTING INNOVATIVE TECHNOLOGIES

In recognition of the growing importance of the use of innovative technologies in its operations, in 2013 the Company developed and approved an Innovation Policy. This sets out the key principles and approaches to managing innovative development in the analysis of technological challenges, researching and selecting possible solutions, and implementing cutting-edge projects.

WHY IS IT IMPORTANT?

The development of hard to recover reserves represents a new opportunity to expand the resource base, which will increase the oil recovery factor and the operational efficiency of the reserves.

“One of the challenges any company faces today is choosing and implementing new technologies effectively. Handling hard to recover reserves is a serious technological challenge. We are creating special competency centres that are accumulating, adapting, and helping to share successful technological solutions. All of this will allow us to bring new reserves into development, boost production, and increase efficiency,” said Gazprom Neft First Deputy CEO Vadim Yakovlev.

In 2013, Gazprom Neft will substantially increase the scope of its horizontal well drilling operations with multiple hydrofracturing, as part of its efforts to develop hard to recover reserves.

This hard to recover reserves programme was approved by Gazprom Neft in 2012, with the aim of adding 60 million tonnes of reserves to the development portfolio before 2015. By 2020, that figure should rise to 300 million tonnes.

Horizontal well drilling with multi-stage hydrofracturing is the main technology for recovering depleted reserves approved by the Company in its 2013 projects. This technology uses multiple hydraulic fracturing in a single well to enhance oil production and raise the oil recovery factor by stimulating separate formations (for example, low-productivity ones) at the same time.

Horizontal drilling, number of wells

Multi-stage hydrofracturing in Gazprom Neft, number of hydrofracs

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ENHANCING REFINING EFFICIENCY

MODERNISE:

ENHANCING REFINING EFFICIENCY

In the last six years, the large-scale refinery modernisation and upgrade programmes, together with the consolidation of assets, have dramatically increased the output of Gazprom Neft’s refineries by over 60%. The Company started producing Euro 4 and Euro 5 fuels two years ahead of the deadline stipulated in the Russian Government’s technical regulations. Further modernisation efforts will focus on increasing the oil-refining yield.

WHY IS IT IMPORTANT?

The programme implementation will enable Gazprom Neft’s refineries to produce more high value-added light oil products and to improve the quality of their output.

OMSK OIL REFINERY

In 2012, the Omsk oil refinery completed the first stage of its development programme, aimed at improving product quality. In 2013, this allowed the Omsk oil refinery to switch completely to the production of Euro 4 and Euro 5 high-octane gasoline, and also to start production of Euro 5 diesel fuel.

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Investment in the Omsk oil refinery modernisation programme from 2013 to 2015

The Omsk oil refinery has started to develop design specifications and cost estimates for the production facilities to be constructed and modernised as part of the second stage of the refinery’s 2020 development programme. The programme’s second stage is focused on increasing the refining yield. Under its medium-term investment programme, Gazprom Neft will allocate more than RUB 50 billion for the modernisation of the Omsk oil refinery in 2013–2015.

MOSCOW OIL REFINERY

As a part of the medium-term investment programme, in 2013 the Moscow oil refinery will switch completely to the production of Euro 5 gasoline, compliant with Russian technical regulations. The share of Euro 5 diesel fuel will account for over 75% of the total volume of diesel fuel produced at the Moscow oil refinery.

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Investment in the Moscow oil refinery modernisation programme from 2013 to 2015

Also under the investment programme, the Company will invest over RUB 50 billion in the modernisation of the Moscow refinery between 2013 and 2015, thus making it possible to implement large-scale projects to improve the facility’s quality of petroleum products, increase its refining yield, reduce its environmental impact and improve its energy efficiency.

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IMPROVING PRODUCT QUALITY

IMPROVE PREMIUM-GRADE MOTOR FUEL:

IMPROVING PRODUCT QUALITY

The G-Drive 98 hi-tech fuel with enhanced properties contains components developed by leading international experts in engine operational efficiency improvement. An active compound of additives increases engine power, improves acceleration, removes deposits from the fuel system and prevents them from reappearing, and also reduces fuel consumption.

WHY IS IT IMPORTANT?

In addition to improved vehicle performance, G-Drive fuel also significantly reduces the environmental impact of exhaust emissions, thereby contributing to a healthier environment.

All Gazprom Neft filling stations sell petroleum products — produced by the Moscow, Yaroslavl, and Omsk Oil Refineries — that are among the best and most advanced automotive gasoline, diesel fuels and oils in Russia. The use of high-quality petroleum products extends the operational life and reliability of automotive equipment.

In 2013, Gazprom Neft launched a new premium-grade 98 octane fuel under the G-Drive brand in Moscow, Saint Petersburg, and the Krasnodar Territory. By the end of the year, this premium-grade gasoline will be available at Gazprom Neft filling stations in the Novosibirsk, Omsk, Chelyabinsk, Kemerovo, and Tyumen Regions, as well as the Krasnoyarsk Territory and the Khanty-Mansiysk and Yamalo-Nenets Autonomous Districts.

Thanks to an active additives compound, the new generation G-Drive fuel offers professional protection of the engine fuel system, increases the engine’s power and improves the vehicle’s acceleration.

BENEFITS OF G-DRIVE FUEL *

Professional engine protection

* Results of tests held at an independent European test centre using fuel with the active additives compound in a Volkswagen Golf, with an engine capacity of 1.6 L and fuel stratified injection (VW Gold 1.6 FSI), demonstrate:

1. Over a 12% increase in the engine’s power at 2,000 RPM. Average increase in engine power at 2,000–4,000 RPM was 7.4%;

2. A reduction in the vehicle’s acceleration from 50km/h to 100 km/h of 1.8 sec in fifth gear. The average improvement of the vehicle’s acceleration performance across a broad range of speeds from 20 km/h to 120 km/h in third, fourth and fifth gear was 8.2%.

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EXPANDING THE RANGE OF PREMIUM PRODUCTS

OILS BUSINESS DEVELOPMENT:

EXPANDING THE RANGE OF PREMIUM PRODUCTS

Gazprom Neft-Lubricants intends to build on its competitive advantages by expanding its range of products and developing new products that are compliant with the latest specifications, in collaboration with leading international auto manufacturers. It is also planning to develop specialised technical services for its clients. The company will continue to build its distribution network and actively promote its products through premium sales channels, primarily at service stations.

WHY IS IT IMPORTANT?

Expanding the motor oil business, taking into account long-term industry forecasts, will allow us to maintain current growth rates until 2025 and strengthen the Company’s market positions.

Gazprom Neft-Lubricants, the operator of Gazprom Neft’s motor oil production and sales business, began selling motor oils under the Gazprom Neft brand. The brand, which previously only sold oils for industrial equipment, has expanded its product line to include synthetics, synthetic blends, and conventional oils for gasoline and diesel engines in cars and trucks, as well as transmission oils, lubricants, and technical fluids.

Gazprom Neft’s lubricants production and sales business is actively growing, both in Russia and abroad. In 2013, Gazprom Neft-Lubricants achieved a historic sales record of 492,000 tonnes of product (an increase of 12% versus 2012), due in part to the commercialisation of returned products. Gazprom Neft-Lubricants increased premium sales by 13.3% compared to 2012, while G-Energy sales showed a 26% increase in a stagnating market with intense competition.

Company share of the Russian lubricants market

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PROVIDING GREATER SALES TRANSPARENCY

REORGANISE SALES
MODEL:

PROVIDING GREATER SALES TRANSPARENCY

In 2013, Gazprom Neft was the first oil company to reorganise its sales to achieve even higher results, both within the Gazpromneft filling station chain and in the wholesale business. The main purpose of the project is to strengthen the sales and corporate governance, in particular, by simplifying and integrating the sales structure and separating the financial results of the wholesale and retail businesses.

WHY IS IT IMPORTANT?

One of the key benefits of the reorganisation to wholesale customers will be the greater transparency of the Company’s sales activities.

The organisational separation of wholesale and retail sales is in line with the “OJSC Gazprom Neft commercial practice rules relating to the sale of gasoline and diesel fuel in the Russian Federation”, signed by Gazprom Neft and Russia’s Antimonopoly Service in February 2013. The document, developed by Gazprom Neft, defines the basic principles of wholesale petroleum product sales, including priority ranking of supplies to the domestic market and a unified pricing procedure.

In order to manage its wholesale business more efficiently, Gazprom Neft set up a new company, LLC Gazpromneft-Regional Sales, in Saint Petersburg, with four cluster branches: a central branch in Moscow, a Ural branch in Tyumen, a West Siberian branch in Omsk, and an East Siberian branch in Kemerovo. Gazpromneft-Regional Sales sells petroleum products to small wholesalers and provides regional logistics services. The central wholesale cluster began operating as a pilot project in April 2013. The cluster encompasses Moscow and the Moscow Region, Saint Petersburg and the Leningrad Region, and the Ivanovo, Kaluga, Nizhny Novgorod, Novgorod, Pskov, Tver, and Yaroslavl Regions. Other branches have been operating since 1 June 2013.

The retail sales restructuring began in June 2013 when the petroleum product supply enterprises were combined into three clusters: a central cluster in Saint Petersburg, a Ural cluster in Yekaterinburg, and a Siberian cluster in Novosibirsk.

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