Competitive Position

Gazprom Neft, together with its subsidiaries, constitutes a vertically integrated oil company operating mainly in the Russian Federation. The Company is engaged in exploration and development of oil and gas fields, production of crude oil and gas, refining and retailing of petroleum products. As per PR MS-SPE classification, the Company’s proven reserves of hydrocarbons amount to more than 1 bn TOE , placing it among the top 20 global producers of crude oil. Gazprom Neft is one of the fastest growing oil producers in Russia today.

PRODUCTION OF CRUDE OIL & GAS

Gazprom Neft was the 5th largest crude oil producer in Russia in 2011.

Total Russian crude oil output (all producers) grew by 1.2% in 2011 to 511.4 mn t, thanks both to development of new fields and enhancement of traditional fields. The highest crude production growth rates among Russian-based vertically integrated oil companies (VIOCs) were by Bashneft, Surgutneftegaz and Rosneft, which achieved 7%, 2% and 2% growth, respectively. The largest production declines in Russia were shown by LUKOIL (-5%) and Slavneft (-2%).

Total crude oil production by Gazprom Neft (including shares of production by other companies, calculated by equity stakes) rose by 1% in 2011 to 50 mn t, mainly thanks to production growth at the Priobskoye and Salym fields, integration of assets purchased at the end of 2011 in Orenburg Region, and further optimization of development work at the Company’s own fields.

Output of gas in Russia also grew substantially (at record rates) in 2011, but the growth was mainly due to independent gas producers, while output by Gazprom declined through the last five months of 2011 due to lower demand in Europe, shrinkage of the company’s share of the Russian market, and changes in weather conditions. Gazprom extracted 510 bn m3 of gas, or just 0.4% more than in 2010. Production by NOVATEK rose by 42% to 53.5 bn m3, and overall Russian gas output rose by 3% to 688 bn m3.

Company

Production, 2011

Share in
2011, %

Production
in 2010

Share in
2010, %

2011 vs
2010, %

Rosneft

135,321

22

132,066

22

2.5

LUKOIL

99,717

16

104,041

17

-4.2

TNK-BP

93,907

15

92,225

15

1.8

Surgutneftegaz

71,411

12

70,756

12

0.9

Gazprom Neft

55,679

9

51,548

9

8.0

Tatneft

26,886

4

26,783

4

0.4

Other

128,074

21

123,000

20

4.1

Russia (not including gas production by Gazprom and NOVATEK)

610,994

100

600,419

100

1.8

Source: INFOTEK

Production of gas (both natural and associated oil gas) by the largest Russian VIOCs was mainly on an upward trend in 2011.

Marketable gas production by Gazprom Neft in Russia rose by 136% y-o-y in 2011 to 8.5 bn m3 (including joint ventures, but not including production by NIS). The growth was mainly due to the launch of natural gas production from Cenomanian deposits at the Muravlenkovskoye and Novogodneye fields in Q4 2010.

Total output of hydrocarbons by Gazprom Neft in Russia in 2011 rose by 8% to 55.7 mn TOE. Together with output by NIS, aggregate consolidated production of hydrocarbons by Gazprom Neft in 2011 amounted to 57.3 mn TOE.

REFINING

Refining volumes by all companies in Russia grew by 3.2% in 2011 compared with 2010 to 258 mn t. Growth in refining was due, among other factors, to stronger domestic demand for light petroleum products.

In 2011, output of diesel fuel rose by 0.3% to 70.6 mn t, fuel oil to 73.1 mn t (+4.6%), and automotive gasoline to 36.7 mn t (+2.0%). Overall loading of main refining capacities in Russia was 92.4%, or 0.3 pp above the 2010 figure.

During the reporting year, Gazprom Neft increased its share in total refining in Russia from 14.0% to 14.8%, retaining third place by this indicator, mainly thanks to maximum refining capacity use at the Moscow Refinery.

Gazprom Neft’s refining output outside Russia includes NIS in Serbia. The Company’s total consolidated refining during 2011, both inside and outside Russia, was 40.5 mn t, which is 7% more than in 2010.

Output of high-octane gasoline rose by 13% (7.2 mn t) thanks to optimization of the product range and increased demand for high-octane gasoline; production of aviation fuel rose by 6% (2.6 mn t); and output of diesel fuel was unchanged from 2010 (11.5 mn t).

Company

Oil refining, 
2011

Share in
2011, %

Oil refining,
2010

Share in
2010, %

2011 vs
2010, %

Rosneft

51,052

20

50,763

20

0.6

LUKOIL

45,491

18

45,214

18

0.6

Gazprom Neft

38,132

14.8

35,048

14.0

8.8

TNK-BP

31,621

12

31,160

12

1.5

Surgutneftegaz

21,161

8

21,237

8

-0.4

Ufa refineries

21,062

8

21,193

8

-0.6

TAIF Oil Company

8,318

3

8,100

3

2.7

Other

41,059

16

37,239

15

10.3

Total

257,895

100

249,953

100

3.2

Source: INFOTEK

EXPORTS

Exports of Russian crude oil to non-CIS countries in 2011 amounted to 212.2 mn t, which is 3.9% less than in 2010. Russian hydrocarbon exports to non-CIS countries via the Transneft pipeline system were 188.1 mn t in 2011 and approximately 24.1 mn t were exported by other means.

Crude oil and gas condensate exports by rail were 25.1 mn t in the reporting year.

Russian exports to CIS countries increased by 13.7% y-o-y to 29.9 mn t in 2011. Crude exports to Belarus rose by 40.1% to 18.1 mn t, while supplies to Ukraine and Kazakhstan fell by 21.8% and 4.7% compared with 2010, to 4.65 mn t and 7.08 mn t, respectively.

Rosneft delivered 59.0 mn t of crude oil to non-CIS countries via Transneft pipelines in 2011, TNK-ÂÐ supplied 29.8 mn t, Surgutneftegaz 27.0 mn t, LUKOIL 23.8 mn t, Tatneft 15.6 mn t and Gazprom Neft 12.7 mn t.

Gazprom Neft’s share of total Russian crude oil exports to non-CIS countries in 2011 was almost unchanged compared with 2010 (-0.6 pp), mainly due to higher refining net back compared with net back from crude oil exports.

Gazprom Neft remained an industry leader in 2011 by indicators including total shareholder return and operating cash flow.

Company

Crude exports
2011

Share
in 2011, %

Crude exports 
2010

Share
in 2010, %

2011 vs 2010,%
2011/ 2010, %

Rosneft

58,974.1

27.8

54,040.3

24.5

9.1

TNK-BP

29,763.5

14.0

31,459.2

14.2

-5.4

Surgutneftegaz

27,010.1

12.7

25,554.7

11.6

5.7

LUKOIL

23,823.2

11.2

27,886.6

12.6

-14.6

Tatneft

15,565.6

7.3

16,345.5

7.4

-4.8

Gazprom Neft

12,751.4

6.0

14,594.1

6.6

-12.6

Other

44,355

20.9

43,932

19.9

1.0

Total

212,210

100

220,822

100

-3.9

Source: INFOTEK