Rosneft is the third largest gas producer in Russia and the second largest independent producer. Natural gas is produced by the Company's 30 subsidiaries and joint ventures in West and East Siberia, central Russia, south of European Russia, the Russian Far East, as well as in Vietnam and Venezuela. Every year, the gas segment is becoming increasingly important for the Company. In 2015, Rosneft produced 62.54 bcm of gas (20% of total hydrocarbon production). Rosneft's strategic objective in gas business development is to ensure a long-term increase in the shareholder value of the Company through the gas production growth underpinned by a highly efficient long-term sales portfolio. To achieve that, the Company is working in the following key strategic areas:
Development of the existing resource base and effective implementation of gas projects.
Rosneft's recoverable gas reserves as of 01.01.2016 under the Russian classification (ABC1 + C2) stand at 7.5 tcm. The Company's resource base enables it to increase gas production steadily. The main production growth centers for the coming years include the Rospan project (Novo-Urengoi and East-Urengoi license areas), the Kharampurskoye and Beregovoye fields, and the Kynsko-Chaselskoye group of fields. Also, a significant growth of associated gas utilization is expected to achieve 95% beneficial utilization. In the future, Rosneft plans to produce 100 bcm of gas per year, with the resource potential of the company enabling it further step up production.
Develop LNG production and tap into the international LNG market. Build the necessary competencies to undertake Arctic LNG projects.
The Company has huge hydrocarbon resources on the shelf of the Russian Federation, a significant part of which is natural gas. Rosneft's gas resources on the Russian offshore stand at some 22.8 tcm. Offshore fields are hard to recover, and tying them in to the Unified Gas Supply System is not economically feasible. Therefore, the most effective method of monetizing natural gas reserves is to liquefy and export them.
In particular, to monetize the Sakhalin-1 gas project and Rosneft´s own offshore gas fields in the area of the Sakhalin Island, it is planned to implement the Far East LNG project under the production sharing agreement (PSA) of the Sakhalin-1 project. The project includes the construction of an LNG plant in the Russian Far East with first stage capacity of 5 million tons per year, as well as a seaport for LNG shipments and associated gas transportation infrastructure. Rosneft's reserves in the region, as well as those of the Sakhalin-1 Consortium will serve as a resource base for the first stage of the plant.
In December 2015, a joint venture with the Alltech Group was established to build a new gas production center in the Nenets Autonomous District, which will develop the Kumzhinskoe and Korovinskoye fields, build an LNG plant and related infrastructure. A favorable asset location provides good opportunities for the marketing and monetization of the hydrocarbons planned for production.
In the future, we plan to conduct an extensive exploration program on the Company's license areas in the Sea of Okhotsk and the Arctic, to convert gas resources into reserves and further development of new LNG production centers.
Improve the efficiency of monetization of associated gas and related liquids by expanding presence in the gas value chain, developing gas processing, gas chemistry and further processing of NGLs and LPG to sell high value added products.
Rosneft is steadily increasing the effectiveness of the monetization of gas and liquid fractions through the development of gas processing. In Orenburg, the Company owns a gas processing complex consisting of the Neftegorsk Gas Processing Plant (500 mcma), Otradnensky GPP (300 mcma), Zaikinskiy GPP (2.2 bcma), Pokrovsky UKPG (450 mcma), and Zagorskaya UKPNG (410 mcma). The Neftegorsky and Otradnensky GPP are currently performing a comprehensive retrofitting and upgrading program. Western Siberia is a promising region for the development of gas processing. As part of the Rospan project in YNAD, the East-Urengoi complex gas and condensate treatment unit is under construction with a capacity of 4.9 million tons a year of condensate and 1.6 million tonnes per year of PBT. In addition, projects to improve the monetization of APG and liquid products in the Yugansk region are being examined.
A leading position has been occupied in gas supplies to the Russian market among independent gas producers (market share >20%) thanks to the development of trading competences and work with the consumers.
In recent years Rosneft has significantly expanded and continues to expand its geography of supplies, which already covers regions from Krasnodar to Sakhalin. However, the Company plans to continue increasing the percentage of supplies to the end consumers and optimizing the portfolio of gas supply contracts, which is an important prerequisite for increasing the efficiency of gas sales and reducing the risks of new production projects. Rosneft is actively using the possibility of gas trade at the St. Petersburg International Mercantile Exchange. In addition, to stimulate demand for natural gas in Russia, Rosneft is considering participating in the development of a sales network for compressed natural gas as a motor fuel.
Introduction of advanced technologies on the basis of international experience in production, processing, transportation and distribution of gas.
The Company's gas business development will be based on the deployment of advanced technologies in gas production and processing. To perform this task, an economic evaluation and implementation of technologies is underway in the areas of development of stranded gas, large-scale and small-tonnage liquefaction, and conversion of gas into liquid.
Promotion of transparency and efficiency of the Russian gas market.
The Company takes an active part in the transformation of the environment, in which the natural gas market operates, and is working in other areas, including federal executive agencies, industrial and expert community in the following areas:
– ensure conditions of fair of competition, including transparent and economically sound pricing and tariff setting;
– gradual liberalization of gas exports;
– develop exchange mechanisms for gas trading in the domestic market;
– develop the gas motor fuel market;
– ensure non-discriminatory access for independent producers to gas trunk pipelines.