Gazprom Neft’s Board of Directors reviewed progress on 2020 strategy

26 March 2012

The Board of Directors havereviewed the outcome of selling the company’s oilfield services assets. In 2011, Gazprom Neft sold out of its oilfield services businesses, reducing its costs and contributing increased competition in the services market.

Gazprom Neft Board of Directors has also reviewed the progress made to date in implementing the company’s long-term strategy up to 2020, which is based on JSC Gazprom’s oil business development strategy adopted in 2006 and revised in 2009.

The approved guidelines aim to result in a significant increase in Gazprom Neft performance indicators in all areas of business by 2020:

  • production will increase to 100 million tonnes of hydrocarbons per year
  • the volume of oil refining in Russia and abroad will grow to 70 million tonnes per year
  • sales of premium petroleum products will reach 40 million tonnes per year (lubricants, aviation and bunker fuel, sales through its own network of filling stations and tank farms).

Gazprom Neft is actively transforming into an international oil company both in terms of the scale of its business, and the geography of its operations. Gazprom Neft’s operations, together with its subsidiaries, include Serbia and other Balkan states, Italy, Iraq, Cuba, Equatorial Guinea, Venezuela, Kyrgyzstan, Kazakhstan, and Tajikistan.

2011 was an important year for Gazprom Neft in achieving its strategic goals: production increased by almost 8% – to 57.3 million tonnes of oil equivalent, refining throughput grew by 7% totalling 40.5 million tonnes, while sales of premium products were up 37% compared to the 2010 numbers to 19.55 million tonnes.

Based on the industry’s financial performance, Gazprom Neft demonstrates a leading position in efficiency particularly with regard to operating profit and cash flow per barrel of oil equivalent, as well as returns on invested capital.

In 2011, a modernization program at the company’s oil refineries (NPZ), led to a 2-fold increase in the production of diesel fuel grades 4 and 5 (complying with European standards Euro 4 and Euro 5), with the production of petrol grades 4 and 5 commencing. The total number of filling stations increased by 10% to 1,689 in 2011. The company started selling its premium-grade branded fuel, G-Drive, and the number of participants in the Going One Way loyalty program at the Gazpromneft filling stations network exceeded 1.9 million people.

Given the significant progress made in achieving Gazprom Neft’s desired goals, a decision was taken to adjust the strategy within two months.

Alexei Miller, Chairman of the Board of Directors of Gazprom Neft, said:

“The progress made to date on achieving Gazprom Neft’s strategic plans reinforces the view that it was absolutely the right decision to build a vertically-integrated oil business within Gazprom. Gazprom Neft’s priorities in the coming years will also be to maintain high growth rates of hydrocarbon production, develop new territories, both in Russia and abroad, improve the quality of products and processing ratio. Gazpromneft filling stations network brand will see further development and we will strengthen our position in the retail market in Russia and the CIS.”