Gazprom Neft board of directors considers business development

29 October 2012

At its meeting on 26 October, Gazprom Neft’s board of directors considered the future development of the company’s international business. Gazprom Neft’s strategy provides for a gradual transformation of the company into an international player. In order to meet this challenge, a diversified portfolio of assets has been formed outside of Russia over the past several years, including projects from all segments of the production chain in extraction, refining and distribution.

In particular, the company has geological exploration and production projects in nine countries in the Balkans, the Middle East, Africa and Latin America. Its crude oil refining projects include two oil refineries (owned by the Serbian company NIS, 56.5% controlled by Gazprom Neft) in Serbia with a total installed capacity of 7.5 million tonnes of oil, as well as oil and lubricant production lines in Italy and Serbia. Gazprom Neft’s enterprises supply jet fuel to refuelling complexes at more than 80 airports in over 30 countries. Gazprom Neft’s networks of filling stations and oil depots outside of Russia are located in Central Asia, Ukraine, Belarus and the Balkans.

One of Gazprom Neft’s strategic goals is to reach a production level of at least 10 million tonnes of oil equivalent a year outside of Russia by 2020 and to gain access to 25-30million tonnes of annual refining capacity abroad. The company will continue to expand the scope of its international business, developing projects in the production sector and considering opportunities to participate in new projects, as well as studying the prospects of gaining access to European vertically integrated companies capable of supporting the business’s high margins and developing oil product sales areas in premium distribution segments.

In addition, the Board of Directors considered the prospects for applying new production technologies at the company. Gazprom Neft’sspecialists estimate that by using the latest innovations at its existing fields the company could boost production by <nobr>700-950</nobr> million tonnes of oil. The company’s technology portfolio is divided into three groups, according to the challenges that need solving. Specifically, this includes making the development of existing assets more efficient by, among other things, increasing the oil recovery ratio and optimising costs, as well as engaging in the development of hard-to-recover and non-traditional reserves.

By 2020, the contribution from these types of technologies could reach around 35 million tonnes of oil out of a projected 100 million tonnes of oil equivalent production.

In order to develop and utilise the potential of new innovations, Gazprom Neft has formed and is currently developing a technology management system that makes it possible to monitor technologies and their utilisation, as well as to accumulate and disseminate acquired know-how and experience within the company.

The board of directors considered the prospects of tight oilproduction. Gazprom Neft will gain the experience in tight oil extraction during the development of the Bazhenov Formation at Upper Salym oil field, operated by Salym Petroleum Development (SPD), which is a joint venture of Gazprom neft and Shell. Experts of Gazprom Neft, Shell and SPD created a road map that defines the stepsto achieve the maingoal -the developmentof the Bazhenovformation in theindustrial scale.

Chairman of the Board of Directors of Gazprom Neft Alexey Miller said: “In contrast to the shale gas extraction , which is quite out of date in Russia, the tight oil production is of considerable interest for Gazprom Group and we will work actively on this issue.”

REFERENCE

Tight oil is hydrocarbons, located in West Siberia in the Bazhenov, Abalak and Frolovskaya rock formations with ultra-low permeability but high oil saturation. The formation lie at It a depth of more than 2 km and spread over more than 1 million square km.