Gazprom Neft Board of Directors reviews preliminary results for 2016 and plans for 2017

26 December 2016

The Gazprom Neft Board of Directors has reviewed provisional outcomes of the company’s investment programme and budget for 2016, as well as plans for 2017.

The company continues to demonstrate strong performance and remains an industry leader in terms of return on average capital employed (ROACE).

2016 production volumes at Gazprom Neft are expected to reach 88.8 million tonnes of oil equivalent (mtoe) — some 7.7 percent up year-on-year. Refining volumes were optimised in the face of prevailing economic and market conditions, and are expected to reach 41.3 million tonnes by the end of the year. Volumes of premium products are expected to remain at 2015 levels.

Gazprom Neft commissioned two major new oilfields in Yamal this year — the Novoportovskoye and Vostochno-Messoyakhskoye fields, as well as establishing a new logistics handling strategy for its Arctic oil and commencing year-round oil transhipments through the Arctic Gates terminal. Total cumulative production at the Prirazlomnoye field — thus far the only field under development on the Russian Arctic Shelf — now stands at more than three million tonnes.

Gazprom Neft continued the implementation of the second phase of the full-scale modernisation of its refining assets, with key projects at the Moscow Refinery — the construction of a combined Euro+ refining facility and a biological treatment plant “Biosfera” — both proceeding to active implementation. A project for the construction of a primary crude oil distillation unit — expected to become one of the most important such facilities in Russia — was launched at the Omsk Refinery, with the Ministry of Energy of the Russian Federation awarding Gazprom Neft’s initiative in developing catalyst production at its Omsk Refinery the status of a national project. The company is establishing a high‑technology complex, expected to be producing high-quality domestic catalysts for the Russian refining industry by 2020.

Declining domestic demand for oil products throughout 2016 notwithstanding, Gazprom Neft succeeded in growing sales volumes of its bitumen products and lubricants, as well as increasing sales of motor fuels through small wholesalers and retail channels. Participants in the company’s “On Our Way” loyalty programme broke through the seven-million barrier in 2016.

The Board of Directors also reviewed the company’s budget for 2017. Gazprom Neft’s investment programme for next year envisages investment assimilation in the order of RUB404.1 billion. 2016 — 2018 will see peak investment in the company’s major projects in both refining and production, with further infrastructure development at the Novoportovskoye and Messoyakhskoye fields, and the construction of processing facilities at the company’s Russian refineries and the refining facilities of its Serbian subsidiary, NIS, all directed at improving operational efficiency, increasing refining depth, and increasing output of light petroleum products. The Board of Directors also reviewed information on plans for the utilisation of associated petroleum gas (APG) to 2020.

The Gazprom Neft Board of Directors was also provided with a programme for the company’s continued development of the Russian Arctic Shelf. Gazprom Neft and its subsidiaries have, in recent years, undertaken major initiatives in further enhancing the viability of offshore projects falling within the company’s remit here. Research undertaken confirms the promise of increasing commercial hydrocarbon reserves through continued geological prospecting on the Russian Arctic Shelf, and confirms the potential of the viable development of offshore fields.

The Board of Directors was also provided with an update on the implementation of Gazprom Neft’s development strategy to 2025, which continues and further refines the company’s strategy to 2020. This document maintains previously formulated objectives and expands on the means of achieving these in key business areas — hydrocarbon production, oil refining and sales of petroleum products —in the light of the changing industry and global economic environment, as well as setting a further key objective of maintaining the size and scale of the business as achieved by 2020.

The company continued moving towards the achievement of its long-term objectives throughout 2016, with Chairman of the Gazprom Neft Board of Directors Alexei Miller confirming: “Gazprom Neft has demonstrated a high level of resilience in the face of complex macroeconomic conditions and — the many challenges of the external environment notwithstanding — has, on numerous occasions throughout 2016, demonstrated its ability to bring major investment projects to fruition.

In commencing development of the Novoportovskoye and Vostochno-Messoyakhskoye fields Gazprom Neft has confirmed its status as a technological leader in developing hydrocarbon reserves in the Arctic — these initiatives, together with the Prirazlomnoye project, can, without exaggeration, be described as landmarks for the entire Russian oil industry.

The company has continued working on projects directed at further improving the operational efficiency of its refineries, at increasing refining depth, at increasing the output of light petroleum products, and increasing its range of high-value-added products.

The company’s achievements were also recognised on the financial markets. The company’s rouble stock pricing in 2016 reached an all-time high, providing incontrovertible evidence of the company’s investment attractiveness. I have no doubt that over the next year Gazprom Neft will retain its market-leading position, both in terms of its performance and rapid business growth.”