the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
the Volga-Urals region; and the Achinsk and Angarsk refineries in East Siberia. The company is also
planning to construct a new 240,000b/d facility in Primorsk in Leningrad Region with Surgutneftegaz.
Rosneft also runs export terminals in Arkhangelsk, Tuapse, Nakhodka and De-Kastri, and operates a retail
network of around 600 service stations.
Strategy
Over the next two decades, Rosneft aims to become Russia’s leading energy company both in output and
financial terms. To achieve this it is pursuing several policies. The company plans to increase crude
production by exploiting existing oil reserves, with the goal of reaching 2.8mn b/d by 2015 and 3.4mn b/d
by 2020. Rosneft also aims to exploit upside potential in gas. Rosneft believes itself to be capable of
producing 40bcm by 2012, but the volumes will depend on gas sales and access to UGSS capacity,
regarding which Rosneft is currently negotiating with Gazprom. The company is also developing value
chains linking upstream assets directly to export markets and refining facilities. Ownership or a
significant equity share in marketing subsidiaries will allow Rosneft to maximise netbacks.
Under the 2010 business plan, Rosneft is planning capex of RUB217bn, equivalent to US$7.23bn using
the RUB30/US$ exchange rate applied by Rosneft. The figure is the same as the investment originally
envisioned for 2009. In February 2009, however, capex for that year was subsequently boosted to
RUB227.85bn. Of the 2010 capex target, US$2bn will go on the refining segment, a 150% rise y-o-y. In
June 2007, Rosneft then CEO Sergei Bogdanchikov announced plans to expand the company's refining
capacity ninefold by 2015. Rosneft is planning to boost output in 2010 by 4.5% to 2.36mn b/d on the back
of new start-ups in East Siberia.
In June 2007, Bogdanchikov said the company plans to issue bonds to reduce debt and expand refining
capacity ninefold. He further said that the company may build new oil refineries abroad, potentially in
China and in other East Asian countries, to meet its refining capacity target by 2015.
Latest Developments
A company press statement on September 6 2010 said First Vice-President Khudainatov has been
appointed President of Rosneft with immediate effect. Khudainatov's previous roles have included a spell
at the Executive Office of the Russian president, as well as the position of general director of
Severneftegaz. He replaced Bogdanchikov, who had been in charge since 1998. According to an FT
report on September 4, Bogdanchikov is believed to have been at odds with company chairman and
Deputy Prime Minister Igor Sechin. An unnamed FT source said that Khudainatov was less likely to
adopt positions that conflicted with those of Sechin. Khudainatov's managerial background at
Severneftegaz, a Gazprom subsidiary, has prompted speculation that Rosneft is looking to increase its
exposure to Russia's gas industry.
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