BP 2015 Annual Report Download - page 42

Rosneft is the largest oil company in Russia, with a
strong portfolio of existing and future opportunities.
Rosneft
Upstream
Rosneft is the largest oil company in Russia and the largest publicly traded
oil company in the world, based on hydrocarbon production volume.
Rosneft has a major resource base of hydrocarbons onshore and offshore,
with assets in all key hydrocarbon regions of Russia: West Siberia, East
Siberia, Timan-Pechora, Volga-Urals, North Caucasus, the continental shelf
of the Arctic Sea, and the Far East.
BP purchased a 20% participatory interest in Taas-Yuryakh
Neftegazodobycha, a Rosneft subsidiary that will further develop the
Srednebotuobinskoye oil and gas condensate field in East Siberia. Related
to this, Rosneft and BP will jointly undertake exploration in an adjacent area
of mutual interest. BP’s interest in Taas-Yuryakh Neftegazodobycha is
reported in the Upstream segment.
Rosneft and BP have also agreed to jointly explore two additional areas of
mutual interest in the prolific West Siberian and Yenisey-Khatanga basins,
where they will jointly appraise the Baikalovskoye discovery subject to
receipt of all relevant consents. This is in addition to the exploration
agreement announced in 2014 for an area of mutual interest in the
Volga-Urals region of Russia, where Rosneft and BP have commenced
joint study work to assess potential non-shale, unconventional tight-oil
exploration prospects.
Rosneft participates in international exploration projects or has operations
in countries including the US, Canada, Vietnam, Venezuela, Brazil, Algeria,
United Arab Emirates, Turkmenistan and Norway.
Rosneft continued to optimize its budget and to focus on new upstream
projects, including the development of the Labaganskoye, Suzun and East
Messoyakha fields. It also signed preliminary contracts for the Russkoye,
Kuyumba, Yurubcheno-Tokhomskoye and East Messoyakha fields to
deliver oil to the Transneft pipeline system.
Rosneft’s estimated hydrocarbon production reached an annual record in
2015. This was due to a ramp-up in drilling, optimization of well
performance and the application of modern technologies such as
multistage fracturing, dual completion and bottomhole treatment. In 2015
estimated gas production increased by around 10% compared with 2014,
primarily driven by greenfield start-ups and commissioning of new wells.
Downstream
Rosneft is the leading Russian refining company based on throughputs.
It owns and operates 10 refineries in Russia. Rosneft continued to
implement the modernization programme for its Russian refineries in
2015 to significantly upgrade and expand refining capacity.
As at 31 December 2015, Rosneft owned and operated more than 2,500
retail service stations in Russia and abroad. This includes BP-branded sites
acquired as part of the TNK-BP acquisition in 2013 that, under a licence
agreement with BP, continue to operate under the BP brand. Downstream
operations also include jet fuel, bunkering, bitumen and lubricants.
On 15 January 2016 BP and Rosneft announced that they had signed
definitive agreements to dissolve the German refining joint operation
Ruhr Oel GmbH (ROG). The restructuring, which is expected to be
completed in 2016, will result in Rosneft taking ownership of ROG’s
interests in the Bayernoil, MiRO Karlsruhe and PCK Schwedt refineries. In
exchange, BP will take sole ownership of the Gelsenkirchen refinery and
the solvent production facility DHC Solvent Chemie.
Rosneft refinery throughputs in 2015 amounted to 1,966mb/d (2014
2,027mb/d, 2013 1,818mb/d).
Taas-Yuryakh central processing facility at the Srednebotuobinskoye oil and
gas field during the Siberian winter.
BP and Rosneft
• BP’s 19.75% shareholding in Rosneft allows us to benefit from a
diversified set of existing and potential projects in the Russian oil
and gas sector.
• Russia has significant hydrocarbon resources and will continue to
play an important role in long-term energy supply to the global
economy.
• BP is positioned to contribute to Rosneft’s strategy implementation
through collaboration on technology and best practice.
• We have the potential to undertake standalone projects with
Rosneft, both in Russia and internationally.
• We remain committed to our strategic investment in Rosneft, while
complying with all relevant sanctions.
2015 summary
• In the current environment Rosneft continues to deliver solid
operational and financial performance, demonstrating the resilience
of its business model.
• BP received $271 million, net of withholding taxes, in July –
representing our share of Rosneft’s dividend of 8.21 Russian
roubles per share for 2014.
• In 2015 Rosneft met all its debt service obligations and increased
total hydrocarbon production by 1%.
• Bob Dudley serves on the Rosneft Board of Directors, and its
Strategic Planning Committee.
• A second BP nominee, Guillermo Quintero, was elected to
Rosneft’s Board of Directors at Rosneft’s annual general meeting in
June 2015 and was subsequently elected to its HR and
Remuneration Committee.
• US and EU sanctions remain in place on certain Russian activities,
individuals and entities, including Rosneft.
BP Annual Report and Form 20-F 201538