1.3 Crude Oil and Petroleum Products Supplies
The core operations of the Gazprom Group’s oil segment are exploration, production, processing and sale of crude oil, gas condensate and petroleum products. PJSC Gazprom Neft is the key link of the Gazprom Group’s oil business.
In 2018, PJSC Gazprom Neft Development Strategy until 2030 was approved, it defines the goals and the areas of the company long-term development. The Strategy entails implementation of the growth and performance improvement opportunities through development and implementation of the advanced technological solutions.
As of the end of 2018, the Gazprom Group’s proven and probable reserves of crude oil and gas condensate under the PRMS international standards amounted to 1,335.4 mmt and 1,090.2 mmt, respectively. According to the Russian classification (А+B1+C1 categories), the reserves are 2,015.7 mmt of crude oil and 1,604.4 mmt of gas condensate.
Gazprom Group's crude oil and gas condensate reserves in the Russian Federation in accordance with the Russian and the international classifications, 2015–2018
(including the share in reserves of organizations in which Gazprom has investments classified as joint operations)
| Indicator as of December 31 | 2015 | 2016 | 2017 | 2018 |
|---|---|---|---|---|
| Crude oil, mmt | ||||
| Explored reserves in accordance with the Russian classification (А+В1+С1)(1) | 2,082.0 | 2,078.5 | 2,045.3 | 2,015.7 |
| including the reserves that passed evaluation in accordance with PRMS standards | 92.4% | 93.3% | 93.5% | 93.9% |
| Proven and probable reserves in accordance with the PRMS international classification | 1,355.4 | 1,378.7 | 1,360.0 | 1,335.4 |
| Proven | 792.7 | 789.5 | 736.8 | 712.3 |
| Probable | 562.7 | 589.2 | 623.2 | 623.1 |
| Gas condensate, mmt | ||||
| Explored reserves in accordance with the Russian classification (А+В1+С1)(1) | 1,499.5 | 1,534.9 | 1,592.6 | 1,604.4 |
| including the reserves that passed evaluation in accordance with PRMS standards | 92.2% | 93.5% | 92.7% | 94.1% |
| Proven and probable reserves in accordance with the PRMS international classification | 933.3 | 1,018.9 | 1,105.7 | 1,090.2 |
| Proven | 699.5 | 759.2 | 797.8 | 759.7 |
| Probable | 233.8 | 259.7 | 307.9 | 330.5 |
(1) In accordance with the new Classification of Reserves and Resources of Oil and Flammable Gases (approved by the Order No. 477, of November 1, 2013, of the Russian Ministry of Natural Resources and Environment), in effect from January 1, 2016, corporate reporting procedures must record reserves of the А+В1+С1 category, which comprises explored reserves with a high degree of geological certainty and correspond to the previously applicable categories of А+В+С1.
During the reporting period, the changes of gas condensate and crude oil reserves according to the Russian and the international classification were driven mainly by GPE, production and taking into account the actual exploration data.
In 2018, the Gazprom Group’s liquid hydrocarbons production amounted to 56.8 mmtNet of the share in production of organizations in which Gazprom has investments classified as joint operations. Crude oil production amounted to 40.9 mmt (48.3 mmt including the share in production of organizations in which Gazprom has investments classified as joint operations), which is slightly less than in 2017.
(1) Net of the share in production of organizations in which Gazprom has investments classified as joint operations.
Gazprom Neft accounts for the majority of crude oil production. Gazprom Neft continued increasing production volumes at the main oil fields: Novoportovskoye (+18.3%), Prirazlomnoye (+23.1%).
In 2019, Gazprom Group plans to produce 41.7 mmt of crude oil and 15.7 mmt of gas condensateNet of the share in production of organizations in which Gazprom has investments classified as joint operations.
The main sources of production growth will be the operating and newly commissioned fields, development of unconventional and hard-to-recover reserves, e.g. the Bazhenov and Achimov formations, and offshore projects. In the medium term, the Company plans to achieve the strategic production target of 100 million tons of oil equivalent with ensuring 15-year proven reserves and 100% annual replacement. Further growth is planned at least at the industry average level.
As of the end of 2018, the Gazprom Group’s increment of liquid hydrocarbons reserves driven by GPE in А+B1+C1 categories in the Russian Federation was:
- 21.8 mmt of gas condensate;
- 19.4 mmt of crude oil.
In 2018, a new major oil field, Triton, was discovered in the shelf area of the Sea of Okhotsk and included in the State balance sheet; in addition, Neptune field discovered in 2017 was included in the State balance sheet. The recoverable crude oil reserves are 70.1 mmt at Neptune field and 45.0 mmt at Triton field.
As conventional reserves are depleted, crude oil production would be associated mainly with new fields development in remote areas.
Unconventional and hard-to-recover reserves are concentrated in the Bazhenov and Achimov formation. The Bazhen Technology Center was established for the Bazhenov formation development; its key objective is to develop the set of commercially viable Russian technologies. In 2017, the project was awarded the National Project status.
In course of unconventional hydrocarbon reserves development at the Bazhenov Formation, Bazhen Technology Center tested successfully eight new Russian drilling technologies. Ten high-tech wells were drilled, and commercial oil flow was achieved at each of them. In 2018, Bazhen Technology Center performed 70 stages of hydrofracturing of the formation (HF), achieving the density of 15 stages per 1,000 m. The high-tech wells drilling terms were reduced from 47 to 35 days, and the HF stage term was made two times shorter, from 48 to 24 hours (the best result was 8 hours).
The hydrocarbon feedstock increment target was set for 2019 at 625.3 million tons in terms of reference fuelNet of Gazprom Neft Group and organizations, in which Gazprom has investments classified as joint operations, including 14.5 mmt of gas condensate and crude oil. Most of the increment of liquid hydrocarbons reserves is expected in the Kara Sea shelf area.
In 2018, the Gazprom Group increased liquid hydrocarbon feedstock (crude oil, gas condensate, fuel oil) by 5.1% to 67.4 mmt; the growth was driven mainly by the increase of processing at Gazprom Neft Group and Gazprom Neftekhim Salavat facilities.
Liquid hydrocarbons processing at the Gazprom Group(1), 2015–2018, mmt
| 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|
| PJSC Gazprom and its key subsidiaries (unstable gas condensate, crude oil) | 17.26 | 17.55 | 17.47 | 17.75 |
| Gazprom Neft Group (crude oil, stable gas condensate) | 43.07 | 41.89 | 40.11 | 42.91 |
| Gazprom Neftekhim Salavat (crude oil, stable gas condensate, fuel oil) | 6.44 | 6.47 | 6.48 | 6.74 |
| Gazprom Group, total | 66.77 | 65.91 | 64.06 | 67.40 |
(1) Tolling arrangements excluded.
Gazprom Neft performs most of the liquid hydrocarbons refining within the Gazprom Group at Moscow and Omsk Refineries.
In order to increase the depth of oil refining and increase the yield of light petroleum products, in 2018 Gazprom Neft continued implementation of the second stage of technological and environmental upgrading the operating refineries. At the Moscow Refinery, construction and installation works were completed at the modern energy-efficient Euro+ complex. Its commissioning will help reduce the environmental impact per ton of crude oil processed by 11.1%.
At the Omsk Refinery, construction of the new CDU/VDU for primary crude oil processing, the advanced oil refining complex and upgrading the delayed coker were continued. In addition, the Omsk Refinery implements the project aimed at setting up the new facility to produce catalysts used for the key processes of secondary oil processing, which, in turn, enable production of Euro-5-compliant engine fuels. The Ministry of Energy of the Russian Federation assigned to the project the national status. In 2018, implementation of the new domestic active matrix catalysts was started; unlike imported analogues, they convert the molecules of hydrocarbon feedstock in valuable products more efficiently.
In 2018, the Moscow Refinery improved the yield of light petroleum products and the refining depth to 59.6% and 83.1%, respectively. The Omsk Refinery also maintained high performance: 71.0% and 90.9%, respectively.
Liquid Hydrocarbons Processing Plans
Implementation of refining facilities upgrade programs remains the strategic priority in oil refining development. As a result of upgrading of oil refining assets, the oil refining depth is going to increase to 95%, and light petroleum products yield to 80%.
In 2018, the Gazprom Group’s crude oil and gas condensate sales amounted to 25.6 mmt, which is 7.2% less than in 2017. This is primarily due to the increase of liquid hydrocarbon feedstock processing volumes upon completion of the scheduled overhauls at Gazprom Neft refineries in Russia in 2017.
Gazprom Neft accounts for the majority of petroleum products sales within the Group. Engine fuels are sold through the network of gas stations (GS) and small-scale wholesale channels. In addition, petroleum products are supplied to industrial customers.
Gazprom Neft Group’s petroleum products sales volume, 2015–2018, mmt
| 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|
| Automotive gasoline | 9.75 | 10.57 | 10.68 | 10.87 |
| Diesel fuel | 12.81 | 13.27 | 13.37 | 14.01 |
| Jet fuel | 3.62 | 3.36 | 3.51 | 3.84 |
| Bunker fuel | 3.98 | 2.87 | 3.29 | 2.89 |
| Fuel oil | 7.42 | 6.62 | 5.23 | 6.09 |
| Bitumen | 2.05 | 2.17 | 2.65 | 2.97 |
| Lubricants | 0.43 | 0.45 | 0.41 | 0.49 |
| Petrochemicals | 1.45 | 1.35 | 1.25 | 1.35 |
| Other petroleum products | 3.33 | 2.93 | 3.09 | 3.40 |
| Total | 44.84 | 43.59 | 43.48 | 45.91 |
In 2018, Gazprom Neft sold 45.91 mmt of petroleum products, which is 5.6% more than in 2017. The sales increased along the whole range of petroleum products other than marine fuels (–12.2%). Sales of the light petroleum products having the highest added value (jet fuel (+9.4%), diesel fuel (+4.8%), motor fuel (+1,8%) increased. In 2018, petroleum products sales growth was driven mainly by demand at the domestic market where the petroleum products sales increased by 6.1% to 29.7 mmt.
Information on Gazprom Neft petroleum products sales structure by regions is provided in Appendix
Motor and Diesel Fuel
As of the end of 2018, Gazprom Neft Group GS network consisted of 1,260 facilities in Russia, including 1,190 own facilities and 70 facilities managed by franchisees. Gazprom Neft retail GS network, including the franchise, is present in 40 regions of Russia.
Gazprom Neft Group's retail sales of automotive gasoline and diesel fuel at the domestic market, 2015–2018
| 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|
| Share of gasoline and diesel fuel sales at the market of the Russian Federation in the regions of operation, % | 24.7 | 24.1 | 23.2 | 23.7 |
| Volume of gasoline and diesel fuel sales at the market of the Russian Federation, mmt | 16.45 | 16.85 | 17.69 | 17.97 |
| Gasoline and diesel fuel sales at the market of the Russian Federation, RUB million | 279,059 | 298,736 | 344,654 | 397,659 |
| Investments in GS network development(1), RUB million | 3,447 | 2,984 | 2,300 | 2,099 |
| Number of GSs(2), units | 1,189 | 1,244 | 1,255 | 1,260 |
(2) Including franchising gas stations.
During the reporting period, the total retail sales of motor fuels in the Russian Federation increased by 3.2% vs 2017, to 9.1 mmt. The growth is driven by the increase of daily average flow per GS. Daily average sales per GS increased to 20.74 tons per day, which is 3.3% more than in 2017.
In 2018, Gazprom Neft began the launch of the new premium brand, high-octane G-Drive 100 gasoline, that became the gold medallist of Best 100 Products in Russia Contest. G-Drive 100 is designed for modern engines with at least 95-point required octane rating and shows the highest efficiency and environmental performance.
The new branded gasoline passed successfully testbed qualification tests at the All-Russian National Research Institute for Oil Refinery (VNII NP) and received a positive opinion on compliance with the Customs Union Technological Regulation to K5 environmental class fuel (matching Euro 5). Compliance with the European requirements to fuel quality was also confirmed by the largest international laboratory SGS.
In order to ensure efficient and comfortable customer service at GSs, Gazprom Neft developed the mobile application to pay for fuel at the gas stations included in the network, which reduces the car fuelling time significantly.
Feedback from retail customers of petroleum products is received through several channels: direct communication at GSs, informational materials placement in the media, prompt response to enquiries in official Gazprom Neft GS communities in social media, as well as through the Unified Customer Support Center omnichannel service. The total number of messages received from retail customers tripled in 2018, to more than 24 million pieces.
At the foreign markets, Gazprom Neft GSs network consists of 618 facilities, including 201 GSs in the CIS states (Belarus, Kazakhstan, Tajikistan and Kyrgyzstan) and 417 GSs in the Eastern Europe (Serbia, Bosnia and Herzegovina, Bulgaria and Romania).
Motor Fuel Sales Plans
By 2025, Gazprom Neft Company intends to increase the total sales of motor fuels in the Russian Federation and CIS via the retail sales channels. By 2021, Gazprom Neft GS network in the CIS shall be expanded by 25 facilities, to 226 stations.
Jet Fuel
In 2018, the total jet fuel sales amounted to 3.03 mmt in Russia. Jet fuel sales are carried out by Gazprom Neft subsidiary JSC Gazpromneft-Aero, which is one of Top 3 fuel suppliers in Russia.
Gazprom Neft performance indicators at jet fuel market in Russia, 2015–2018
| 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|
| Share of jet fuel market of the Russian Federation, % | 25.8 | 26.2 | 25.6 | 26.3 |
| Jet fuel sales volume, mmt | 3.08 | 3.05 | 3.04 | 3.03 |
| Investments in jet fuel business development, RUB million | 2,323 | 3,059 | 2,109 | 1,475 |
| Number of own sales facilities in the Russian Federation, units | 41 | 46 | 50 | 53 |
As of the end of 2018, Gazprom Neft proprietary sales network at jet fuel market consisted of 53 bulk fuel installations (BFI) in Russia and one BFI in Kyrgyzstan. In 2018, the international geography of jet fuel sales expanded to 260 airports (11 airports were added compared to 2017) in 66 countries. JSC Gazpromneft-Aero expanded its geography of operations: it began performing fuelling in Malaysia and Gambia and expanded its proprietary sales network in China.
Jet Fuel Sales Plans
JSC Gazpromneft-Aero’s Strategy stipulates further expansion of operations in the international network of airports guaranteeing timely fuelling to the air carriers.
Bunker Fuel
Bunker fuel sales are handled by Gazprom Neft subsidiary Gazpromneft Gazprom Neft Marine Bunker LLC. In 2018, bunker fuels sales amounted to 1.90 mmt in the Russian Federation.
Gazprom Neft performance indicators at marine fuel market in Russia, 2015–2018
| 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|
| Share of the bunkering market in the Russian Federation, % | 21.0 | 19.1 | 16.6 | 15.8 |
| Bunker fuel sales, mmt | 3.98 | 2.46 | 2.26 | 1.90 |
| Number of refuelling ships, units | 9 | 9 | 9 | 10 |
In 2018, Arctic class refuelling ship, GPN-Murmansk, with a 8,200-ton capacity was added to Gazprom Neft fleet. That vessel is designed for refuelling tanker and icebreaking fleet in complex ice conditions in the Arctics.
During the reporting year, the share of low-sulphur fuel increased in the overall company sales structure. The sales volumes of environmentally friendly bunker fuel with sulphur content less than 0.1% increased by 26%, to 200,000 tons. That is in line with the environmental requirements stipulated in International Convention for the Prevention of Pollution from Ships (MARPOL).
Bunker Fuel Sales Plans
In the medium term, Gazpromneft Marine Bunker LLC intends to expand the range of bunker fuels by using LNG, which meets MARPOL requirements as related both to sulphur content and to concentration of nitrogen compounds.
In 2018, Gazpromneft Marine Bunker LLC passed the resolution to build the first LNG refuelling vessel in Russia, the source of LNG for it would be the LNG production, storage and shipment complex near the Portovaya CS.