Rosneft

Rosneft was one of the last vertically integrated oil companies to emerge from the reorganization and large-scale privatization of Russia’s oil industry in the years following the dissolution of the Soviet Union. Initially, Rosneft was established in 1993 as a state enterprise on the basis of assets previously held by Rosneftegaz, the successor to the USSR Ministry of Oil and Gas.

In 1995, a Russian government decree transformed Rosneft into an open joint stock company (OJSC). From 1995 until 1998, Rosneft endured a series of rapid management changes that undermined the practical control which successive Moscow-based executives were able to exert over the Company’s assets. This undermined the coordination between Rosneft’s various businesses and, thus, did significant harm to the Company’s overall operational performance with production declining and the limited utilization of refining capacity throughout the period.

Recovery

In order to secure Rosneft’s position as an important player in Russia’s energy industry, the government appointed a new management team in October 1998, headed by the Company’s current president, Sergey Bogdanchikov. The new team immediately began implementing what would become a full-scale turnaround of the Company. By 2000, Rosneft was again realizing profits. That year also marked the start of a new period of growth, with average oil production increases in excess of 11% annually.

Continued growth and expansion

Improved management, asset acquisition and consolidation, financial discipline and technological integration all resulted in significantly improved performance from existing assets and allowed Rosneft to embark on a program of growth and expansion.

From 2000-2004, Rosneft boosted its annual oil production, from 268 kb/d in 2000 to 433 kb/d in 2004. Gas production increased from 5.6 bcm in 2000 to 9.4 bcm in 2004. In 2001, Rosneft became the official state representative in Production Sharing Agreements (PSAs). In 2002, Rosneft expanded its international operations by entering into projects in Algeria. In 2003, the Company began producing oil at the Aday block in the Caspian Sea region of Western Kazakhstan, and in 2005, it entered a PSA at the Kurmangazy structure on the Caspian Sea shelf in Kazakhstan.

Rosneft has pursued its upstream asset acquisition strategy in Russia with a focus on geological quality and transport efficiency. Among the key assets acquired between 2000 and 2004 were Selkupneftegaz (2000), Severnaya Neft (2003), the Veninsky block at Sakhalin-3 (2003) and the Anglo-Siberian Oil Company (2003), owner of the license to the Vankor oilfield in Eastern Siberia. In December 2004, the Company purchased a controlling stake in one of Russia’s largest oil and gas companies, Yuganskneftegaz.

This acquisition, together with significant organic growth, has propelled Rosneft into its current position as Russia’s second largest oil producer, with average daily production of approximately 1.5 million barrels in 2005. In early 2005, Rosneft won the auction to the Vorgamusur field in the Timano-Pechora province, an acquisition that will ensure further growth of Severnaya Neft, whose operations are located only 80 kilometers away.

At the end of 2005, Rosneft announced the acquisition of a 25.94% stake in Verkhnechonskneftegaz, which was later complemented by the acquisition of an exploration license to the East Sugdinsky block. These acquisitions are consistent with the Company’s goal of establishing a major presence in Eastern Siberia which it believes is poised to become one of Russia’s most significant new oil and gas production bases.

In July 2006, Rosneft conducted its first ever public share offering, which raised USD 10.6 billion, making it the world’s fifth-largest IPO. Finally, in October 2006, Rosneft completed the consolidation of 12 of the Company’s upstream and downstream subsidiaries. This consolidation program will allow for further improvements in transparency and management efficiency as Rosneft grows as a public company.

1993 - Rosneft established as a state enterprise on the basis of Rosneftegaz, the shortlived successor to the USSR Ministry of Oil and Gas.

1995 - Rosneft transformed into an OJSC.

1998 - New management appointed at Rosneft to begin rehabilitation work. First crude oil produced on the Sakhalin shelf.

1999 - Cost-cutting program launched. Major reconstruction of the Komsomolsk Refinery begins. Well efficiency enhancement program implemented.

2000 - Financial performance improves in all areas. Introduction of modern satellite communications network.

2001 - Rosneft appointed as the state representative in PSA (Production Sharing Agreement) projects.

2002 - Rosneft appointed as official representative of the Russian Federation in developing the Caspian Sea’s Kurmangazy field. Sakhalin-5 gets underway. Rosneft awarded license to develop the Kaygansko-Vasyukansky sector. Rosneft awarded licenses to develop the Kynsko-Chaselskaya and Udmutsko-Chatylkinskaya groups of fields.

2003 - Rosneft purchases Severnaya Neft. Rosneft receives license to develop the Vankor and Northern Vankor fields in Eastern Siberia. Oil production begins at the Aday block in Kazakhstan. Development begins on the Sea of Azov shelf. Oil production begins at the Kynsky deposit. Rosneft receives exploration license to the Veninsky sector at Sakhalin-3.

2004 - First prospective drilling at Vankor. First prospective drilling at Sakhalin-5. Launch of transport system involving the Belokamenka floating oil storage facility and Privodino station. Rosneft purchases Baikalfinansgroup LLC, owner of Yuganskneftegaz.

2005 - Oil production begins at Sakhalin-1. Operational and logistical integration of Yuganskneftegaz. Geological prospecting continues at the Vankor and Northern Vankor fields; a well with a flow of 1,000 cubic meters a day is drilled. Completion of Udachnaya-1 exploration well drilling at Sakhalin-5, with highly promising reserves discovered. Purchase of strategic stake in Verkhnechonsk oil and gas condensate field. Purchase of East Sugdinsky development license. All-time oil production high of 74.6 million tons is achieved.

2006 - Exploratory drilling begins at the Kurmangazy structure. Rosneft acquires 51% stake in Udmurtneft. Rosneft conducts USD 10.6 billion IPO. Consolidation of 12 subsidiaries completed.

Words and expressions

to emerge dissolution assets to endure rapid refining capacity to appoint implementing full-scale turnaround excess acquisition to embark expansion to pursue upstream asset acquisition strategy to propel complemented to be poised transparency successor to be appointed rehabilitation launched to get underway prospective drilling oil storage facility

возникать распад активы терпеть, вынести быстрый перерабатывающие мощности назначить осуществление полномасштабные полное изменение превышение получение, приобретение начинать, вступать в дело развитие, рост преследовать, добиваться апстрим стратегия приобретения активов двигаться вперед, продвинуться дополненый быть готовым прозрачность преемник, наследник быть назначенным восстановление предпринимать, начинать начать осуществлять перспективное бурение нефтехранилище

LUKOIL

The company was founded by three West-Siberian oil and gas plants: “Langepasneftegas”, “Urayneftegas” and “Kogalimneftegas”. This initial letters of these names formed the first part of the new presence in the Russian oil and gas industry – LUKOIL.

LUKOIL is one of the world’s leading vertically integrated oil & gas companies. Main activities of the Company are exploration and production of oil & gas, production of petroleum products and petrochemicals, and marketing of these outputs. Most of the Company’s exploration and production activity is located in

Russia, and its main resource base is in Western Siberia. Most of the Company’s production is sold on the international market. LUKOIL petroleum products are sold in Russia, Eastern Europe, CIS countries and the USA. LUKOIL is the second largest private oil Company worldwide by proven hydrocarbon reserves. The Company has around 1.3% of global oil reserves and 2.1% of global oil production. LUKOIL dominates the Russian energy sector, with 18% of total Russian oil production and 18% of total Russian oil refining. LUKOIL proven reserves at the beginning of 2005 were 15,972 mln barrels of crude oil and 24,598 bcf of natural gas, totaling 20,072 mln.

LUKOIL has an outstanding portfolio of production assets. The main production region for LUKOIL Group is Western Siberia. The Company is developing a new production base in Timan-Pechora where its crude oil output has increased by more than 1.6 times in 5 years. LUKOIL is carrying out international exploration and production projects in Kazakhstan, Egypt, Azerbaijan, Uzbekistan, Saudi Arabia, Iran, Columbia, Venezuela and Iraq. With putting into operation the Nakhodkinskoye gas field the Company started its gas program which targets at a rapid growth of gas production in the mid-term.

The key regions for development of LUKOIL gas production are the Bolshekhetskaya Depression and the Northern Caspian as well as the Kandym – Khauzak – Shady project in Uzbekistan and the Shakh Deniz project in Azerbaijan. LUKOIL owns significant oil refining capacity both in Russia and abroad. In Russia the company owns four large refineries at Perm, Volgograd, Ukhta and Nizhny Novgorod. Total capacity of LUKOIL facilities in Russia is 41.8 mln tons of oil per year. LUKOIL also has refineries in Ukraine, Bulgaria, and Romania, with total capacity of 16.7 mln tons per year. In 2004 LUKOIL refined 44.0 mln tons of oil at its own refineries, including 35.5 mln tons at its Russian refineries.

By the end of 2004 LUKOIL's sales network covered 17 countries of the world, including Russia, the CIS (Azerbaijan, Belarus, Georgia, Moldova, Ukraine), Europe (Bulgaria, Hungary, Cyprus, Latvia, Lithuania, Poland, Serbia, Romania, Czech Republic, Estonia) and the USA, and consisted of 199 tank farms and 5,405 filling stations. LUKOIL sales network consisted of 10 marketing entities operating in 59 regions of Russia.

Words and expressions

proven reserves target entity

достоверные запасы делать мишенью, целиться экономический объект

Exercise 19. Answer the following questions.

1. What spheres does Total operate in?

2. Does Total operate only in France?

3. When was Total created?

4. What does the abbreviation S.A. (Total S.A.) stand for?

5. When was Halliburton established?

6. In what way did Halliburton expand?

7. How many countries does Halliburton operate in?

8. What are the key goals of the company?

9. Can we say that British Petroleum operates worldwide?

10. Does BP form joint ventures in many countries? (Give some examples).

11. Where are BP’s corporate headquarters located?

12. What is TNK-BP? What does the abbreviation TNK stand for?

13. What are the major activities of BP?

14. How was Rosneft established?

15. Was Rosneft a successful company from the start?

16. Do you consider Rosneft’s growth and expansion very impressive?

17. How many subsidiaries does Rosneft have?

18. What are the main activities of LUKOIL?

19. What were the companies that founded LUKOIL?

20. Does LUKOIL carry out international projects?

21. What is the total capacity of LUKOIL facilities in Russia and abroad?

Exercise 20. Complete the sentences.

1. Rosneft emerged as a result of … .

2. Bad management coordination did … .

3. New acquisitions and international operations made Rosneft … producer.

4. Easten Siberia is viewed as … .

5. LUKOIL main resource base is in … .

6. LUKOIL sells its products in … .

7. LUKOIL has refineries both in … and … .

8. BP products and services … in more than 100 countries.

9. London is the center for BP’s … .

10. BP forms a lot of … in the countries where they operate.

11. The major part of Total’s investors are from … .

12. Halliburton provides services in … industries.

Exercise 21. Match each abbreviation with its full version and translate..

1. OJSC	a) Dow Jones
2. PSA	b) Initial Public Offering
3. LLC	c) billion cubic feet
4. IPO	d) Liquefied Natural Gas
5. bcf	e) Limited Liability Company
6. LNG	g) Open Joint Stock Company
7. DJ	h) Production Sharing Agreement

Exercise 22.  Listening

Discuss the following with your partner before listening.

Russia is the second largest oil producer in the world. It also produces huge amounts of natural gas. How many other oil producing nations can you name?

Listen to the text and complete the notes with the correct number.

Russia’s gas reserves: (1)………… cubic meters.

Russia’s gas output: (2)……… cubic meters per day.

Russia’s oil reserves: (3) ………barrels.

Russia’s oil output: (4)…………barrels per day.

Proportion of European oil and gas bought from Russia: (5)…………

Proposed pipeline to connect Russia with China and South Korea:

Length of pipeline: (6)………… km.

Cost of proposed pipeline: (7)…………$.

Exercise 23. Talking point

1. Imagine that you are a PR representative of one of the oil companies. You are asked to make a press release about main activities and historical background of your company.

2. Pair work. You were invited for a job interview. You are an applicant and talk to an interviewer of an oil company. Find out as much information as possible.