Words and expressions

exploration activity	поиск полезных ископаемых
production activity	производственная деятельность
to support	поддержать
elsewhere	где-то в другом месте
retail	розничный
lubricant	смазочный материал
solar panel	солнечная батарея
corporate headquarters	штаб-квартира корпорации
mainstream	основной, представляющий большинство
stake	доля, участие (в капитале предприятия)
retailer	розничный продавец
derivative	производное соединение
core aspect	ключевой аспект, основная причина

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.