
- •Contents
- •Foreword
- •Industry snapshot
- •Industry snapshot
- •Reserves
- •Oil output
- •Oil output
- •Gas output
- •Gas output
- •Refining
- •Refining
- •Upstream
- •Upstream
- •Oil output
- •Gas output
- •New wells
- •Well-stock management
- •Well productivity
- •Reserves
- •Reserves
- •Oil reserves
- •Gas reserves
- •Reserve replacement
- •Reserve replacement
- •Refining
- •Refining
- •Capacity, throughput, utilisation
- •Light products yield
- •Complexity
- •Complexity
- •Modernisation plans
- •Capex
- •Capex
- •Oil & gas sector capex
- •Crude exports
- •Crude exports
- •Crude exports by market, company and direction
- •Russian crude exports in the FSU context
- •Crude export proceeds
- •Refined products exports
- •Refined products exports
- •Analysis by product
- •Gas balance
- •Gas balance
- •Domestic sales
- •UGSS balance
- •Appendix I: Reserves classifications
- •Appendix I: Reserves classifications
- •Russian reserves definitions
- •Western reserves definitions
- •Appendix II: Pricing
- •Appendix II: Pricing
- •Monthly pricing trends
- •International crude oil pricing
- •Domestic crude oil pricing
- •Domestic product pricing
- •International gas pricing
- •Domestic gas pricing
- •Gas tariffs
- •Appendix III: Regulation and tax
- •Appendix III: Regulation and tax
- •Regulatory overview
- •Licensing
- •Environmental protection
- •Oil and product transportation
- •Transportation costs
- •Typical crude export route costs
- •Volume and price controls for gas
- •Tax regime
- •Mineral Extraction Tax (MET)
- •Crude-export duty
- •Excess profits tax
- •Specific taxes applied to natural gas
- •Taxation of offshore projects – special treatment
- •Appendix IV: Sanctions
- •Appendix IV: Sanctions
- •Summary
- •Appendix V: Who’s Who
- •Appendix V: Who’s Who
- •Key policymakers
- •Company heads
- •Disclosures appendix

vk.com/id446425943
Well-stock management
The number of production wells operated by Russia’s VICs increased by 0.9% in 2018, following growth rates of 1.3% and 1.4% in 2017 and 2016, respectively. Gazprom Neft was the leader, adding 11.8% to its well stock following a 12.3% decline in 2017, which we associate with the conservation of a part of the brownfield wells by the company as part of the OPEC+ deal. Surgutneftegas and Tatneft both increased their well stock by 3.2% and 1.8%, respectively. Slavneft demonstrated flat dynamics YoY. Bashneft, Rosneft, LUKOIL and Russneft all had declines in their well stock, by 0.1%, 0.2%, 1.7% and 2.3%, respectively (see below for more detail).
Figure 22: Production well stock by company
|
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
YoY |
Oil companies |
153,297 |
154,671 |
155,081 |
157,559 |
158,198 |
160,474 |
162,500 |
163,990 |
0.9% |
Gazprom Neft |
7,993 |
8,430 |
8,990 |
9,690 |
10,173 |
10,401 |
9,122 |
10,195 |
11.8% |
SurgutNG |
20,350 |
21,140 |
21,968 |
22,380 |
22,459 |
22,929 |
23,704 |
24,457 |
3.2% |
Tatneft |
22,502 |
22,585 |
22,433 |
22,416 |
22,403 |
22,626 |
23,174 |
23,585 |
1.8% |
Slavneft |
4,042 |
4,232 |
4,435 |
4,431 |
4,441 |
4,423 |
4,430 |
4,431 |
0.0% |
Bashneft |
17,284 |
17,064 |
16,883 |
16,860 |
16,790 |
16,773 |
16,733 |
16,716 |
-0.1% |
Rosneft |
26,448 |
25,971 |
47,267 |
47,829 |
47,551 |
48,680 |
50,519 |
50,409 |
-0.2% |
LUKOIL |
29,066 |
29,586 |
30,598 |
31,538 |
31,956 |
32,271 |
32,383 |
31,817 |
-1.7% |
Russneft |
4,559 |
4,599 |
2,508 |
2,416 |
2,425 |
2,372 |
2,436 |
2,380 |
-2.3% |
TNK-BP |
21,053 |
21,064 |
0 |
0 |
0 |
0 |
0 |
0 |
n.a. |
NOVATEK |
55 |
75 |
104 |
131 |
149 |
194 |
197 |
205 |
4.1% |
Source: Ministry of Energy, InfoTEK, Interfax, Renaissance Capital
The idle well ratio for VICs decreased in 2018 to 12.6% (14.1% in 2017), reversing the upward dynamics of the previous year (Figure 23) on the relaxation of the curbs to the domestic production in 2H18. Figure 24 shows this dynamic in a historical context. The decline that began in 2004, reversing gains since 2002, stalled mainly as a result of various savings and cost optimisation programmes introduced by companies in 2009 to address the consequences of the financial crisis. Meanwhile, the downward trend that restarted in 2010 was curbed in 2011 as companies focused more on drilling new wells and optimising their existing well stock, and writing down and abandoning nonperformers. In 2012, the focus again shifted to existing well optimisation, leading to a decreased number of new wells and the continuation of the downward trend in the idle well ratio. A surge in the idle well count in 2017 reflected the first year of OPEC+ production constraints, while their relaxation led to a reduction of the idle well ratio in 2018. The current ratio implies 20,673 idle wells at the end of 2018, or a decrease of 2,200 wells from 2017.
Surgutneftegas continues to display the lowest share (7.8%) of idle wells among VICs, 0.2 ppt below the levels in 2017 and 2016. The ratio has been falling since 2002, when it was 13.5%, but the decline was briefly halted in 2011, as the company increased its idle ratio from 6.6% to 7.3%, and in 2014, when it increased from 7.2% to 8.6%. The secondand third-best ratio of idle wells in 2018 was demonstrated by Gazprom Neft and LUKOIL, at 9.6%(-0.6 ppt) and 10.4%(+0.5 ppt), respectively, while Slavneft and Bashneft had the highest idle well ratios in 2018, at 15.4% (-3.3 ppts) and 18.0% (+3.8 ppts), respectively. Tatneft and Rosneft decreased their idle well stock by 9.4 ppts and 1.5 ppts YoY, respectively, while Russneft increased it by 1.4 ppts. The idle ratio for NOVATEK stood at 34.6% in 2018, up 11.3 ppts YoY and 2.7 times above average for the oil companies which we associate with the company’s development activities in Yamal and Gydan peninsulas in preparation for new greenfield launches.
Renaissance Capital
20 June 2019
Russian oil & gas
Production well stock was up by 0.9% in 2018
Idle wells ratio declined in 2018
24

vk.com/id446425943
Renaissance Capital
20 June 2019
Russian oil & gas
Figure 23: Idle well ratio by company, 2014-2018, % of total well stock |
Figure 24: Well stock and idle wells, 1998-2018, number of wells |
|
|
2014 |
2015 |
2016 |
2017 |
2018 |
|
|
|
|
|
Well stock (LHS) |
|
Idle wells (RHS) |
|
||||||
40 |
|
|
|
|
|
|
|
|
180,000 |
|
|
|
|
|
|
|
|
|
|
40,000 |
|
35 |
|
|
|
|
|
|
|
|
160,000 |
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
30 |
|
|
|
|
|
|
|
|
140,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
||
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
||
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
15 |
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
80,000 |
|
|
|
|
|
|
|
|
|
|
||
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
||
5 |
|
|
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
0 |
|
|
|
|
|
|
SurgutNG |
|
40,000 |
|
|
|
|
|
|
|
|
|
|
10,000 |
|
Bashneft |
Slavneft |
Tatneft |
Rosneft |
Russneft |
LUKOIL |
NeftGazprom |
NOVATEK |
1998 |
2000 |
2002 |
2004 |
2006 |
2008 |
2010 |
2012 |
2014 |
2016 |
2018 |
|||
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
Source: Ministry of Energy, InfoTEK, Interfax, Renaissance Capital |
|
|
|
|
|
Source: Ministry of Energy, InfoTEK, Interfax, Renaissance Capital |
Figure 25: Well stock management, 2018
|
Starting |
New |
+Additions /-removals to / from |
Ending |
|
producing wells |
wells |
producing well stock |
producing wells |
Oil companies |
139,627 |
6,236 |
-2,546 |
143,317 |
LUKOIL |
29,183 |
781 |
-1,444 |
28,520 |
Rosneft |
42,708 |
2,705 |
-2,050 |
43,363 |
Tatneft |
17,616 |
434 |
2,095 |
20,145 |
Bashneft |
14,358 |
122 |
-778 |
13,702 |
SurgutNG |
21,806 |
1,286 |
-550 |
22,542 |
Gazprom Neft |
8,187 |
578 |
448 |
9,213 |
Russneft |
2,165 |
127 |
-209 |
2,083 |
Slavneft |
3,604 |
203 |
-58 |
3,749 |
NOVATEK |
151 |
11 |
-28 |
134 |
Source: Ministry of Energy, InfoTEK, Interfax, Renaissance Capital
Having examined the change in the idle well count and new wells commissioned, we can estimate other movements in the producing well stock. These typically result from shutting-in, abandoning and plugging wells, or from the conversion of producers into water injectors, which is offset by the reactivation of idle or other non-producing wells. In 2017 the picture was defined by OPEC+ agreements, to comply with which VICs saw removals in their producing well stocks in net terms at a rate of almost two times higher than in 2016. The relaxation of the OPEC+ agreement in 2018 has slowed down the net amount of removals by almost three times YoY.
Figure 26 shows the ratio of new wells completed during 2018 to the end-2018 well stock. We believe this is a reasonable (but far from perfect) proxy for the greenfield development efforts that are being undertaken by the various companies. More generally, it signals the intensity of drilling relative to production growth.
Gazprom Neft topped the ranking for the 12th consecutive year, however, the gap has contracted as the company reduced the drilling at its brownfields – its ratio of new wells was 5.7 % vs the 3.8% average for VICs. Rosneft, with the increasing share of greenfields in production, came in second with a ratio of 5.4% in 2018 (vs 5.2% in 2017), followed by Russneft (5.3%) and Surgutneftegas (5.3%). Slavneft ranks in the middle, with new-well ratios slightly above the average (4.6%). Lower down in the ranking and below the average stood LUKOIL, Tatneft and Bashneft at 2.5%, 1.8%, and 0.7%, respectively. LUKOIL’s ratio has come down significantly from 3.4% in 2014 as the company reduced drilling volumes in West Siberia. Tatneft operates a vast, mature well stock, although its drilling intensity has increased recently after having remained flat for some time. The previous owners of Bashneft put more focus on the intensification of oil production and well-stock management, which led to a reduction in the new wells ratio. NOVATEK also
Role of new drilling in support of production
25

vk.com/id446425943
Renaissance Capital
20 June 2019
Russian oil & gas
saw a substantial decrease of its new wells ratio, which declined from 21.3% in 2012 to 5.4% in 2018. We associate this change with the higher base effect as a result of expansion of the production well stock by almost 3.7 times during the period.
Figure 26: Ratio of new wells (new wells as % of ending well stock), 2013-2018
2014
2015
2016
2017
2018
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Gazprom Rosneft Russneft SurgutNG Slavneft LUKOIL Tatneft Bashneft NOVATEK Neft
Source: Ministry of Energy, InfoTEK, Interfax, Renaissance Capital
26