Russian Federation

JC RUSVIETPETRO LLC

JC RUSVIETPETRO LLC is the primary Russian producing asset of Zarubezhneft JSC.

JC RUSVIETPETRO LLC carries out its activities on hydrocarbons production at the facilities of the Central Khoreyver Uplift in the Nenets Autonomous Area since September 2010.

JC RUSVIETPETRO LLC

Development and production

In 2019, production of hydrocarbons by JC RUSVIETPETRO LLC was 3,257 K t.o.e., which is higher than the level of the previous year by 1.7% and than the target level by 1.9%. The production was carried out at the following fields of the Central Khoreyver Uplift: Severo-Khosedayuskoye, Visovoye, Verkhnekolvinskoye, Zapadno-Khosedayuskoye, Sikhoreyskoye, Vostochno-Sikhoreyskoye, Severo-Sikhoreyskoye, Severo-Oshkotynskoye, Syurkharatinskoye, Yuzhno-Syurkharatinskoye, Pyuseyskoye, Urernyrdskoye, Vostochno-Yanemdeyskoye.

In order to fulfill the production plan over the course of the reporting period, 10 new wells were commissioned and 4 sidetrackings made with the incremental production of 206.2 thous. tons.

With a view to improve the development of low-density reserves based on detailed geological flow simulation and risks analysis, an optimal development option has been selected — lateral drilling with further intensification. After exploration and performance evaluation completion, it is planned to take a decision on distributing the technology.

Apart from well interventions, enhanced oil recovery methods are evaluated for performance: thermal gas treatment, surfactant polymer treatment, use of smart water, selective isolation of bottom waters. The stage of field tests has been completed for a number of operations.

JC RUSVIETPETRO LLC production program is traditionally performed in close cooperation with the companies of the Service and Other Assets segment: RMNTK Nefteotdacha JSC meets the demand in integrated services when drilling wells and during workover at the Central Khoreyver Uplift fields; Zarubezhneftestroymontazh LLC carries out construction and installation activities for the fields infrastructure development; VNIIneft JSC and Giprovostokneft JSC carry out researches and development to search for new technologies and reagents in order to improve performance and enhance oil recovery of formations in the Central Khoreyver Uplift conditions.

Ownership structure, %
Ownership structure

Financial indicators

JC RUSVIETPETRO LLC sells produced oil at the internal and external markets under commission agreements as well as supplies oil for process needs of the field under direct agreements. Through constant monitoring of the market situation on the international and internal oil markets, the Company can flexibly respond to changes in demand thereby increasing its profitability.

Revenue from sales, including other sales, for 2019 grew by 0.2% to 75,343 MM RUB as compared to 2018, since the increase in oil sales in physical terms (+1.0%) and growth of rate of exchange are compensated by the oil price drop.

Hydrocarbon production, thous. t.o.e
Hydrocarbon production, thous. t.o.e

Growth of revenue from oil sales in far-abroad countries by 14% resulted from the supply volume growing by 22% and rate of exchange rising by 5%, which compensated for the drop of global oil price by 11%. The growth of supply volumes to far-abroad countries is caused by reduced opportunities of supply to the CIS countries (the Republic of Belarus).

In 2019, sales to the Republic of Belarus were 124 thous. tons (62% reduction as compared to the same period of the previous year) or 4% of the total sales volume. The volume reduction is related to contamination of the Druzhba piping system by chlororganic compounds and absence of opportunity to transport oil in this direction since July 2019.

As a part of the tax burden reduction in 2019, the Company successfully exercised the right to apply a preferential rate for export duty for the Zapadno-Khodesayuskoye field for the volume equal to 366 thous. tons of oil.

In 2019, the tax burden on the Company was about 56%, with the tax concessions being 26.5 bln RUB. The ratio between taxes and revenue was about 47%.

Capital expenses for 2019 were 7,369 MM RUB, which is by 27% lower than the last year indicator. The Company completed the active phase drilling of Block 4 fields, which resulted in reduced costs of drilling, surveying and infrastructure development of new fields of western and north-western areas.

EBITDA, MM RUB
EBITDA, MM RUB
In 2019, EBITDA decreased by 5,396 MM RUB as compared to the same period of 2018 to 37,294 MM RUB, or 49.5% of the revenue (56.8% for 12 months of 2018). Apart from oil price reduction, EBITDA decreasing for 12 months of 2019 as compared to the same period of 2018 is related to an increased tax burden and reduced qualifying oil volume.
Kharyaga PSA

Zarubezhneft JSC entered the Kharyaga PSA project on January 1, 2010 with the participating interest of 20%.

In accordance with Schedule 3 to the Product Sharing Kharyaga Field Oil Development and Production Agreement dated August 1, 2016, Total Exploration and Production Russie transferred 20% of its participating interest and the project operator functions to Zarubezhneft JSC subsidiary — ZARUBEZHNEFT-Dobycha Kharyaga LLC. As a result, the parties to the Kharyaga PSA are Statoil Kharyaga AS (30%), Zarubezhneft JSC (20%), ZARUBEZHNEFT-Dobycha Kharyaga LLC (20%), Total Exploration and Production Russie (20%), Nenets Oil Company JSC (10%).

Kharyaga PSA

Development and production

In 2019, ZARUBEZHNEFT-Dobycha Kharyaga LLC reached the maximum production for the last six years — 1,599 K t.o.e. This result exceeded the level of 2018 by 2.3% and the planned level by 6.3%. High results are associated with the permanent optimization and integrated control of the FPM system which allowed reducing water breakthrough rate for wells, and with implementation of the program for further drilling of the field.

4 new wells were commissioned in the financial year, 2 sidetracking activities were undertaken, 2 hydraulic fractures made along with 6 other WIs with the additional production of 111 thous. tons.

Ownership structure, %
Ownership structure
Hydrocarbon production, thous. t.o.e.

Hydrocarbon production,  thous. t.o.e.

In 2019, the third campaign for injection of water diverting agents was completed under the project of injecting cross-linked polymeric compositions based on polyacrylamide. To control the profile and composition of the producing wells inflow without any additional tripping operations for survey bottom-hole apparatuses, smart tracer packages are integrated. To evaluate performance of using low-mineralized water injection, works were done in field conditions at a single well using Single Well Chemical Tracer Test (SWCTT) method. Surfactant/polymeric formula were selected for injection into formation D3-III in order to enhance oil recovery. In 2019, the optimal formula was synthesized and filtration experiments completed to evaluate the marginal coefficient of oil displacement by surfactant-polymeric composition. Proppant HFF work was undertaken; first oil was received from the prospective facility Alpha.

Commissioning

In 2019, all registration procedures for Stage 1 facilities were documented and completed. Furthermore, the following facilities were commissioned:

  • Office building;
  • Control center building;
  • Testing chemical and analytical laboratory;
  • Well cluster 108. Reconstruction (organization of the production metering system).

In 2020, it is planned to complete works on facilities of well clusters, CPF facilities and the New Field Camp.

Financial indicators

By means of increasing the sales volume (+86 thous. tons) in 2019 and taking into account that the successful program of performance improvement and optimization of costs is continued, the results for all economical indicators have been improved compared to the planned level.

Revenue is 6% above the planned level (+2.5 bln RUB), EBITDA is +0.9 bln RUB, reimbursable costs for 2019 are by 357 MM RUB lower than the planned level (-2%).

CAPEX changes in the reporting period relative to the 2018 level are related to increased construction rates of infrastructure facilities and increased number of drilled completed wells (+2 wells).

Reduction of expenditures is noted for all categories except for commercial costs and mandatory payments under the PSA, related with increased oil production volumes (CAPEX -101 MM RUB, -1%, OPEX -216 MM RUB, -6%, G&A -200 MM RUB, -14%).

EBITDA was negatively affected by the growth of commercial expenditures due to increased oil sales volumes as well as an insignificant growth of mandatory payments under the PSA (contributions for reworking of work sites due to increased oil production rates and revision of the calculation rate).

In 2019, specific operating expenses were 2,134 RUB/ton, which is by 11% below the planned level. Cumulative operational costs were 3,269 thous RUB in total, which is by 6% below the planned level. The stable dynamics of the indicator is maintained as a result of the increased share of Russian suppliers after the operator function is transferred to ZARUBEZHNEFT-Dobycha Kharyaga LLC and an opportunity to constantly implement the Performance Improvement and Costs Optimization program has been obtained.

EBITDA, MM RUB (excluding state profit oil)
EBITDA, MM RUB  (excluding state profit oil)
Capital investment,
MM RUB
Capital investment,  MM RUB

Development prospects

Primary attention in the mid term is paid to maintaining the production level of 1,500 thous. tons. A respective program has been formed for that purpose, and it is planned to continue optimization of the waterflooding system and use the EOR methods.

In order to establish the center of expertise for development of carbonate reservoirs, it is planned to test and implement enhanced oil recovery methods. To involve reserves of low-productive reservoirs, it is intended to drill horizontal wells with multi-stage acid-proppant HFF and multilateral well drilling. To improve the ORF, it is planned to test the surfactant-polymeric flooding and reduplicate injection of large-volume polymeric rims.

For the nearest 5 years, the investment activity provides for construction of infrastructure facilities, arrangement of new well clusters, facilities necessary for optimization of injected liquid and implementation of the gas program under Stages 3, 4А, 4В, 4С, and 5.

By 2022, it is planned to reach the associated petroleum gas utilization of 95%.

Special attention will be paid to improving drilling results, production performance, reduction and optimization of costs, development of measures to re-involve materials into production.

Haryaga PSA

Structure of the state’s revenues, MM RUB
Government revenue 2019
Royalty 3,624
State profit oil 12,858
Profit tax 2,598
Total 19,080
Zarubezhneft-Dobycha Samara LLC

Zarubezhneft-Dobycha Samara LLC is established in order to improve performance of production and economic activity of the companies within Samara group. The company was registered on July 2, 022015 and assigned the Management Company functions. Oil and gas production assets of Ulyanovskneftegaz LLC, Orenburgnefteotdacha JSC and Severo-Karasevskoye Petroleum Enterprise LLC are transferred under its control. In May 2017, a license was granted for using subsoil of the Yuzhno-Pcheliny license site under development. 100% participant of the Company is Zarubezhneft-Dobycha LLC.

Zarubezhneft-Dobycha Samara LLC
OPEX for Samara Group, RUB/t
OPEX for Samara Group,  RUB/t
During the operation activity of Zarubezhneft-Dobycha Samara LLC, it became possible to ensure the stable growth of production for Samara group assets (+42% in 2019 as compared to 2015) and keep the level of specific operational costs within 2,600–2,900 RUB/ton. Operating expenses are fully covered by the Company’s revenue.
Ownership structure, %
Ownership structure
Ulyanovskneftegaz LLC

Ulyanovskneftegaz LLC is an oil producing asset engaged in prospecting, exploration and production at five license sites located in the Ulyanovsk Region. Oil and gas are produced from sediments of Lower and Middle Carboniferous period predominantly represented by terrigenous reservoirs.

Recovery of reserves from Ulyanovskneftegaz LLC fields is from 1% and 5% at the Nizhnemazinskoye and Kondakovskoye fields to 52% and 55% at the Slavkinskoye and Sulakskoye fields, respectively. Recovery of reserves at the Ruzhevskoye field is 99%. Average water-cut of well production for the fields is 73%.

Ulyanovskneftegaz LLC

Production

The actual production of hydrocarbons of Ulyanovskneftegaz LLC in 2019 was 47.3 K t.o.e. which exceeds the planned level by 15%.

Development prospects

The primary task of the Company is to take measures intended to keep the achieved hydrocarbons production volumes and take additional steps to reduce operational costs.

Financial indicators

EBITDA for the reporting period was 309 MM RUB, which exceeds the planned level by 36% due to increased production relative to the plan. Due to reduced production relative to the actual level of 2018, operational profit for 2019 is lower by 126 MM RUB than in 2018.

Hydrocarbon production, thous. t.o.e.
Hydrocarbon production,  thous. t.o.e
There were no workover operations ensuring additional oil production volumes in 2019. Overproduction was ensured by reducing the drop rates in the base wells relative to the planned production indicators (drop rate was 3% with the planned level of 27%).
Ownership structure, %
Ownership structure
Orenburgnefteotdobycha JSC

Orenburgnefteotdacha JSC is an oil producing asset engaged in prospecting, exploration and production at three license sites located in the Orenburg Region. Oil is produced from sediments of Lower Carboniferous period and Upper Devonian period predominantly represented by carbonate reservoirs.

Orenburgnefteotdacha JSC

Recovery of reserves from Orenburgnefteotdacha JSC fields is 43% at the Chernovskoye field, 25% at the Kirsanovskoye field and 39% at the Pashkinskoye field with the average water-cut of 32%.

Production

The actual hydrocarbons production of Orenburgnefteotdacha JSC in 2019 was 124.2 K t.o.e. which exceeds the previous year level by 9.7% and the planned level by 20.8%.

Hydrocarbon production, thous. t.o.e.
Hydrocarbon production, thous. t.o.e.
Primary factors of production increase in 2019 were commissioning of 2 new wells at the Pashkinskoye field (cumulative oil production as of the end of the year was 16 K t.o.e.) and completion of 4 WIs at the Pashkinskoye and the Kirsanovskoye fields (cumulative growth of production was 3.9 K t.o.e.).

Financial indicators

Capital investment, MM RUB
Capital investment, MM RUB
Increase of CAPEX in 2019 as compared to the previous period is caused by increased volume of development drilling.
EBITDA, MM RUB
EBITDA, MM RUB
EBITDA for 2019 was at the actual level of 2018 with comparable prices.
Ownership structure, %
Ownership structure

Development prospects

The primary task of the Company is to take measures intended to maintain the achieved hydrocarbons production volumes and take additional steps to reduce operational costs.

Severo-Karasevskoye Petroleum Enterprise LLC

The Lutseyakhskoye oil field with the area of 360.8 km2 is located in the Nadymsky District of the Yamalo-Nenets Autonomous Area in the Tyumen Region. The District center — Nadym — is located 45 km to the North-W-est, the village of Pangody is located 90 km to the North-Wnorth-est.

The Lutseyakhskoye field was discovered in 2011 after drilling a prospecting appraisal well No. 70-Lutseyakhskaya. A subsoil use license dated March 1, 2013 is owned by Severo-Karasevskoye Petroleum Enterprise LLC. In June 2016, a Sales and Purchase Contract was concluded between DEDACI ENTERPRISES LIMITED and Zarubezhneft JSC (Zarubezhneft-Dobycha Samara LLC) for acquiring of 100% participating interest of Severo-Karasevskoye Petroleum Enterprise LLC. Recoverable reserves are 11.2 MM tons as of January 1, 2016.

Severo-Karasevskoye Petroleum Enterprise LLC

In 2019, a project document was approved which regulated production testing of the Lutseyakhskoye field; the decision was recorded by the Minutes of the Central Oil and Gas Commission meeting dated July 15, 2019 (Central Commission for HC Reserves). Surveys are completed for on-site and linear facilities and the infrastructure development project is formulated for the period of production testing under the Lutseyakhskoye field project. The expert opinion of the General Directorate for State Environmental Review of the Russian Federation on the infrastructure development project of the Lutseyakhskoye field for the period of production testing is planned to be received in 2020. The Land Plot Lease Agreement (55.2 ha) has been concluded, land use and cadastral plans are being developed. A positive opinion was received towards the sand reserves in open pit No. 2 at the Lutseyakhskoye field in the amount of 321,903 m3 (Minutes No. 1382 of the Department of Resources Regulation and Oil and Gas Complex Development of the Yamalo-Nenets Autonomous Area dated February 11, 2019). CPF facilities of the Khulymskoye field (RITEK) and the Yarudeyskoye field (YARGEO LLC) were examined in order to select the optimal location of the oil discharge station.

Exploration and development

Geological survey activities in 2019 included:

  • Field seismic 3D SMP surveys for 270 sq. m, the works completed in Apri l 2019;
  • Since May 2019, 3D SMP seismic data has been processed and interpreted, with preliminary location of exploration wells No. 71R and 72R; the final report is planned for January 2020;
  • In June 2019, the operative re-estimation of HC reserves of the Lutseyakhskoye field was completed (Minutes of the Federal Agency on Subsoil Usage No. 03-18/201-пр(pr) dated June 4, 2019).

Development prospects

Work program 2020 suggests well drilling under production testing of the field, start of field infrastructure development for production testing. In the mid term, it is suggested to stage-wisely implement the exploration works program, drill exploration and development wells, and construct the field infrastructure. First oil inflow is expected during production testing in 2021.

Ownership structure, %
Ownership structure
Capital investment, MM RUB
Capital investment, MM RUB