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    Rosneft output slumps on OPEC+ cuts, asset sales


The company's gas output should recover thanks to increased flows at the Rospan project.

by: Joseph Murphy

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Rosneft output slumps on OPEC+ cuts, asset sales

Russia's largest oil company Rosneft suffered a 17% year-on-year decline in hydrocarbon production in the first quarter on the back of OPEC+ cuts and asset sales, the firm said on May 14.

Rosneft's hydrocarbon output averaged 4.76mn barrels of oil equivalent/day in the three-month period, versus 5.75mn boe/d a year earlier. Liquids extraction fell to 3.75mn b/d from 4.64mn b/d, primarily as a result of cuts undertaken by Russia and other OPEC+ members to support prices amid the coronavirus pandemic. The cuts came into force in May 2020. 

The company also sold a number of low-margin assets at the end of last year, as part of efforts to rationalise its portfolio and raise funds for its Vostok Oil project in the Russian Arctic.

Rosneft's gas production amounted to 15bn m3 in the first quarter, down 16.6bn m3 a year before. Output should recover later this year, however, thanks to the start-up of new phases at the Rospan project in west Siberia.

The company enjoyed a 22.4% yr/yr growth in core earnings (Ebitda) in US dollar terms in the first quarter to $6bn, despite a 13.4% drop in revenues. It posted a net income of $2bn, compared with a $2bn loss a year before. In ruble terms, Rosneft's results were strong because of the currency's devaluation last year. Its revenues were down only 1.2% while Ebitda surged 44% to 445bn rubles.

In an earnings call,  Rosneft vice president Didier Casimiro said the company aimed to bring on board another partner at Vostok Oil by the end of this year. The project comprises 13 fields and 52 licence areas mostly on the Taymyr peninsula, which Rosneft CEO Igor Sechin has estimated could one day flow over 2mn b/d of oil and up to 50mn metric tons/year of LNG. The company sold a 10% interest in Vostok Oil to commodities trader Trafigura in December last year.

Rosneft collected 500 km2 of 3D seismic data at the Zapadno-Irkinsky licence area, part of Vostok Oil, in the first quarter, in order to prepare for exploratory drilling. It plans to launch pilot production at the project in 2022, having already identified locations for well pads. It is. preparing a site for oil collection and treatment units, and is undertaking design and survey work for constructing a pipeline and a port in the Sever Bay, as well as for building storage facilities. Vostok Oil's crude and LNG will be transported to markets via the Northern Sea Route.