Common Economic Space in Eurasia: Open Borders ... · understood that nothing in this report /...

22
Common Economic Space in Eurasia: Open Borders, Partnership, Flow of Resources, Capital and Technologies Verona / 22 Oct. 2015 Igor Sechin Chairman of Rosneft Management Board

Transcript of Common Economic Space in Eurasia: Open Borders ... · understood that nothing in this report /...

Page 1: Common Economic Space in Eurasia: Open Borders ... · understood that nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information

Common Economic Space in Eurasia:

Open Borders, Partnership, Flow of Resources,

Capital and Technologies

Verona / 22 Oct. 2015

Igor Sechin

Chairman of Rosneft Management Board

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Information herein has been prepared by the Company. The presented conclusions are based on the general information collected

as of the date hereof and can be amended without any additional notice. The Company relies on the information obtained from the

sources which it deems credible; however, it does not guarantee its accuracy or completeness.

These materials contain statements about future events and explanations representing a forecast of such events. Any assertion in

these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks,

uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from any

future results, performance or achievements expressed or implied by such forward-looking statements. We assume no obligations to

update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors

affecting such statements.

This presentation does not constitute an offer to sell, or any solicitation of any offer to subscribe for or purchase any securities. It is

understood that nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information

herein should not for any purpose be deemed complete, accurate or impartial. The information herein in subject to verification, final

formatting and modification. The contents hereof has not been verified by the Company. Accordingly, we did not and do not give on

behalf of the Company, its shareholders, directors, officers or employees or any other person, any representations or warranties,

either explicitly expressed or implied, as to the accuracy, completeness or objectivity of information or opinions contained in it. None

of the directors of the Company, its shareholders, officers or employees or any other persons accepts any liability for any loss of any

kind that may arise from any use of this presentation or its contents or otherwise arising in connection therewith.

2

Disclaimer

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2 q

2015

3

-10

-5

0

5

10

15

20

1 q

2000

4 q

2001

3 q

2003

2 q

2005

1 q

2007

4 q

2008

3 q

2010

2 q

2012

1 q

2014

Germany Italy USA China

%, y/y

20

30

40

50

60

70

Китай США Еврозона China USA Eurozone

Global economy shows stable economic growth

Sources: ОECD, National Bureau of Statistics of China; Bloomberg, Markit

PMI in Eurozone, US and China GDP growth in developed economies and in China

Developed global economies show upward GDP trend over QI-II 2015

The Chines economy despite a minor slowdown continues to show a high growth rate of 7 % (in QII 2015 YOY)

The EU and US Purchasing Managers' Index (PMI) continues to exceed 50 points thus evidencing the confidence of

developed economy company managers in economic growth

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Despite current downturn EU remains Russia's main trading

partner

Sources: Federal Customs Service (FCS), trademap.org

4

In 2000-2013 the trade volume of Russia and EU

countries grew more than 5-fold to $413 bln and fell by

10% in 2014

EU rate in the Russia's external trade in 2014 was 48%

Over 8 months 2015 the trade volume of Russia and EU

countries fell by 39%

The trade volume of Russia and Eurasian Economic

Union and APEC countries showed a smaller reduction

of 26 and 30% accordingly

Reduction of Russia trade volume over 8 months

2015 by country groups Russia and EU trade volumes

0 10 20 30 40 50

ЕС

АТЭС

ЕАЭС

%

an average of 34.4%

25

40

55

70

0

150

300

450

% $ bln

Товарооборот России и ЕС-28 (левая шкала)

Доля ЕС-28 в товарообороте России

Goods turnover Russia and EU-28 (LHS)

EU-28 share in Russian goods turnover

EAEC

APEC

EU

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1

2

3

4

5

6

7

8

9

9,5

10

10,5

01.2012 07.2012 01.2013 07.2013 01.2014 07.2014 01.2015 07.2015

Crude oil production Crude oil export (RHS) Oil products export (RHS)

Russia's oil sector demonstrates stability

Sources: JODI; FCS

5

Oil production in Russia keeps growing giving rise to

larger exports

In January-February 2015 Russian petroleum product

export grew up significantly (by 5.7%)

Italy is the second largest route of Russian oil and

petroleum product exports outpacing China and

Germany

Key routes of Russian oil and petroleum product

exports, 2014, mmt

Russian production and exports of oil and petroleum

products, mmbd

Low oil price

period

0 25 50 75 100

Japan

South Korea

Poland

Belarus

Germany

China

Italy

Netherlands

Crude oil

Oil products

Page 6: Common Economic Space in Eurasia: Open Borders ... · understood that nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information

Rosneft performance over Q1 2015

Source: Rosneft

6

Indicator H1 2015 H1 2014 change

Hydrocarbon production (mbpd) 5,175 5,075 2.0%

Sales of oil, petroleum products and

petrochemicals (mmt) 106.2 104.6 1.5%

Gas sales (bcm) 29.2 25.76 13.4%

APG utilization (%) 87 77.2 12.7p.p.

3D seismic, km2 4,483 4,497 -0.3%

2D seismic, line km 2,084 889 134.4%

In H1 2015 hydrocarbon production amounted to 126.5 mmtoe which is 2.0% higher than 124.0 mmtoe produced in HI 2014.

The production growth was ensured by successful exploration, drilling of new wells and the use of up-to-date technologies,

along with cost optimization.

In H1 2015 the Company increased the footage in development drilling by more than 30% YOY and commissioned more

than 800 new wells

The number of horizontal wells in HI 2015 exceeded 30% of the total development well drilling scope (more than 260 wells).

The number of own drilling rigs reached 215 as of the middle of this year with the number of crews being 203.

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1,7

2,4

2,7

2,8

3,2

3,3

4,2

4,2

5,2

HC reserves(1)

Rosneft – world leader in reserves volume, production and

efficiency

(1) Rosneft reserves are listed according to the Russian classification ABC1 + C2 as of 01.01.2015; Lukoil reserves are given as reported as of 01.01.2015 including proven, probable and possible

reserves; for the rest of the companies reserves are given on the basis of Wood Mackenzie reserves estimates, including commercial and sub-commercial reserves

(2) Daily production in Q1 2015. (3) Production costs of the companies are shown for 2014; Rosneft, Lukoil and Petrobras - for H1 2015. Source: companies' data

HC production costs(3) HC production(2)

23

28

40

46

49

54

65

79

129

Жидкие УВ Газ

bboe mmboepd $/boe

7

Gas Liquid

HC

18

16

15

14

13

13

12

5

2,8

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FX rate in Russia – key compensatory macroeconomic variable

*Consolidated budget and Governmental off-budget funds Sources: EIA, oanda.com; Federal Service for State Statistics (RosStat), Federal Treasury

**When exporting crude oil and specific petroleum products from the Republic of Belarus outside the Customs Union 8

Oil and gas revenues as % of the budget* income Profile of oil price, dollar exchange rate, ruble

denominated oil bbl price

Since 2011 the ruble denominated price of an oil barrel has been remaining within the 3-4 thous. RUR/bbl range despite

severe fluctuation of oil prices balanced by the changing rate of the national currency

In Russia the priority is given to sustaining budget stability and nominal level of population income. This results in high

stability of ruble revenues from the oil and gas industry, the main source of fiscal revenues.

0

10

20

30

40

50

60

70

80

0

5

10

15

20

25

30

35 Таможенная пошлина*

Вывозные таможенные пошлины на нефтепродукты

Вывозные таможенные пошлины на газ

Вывозные таможенные пошлины на нефть

Акцизы на нефтепродукты

НДПИ на газ

НДПИ на нефть

ВВП, текущие цены (правая шкала)

% trn RUR

Customs duty**

Export duty on oil

products

Export duty on gas

Export duty on oil

Excise on oil

products

MET on gas

MET on oil

GDP, current prices

(RHS)

1000

1500

2000

2500

3000

3500

4000

4500

5000

0

50

100

150

200

250

300

Ruble/dollar exchange rate

Brent price

Oil price, RUR/bbl (RHS)

January 2008 =100% RUB/bbl

3-4 thous. RUR/bbl range

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-16

-14

-12

-10

-8

-6

-4

-2

0

2

CR

C

Contin

enta

l

SM

Cabot

New

fie

ld

South

weste

rn

Energ

en

Range

EP

Pio

neer

Cim

are

x

Concho

Murp

hy

Encana

Ante

ro

EO

G

Whitin

g

Mara

thon

Devon

Hess

Noble

Chesapeake

Apache

Occid

enta

l

Anadark

o

ConocoP

hill

ips

H2 2015

2016

2017

Ликвидность

$ bln

Forecast of demand for

liquidity by years

Risk hedging levers and loan liquidity to be raised by the

American shale companies by 2017

*scenario assumptions: $37/bbl of WTI oil and $2.4/cf (H2 2015), $41/bbl of WTI oil and $2.7/cf (2016)

Source: Wood Mackenzie 9

Forecast hedging gain, % of revenues Level of loan liquidity accessible for shale companies and

predicted demand for it*

Hedging ceases to be an important source of liquidity for the shale companies.

One of the conditions underlying the "survivability" of shale companies is that they get loans from banks per a specific field

(RBL – Reserve Based Lending). Such loans can be renewed and prolonged on the pledge of proved reserves

RBL is the only chance for small and medium-size companies to raise necessary funds to maintain the business. This

scheme will be effective in low oil price environment till at least 2017

potential strain

on liquidity in 2017

-20% 0% 20% 40% 60%

Apache

ConocoPhillips

Hess

Murphy

Anadarko

Marathon

Cabot

CRC

Noble

SM

Devon

Range

Energen

Сценарий "Высокие цены"

Сценарий "Базовый"

Сценарий "Низкие цены"

H2 2015

-20% 0% 20% 40%

EOG

Apache

ConocoPhillips

Cabot

Occidental

Cimarex

CRC

Anadarko

Whiting

Encana

Newfield

Pioneer

Antero

2016

2015:$73/bbl of WTI oil, 2016: $79/bbl

2015:$55/bbl of WTI oil, 2016: $60/bbl

2015:$37/bbl of WTI oil, 2016: $41/bbl

availability of credit liquidity

Low Price scenario

High Price scenario

Base case

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Changes in crude oil global production

by 2030 Full lifting cost of new oil produced by 2030*

Changes in global production and anticipated lifting cost

* ~ 75% of expected new oil production

Source: IHS 10

Analysis of ~75% new oil lifting costs till 2030 (around 33 mmbpd) demonstrates that the last 3 mmbpd of

production will account for expensive oil with a lifting cost of $85-98/bbl in 2015 prices. The lifting cost of ~28

mmbpd new production will not exceed $75/bbl in 2015 prices

0

10

20

30

40

50

60

70

80

90

100

0 5 10 15 20 25 30

Middle East Algeria China Brazil Kazakhstan Tar sands of Canada (drilling) Russia (incl. export duty) West Africa North America- challenged oil USA - Gulf of Mexico Norway and UK Iraq Venezuela

New oil production by 2030, mmbpd

Full

lifting c

ost of new

oil

в in 2

015 p

rices, $/b

bl

0 30 60 90

Crude production in 2030

New supply additions by 2030

Field declines to 2030

Crude production in 2014

Global crude production,

mmbpd

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European refining facilities and their utilization rate Share of shut down facilities as of end 2014 vs 2008

European refining business has long been facing hard times

Source: IHS

11

After the 2008 downturn 15 European refineries were

shut down to a total capacity of 2 mmbpd (12% of the

total refining capacity in Europe)

As a result, the Europe refining capacity utilization rate

averages 75-80%

The biggest losses have France and the Great Britain.

These countries shut down 30% of their facilities each

(0.6 and 0.57 mmbpd accordingly)

Italy shut down 22% of the facilities (0.48 mmbpd) but

still has the second largest refining capacity in Europe

50

60

70

80

90

14

15

16

17

18

1985 1990 1995 2000 2005 2010

Refining capacity, end of year

Utilization rate (RHS)

mmbpd %

0

5

10

15

20

25

30

35

UK France Italy Germany

%

2014

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Share of Asia and Europe in global primary energy consumption

Sources: IEA, ВР, Rosneft

12

Liquid HC consumption in the EU, China, India, and

Japan

Share of Asia and Europe in global primary energy

consumption

The share of Europe (including Russia) in global primary energy consumption declines from 32% in 1985 to 19% in 2015 and

16% in 2030. At that the share of Asia increases from 32% to 50% and 54% accordingly

In liquid HC consumption the three largest consumers in Asia, i.e. China, India, and Japan, outpaced the EU countries in

early 2000s

0

2

4

6

8

10

12

14

16

18

20

0

10

20

30

40

50

60

1970 1985 2000 2015 2030

btoe %

Мировое потребление первичных энергоресурсов (правая шкала)

Европа

Азия

forecast

0

200

400

600

800

1 000

1 200

1 400

1970 1985 2000 2015 2030

mmt

Китай

Индия

Япония

Евросоюз

forecast

China

India

Japan

EU

World consumption of

primary resources (RHS)

Europe

Asia

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Oil shortage in Eurasia is mainly covered by supplies from African

countries

*under 2013 results

Sources: IEA, ВР, Rosneft; EIA, trademap.org 13

Key crude oil suppliers to Eurasia in 2014 Oil production, consumption, and shortage in Eurasia

Despite such major oil producers in Eurasia as Russia, Saudi Arabia, UAE, Iran, and Iraq, there has been physical shortage

of oil in the mainland since late 2000s

Oil shortage will increase in Eurasia and may reach 400 mmt by 2030

A source to cover the shortage is supplies from North and West Africa and Latin America

0 20 40 60 80

Алжир

Венесуэла*

Ливия*

Ангола

Нигерия

mmt

Nigeria

Angola

Libya*

Venezuela*

Algeria 0

200

400

600

800

0

1

2

3

4

1990 2000 2010 2020 2030

mmt bln t

Shortage (RHS)

Output

Consumption

forecast

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Drop in oil industry investments

Source: Rystad Energy

14

Investments to new oil production projects Exploration and production costs in the world

According to Rystad Energy assessments, exploration and production costs in the world in 2015 will be reduced by $180 bln

vs last year

Capes will be reduced by nearly 20% and new project investments will drop by 40%

0

200

400

600

800

1000

1200

2010 2011 2012 2013 2014 2015 2016

$ bln

Разведка

Операционные расходы

Капитальные затраты

2014, yoy

2%

6%

2%

2015, yoy

–17%

–1%

–18%

0

20

40

60

80

100

120

0

50

100

150

200

250

300

350

400

450

500

2000 2005 2010 2015 2020

$/bbl (in 2014

prices)

$ bln (in 2014

prices)

Инвестиции в новые нефтедобычные проекты в мире

Цена нефти сорта Brent (правая шкала)

forecast

Exploration

OPEX

CAPEX

Investments in new oil production projects worldwide

Brent price (RHS)

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The increased oil production in Saudi Arabia in 2015

does not only result in more exports but additional

throughput at two major refineries at 0.8 mmbpd started

up in 2014-2015

Saudi Arabia oil production and export*

Saudi Arabia ramps up oil production

* the chart shows three-month moving averages of production and export volumes

Sources: Baker Hughes, JODI 15

Number of rigs, oil production, and share of Saudi

Arabia in global production

Drilling activity of Saudi Arabia started to grow back in

autumn 2013, more than 6 months before oil prices

slumped

In September 2015 Saudi Arabia crude oil production

grew up to 10.2 mmbpd exceeding the previous year

figures by 0.5 mmbpd

8

10

12

14

60

100

140

180

220

260

Доля Саудовской Аравии в мировой добыче нефти (правая шкала)

Добыча нефти

Количество буровых

January 2011 = 100% %

4

5

6

7

8

9

10

6

7

8

9

10

11

12

Добыча Экспорт (правая шкала)

SATORP refinery startup

(0.4 mmbpd)

YASREF refinery startup

(0.4 mmbpd)

mmbpd mmbpd

Saudi Arabia share in

world’s oil production (RHS)

Oil production

Number of rigs

Production Exports (RHS)

Page 16: Common Economic Space in Eurasia: Open Borders ... · understood that nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information

Rosneft investment program related to procured materials, works

and services

* 1456 bln in rubles, based on the average Euro rate over 9 months 2015 at 66.5 RUB/Euro

Source: Rosneft 16

Total scope of materials, works and services procured by Rosneft for the Subs in 2015 equals € 21.9 bln*

Rosneft conducts its procurement activities in compliance with Federal Law dated 18.07.2011 №223-FZ "On Procurement".

All information on procurement, including the procurement plans, the requirements for accreditation, procurement records,

protocols of the decisions are placed on the official website zakupki.gov.ru and on the corporate website

zakupki.rosneft.ru

Разведка и добыча

Переработка

Коммерция и логистика

Прочие

€ 21,9 млрд

Rosneft purchases in 2015 by areas of focus and product range

0 1 2 3 4

Текущий и капитальный ремонт скважин

Гидроразрыв пласта

Сопутств. услуги при бурении и зарезке боковых стволов

Транспортные услуги

Трубная продукция

Услуги при поставке нефти, газа, нефтепродуктов

Строит.-монтажные и проектно-изыскат. работы

Бурение и зарезка боковых стволов

€ bln

Other: €6.9 billion

Exploration

and production

Refining

Commerce and

logistics

Other

Drilling and sidetracking

Construction, installation

Oil supply services

Pipe products

Transportation services

Auxiliary services for drilling

Hydrofracs

Repair and overhaul of wells

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Annual anchor order of Rosneft

* 1056 bln in ruble equivalent, **306 bln in ruble equivalent, based on the average Euro rate over 9 months 2015 at 66.5 RUB/Euro

Source: Rosneft 17

Structure of the anchor order for materials Annual anchor order

According to the Business Plan, total

demand of Rosneft for materials in 2016-

2018 will achieve € 15,9 bln* In particular,

the following product ranges will be required:

Over 2.5 mmt of casing and tubing

Over 800,00 t of chemicals, additives

and other chemical products

Over 47,000 km of downhole cable

Over 17,000 downhole pumps for

production

Over 2800 transformer substations

Other: €0.74 billion 0 0,4 0,8 1,2

Продукция кабельная

Контрольно-измерит. приборы и средства автоматизации

Оборудование буровое, нефтепромысловое и запчасти

Арматура промышленная трубопроводная

Оборудование насосно-компрессорное

Оборудование химическое, нефтегазоперерабатывающее

Оборудование энергетическое и электротехническое

Продукты химические, масла, присадки

Трубы металлические

€ bn

Metal pipes

Chemicals, lubes,

additives

Electric power

equipment

Chemical, refining

equipment

Pumps and

compressors

Pipeline fittings

Drilling, oilfield

equipment and spare parts

Instrumentation and

automation means

Cables

Annual anchor order for materials - average scope of the

Company’s annual demand for the most sought-for materials.

In the last 3 years, the anchor order was € 4.6 bln p.a.**

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Imports of oil and gas equipment is much higher than the scope of

its production in Russia

* Catalysts and cable products that are also largely imported are not considered

Sources: Rosneft, Federal Customs Service, IEF, Federal Service for State Statistics 18

Largest state-owned companies and corporations in

terms of investment programs in 2014

Products shipped by the industrial enterprises, RUR

bln

Largest state-owned companies and corporations in

terms of investment programs in 2013-2014, RUR

bln

Imported equipment for oil and gas sector in 2014, $

mln

According to the Trade Ministry of the Russian Federation, the consumption of oil and gas engineering products* in 2014

amounted to 450 billion rubles, of which 60% was imported (i.e. 270 billion rubles.)

The key import items are: pump and compressor equipment, column equipment and tanks and fittings for pipelines and tanks

0 200 400 600 800 1000

Трубы обсадные, бурильные

Аппараты для дистилляции и ректификации

Буровые установки и их части

Реакторное оборудование

Компрессоры

Арматура для трубопроводов, котлов, резервуаров

Оборудование для фильтрования и очистки газов

Насосы центробежные

0

20

40

60

80

100

120

140

160

180

200

2010 2011 2012 2013 2014

Насосы для перекачки жидкостей

Трубопроводная арматура

Газогенераторы, аппараты для дистилляции, очистки жидкости и газов

Воздушные и газовые компрессоры

Металлические цистерны, резервуары и прочие емкости

Liquids pumps

Pipe valving

Gas generators, gas and

liquids distillation and

purification units

Air and gas compressors

Metal tanks, barrels and

other vessels

Centrifugal pumps (ESP)

Gas filtering and stripping

equipment

Valving for pipes, boilers,

tanks

Compressors

Reactor equipment

Drilling rigs and parts

Distillation and rectification

units

Casing, drill pipe

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Europe needs oil deliveries with good prices

from Russia:

Ready infrastructure in Russia for oil

delivery to Northern Europe, Central Europe

and the Mediterranean (pipelines, sea

terminals)

Absence of bottlenecks and "danger

spots" on the logistic way from Russia to

Europe

Configuration of European refineries

optimized for the refining of Russian oil

Building the market share with non-market

methods carries potential risks for the

European refining:

How long and how much can the Middle East

provide discounts, in the presence of the

growing Asia-Pacific market alternative?

Who's gonna pay for the investment to

change the oil refineries configuration?

Russia means safe and reliable energy supplies

Sources: Rosneft

Other

Azerbaijan

Kazakhstan Europe

Northern Sea

Middle East

Africa Russia

2014 oil supplies = 636 mmt*

19

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Long-term contracts with Russian partners will help ensure the

competitiveness of the European refining

Sources: Fuel and Energy Complex Central Dispatch Department, Rosneft

Shipment

destination Counterparty

Average

volume,

mmtpa

Total

supplies,

mmt

Contract

term, years

Novorossiysk,

Primorsk/Ust-

Luga

Glencore, Vitol,

Trafigura 13,2 66 5

Germany Total, RTSA 6,2 27 3-5

Poland

Orlen,

Mercuria,

Grupa LOTOS

S.A

10,5 38 3-6

Belorussia Mozyr refinery,

Naftan 8 23 3-6

Czech Orlen 3,2 9,6 3

Asset /

Rosneft share Country

Refinery in the

country

Share in

JV

refinery

Capacity,

mmt

ROG / 50% Germany

Gelsenkirchen

PCK Schwedt

MiRO

Bayernoil

100%

37,5%

24%

25%

12,8

11,5

14,9

10,3

Saras / 12% Italy Sarroch 100% 15,0

Long-term contracts for crude supply to Europe

Rosneft refining assets in Europe

20

Direct supplies via Druzhba

pipeline

Trans-Alpine pipeline

Tanker deliveries

RF exports to Europe, mmt

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Shareholder cooperation with Pirelli – an example of the business

bridge between Europe and Asia

Source: Rosneft

21

competition

Trade

+

Competition

Joint business

management

Rosneft and ChemChina are shareholders of Pirelli

BoD updated: now it includes the reps of Rosneft,

ChemChina, Pirelli, independent directors

Joint projects in Russia and China under review

New partners involved, e.g. Synthos Group (Poland)

Oil supplies

Tires retail

Research and development

Feedstock

Technologies Market

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22.10.2015

26/1 Sofiyskaya Embankment, Moscow 117997

Russia

Tel: +7 (499) 517-88-99

Fax: +7 (499) 517-72-35

E-mail:[email protected]

Contacts

Thank you for your attention!