Page 128 - RusRPTMar21

· Production at the Zima project is to grow in the next few years, with the plateau reached after 2023.
· The company’s FY21 capex guidance exceeds our forecast of $5.2bn (RUB383bn). We assume flattish production in the upstream, but a reduction in refining capex. We also forecast a close to zero FCF for 2021F, so higher capex might bring FCF into negative territory, on our numbers.
• Rosneft
Rosneft held its 4Q20 IFRS call on February 12. The call focused largely on ESG, Vostok oil, and LNG projects.
ESG highlighted: The company is currently working on its 2020-25 carbon management plan, but the BoD has already reviewed a preliminary 2035 plan. A 2050 plan will follow that will include a target to be carbon-neutral by 2035. When approved, all plans will contain very specific, verifiable targets. As a part of that, management indicated that Vostok Oil will have a small carbon footprint, emitting perhaps 1/4 of the CO2 per barrel extracted of a traditional greenfield.
Vostok Oil a focus point on the call: Vladimir Chernov, Director of Vostok Oil, stated Rosneft is currently in the project design phase for major infrastructure, including the airport, port, etc. The company has signed more than 20 contracts for initial work including earth-moving jobs, unloading bays, storage bases, etc. Exploration work is ongoing, and will include 5 wells this year to gain more geological information of the fields.
Increasing focus on gas, LNG, Vostok Gas: Management said gas production will increase to 25% of total boe output. This may include the Vostok Gas project, a parallel project to Vostok Oil. Vostok Gas has the potential to make Rosneft one of the largest LNG producers in the world. With exploration activities ongoing, reserves already are in excess of 5tcm, and could produce potentially produce >50mtpa. Vostok Gas would naturally have significant synergies with the Vostok Oil and would also offer significant economies of scale.
Rosneft published its 4Q20 IFRS results on February 12. Despite EBITDA coming 6% below our forecast due to higher opex and SGA, the company reported a strong bottom line at USD 4.3bn (vs. our forecast of USD 2.2bn).
That was supported by the USD 6.6bn gain from the acquisition of assets of Taimyrneftegas (part of Vostok Oil) from NNK. Rosneft also
128 RUSSIA Country Report March 2021 www.intellinews.com