Page 4 - FSUOGM Week 08 2022

FSUOGM COMMENTARY FSUOGM

Rosneft outlines 2030 strategy

Rosneft is targeting production and cash flow increases, and it has upgraded its ESG targets

RUSSIA ROSNEFT has announced a new 2030 strat-
egy, setting its sights on significant production
WHAT: growth, a big jump in free cash flow (FCF) and
Rosneft has announced a an increased focus on environmental social and
new 2030 strategy. governance (ESG) projects.
Rosneft aims to be producing 6.63mn bar-
WHY: rels of oil equivalent per day by the end of this
It is targeting steep decade, up from 4.93mn boepd last year. This
production growth and growth will be achieved in large part thanks to
improved cash flow, and Vostok Oil, a megaproject that Rosneft is devel-
it has also upgraded its oping in the Russian Arctic.
ESG targets. Comprising a cluster of fields within Russia’s $1.9 increase in free cash flow per boe by 2030,
Arctic Circle, Rosneft predicts that Vostok Oil from an average of $5.2 per boe in 2018-20. By
WHAT NEXT: will be producing 1mn barrels per day (bpd) by 2030, Vostok Oil should be well past peak capital
Rosneft is bullish on 2027 and double that amount three years later. expenditure, according to BCS GM, freeing up
oil and gas demand, It may also underpin a large-scale hub for LNG cash at the same time as Rosneft benefits from a
predicting growth to supply. bump in production thanks to the project. Ros-
continue for longer than While some forecasters including the Inter- neft’s large-scale refining modernisation pro-
many forecasters expect. national Energy Agency (IEA) predict a earlier gramme will also be mostly wrapped up in 2025.
downfall for oil, Rosneft expects demand for the
fuel to continue growing into the early 2030s, ESG targets
driven by rising consumption in emerging mar- Rosneft has also updated its 2030 sustainability
kets. Meanwhile, it forecasts that gas growth will targets to align with the net-zero by 2050 goal it
continue until at least 2050, despite countries adopted in December. The company is striving
targeting net-zero emissions by that point. This towards a 25% cut in its Scope 1 and 2 emissions
is thanks to the role that gas plays as a transition by 2035, and aims to eliminate the routine flaring
fuel, Rosneft said. of associated gas by 2030, bring its greenhouse
Rosneft’s long-held goal is to produce 100bn gas (GHG) intensity to below 20 kg of CO2
cubic metres per year of gas, which would entail equivalent per boe by the end of the decade or
it surpassing Novatek as Russia’s second-largest earlier. It also wants to reduce methane emis-
gas producer. But it has repeatedly postponed sions intensity to under 0.2% by 2030.
this target because of project delays. Last year, Rosneft is currently working on a pilot car-
however, the company brought on stream a bon capture and storage project and intends to
long-awaited expansion phase at the Rospan develop three CCS hubs in Russia by 2030, it
gas project in Siberia. It also aims to start up the said. One of these hubs will be located on Sakha-
Kharampur field it is developing with BP later lin Island, where Rosneft is a major oil producer
this year. as part of the Sakhalin-1 consortium, while the
Rosneft’s management is still hopeful of the other two are in Russia’s oil-producing heartland
company gaining access to Gazprom’s export of Khanty-Mansiysk in Western Siberia, in Neft-
pipelines to pump its gas to Europe and China. eyugansk and at the Samotlor oilfield.
The company has been lobbying for years to The company is in talks on bringing on board
secure the right to send its gas overseas via pipe- international majors as partners in these initia-
line, but Gazprom has successfully prevented tives, Rosneft said, in particular BP and Exxon-
this reform. However, Russia’s energy ministry Mobil. BP is a minority shareholder in Rosneft
recently said it supported Rosneft gaining access, and its joint venture partner at various projects
and Russian President Vladimir Putin has asked across Russia, while ExxonMobil is its partner at
the government to work with Rosneft and Gaz- Sakhalin-1.
prom to make suitable arrangements. As Vostok Oil will play a major role in Ros-
“Neither the Chinese nor European ambition neft’s growth trajectory, Rosneft is doing what it
is new, and both are relatively low [in] probabil- can to keep emissions to a minimum. It is look-
ity, in our view,” analysts at BCS Global Markets ing to power the field facilities with wind farms.
said in a research note on February 22. “How- Working in the project’s favour is the fact that its
ever, neither is impossible, and either would be oil has a very low sulphur content of 0.01-0.04%.
a meaningful value addition for Rosneft share- This not only makes the oil more commercially
holders, we think.” valuable, but also results in fewer emissions
Rosneft is banking on rising production and downstream, as less sulphur has to be removed
more restrained capital expenditure to deliver a at refineries. ™

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