Believing the current oil price to be an acceptable scenario, Gazprom Neft is set to increase production

Reuters

Interview with First Deputy CEO Vadim Yakovlev

Reuters Vadim Yakovlev

The current low oil price on the global markets notwithstanding, Gazprom oil subsidiary Gazprom Neft expects a sharp increase in production growth in 2015, according to Gazprom Neft First Deputy CEO Vadim Yakovlev, (responsible for exploration and production (E&P) in an interview with Reuters.

“We’re aiming to produce at least 78 million tonnes of oil equivalent (mtoe) this year, and we plan to grow production volumes by at least five percent every year to 2020,” said Yakovlev.

In 2014, when the global oil price fell by more than half, Gazprom Neft produced 66.3 million tonnes of hydrocarbons, showing a production increase of 6.4 percent.

“I’m not sure the current oil price can really be described as ‘low’. It’s perfectly viable, and an expected scenario. And, on that basis, to expect the oil price to show a significant rise — that may as well not happen.”

Publication of the company’s first half-year results last week (produced in line with international accounting standards (IFRS)) shows production of hydrocarbons up by 20.5 percent in the first half of 2015, thanks to new projects, greater utilisation of associated petroleum gas (APG), and greater oil recovery from mature fields.

“External conditions are no surprise — we had always anticipated this sort of price scenario, and we’re ready for it, we’ve already taken this into account. A number of factors, taken together, mean we’re in pretty good shape.”

Gazprom Neft, which last year fell victim to Western sanctions and limited access to global financial markets, is on course to produce 100 mtoe by 2020, of which more than 10 million tonnes is expected to be produced from hard-to-recover reserves. According to Yakovlev, by 2020 the company expects to be involved in the development of hard-to-recover reserves bearing approximately 300 million tonnes of tight oil.

GROWTH POINTS

Yakovlev advised that Prirazlomnoye — Gazprom Neft’s first project on the Arctic Shelf, viewed as one of the main drivers behind the company’s production growth and which last year saw production volumes of 300,000 tonnes — will, this year, produce 800,000 tonnes of crude.

Regarding production strategy at Prirazlomnoye Yakovlev commented: “We expect to double these volumes next year, and to increase by a further million (tonnes) in 2017.”

At the beginning of this year Yakovlev stated that Prirazlomnoye was profitable at $50–60 per barrel, and that, even if the price did fall below this level, the company would not cease production on the project.

Gazprom Neft announced on Wednesday that a second production well had been launched at Prirazlomnoye.

Yakovlev stated that another ambitious Gazprom Neft project in Yamal — Novoportovskoye, where the company expects to be producing six to nine million tonnes of oil by 2020 — will produce 2.8 million tonnes of crude in 2016.

Gazprom Neft announced in June that the company had, between February and June 2015, delivered 110,000 tonnes of oil for European markets from Novoportovskoye, by sea.

The shipment of major consignments of oil from this field via the Northern Sea Route has required the development of a loading and transportation system involving specially upgraded ice-class tankers, towed by Atomflot nuclear-powered icebreakers. Gazprom Neft transports crude via a pipeline (of more than 100 kilometres in length, with a capacity of 600,000 tonnes per year) to Cape Kamenny (on the coast of the Gulf of Ob, an inlet of the Kara Sea), where the oil is reloaded onto tankers. The company plans, in the future, to extend the pipeline and pump up to five million tonnes of oil per year which, coupled with construction of an oil-loading terminal, will make possible the shipment of oil by sea all year round.

Yakovlev stated that the new terminal for the Novoportovskoye field, built by Netherlands company Blue Water, is now en route from Abu Dhabi and is expected to arrive at Cape Kamenny in early September.

“We should finish installation works in the narrow window by mid-October and, next year, begin year-round shipments”, commented Yakovlev.

Yakovlev added that Gazprom Neft still plans to achieve production at another giant field — Messoyakhskoye — at which the company expects to be producing 10 million tonnes of oil [per year] by 2022–23.