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Sibneft To Almost Triple Capital Expenditure

Moscow, 8 November 2000; Sibneft will almost triple upstream capital expenditure next year to $595 million, under an aggressive new business plan approved this week. The company aims to hike oil production by another 11% to over 375,000 barrels per day (19 million tonnes), building on its success in boosting output this year. Production in 2000 is expected to total 337,000 barrels per day (17.1 million tonnes), or some 5% higher than the previous year.

The hike in upstream capex from an estimated $219 million this year will allow Sibneft to accelerate the development of new fields and intensify its use of enhanced recovery methods. The company expects new wells brought on stream during the course of next year to generate additional production of over 45,000 barrels per day (2.3 million tonnes), while the application of enhanced recovery methods is expected to contribute some 24,000 barrels per day (1.2 million tonnes) to the output tally.

Sibneft will focus on accelerating work on the pilot project at the giant Sugmut field, as well as speeding up the development of the Novogodnoye, Yarainerskoye and Romanovskoye fields which entered production this year. Sibneft almost doubled drilling this year to an expected total of 730,000 metres, and plans a further hike to over one million metres in 2001.

Sibneft also aims to complete the restructuring of its upstream operations, reducing the headcount of its production subsidiary by another 10,000 from around 27,000 currently. Sibneft will spin off several drilling and well workover units into independent companies, as well as divisions responsible for communications and road construction. This will mark the final stage in Sibneft’s wide-ranging restructuring programme, which has seen a series of service units hived off into independent units, the sale of non-core businesses and the transfer of social assets to local authorities.

“This ambitious business plan offers further evidence of our continued commitment to boost investment in order to extract maximum value from our upstream assets,” Sibneft president Eugene Shvidler noted. “Taken together with fresh efforts aimed at enhancing efficiency and controlling costs, this blueprint lays the foundation for a strong performance over the coming year.”