Annual Report 2020

Market trends

Upstream

Russian oil industry consists of several vertically integrated companies. Five of them account for 3/4 of the country’s oil production and refining, and a number of smaller companies, typically comprising one or several oilfields. About half of produced oil is processed at the country’s refineries, while the other half is exported.

The oil extraction declined from 561.2 to 512.8 million tons of product in 2020 (–8.6% YoY), as a result of lower demand for energy caused by COVID-19 and limitations set by the new OPEC+ agreement. Average Urals oil price decreased from US$ 64/barrel in 2019 to US$ 42/barrel in 2020.

During the year, the country’s operating well stock decreased by 1.0% to 178,712 units (including 6,957 new wells). The total drilling volume declined by 1.7% to 28 million meters.

Several new oilfields were put into operation, such as Erginskiy license area and Severo-Danylovskoye oilfield (Rosneft), Komandirshorskaya group of fields (Lukoil), oil rims of Chayandinskoye field (Gazprom Neft). A number of large oilfields are expected to be launched in the next few years, including Lodochnoye and Severo-Komsomolskoye fields (Rosneft), and Grayfer field (Lukoil).

Top 5 oil producers in Russian in 2020

Top 5 oil producers in Russian in 2020

The major gas company in Russia, Gazprom, accounted for 65% of gas production in Russia in 2020. The second largest producer, NOVATEK, produced 11% of all natural gas volume.

Natural gas extraction in Russia reduced from 737.7 to 692.9 bcm (–6% YoY), the average export prices decreased to US$ 127/mcm, with the most significant decline to US$ 98/mcm observed in 2Q 2020.

Gazprom has plans to launch a number of new large gas fields, including Kharasaveyskoye and Kovyktinskoye (currently in pilot production), while Rosneft plans to start works on Kharampur field (gas formations).

Crude oil production in Russia (incl. gas condensate) and Urals oil price dynamics

Crude oil production in Russia (incl. gas condensate) and Urals oil price dynamics <span></span>

Natural and petroleum associated gas production in Russia and average export price of gas

Natural and petroleum associated gas production in Russia and average export price of gas<span></span>

Midstream

As Russian oil fields and gas fields are widespread across the country, Russia has one of the largest oil and gas pipeline networks in the world, which has significantly expanded during the last ten years.

Transneft is the major operator of the Russian oil trunk pipeline system (50.8 thousand km), and oil-product trunk pipeline system (16.4 thousand km) with over than 500 of oil pump stations.

The total length of the Russian gas transportation system is over 170 thousand km, comprising over 250 gas compressor stations. The main operator of gas pipelines is Gazprom. In 2020, the company started construction of the Khovykta-Chayanda pipeline (a part of the Power of Siberia pipeline). The main prospective projects for the next years is the construction of the Power of Siberia-2 (from the Yamal Peninsula to China), Bovanenkovo-Ukhta-3 and Ukhta–Torzhok pipelines.

Downstream

The total number of large oil refineries in Russia is 35, and together with smaller refineries they processed 270 million tons of crude oil in 2020 (total capacity is over 315 million tons), a decrease by 5.4% compared to 2019. Rosneft, the leading Russian oil company, is the largest refinery operator with twelve major refineries. LUKOIL, with four major refineries, is the second-largest refineries operator, Gazprom Neft operates 2 refineries.

The production of all main petroleum products declined in 2020: gasoline — by 4.5% to 38.4 million tons, diesel oil — by 0.4% to 78.0 million tons, and fuel oil — by 11.1% to 40.8 million tons.

The depth of processing increased by 1% to the level of 84% in 2020.

Primary oil processing volume and processing depth
in Russia

Primary oil processing volume and processing depth<br />in Russia <span></span>

Top 5 petroleum refiners in Russia in 2020
(including gas condensate)

Top 5 petroleum refiners in Russia in 2020<br />(including gas condensate)<span></span>

A number of further projects on the modernisation of oil refineries, as well as new construction are planned on the horizon until 2025, including Slavneft advanced oil refining complex, Moscow refinery advanced oil refining complex (Gazprom Neft), further development of Taneco Refining and petrochemical plants complex (Tatneft).

Russian gas-processing industry is represented by 33 plants, which processed 77.8 bcm of natural gas and petroleum associated gas in 2020 (–3.9% YoY), including 7 largest plants which processed 3/4 of all gas volume. A new Amur GPP is currently under construction, it should be the largest GPP in the world with 42 bcm of gas per year design processing capacity.

LNG production is one of the fast-growing segments in Russian energy market. The volume of LNG produced in Russia reached 30.5 million tons compared to 29.5 million tons processed in the previous year (+3.5%). The largest operating LNG plants are Sakhalin-2 (consortium led by Gazprom) and Yamal LNG (NOVATEK). Examples of prospective LNG plants include Arctic LNG-2 (NOVATEK, currently under construction) and the complex for processing ethane-containing gas and LNG production in Leningrad region (Gazprom and RusGazDobycha). A large number of small-scale LNG plants are expected to be built in the next years as well.

The main trend in the oil and gas markets is that the major companies tend to limit their investments in upstream, while the importance of downstream (including LNG and gas processing projects) grows.