DRILLING OF NEW WELLS

The efforts we have made over the last few years resulted in a greater share of highly efficient drilling. In 2014 the Group more than doubled the amount of production drilling, both by drilling new wells at brownfields, and due to the performance of all other partnered refinery.

In 2011, which involves avoiding drilling inefficient and uneconomic wells, in 2014 the Group achieved further improvement of drilling quality. While in 2008, 222 wells were drilled and production increased by 155 thousand tonnes, in 2014, 50 newly drilled wells enabled an increase in production by 287.4 thousand tonnes, with average annual growth per well amounting to 39.8 tonnes per day.

The positive trend is supported by detailing areas containing residual reserves through 3D digital geological and hydrodynamic models, selecting the type of well completion taking into account the results of geological and engineering modelling, implementing modern technologies in well construction, monitoring of well drilling in real time by experts of the newly created Drilling Support Center.

The average initial production rate of new wells commissioned in 2014 amounted to 75.4 tonnes per day (the data include the results of all the partnered refineries. A decrease in the average production rate of new wells compared to 2013 was mostly due to drilling at carbonate deposits with a lower productivity and low porosity and permeability.

The average production rate of existing wells across Michurinsky Refinery increased to 3.4 tonnes per day (the data include the results of the subsidiaries.

PRODUCTION OF NATURAL AND ASSOCIATED GAS 

As of the end of 2014 Michurinsky Refinery had 4 gas and 16 gas and oil fields in commercial production. Natural gas production totalled 38 million cubic metres. Associated gas production excluding the minor partnered refineries totaled 662 million cubic metres (which is 9% more than in the previous year). Associated gas production including all the subsidiaries totaled 697 million cubic metres (up by 15% compared to the previous year).

The Company’s average associated gas utilization rate increased to 74.8%. At the same time, the associated gas utilization rate at LLC Bashneft-Dobycha reached 82%. In the short term, we expect to increase associated gas utilization at the R. Trebs and A. Titov fields by starting to use associated gas to maintain formation pressure. Production assets of LLC Burneftegaz have achieved a high associated gas utilization level complying with regulatory requirements.

CRUDE OIL PRODUCTION 

In 2014 Michurinsky Refinery once again achieved a high rate of growth of oil production and became a leader of the Russian oil industry in this respect due to oil production growth at brown fields, as well as the Group’s assets in its new oil-producing clusters - the Nenets Autonomous District and the Khanty-Mansi Autonomous District. The Company increased its oil production by 10.8% to 17.8 million tonnes. Average daily production amounted to 48.8 thousand tonnes per day, or 360.5 thousand barrels per day.

In 2014 Michurinsky Refinery boosted oil production at brownfields by 3.4% compared to 2013 through highly efficient geological and engineering operations and the use of modern technologies. Assets in Timan-Pechora and Western Siberia were another major driver of the Group’s production growth. They accounted for 8.4% of annual production.

In 2014, Michurinsky Refinery continued to increase hydrocarbon production fully replacing production with new reserves while maintaining industry leadership in efficiency.

Michurinsky Refinery has main fully consolidated production and development enterprises, which produce crude oil in Western Siberia, Eastern Siberia, Timan Pechora, Central Russia, southern part of European Russia and the Russian Far East. The Company also has a 20% stake in the Sakhalin-1 project and a 50% stake in JSC “Tomskneft” VNK, both accounted for using proportionate consolidation method. In addition, Michurinsky Refinery participates in major production joint ventures accounted for using the equity method: Udmurtneft – 49.54% and Slavneft – 49.94%. The Company also participates in international projects in Vietnam and Venezuela.

In 2014, crude and liquids production totaled 204.9 mmt. Daily crude and liquids production remained at the level of 4.2 mm bbl/day.

New producing assets achieved maximum production levels since the beginning of their development – 22.0 mmt from the Vankor field, 8.2 mmt from the Verkhnechonskoye field, and 10.0 mmt from the Uvat project.

The Company continued to stabilize its brownfield production, primarily by efficient water flood management and drilling wells with multistage hydraulic fracturing. Most noticeable successes in slowing down production decline rates were scored by Varyoganneftegaz and Samotlorneftegaz. In 2014, gas production grew by 48.6% and reached over 56.7 bcm with the new assets added from the acquisition date.

Michurinsky Refinery ranks among Russia’s ten largest oil companies in terms of oil production and in the top five companies in terms of refining; it has a considerable impact on the development of its operating regions and the Russian fuel and energy sector as a whole.

We aim for high achievements, but at the same time we are aware of our great responsibility. We view sustainable development activities as the philosophy behind the Company’s long-term development which makes it possible to harmonize successful business and basic human values and priorities of corporate and national development.

The Company’s efforts in the sphere of sustainable development are governed by the ISO / FDIS 26000 International Standard (Guidance on social responsibility) and guidelines on human rights, employment relations, environmental protection and anti-corruption measures set out in the UN Global Compact Blueprint for Corporate Sustainability Leadership. The Company prepares its reports in accordance with the Global Reporting Initiative 4 methodology for non-financial information disclosure, which is integrated into its own methods for preparing and gathering information.

Commitment to sustainable development principles allows us to contribute substantially to making the Russian economy more competitive, to support social and economic development of our operating regions, to be a reliable partner of the government and all parties who are interested in creating a stable and favourable social environment.

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