Rosneft cuts upstream operating costs, Q3 results hit by pandemic, OPEC+ cuts

Moscow — Rosneft cut its third-quarter upstream operating costs by 3.4% on the quarter to $2.8/b of oil equivalent, as liquids output continued to slide due to constraints under the OPEC+ agreement and implications from the coronavirus pandemic, the company reported Nov. 13 in its financial results.

Rosneft's Q3 liquids production was down 16.2% on the year and 2.1% on the quarter to 48.51 million mt, or 3.91 million b/d, as the company was allowed to produce more in April, when the new OPEC+ deal was not yet in force.

Rosneft CEO Igor Sechin lauded the company's ability "to work successfully in difficult conditions of crude oil output restrictions and relatively low hydrocarbon prices."

"Significant achievements of the third quarter include a reduction of upstream operating costs to $2.8/boe and a decrease in interest costs by 24% in USD terms year on year," he said in a release.

Rosneft's overall liquids output in January-September amounted to 4.19 million b/d, down 10.3% on the year, it said.

No well suspension

The company continued to restrain production without well suspension to retain the ability of prompt output increase, if needed.

As a result, Rosneft managed to quickly increase oil production by over 6% in August, when OPEC+ cuts were eased to 7.7 million b/d.

Rosneft's Q3 gas production constituted 14.96 Bcm, down 8.2% on the year and 1.3% on the quarter, also affected by decline in demand caused by the coronavirus pandemic.

The company's total Q3 hydrocarbon output amounted to 4.9 million boe/d, down 14.7% on the year and 3% on the quarter.

Rosneft's Q3 refining throughput increased by 6.1% on the quarter to 25.5 million mt in accordance with Russia's pledge to direct output increase to the domestic market.

However, refining volumes were still down 15.3% on the year due to lower demand for petroleum products and low refining margin due to the pandemic.

In addition, Rosneft started drafting a "carbon management" plan through 2035, which will help the company to transition to the low-carbon economy, manage climate risks and meet future energy demand.

"The plan implementation will be instrumental in strengthening Rosneft's leading position in the global energy market in the context of the energy transition process and the maximum monetization of the company's proven reserves," it said.