Development of International Projects in Promising Oil and Gas Regions

Rosneft is one of the largest international investors in the Bolivarian Republic of Venezuela (BRV). The Company continues its cooperation in oil and gas projects with Petróleos de Venezuela S.A. (PDVSA), Venezuela’s state oil company. Rosneft and PDVSA are successfully implementing five joint projects:

Oil production from the Company’s projects in Venezuela was 8.63 mmt in 2018, with 3.36 mmt attributable to Rosneft, a 7% increase year-on-year. Start-up of pilot production at the Carabobo 2/4 project (Petrovictoria JVCo) contributed to production growth.

Achievements

PetroMonagas JVCo

The Company is a member of three production joint ventures (Petromonagas S.A., Petroperija S.A., Boqueron S.A.), dealing with the development of mature fields. Petromonagas S.A. is the largest joint venture.

• 35 horizontal wells were constructed and commissioned.
• 249 well workover and servicing operations were provided, more than 65% of which were executed by the crews of Perforosven S.A. (Rosneft’s stake 51%).
• Two additional rig vehicles were successfully commissioned in 2018.
• Pilot testing was successfully completed for the application of chemical additives to reduce diluent consumption, with up to 50% reduction targeted.
• The pilot works for testing a four-phase flowmeter were conducted at 10 wells and proved high reliability of on-line measurements that allowed for the production efficiency growth due to operational monitoring and regulation of well operation conditions.
• The design works for construction of horizontal wells with intelligent completion were finalized. The program was developed to implement a technology that provides production monitoring and control in difficult conditions with a potential possibility of well production increase and water cut reduction.

Petromiranda S.A.

Established in 2010 for the development of the Junin–6 project, located in the heavy oil belt of the Orinoco Basin.

Since 2013, oil has been produced under the fast and early production program.

• Phase 1 is currently in progress. It involves further exploration and infrastructure engineering.
• Pilot development of a priority area is being carried out to characterize the pay zone.

Petrovictoria S.A.

Petrovictoria S.A. was incorporated in 2014 to implement the Carabobo 2/4 project.

• A temporary extraction permit was obtained in 2018, and production drilling is being performed.
• Drilling is in progress as part of a further exploration program, and the geological and hydrodynamic models are currently updated. The final basic design of the field permanent infrastructure is being expected.
• In 2018, the onshore infrastructure for further exploration and early production was under construction (erection of sites, power transmission lines and substations, setup of well clusters).

Mejillones and Patao

Rosneft owns a 100% stake in the project, with the option to export the entire gas output, subject to royalty payments in kind.

• In December 2017, Rosneft was granted a production license by the Venezuelan Oil Ministry for natural gas exploration and development at the Patao and Mejillones fields as part of the Mariscal Sucre project offshore Venezuela.
• The activities on the conceptual design of field development were started.
• The production profile optimization and drilling costs were calculated, and the well construction schedule was developed. The updated field reserves estimation was presented to the Venezuelan Oil Ministry in compliance with the license.
• In 2019, it is planned to define the field setup variant.

Social Projects and Training of Specialists

• In December 2017, a social project to construct the President Hugo Chávez Legacy Institute in Sabaneta was completed with the Company’s involvement. The project was accepted and passed on to the City Council. The Institute is currently working under the supervision of Hugo Chávez Foundation.
• In September 2015 - June 2018, 15 PDVSA representatives were trained at the Gubkin Russian State University of Oil and Gas in Master’s program in the oil and gas field. In June 2018, the students successfully defended their final dissertations and completed training.
• Under the tripartite agreement signed in 2017 by Rosneft, PDVSA, and the Gubkin Russian State University of Oil and Gas, 27 new students began their training in Master’s oil and gas programs in September 2018.

Rosneft participates in exploration projects and a joint gas and condensate production project at Block 06.1 in the Socialist Republic of Vietnam (Rosneft Vietnam B.V. - project operator - 35%, ONGC 45%, and PVN 20%). The project is implemented in line with the Production Sharing Agreement. Three gas condensate fields - Lan Tai, Lan Do and PLD (Wild Orchid) are located on Block 06.1. The fields are 370 km offshore in the Nam Con Son Basin.

The Company signed a production sharing agreement for the development of Block 05.3/11 in 2013 – the project is currently at the exploration stage. The license area is located in the region with confirmed oil and gas potential and extensive infrastructure, and borders on the currently developed fields of Block 06.1.

Rosneft also participates in the offshore Nam Con Son Pipeline project, which involves the transportation and treatment of gas and gas condensate produced at offshore blocks in the Nam Con Son Basin to the onshore processing facility. After that, the products are delivered to the complex of gas turbine power stations to produce electricity (Rosneft Vietnam Pipelines B.V. 32.67%, Perenco 16.33%, PVN 51%).

Block 06.1

On 22 June 2018, Rosneft Vietnam B.V., one of the Group Subsidiaries operating on the territory of Vietnam, reached an important milestone in its operations – 16 years of accident-free marine activities. Not a single case of staff disability was registered during this period.

In June 2018, drilling of PLD-1P production well was successfully completed by sidetracking of PLD-1X well, confirming the existence of productive deposits at PLD field.

Also in June 2018, LD-3P well was drilled as part of the infill drilling operations at the Lan Do field. Both wells were successfully commissioned on 28–29 October 2018.

The Vietnam Government highly appreciates the Company’s performance in the country. Rosneft Vietnam B.V. on 29 November 2018, received the first class Labor Order that is one of the highest national awards in Vietnam.

Actual production in 2018 (100% of the project) totaled 3.28 bcm of gas and 0.06 mmt of gas condensate (Rosneft’s share: 0.78 bcm of gas and 0.01 mmt of gas condensate).

Block 05.3/11

In June 2018, drilling of the second exploration well TTN-1X on Block 05.3/11 was completed. The well confirmed the existence of productive deposits. On 3 December 2018, the Company notified Petrovietnam Oil and Gas Group on the decision to proceed to the second exploration phase.

The Nam Con Son Pipeline

The pipeline has a capacity of 7.7 bcm per year, carrying approximately 6.4 bcm of gas in 2018, including the gas produced from Block 06.1 and other operators in the Nam Con Son Basin.

Rosneft has a 30% stake in the project.

The Zohr field was discovered by Eni S.p.A. in 2015. It covers an area of 231 sq. km, with sea depth ranging from 1.2 thousand m to 1.7 thousand m and a gas deposit of 3.4 km to 4 km. Zohr is one of the biggest offshore fields in the Mediterranean Sea. Gas production at the Zohr field started in December 2017.

In 2018, seven new production wells, four gas treatment unit trains and the second pipeline for gas transportation from the field to the gas treatment facilities were commissioned. This allowed meeting the demand of the Egyptian Government for gas supply ahead of time by increasing the daily gas production to 57 mmcm per day in September 2018. The infrastructure facilities and gas treatment unit trains are commissioned ahead of schedule.

Rosneft’s stake in hydrocarbons production in 2018 was 2.2 bcm of gas and 0.02 mmt of condensate.

By the end of 2019 the gas production is due to reach the design capacity of 76 mmcm per day.

The entire volume of gas produced at the Zohr field is supplied into Egypt’s national gas grid.

Through its subsidiary, Rosneft Brasil E&P Ltd., Rosneft is implementing a hydrocarbon exploration project at license areas in the Solimões River Basin in the State of Amazonas, Brazil, holding a 100% stake and operatorship in these licenses.

In 2018, two exploration wells were drilled in Buriti and Tamboril. According to the results, the gas content of the basin was confirmed and the reserves were updated. In 2018, 114 sq. km of 3D seismic surveys and 257 linear km of 2D seismic surveys were conducted, the drilling location for the next exploration well was determined, and its drilling is scheduled for 2019.

Bashneft International B.V. is the project operator and owns a 100% stake in the hydrocarbon exploration and production agreement for Block 12.

In February 2018, the Company completed testing of the first exploration well at Block 12 in southwestern Iraq. The tests showed free flows of water-free oil from several formations. The obtained test results give reason to anticipate the discovery of commercial oil reserves. The Iraqi side recognized the discovery of a new field and named it Salman. In 2019, further field exploration and studying of the rest of the license territory will continue.

In 2017 and 2018, Rosneft and the Government of Iraq’s autonomous Kurdistan Region signed a series of agreements on cooperation in the exploration and production of hydrocarbons, including a production sharing agreement regarding five blocks in Iraqi Kurdistan. The Company is the project operator, holding an 80% stake in the production sharing agreement.

In 2018, exploration activities were started in line with the commitments. Seismic survey and drilling of exploration wells are scheduled for 2019.

As part of efforts to expand strategic cooperation, Rosneft and ExxonMobil formed a consortium to bid for exploration licenses in deep-water areas offshore the Republic of Mozambique.

Following a tender in October 2015, the Government of Mozambique signed the Hydrocarbon Exploration and Production Concession Contracts for Blocks А5-В, Z5-C, and Z5-D in October 2018. The Company’s stake in the projects is 20%.

Bashneft International B.V. is the project operator at Block EP-4, holding a 90% stake in the production sharing agreement.

The findings identified a number of promising structures. Drilling of the first exploration well is scheduled for 2019.