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Rosneft Board agrees upon Samotlor development program

18 December 2017

Rosneft Board of Directors affirmed key parameters for Samotlor field development program.

As for today, total oil output at Samotlor exceeds 2.7 btoe. Over 19,000 wells were drilled at the field. However, the water-cut of its production amounts up to 96 percent, which has a great impact on economic efficiency of investments into oil production.

The main part of Samotlor reserves are hidden in formations with low permeability and low saturation. The rest are edge zones of depleted reservoirs. Given current fiscal burden such features of the field could have led to low return of investments into new drilling, as well as to output decline.

During 2016-2017 Rosneft and the Russian government have been elaborating in details additional options for the development of unique Samotlor field. As a result a joint decision was made for an investment incentive in the form of an annual mineral extraction tax reduction of RUB 35 bln during 10 years.

The Board has confirmed the Company’s obligations to drill over 2,400 wells during 2018-2027 that would provide additional output in the amount of more than 50 mtoe. The extended Samotlor development program would result in an increase of tax liabilities to budgets of all administrative levels to RUB 1.7 trln. The investment incentives should give new momentum to the development of one of the largest fields in the country and bring significant multiplicative effect for Russian economy.

With this Russian Federation would receive considerable income not only due to the output increase at Samotlor in the nearest future, but also as the controlling shareholder of Rosneft - from capitalization growth and additional dividend payouts.

Commenting the decision of the Board Rosneft Chief Executive Officer Igor Sechin said: “The confirmation of the extended Samotlor development program finalizes the set of measures being implemented under instructions of President of Russia to increase the investment appeal of Rosneft in the integrated privatization deal. The program affirms the Company’s earlier taken liabilities to develop one of the largest remaining-reserves oil fields in the country within a decade, which creates a basis to form sustainable multiplicative effect both for the region and for the Russian economy.”

Notes for Editors:

Samotlor is unique for its initial recoverable oil reserves exceeding 3.5 btoe. It was discovered in 1965 and put into production in 1969. High efficiency of its wells and large reserves gave soviet oil-industry workers the incentive for intensive development – the oil output here increased over a hundredfold within 10 years. Samotlor oil field is located near Nizhnevartovsk with the population of 270,000 people and contributed to the rapid development of the city. Following the initial stage of development, Samotlor annual output level reached 159 mtoe very soon. Though the high rate of recovery resulted in depletion of the formations and in growing water-cut. This caused the annual production decrease at the field since 1981. In 1991 it produced less than 50 mtoe with the water-cut of about 90 percent.

Today the field is operated by backbone enterprise Samotlorneftegaz that employs over 500 contracting entities.

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December 18, 2017