Tatneft joined the oil production race

The 30-million milestone will be passed 5 years earlier

'One of the ten largest Russian oil companies Tatneft is planning to increase the oil production up to 30 million tonnes by 2020,' made the fateful statement the company's CEO Nail Maganov. According to him, this task is one of the key ones in achieving the strategic goal — the doubling of the market capitalization up to $21.5 billion by 2025. 'For this purpose it has been adopted a number of strategic initiatives: it includes the growth of cost-effective oil production at the current resource base, including deposits of ultra-viscous oil,' he explained. The necessity of capitalization growth of Tatneft was first stated by the Tatarstan President and the chairperson of the Board of Directors of the company Rustam Minnikhanov at the annual meeting of shareholders of the company at the end of June of this year. At that time, the leadership of Tatneft for the first time in the last few years decided to raise annual production up to 30 million tonnes. Because until that moment the Tatarstan company adhered to the policy of stabilizing production at the level of 24-26 million tonnes. In June the leadership of Tatneft intended to stretch 'the transition period' for 8-9 years, but on 13 July those plans were cancelled. The term was reduced to a minimum — for three years Tatneft will have to increase its annual production by 3.6 million tonnes. As Nail Maganov admitted to the journalists, the ambitious task is set by the Tatarstan President. 'I want to say that the figure is not taken out of thin air and backed by real programmes, technologies and resources. One of the sources of growth should be ultra-viscous oil. By 2018, Tatneft must reach the annual level of 1.9 million tonnes of ultraviscous oil. But not only due to it,' retorted Maganov the further inquiries of the journalists. According to him, such dynamics will be possible with the use of innovation, improving the technological equipment of the company, the development of automation.

The current situation in prices at around 50-55 dollars per barrel — it is the figure, with which, most likely, we will have to work long enough, said Molodtsov

Oil will remain in the range of $50-55 per barrel in the next three years

Meanwhile, the situation with the world prices for oil does not promise rosy prospects. As the Deputy Minister of Energy Kirill Molodtsov reported, in the next three-five years, they are likely to be around 50-55 dollars a barrel. 'We think that all difficulties that were in last year are still not completed,' he shared his vision on the situation on the market. 'It primarily concerns the current state of supply on the world market. You know that OPEC has increased and is now at an unprecedented level of production, in general they are producing about 32.8 million barrels a day. Russia is also actively increasing production and is about at the same levels of 10.9 million barrels per day. But our supply is compensated by a clear tendency of falling production volumes in the U.S., and we expect that by the end of the year the production will be about 8.2 million barrels per day, which is far below the level of the beginning of the year,' said the Deputy Minister.

'The current situation in prices at around 50-55 dollars per barrel — it is the figure, with which, most likely, we will have to work for a long time,' said Molodtsov. Therefore, according to him, the work on the intensification of production, the cost savings, the parameters of a possible increase profitability – these are the challenges that must be taken in the next three or five years.

The recommendations the Deputy Minister of Energy of the Russian Federation sounded in unison with the speech of the Director General of Tatneft. Recognizing that today 'the macroeconomic situation continues to be characterized by volatile world oil prices and fluctuations in the national currency', he said that Tatneft aims to reduce the level of operating expences by at least 10% and the provision of growth of investment efficiency. In the light of intensification of oil production, it turns out that Tatneft in order of priority will invest in drilling and production. Being at the start of this process, Tatneft has increased the production in the first six months by 4.9% — up to 13.9 million tonnes. 290 thousand tonnes out of them are extra viscous oil.

There are no prizes for guessing that the increasing of the pace of production is needed due to the expansion of refining capacities in the Republic. As Rustam Minnikhanov said to the journalists, now TANECO processes 15-16 million tonnes, in a year the Republic will increase the capacity up to 22-23 million tonnes (after the opening of the complex of heavy residue of oil of TAIF-NK and the second stage of TANECO, which will be completed in 2017). 'The oil-refining is the growth point of economy of RT, but the base is still the oil production,' he said.

Tatneft has increased the production in the first six months by 4.9% — up to 13.9 million tonnes. 290 thousand tonnes out of them are extra viscous oil

The oil companies in expectation of tax incentives

However, maybe, the oil production increase is associated with positive expectations of the oil companies about changing of the tax regime. As Kirill Molodtsov told the journalists, until August the Russian Energy Ministry is planning to coordinate with the Ministry of Finances the position on the draft law on the tax on financial result, which will replace the tax on extraction of mineral resources at the mined-out fields where high production costs make the development low-profitable (these include deposits of Tatarstan). The Energy Ministry had previously proposed to replace in 2016 the tax on extraction of mineral resources with the tax on financial result (NFR) at the mined-out fields where high production costs make the development low-profitable. The initiators of the project are the deputies of Khanty-Mansi Autonomous Okrug. The Ministry of Energy offered to test the new tax during three-five years at several pilot fields, however, the Ministry of Finances opposed – they developed their own draft law on the tax on added revenue. Molodtsov reminded that the issue has being discussed for three years, the representatives of many oil companies are involved in the process, by August they may have found a compromise solution.

The contribution of the Republican oilers in the industry and the economy is huge, told the Ministry of Industry and Trade Albert Karimov. In the first six months of 2016 in Tatarstan there were produced 17.3 million tonnes of oil, out of them Tatneft PJSC – 13.7 million tonnes of oil, small oil production companies – more than 3.55 million tonnes. That is, every fifth tonne of oil is extracted by small companies. The results of the industry development in the first six months of this year pleased with the growth at 103.2%. According to the preliminary data, the products at about 890 billion rubles have been offloaded, more than 60% is accounted for petrochemical complex (or 540 billion rubles).