Oil of Russia

Overview of Major Russian Oil Companies

The natural resources and production, scientific–technical, and human resource potential of the oil sector are Russia’s national property. The efficient use of such resources and potential creates the necessary conditions for sustainable national economic development and ensures growth of the people’s well-being and standard of living. It is an important source of tax and hard-currency revenue for the federal budget. According to data from the Russian Federal Customs Service, the Russian Federation derived $93,486 billion of oil export income in 2009.

The main center of the Russian oil industry is Western Siberia, which houses 53% of the initial total resources. Other major oil and gas regions are the Volga-Urals region (14.2% of initial total resources), the Far East (over 3%), the North Caucasus (1.6%), and in the near future, Eastern Siberia (10.5%) and the Russian continental shelf (12.4%).

The Russian Federation’s production of oil, including gas condensate, was 537.5 million tons in 2008 (99.3% of the 2007 figure), just as the world financial crisis was beginning to expand across the globe. Despite this, however, according to the Federal State Statistical Service, in 2009 the country produced 544.2 million tons of oil, or 1.2% more than in 2008.

As of the end of 2009, the oil sector of the Russian fuel and energy industry included 10 major vertically integrated companies, as well as 160 small and mid-sized oil production companies that together account for about 22 million tons of total Russian oil production. Four Russian regions—the Republic of Tatarstan, the Republic of Komi, the Khanty-Mansi Autonomous District, and the Orenburg Region—are home to 60% of small and mid-sized oil and gas companies. Three-fourths (74.2%) of the oil production volume in this sector comes from three oil regions: the Khanty-Mansi Autonomous District, the Republic of Tatarstan, and the Republic of Komi. Such companies are now developing about a billion tons of recoverable reserves at 250 fields.

These 10 vertically integrated companies account for the bulk (95.9%) of Russian oil production. Among these, the leaders in oil production volume are Rosneft (23.4% of the nation’s total production), LUKOIL (18.5%), TNK-BP Holding Company (14.1%), and Surgutneftegaz (12.7%).

Table 1. Oil Production by Russian Vertically Integrated Companies, 2007–2009, in millions of tons

Source: RF Central Dispatching Administration of the Fuel and Energy Industry [TsDU TEKJ].

In 2008, Russian refineries processed 260 million tons of crude hydrocarbons (103.2% of the 2007 level). Overall, oil refined as a share of its production increased to 48.5% from 46.6% in 2007. The crude refining yield in 2008 averaged 72% across Russian refineries, versus 71.6% in 2007. The country produced 39.4 million tons of gasoline (101.8% of 2007), 76 million tons of diesel fuel (104.1% of 2007), and 70.4 million tons of heating oil (101.9% of 2007).

Table 2. Refining Input by Russian Vertically Integrated Companies, 2007–2008, in millions of tons

Source: RF Central Dispatching Administration of the Fuel and Energy Industry [TsDU TEKJ].

It is clear from the above data that the vertically integrated company Rosneft Open Joint-Stock Company now leads the Russian oil industry. It was created in 1993 as a 100% state-owned company. The government planned to privatize the company several times in the 1990s, but a lack of investor interest—a result of the company’s difficult straits at the time— repeatedly scuttled such plans. Rosneft’s financial position did not begin to improve until after 1998, and rising oil prices on the world market played an important role in the improvement of its economic indicators. Within several years, it regained control over its subsidiaries and began acquiring new assets. A new phase in the company’s development began with the bankruptcy of Yukos. In late 2004, Rosneft purchased Yuganskneftegaz, and in 2007 it acquired most of Yukos’s remaining assets. This, in turn, enabled Rosneft to assume first place in Russian oil production and refining and to become a leading player in the petroleum products sales market.

Rosneft is currently on Russia’s list of strategic enterprises and organizations. Its authorized capital, after consolidation of 12 subsidiaries, is 105,981,778 rubles and 17 kopecks (10,598,177,817 shares of common stock at a par value of 0.01 ruble per share). The state-owned Rosneftegaz holds 75.16% of Rosneft’s stock, while the remainder belongs to a wide range of strategic, institutional, and individual investors. The company’s net profit in 2008, calculated by US GAAP standards, declined 13.5% compared to 2007, to $11.12 billion.

Rosneft represents Russia’s interests in a variety of international projects, in particular in the project to develop the Kurmangazy structure in Kazakhstan, in the Sakhalin projects, and in the construction of the Burgas-Alexandropol oil pipeline.

The geography of Rosneft’s operations in the exploration and production division encompasses all of Russia’s major oil and gas provinces: Western Siberia, South and Central Russia, Timan-Pechora, Eastern Siberia, and the Far East. The company is also implementing a series of oil projects outside Russia, in Kazakhstan and Algeria.

The size and quality of its upstream reserves guarantee Rosneft a stable leadership position. The company has 22.3 billion BOE of proven reserves, enough to support it for 26 years. Most of these are conventional reserves, which will allow it to increase oil production volumes efficiently in the near future. Rosneft also has 26.6 billion BOE of probable and possible reserves, a future source to replenish proven reserves. The company does most of its geologic exploration in Russia’s most promising oil and gas regions, such as Eastern Siberia and the Far East, as well as on the continental shelves of Russia’s southern seas. This affords it access to approximately 53 billion BOE of prospective resources.

Rosneft’s oil production segment includes: RN-Yuganskneftegaz, RN-Purneftegaz, RN-Severnaya Neft, RN-Samaraneftegaz, Tomskneft, Udmurtneft, RN-Sakhalinmorneftegaz, RN-Krasnodarneftegaz, Grozneftegaz, Sakhalin Projects, RN-Stavropolneftegaz, Northern Lights Company, Vankorneft, Rosneft-Dalneft Oil Company, Dagneftegaz, Verkhnechonskneftegaz, and Eastern Siberia Oil and Gas Company.

Rosneft is also one of the leading independent gas producers in the Russian Federation. The company produces over 423 BCF of natural and associated gas per year and has substantial potential for further growth in production due to its unique portfolio of reserves. Rosneft is currently implementing a program to increase its associated petroleum gas utilization to 95%.

Rosneft has seven refineries scattered across Russia, from the Black Sea coast to the Far East. The refineries are advantageously located, considerably increasing the efficiency of petroleum products delivery. Rosneft’s refining segment includes: the Angara Petrochemical Company, the Achinsk Refinery, the RN-Komsomolsk Refinery, the RN-Novokuybyshevsk Refinery, the Kuybyshev Refinery, the Syzran Refinery, the RN-Tuapse Refinery, and the Rosneft-Moscow Nefteprodukt Refinery. The company is currently implementing projects to expand and modernize its refineries in order to continue to improve the balance between oil production and refining volumes, and to increase the output of quality products with high added value, meeting the most up-to-date environmental standards.

An important competitive advantage for Rosneft is its proprietary export terminals at Tuapse, De Kastri, Nakhodka, and Arkhangelsk, enabling it to substantially increase the efficiency of crude oil and petroleum products exports. The company is currently implementing comprehensive terminal expansion and modernization programs to bring capacities in line with planned export volumes.

One of Rosneft’s strategic objectives is the further development of its proprietary petroleum products retail sales network, which currently includes some 1,700 gas stations in 38 regions of the Russian Federation.

LUKOIL Open Joint-Stock Company is one of the largest international vertically integrated oil and gas companies. The company’s principal activities are oil and gas exploration and production, petroleum products and petrochemical production, and end product sale. Most of the company’s exploration and production operations take place within the Russian Federation, and its main resource base is Western Siberia. LUKOIL owns modern refineries, gas processing plants, and petrochemical plants located in Eastern and Western Europe, Russia, and other countries of the former Soviet Union. Most of the company’s products are sold on the international market. LUKOIL sells petroleum products in Eastern and Western Europe, Russia, other countries of the former Soviet Union, and the United States. In terms of proven hydrocarbon reserves, LUKOIL is the second largest private oil and gas company in the world, with a 1.1% share of total world oil reserves. The company also has a 2.3% share of total world oil production. The company plays a key role in the Russian energy sector, accounting for 18% of total Russian oil production and 19% of total Russian refining. According to data audited by Miller and Lents (US), the company’s proven hydrocarbon reserves as of January 1, 2010 amounted to 17.5 billion barrels of oil equivalent, including 13.7 billion barrels of oil and 22.9 TCF of gas. In 2009, expansion of proven reserves through geologic exploration, development drilling, and acquisitions amounted to 782 million BOE, or 95% of its annual production.

LUKOIL’s exploration and production division has a high-quality diversified asset portfolio. The company’s main oil production regions are Western Siberia, the Timan-Pechora oil and gas province, the Volga region, and the Caspian region. LUKOIL’s Russian oil production division includes: LUKOIL-Western Siberia, LUKOIL-Komi, LUKOIL-Naryanmarneftegaz, LUKOIL-Perm, LUKOIL-Kaliningradmorneft, LUKOIL-Nizhnevolzhskneft, LUKOIL-Volgogradneft, and RITEK.

Through a subsidiary, LUKOIL Overseas Holding Ltd., the company also implements oil and gas exploration and production projects outside Russia—in Kazakhstan, Egypt, Azerbaijan, Uzbekistan, Saudi Arabia, Colombia, Venezuela, Côte d’Ivoire, Ghana, and Iraq.

In 2005, when Nakhodka Field came online, LUKOIL began a program under which gas production would grow at accelerated rates, both in Russia and abroad, increasing the share of produced gas to one-third of total hydrocarbon production. The upstream reserves for realizing this program are the fields of the Big Kheta Depression, the Caspian Sea, and the Central Astrakhan field in Russia, as well as the international gas projects at Kandym-Hauzak-Shady in Uzbekistan (where production began in 2007) and Shah-Deniz in Azerbaijan. The leading enterprise in the company’s gas processing segment is Permneftegazpererabotka (Perm).

LUKOIL owns modern refining capacity in Russia and abroad. The company’s Russian refining segment includes: LUKOIL-Permnefteorgsintez, LUKOIL-Volgogradneftepererabotka (Volgograd), LUKOIL-Nizhegorodnefteorgsintez (Kstovo, the Nizhny Novgorod Region), and LUKOIL-Ukhtaneftepererabotka. The total capacity of its Russian refineries is 49.3 million tons of crude oil per year.

The company’s foreign refineries are located in Ukraine, Bulgaria, and Romania, and it also holds a 49% interest in the ISAB refining complex (Sicily, Italy). The total capacity of its foreign refineries is 24 million tons of crude oil per year.

LUKOIL attends carefully to the development of its petrochemical segment, which includes: Stavrolen (Budënnovsk, the Stavropol Territory), LUKOIL-Saratovorgsintez, LUKOR (Ukraine), and Karpatneftekhim (Ukraine).

In 2008, as part of the implementation of its Strategic Development Program for 2008–2017, LUKOIL created a new business division, Power Generation. In addition to the TGK-8 Southern Generating Company acquired in 2008 and proprietary generating stations at a field in Russia, the division includes enterprises that generate electrical and thermal energy in Bulgaria, Romania, and Ukraine. The total electric power generated by division companies was 16.2 billion kWh, and thermal energy generated exceeded 18.1 million Gcal (TGK-8 Southern Generating Company accounted for 90% and 85% of these totals, respectively). Over the long term, the Power Generation division will become an important factor in the company’s capitalization growth.

As of the beginning of 2009, the company’s sales network operated in 25 countries, including Russia, the former Soviet Union, and Europe (Azerbaijan, Belarus, Georgia, Moldova, Ukraine, Bulgaria, Hungary, Finland, Estonia, Latvia, Lithuania, Poland, Serbia, Montenegro, Romania, Macedonia, Cyprus, Turkey, Belgium, Luxembourg, the Czech Republic, Slovakia, and Croatia), as well as in the United States, and comprised 204 oil tank farm facilities with a total tank capacity of 108 MMCF and 6,748 gas stations (including franchise stations).

The company is confidently building its strategy and production policy on the principles of effective nature and resource conservation, and is actively introducing state-of-the-art technologies to substantially reduce the anthropogenic environmental impacts.

TNK-BP Holding Company Open Joint-Stock Company is one of Russia’s leading vertically integrated oil companies. It was formed in 2003 by the merger of the oil and gas assets of the transnational BP in Russia and the oil and gas assets of a Russian consortium of Alpha and Access/Renova (AAR). BP and AAR own TNK-BP Holding Company on a parity basis.

TNK-BP Holding Company incorporates a series of production, refining, and sales enterprises in Russia and Ukraine and employs some 63,000 people.

The company’s oil production assets are located mainly in Western Siberia (the Khanty-Mansi and Yamal-Nenets Autonomous Districts and the Tyumen Region), Eastern Siberia (the Irkutsk Region) and the Volga-Urals region (the Orenburg Region). An independent audit of reserves performed by De Golyer & MacNaughton has confirmed that, as of December 31, 2008, TNK-BP’s total proven reserves were 10.252 billion BOE, using PRMS (former SPE) criteria, and the reserve replacement ratio was 146%. Using the SEC method and ignoring license expiration dates, TNK-BP’s total proven reserves were 8.112 billion BOE, with a reserve replacement ratio of 82%. TNK-BP Holding Company holds about 200 production licenses. Eighty percent of proven reserves are in the company’s 20 main fields and about two-thirds of production occurs at 10 main fields.

TNK-BP’s oil production division includes: Samotlorneftegaz, TNK-Nizhnevartovsk, Orenburgneft, TNK-Nyagan, NNP, Varyëganneftegaz, Tyumenneftegaz, Yugraneft, Novosibirskneftegaz, Rospan International, Orenburggeologiya, and Vanyëganneft.

At present, TNK-BP has refining capacity of 675,000 barrels/day. TNK-BP’s refining division includes: the Ryazan Refinery, the Saratov Refinery, and the Nizhnevartovsk and Krasnoleninsk Refineries, both located in Western Siberia. The company also owns the Lisichansk Refinery in Ukraine, which is advantageously located from the standpoint of serving the domestic market as well as making export deliveries through Black Sea terminals.

TNK-BP’s retail network includes some 1,400 gas stations in Russia and Ukraine, operating under the TNK and BP brands. The company is among the most important petroleum products suppliers on the Moscow retail market, and is well-positioned on the Ukrainian market.

Surgutneftegaz Open Joint-Stock Company is Russia’s fourth-largest vertically integrated company in oil production. Its upstream reserves include mineral licenses in the Western Siberian, Eastern Siberian, and Timan-Pechora oil and gas provinces within the territory of 10 Russian Federation regions. An estimate made per international standards puts the company’s recoverable oil and gas reserves at about 2.8 billion TOE.

Surgutneftegaz has 60 organizational units, including six major oil production divisions: Surgutneft, Bystrinskneft, Nizhnesortymskneft, Komsomolskneft, Lyantorneft, and Fëdorovskneft. The company is well-positioned to build wells and develop new fields, having accounted for 20% of the industry’s exploratory drilling in 2008. The growth in its C₁ oil reserves in 2009 exceeded 115 million tons, or 171% of its annual oil production volume.

Surgutneftegaz is also a leading independent gas producer. Its assets include one-third of the gas produced by Russian oil companies. The company was an industry pioneer in the creation of a full cycle of gas production, processing, and sale, as well as the gas-fired generation of electricity to supply its own fields and industrial processes.

The main enterprise in the company’s refining division is the Kirishinefteorgsintez Refinery (the Leningrad Region), which has transitioned to the manufacture of high-octane gasoline that meets the Euro-4 standard, and continues to manufacture diesel fuel to current European standards.

Surgutneftegaz’s retail network includes six petroleum products supply subsidiaries: Kaliningradnefteprodukt, Kirishiavtoservis, Lennefteprodukt, Novogorodnefteprodukt, Pskovnefteprodukt, and Tvernefteprodukt.

In all, Surgutneftegaz employs about 100,000 people.

With every year, Gazprom Neft Open Joint-Stock Company confidently increases its pace as it strives to improve its standing among Russian vertically integrated companies. It was founded in 1995 and was originally called “Sibneft.” In 2005, Gazprom became the main stockholder in Gazprom Neft, when it acquired 75.68% of the company’s stock. Another 20% belongs to EniNeftegaz, which is controlled by Eni (Italy). The remainder of the stock is in public circulation. Gazprom Neft controls 50% of Slavneft and 74.43% of Sibir Energy on an equal footing with TNK-BP Holding Company.

Gazprom Neft operates in Russia’s largest oil and gas regions: the Khanty-Mansi, Yamal-Nenets, and Nenets Autonomous Districts, the Tomsk and Omsk regions, and the Krasnoyarsk Territory, as well as areas outside the former Soviet Union, in Serbia and Angola. The company and its subsidiaries currently hold more than 60 field exploration and development licenses, and the proven oil reserves of the company’s fields exceed 4.5 billion barrels. Its upstream reserves increase annually due to the acquisition of new assets in Russia and abroad. Today, its proven and probable oil reserves per international Society of Petroleum Engineers (SPE) standards amount to 7.2 billion barrels. Most of Gazprom Neft’s oil reserves are at the early stages of development. This is a great plus, affording the company excellent prospects for further growth and development.

The Gazprom Neft Group includes more than 40 oil production, refining, and sales enterprises that are vertically integrated in 18 regions of the Russian Federation and former Soviet Union. Gazprom Neft has a total payroll of more than 48,000 people.

Gazprom Neft’s oil production division includes: Gazprom Neft-Noyabrskneftegaz, Gazprom Neft-Khantos, Gazprom Neft-East, Gazprom Neft-Yamal, Gazprom Neft-Sakhalin, Gazprom Neft-Angara, Meretoyakhaneftegaz, NP Ortyagunskoye, Sibneft-Yugra, Archinskoye, Sibneft-Chukotka, Severnaya tayga-Neftegaz, Zapolyarneft, Pechora-Neftegaz, and Shinginskoye.

Gazprom Neft refines over 60% of its crude oil, demonstrating the industry’s best production to refining ratio. Gazprom Neft refines its production mainly at the processing facilities of the Gazprom Neft-Omsk Refinery. The company’s other refining assets are located in the Moscow and Yaroslavl regions. Gazprom Neft also holds a stock interest in the Moscow Refinery (38.8%).

Gazprom Neft’s products are exported to 48 countries and sold throughout the Russian Federation through an elaborate network of proprietary sales enterprises. The company currently operates 812 gas stations in Russia and more than 100 in Kyrgyzstan under the Sibneft brand.

The company’s plans, focused on 2020, are aimed at increasing annual oil production to 88 million tons. Gazprom Neft also plans to develop new oil and gas fields, improve its network of proprietary gas stations, and participate in social projects and programs of a regional, national, and international nature.

Tatneft Open Joint-Stock Company’s history goes back to before 1950, when a USSR Council of Ministers resolution organized the Tatneft association, consisting of the Bavlyneft and Bubulmaneft oil production trusts, the Tatburneft drilling trust, the Tatneftepromstroy construction and erection trust, and the Tatnefteproyekt design office. Late that same year, oil workers reported production of the millionth ton of Tatarstan oil. Tatneft has been a joint-stock company since 1994. At present, Tatneft is a vertically integrated oil company that produces and refines crude hydrocarbons primarily in the Republic of Tatarstan. The company’s main stockholders include Svyazinvestneftekhim (30.44%) and the Bank of New York International (22.99%); 31% of the company’s stock is held by the Republic of Tatarstan, which provides appropriate support on the part of regional authorities.

Tatneft holds 109 crude hydrocarbon prospecting and development licenses. Of these, 73 are within the Republic of Tatarstan. Tatneft has four licenses outside the Republic of Tatarstan (one each in the Samara, Ulyanovsk, and Orenburg regions and one in the Nenets Autonomous District). Miller and Lents, Ltd. (US) estimates that, as of January 1, 2008, Tatneft’s oil and gas reserves were 6,139,700,000 barrels of proven oil and gas condensate reserves and 2,141,300,000 barrels of probable oil and gas condensate reserves (per the international classification of the SPE and the World Petroleum Congress (WPC)). Tatneft’s upstream reserves are among the most complex in the industry, as most fields in Tatarstan are at the stage of declining production. The company’s largest field, Romashkino, is 80% depleted. The crude underlying the Republic of Tatarstan is highly dense and sour, and the company’s cost of producing oil at its fields is very high.

Tatneft includes nine major oil production divisions: Almetyevneft Oil and Gas Production Administration, Aznakayevskneft OGPA, Bavlyneft OGPA, Dzhalilneft OGPA, Yelkhovneft OGPA, Leninogorskneft OGPA, Nurlatneft OGPA, Prikamneft OGPA, and Yamashneft OGPA. The company is a founding stockholder of several oil production joint ventures, including: Tatoylgaz, Tatekh, KalmTatneft, Okhtin-Oyl, Yambul-Oyl, Tatneft-Samara, Tatneft-Severny, Tatneft-Abdulino, and Tatneft-Tarakal. The main enterprise in Tatneft’s refining and processing division is the Tatneftegazpererabotka Administration. The company has a total payroll of more than 100,000 employees. Tatneft’s retail network counts over 473 gas stations in 20 regions of Russia and the CIS.

At present, Tatneft is actively building a new-generation major refining complex at Nizhnekamsk, the Republic of Tatarstan, which will refine 15 million tons of oil per year and produce 18 types of refined products, from motor fuels to feedstocks for the production of a wide range of petrochemicals.

Slavneft Open Joint-Stock Company was founded in 1994, based on a Russian Federation Government resolution dated April 8, 1994 and a Belarusian Council of Ministers directive dated June 15, 1994. Slavneft’s founders were the Russian State Property Management Committee [Goskomimushchestvo] with an initial equity interest of 86.3% and the Republic of Belarus Ministry of State Property with 7.2%. In November 2002, the Republic of Belarus government sold its interest in Slavneft, and on December 18, 2002, the Russian federal government auctioned off its 74.95% stake in Slavneft. After privatization, Slavneft became a wholly private oil company. As of May 15, 2009, company stock was owned as follows: Invest-Oyl (74.9570%), Stranberg Investments Ltd. (11.5772%), and Select Holdings Ltd. (7.7037%).

At present, the company’s vertically integrated structure enables it to support a full production cycle, from field exploration and production of hydrocarbon reserves to their refining. Slavneft holds subsurface geologic study and oil and gas exploration and production licenses to 39 license tracts within the territory of Western Siberia and the Krasnoyarsk Territory. The company’s main production unit is Slavneft-Megionneftegaz. Operating at Megion, Agan, and many other fields, the company produces over 1.8 million tons of crude hydrocarbons annually. The produced crude (except the export portion) is sent for refining to the Slavneft-Yaroslavnefteorgsintez, the Slavneft-Yaroslavl Refinery, and the Mozyr Refinery.

The company’s principal objectives in the next few years are to implement its new oil production strategy, continue to upgrade its refining capacity and increase its refining volume, restructure its business, create an optimal interactive framework for holding company enterprises, reduce costs, and increase production efficiency.

Russneft Open Joint-Stock Company is also one of the ten largest Russian oil companies. Geographically, Russneft’s operations cover the Khanty-Mansi Autonomous District, the Yamal-Nenets Autonomous District, the Tomsk, Ulyanovsk, Penza, Volgograd, Bryansk, Saratov, Kirov, and Orenburg regions, the Krasnodar Territory, the Republic of Udmurtia, and the Republic of Belarus. The company currently has 178 oil and gas fields under development.

In 2008, Russneft increased its crude reserves by more than 22 million tons (a 5% increase over 2007). In Saratov Region, Russneft discovered Luzyanskoye field, and found new accumulations within the Tagr-Yëgan field (the Khanty-Mansi Autonomous District), the Roslavl field (the Khanty-Mansi Autonomous District), the Belokamennoye field (the Saratov Region), and the Gurarinskoye field (the Tomsk Region). According to Miller and Lents (US), Russneft’s proven reserves, certified according to international accounting standards, amounted to 1,713.3 million BOE, including 1,562.5 million barrels (235 million tons) of oil and 905 BCF (25 billion cubic meters) of gas. The total recoverable reserves at fields belonging to Russneft Oil Company are 648 million tons of oil and 3 TCF of gas per the Russian ABC₁ + C₂ classification.

Russneft has 21 oil production enterprises. The company’s Western Siberian Group includes: Varyëganneft, MPK Aganneftegazgeologiya, White Nights, Goloyl Siberian-Texas, Aki-Otyr Oil Company, Chernogorskoye JV, Mokhtikneft, Archneftegeologiya, and West Malobalyk. Its Urals Group includes Belkamneft, Ural Oil, Udmurt National Oil Company, and Udmurt Oil Company. Its Volga Group includes Saratovneftegaz, Ulyanovskneft, Nafta-Ulyanovsk JV, Nefterazvedka, and Penzaneft. Its Central Siberian Group includes Sobolinoye Group and Tomsk Oil.

Russneft’s refining division includes: Orsknefteorgsintez, the Krasnodar Refinery-Krasnodarekoneft, Neftemaslozavod, and Slavneftekhim. Russneft’s sales network comprises 96 gas stations located in 14 regions of Russia and the CIS. The company has a modern oil-loading terminal in the Bryansk Region with a capacity of up to 7.7 million tons per year. Russneft’s total payroll is over 20,000 employees.

The company is trying both to sustain its positive performance of recent years and to make its operation substantially more efficient by introducing advanced technologies and modern oil and gas equipment and by investing in the development of proprietary production facilities.

Bashneft Open Joint-Stock Company rounds out the list of the 10 largest Russian oil companies. Bashneft’s history began in 1946, when the Bashkir Petrochemical Integrated Works [Bashneftekhimkombinat] was formed to develop the fields of the “Second Baku.” Since 1995, it has been a joint-stock company. In April 2009, Sistema Joint-Stock Financial Corporation [AFK Sistema] completed a deal to acquire controlling stock interests in six Bashkir oil enterprises for $2.5 billion. The company purchased controlling interests in Bashneft, Ufaneftekhim, Novoyl, Ufaorgsintez, the Ufa Refinery, and Bashkirnefteprodukt from Agidel-Invest, Ural-Invest, Inzer-Invest, and Yuryuzan-Invest. Together with its existing holdings, the company then had a 76.52% equity interest in Bashneft, a 65.78% interest in Ufaneftekhim, an 87.23% interest in Novoyl, a 73.02% interest in Ufaorgsintez, a 78.49% interest in the Ufa Refinery, and a 73.33% interest in Bashkirnefteprodukt.

In October 2009, Bashneft formed an oil and gas production operating company, Bashneft-Dobycha. All of Bashneft-Dobycha’s stock is held by Bashneft.

At present, Bashneft-Dobycha operates mainly within the territory of the Republic of Bashkortostan, the Republic of Tatarstan, the Orenburg Region, and the Khanty-Mansi Autonomous District. The company’s total proven reserves are estimated at 375 million tons. It produces crude oil at more than 160 fields, most of which are nearing exhaustion. The quality of the company’s reserves is low; most fields are characterized by high levels of depletion (about 85%), water cuts (up to 90%), and sulfur content (2% or more).

Bashneft-Dobycha includes nine major oil production divisions: Arlanneft, Aksakovneft, Ishimbayneft, Krasnokholmskneft, Oktyabrskneft, Chekmagushneft, Tuymazaneft, Ufaneft, and Yuzharlanneft.

Bashneft delivers most of its crude hydrocarbons (over 60% of oil production) to refineries in Bashkiria, including the Ufa Refinery, Salavatnefteorgsintez, Ufaneftekhim, and Ufaorgsintez.

The leading enterprise in Bashneft’s gas processing division is the Tuymaza Gas Processing Plant. In addition, the company also has two oil and gas machine-building enterprises: Neftekamsk Oilfield Equipment Plant (Neftekamsk) and Oktyabrsky Oilfield Equipment Plant (Oktyabrsky).

Bashneft’s sales network comprises over 300 gas stations and 60 oil tank farms, which are located in 11 regions of Russia and the CIS. Bashneft has a total payroll of over 67,000 employees.

Over the next several years, the company’s will strive to balance development of its production potential and improve the efficiency of its operations using high-performance methods to introduce state-of-the-art technologies to reduce the level of oil production drop-off at depleted fields.