Rosneft Profits Surge in 2019 Despite Challenges
Full-year profit at Russian oil and gas giant Rosneft were up 29% in 2019 at rubles 708bn, ($11bn), despite the Druzhba dirty oil crisis last spring and Opec+ restrictions on its output.
Revenues rose 5.3% rubles 8.68 trillion, while core earnings (Ebitda) were up 1.2% at rubles 2.11 trillion, Rosneft said in a report published on February 19. Fourth-quarter results were also strong, with profit rising 45% yr/yr to rubles 109bn and revenues by 2.7% to rubles 2.17 trillion. Core earnings were unchanged at rubles 488bn.
Rosneft attributed its improved performance to higher oil sales eastwards and lower costs. Company CEO Igor Sechin pointed to the company's resilience last year in the face of "a series of negative factors and market uncertainties."
The Druzhba pipeline system, Russia's main means of delivering oil to Europe, was shut down in April after millions of barrels of oil were found to have been contaminated with organic chlorides – chemicals used to boost recovery at oilfields that can damage refining equipment if not removed.
"The restriction of oil intake to the Transneft main pipeline system did not allow the company to fully realise the potential of its production capacity," Sechin said. "The Opec+ agreement had an additional impact in terms of production volumes and the timing of new projects."
Rosneft's oil and condensate production was static at 230.3mn mt in 2019, but was down 2.5% yr/yr in the fourth quarter at 58mn mt.
Its gas production was down 0.5% yr/yr in 2019 at 66.95bn m3. Fourth-quarter output was also 0.5% lower yr/yr at 17.22bn m3, although it was 5.6% higher than in preceding three months.
The company's use of associated petroleum gas (APG) notably dropped from 84.4% in 2018 to 77.8% in 2019. Russia requires that producers use at least 95% of their APG, though many fall short of this goal, meaning they have to pay modest fines.
Taking the shine off Rosneft's financial strength last year, the US on February 18 announced it was imposing sanctions on a Rosneft subsidiary that has been trading Venezuelan oil. Washington says Rosneft Trading is propping up the regime of president Nicolas Maduro by buying Venezuelan oil and reselling it, primarily in Asia. The US Treasury Department has given companies 90 days to cut business ties with the company, while also freezing its US-held assets.