Rosneft Ready to Step Up Development of Kuban Oil & Gas Sector

Rosneft President Sergei Bogdanchikov completed his working visit to the Krasnodar Territory on December 1, 2005. He visited Rosneft-Krasnodarneftegaz’s production areas and held an operations meeting to sum up the results of the company’s activities in the region over the first 11 months of this year, and to discuss short-term development plans.

As announced by the Krasnodar Territorial Administration’s press service, Governor Alexander Tkachev hosted a meeting with Mr. Bogdanchikov later that day, to discuss their bilateral collaboration. They also highlighted the placing in operation this week of another of Krasnodarneftegaz’s wells at the Chumakovskaya section of the Temryuksko-Akhtarsky petroleum zone.

Extraction results, it was emphasized at the meeting, were evidence of significant reserves of ‘black gold’ in the region (it was announced that well yield totaled 450 tons of oil a day). According to the Territorial Administration, three new wells are to be drilled in the Chumakovskaya region at the start of 2006. If drilling results are just as successful, the intensive development of the field will continue, the Administration noted.

‘The Territory has large quantities of high-grade oil, but more importantly, it has the opportunities and desire to develop new fields and explore further, so that oil production volumes continue to increase,’ said Alexander Tkachev at his meeting with the head of Rosneft. Mr. Bogdanchikov stated, ‘We don’t yet have such a well-developed, integrated approach towards investments in all areas of activity in any region’. He emphasized that Kuban’s uniqueness was its existing infrastructure, the short transportation distances for oil and oil products — ‘making each ton of crude produced here economically more valuable even than in Western Siberia’. Therefore, Mr. Bogdanchikov said, the Territory’s oil sector was a strategic object for Rosneft, into which the company was prepared to invest large amounts of funds in future, the Territorial Administration reported.

At the end of the meeting, the Governor presented the Rosneft President with a medal ‘For Outstanding Contributions to Kuban’s Development’. They agreed to meet again in April 2006, ‘when the new well starts operations in the Temryuk region’, the Governor’s press service noted.

The Krasnodar Territorial Administration emphasized that Rosneft is one of Kuban’s biggest taxpayers. Whilst over the first 10 months of 2004, the company paid 1.3 billion rubles in tax in the Territory, this figure exceeded 2.1 billion over the same period this year. Five-year plans have been developed for all of Rosneft’s activities in the Territory. According to the Administration, large investments will be made in exploring Kuban oil and gas fields. In addition to increasing oil production volumes, gas extraction in the region will be almost doubled as compared to the current level of 1.9 billion cubic meters. Development of the Azov and Black Sea shelves, where exploration works are currently underway, will continue, the Administration reported.

The Territorial Administration is also pleased to approve Rosneft’s plans to build new fuel stations in the region and upgrade existing stations.

According to geologists, the Territorial Administration note, onshore reserves of Kuban oil total some 400 million tons, although this figure could double, taking into account the Azov and Black Sea shelves. It’s no secret that over recent years, the level of hydrocarbons production in the Krasnodar Territory, one of the oldest oil-and-gas regions, has gone down sharply: the reserves of many of the fields developed here over many decades are almost depleted, and, as a result, a third of wells have been temporarily abandoned and are no longer of interest to major subsurface users. However, the Territorial Administration points out, these areas may still be successfully used by medium-sized businesses. The local authorities are therefore promising in the near future to conduct an inventory of oil-bearing areas of lesser interest and identify which may be redistributed to small oil companies. If these plans are implemented, then in the Administration’s view, the Territory may achieve new oil production levels.