Surging oil prices and the global economic recovery propelled Rosneft, Russia’s leading oil producer, to record profits last year, offsetting cuts in production because of Opec+ restrictions.
Like other oil producers around the world, the company benefited from recovering demand in 2021 after the Covid-19 pandemic hit consumption in 2020.
Rosneft, which accounts for about 40 per cent of Russia’s total crude oil output, said its net profit increased nearly seven-fold year on year in rouble terms to Rbs883bn and nearly six fold-in dollar terms to $11.9bn.
“Against the background of the recovery of the global economy, the company achieved new financial records in 2021,” chief executive Igor Sechin said in a statement, adding that production costs hit the lowest level in five years, down 3.6 per cent to $2.7 per barrel of oil equivalent.
Rosneft was helped by increases of 60-70 per cent in the price of the main crude blends that it exports, and by a weakening of the rouble. The company’s costs are paid in roubles, while revenues from exports are in dollars.
The company’s record profit came in spite of a drop in oil production last year because of countrywide production restrictions under the Opec+ agreements. Rosneft’s production of crude and condensate fell 6 per cent year on year to 3.9mn barrels per day.
Analysts expect production to recover this year.
“We anticipate the company will easily lead all of its Russian peers in oil production growth,” said Ron Smith, senior oil and gas analyst at BCS Global Markets. He expects Rosneft’s production to rise 9 per cent in 2022, against a 5 per cent increase for the company as a whole.
Analysts at Aton expect the Vostok oil project to bolster Rosneft’s production for the rest of the decade.
Rosneft’s gas output rose 3 per cent year on year to nearly 65bn cubic metres last year. The company is Russia’s second-largest gas producer, and has been seeking the right to break Gazprom’s monopoly on exports via pipelines. Rosneft is awaiting the government’s decision to supply 10bn cubic metres of gas via the Nord Stream 2 pipeline to Europe.