• Natural Gas News

    Rosneft profits climb in H1 despite fallout from Ukraine war


Rosneft's oil production hardly changed year/year.

by: NGW

Posted in:

Natural Gas & LNG News, Europe, Top Stories, Corporate, Exploration & Production, Financials, Political, News By Country, Russia

Rosneft profits climb in H1 despite fallout from Ukraine war

Russia's national oil company Rosneft saw its net income climb 17.6% in US dollar terms and 13.1% in ruble terms year/year in the first half of 2022, despite Western sanctions and other fallout from Russia's invasion of Ukraine.

The EU is preparing to enforce a partial embargo on Russian crude oil and petroleum product purchases, and some Western buyers are already shunning the country's supplies, while sanctions have complicated the delivery of its oil on tankers. Rosneft's overall hydrocarbon output nevertheless grew by 1.5% to 4.85mn barrels of oil equivalent/day, supported by a 9.2% in gas production to 1.12mn boe/d. Its crude production saw only a 0.5% decline, to 3.73mn boe/d.

Rosneft's US dollar net income came to $6bn in the six-month period, up from $5.1bn a year earlier, while in ruble terms, it increased to 527bn rubles, from 462bn rubles. Capital expenditure was up 14.8% at $7bn.

"In H1 2022, Rosneft was under an unprecedented pressure of adverse external factors and unlawful sanctions," company CEO Igor Sechin said in a statement. "However, thanks to high operational efficiency and appropriate management decisions, we were able to ensure business continuity and demonstrate stable results."

Rosneft noted it would be paying 441bn rubles in dividends from its 2021 profit to its shareholders, including BP, despite the UK major's intention to withdraw from Russia in response to Moscow's invasion of Ukraine.

Russian oil and other liquids output amounted to 11mn b/d in August, barely changed from its pre-war output, as its exporters have been able to offset declines in European sales by diverting cargoes to Asian markets like India and China, which have no qualms about continuing to buy Russian oil, and now at a hefty discount to other benchmarks. However, the International Energy Agency (IEA) predicted in its monthly oil report this week that the country's production would slide to 10.2mn b/d by December and 9.5mn b/d by 2023, as a result of the EU embargo.

The EU embargo will apply to all seaborne crude oil shipments from Russia from this December, and will then be extended to oil products two months later. Pipeline imports from Russia will still be permitted, as Hungary and other countries in Central Europe have limited options to source alternative supplies so quickly. 

A significant determiner for Russian oil output and pricing going forward will be the success or failure of the G7's proposal to impose a price cap on the country's exports. The proposal will work by preventing the insurance of Russian oil shipments unless the buyers of those cargoes agree to the price cap. But the uncertainty about whether major purchasers like China and India sign up, and whether Russia will react by curtailing supplies to Europe.

The IEA in its latest report slashed its forecast for global oil demand this year by 110,000 b/d. It is now predicting a 2mn b/d bump in consumption this year to 99.7mn b/d, followed by a 2.1mn b/d growth next year, finally exceeding the pre-pandemic level of 101.8mn b/d.

“Growth in global oil demand continues to decelerate,” the Paris-based agency said, citing a slowdown in developed economies and the ramifications of COVID-19 lockdowns in China. However, "large-scale" gas to oil switching in power generation due to high prices has limited the slowdown in growth, it said.