OREANDA-NEWS. October 11, 2012. OJSC “Surgutneftegas” celebrates its 35th anniversary. Production Association “Surgutneftegas” was established on 03 October 1977 under Order No. 568 of Glavtyumenneftegas.

Being one of the leading vertically integrated companies in Russia, Surgutneftegas accounts for 12% of domestic oil production, 20% of domestic gas output and 8% of domestic refining. The Company is well-recognized both by Russian and foreign partners.

Over 35 years, Surgutneftegas has extended its geographical presence significantly, become the top performer in various industry segments, implemented innovative approach within its production, achieved invaluable professional experience and skills, and gained a reputation of socially responsible enterprise.

OIL AND GAS PRODUCTION

As of today, the Company operates in 16 regions and actively develops three oil and gas provinces – Western Siberia, Eastern Siberia, and Timano-Pechora.

Surgutneftegas is engaged in oil and gas production, prospecting and exploration in Khanty-Mansiysky Autonomous Okrug-Yugra, Yamalo-Nenetsky Autonomous Okrug, the Republic of Sakha (Yakutia), as well as performs exploratory drilling in Krasnoyarsky Krai, Tyumenskaya, Novosibirskaya, Irkutskaya Oblasts and Nenetsky Autonomous Okrug.

For 35 years, the Company has produced over 1.8 bn tons of oil and 308 bcm of gas, constructed more than 30 thous. km of pipelines and 15 thous. km of power lines, built hundreds of industrial and civil facilities, and commissioned as much as 27.9 thous. of oil wells. The total well stock consists of about 40 thous. wells (in 1977, there was only one well in the well stock).

Since 1977, Surgutneftegas has increased its number of producing oil fields by 12 times (from 5 to 61 fields). Despite the growing amount of hard-to-recover reserves, the Company managed to stabilize its hydrocarbon production in Western Siberia and provide higher production output in Eastern Siberia. Annually, Surgutneftegas produces over 60 mn tons of oil and as much as 13 bcm of gas. Oil output in the Republic of Sakha (Yakutia) in 2011 amounted to 5.4 mn tons or almost 1/10 of the total production.

For many years, Surgutneftegas has been maintaining leadership in well construction. Over the last decade alone, development drilling has increased twofold – from 2 to over 4.5 mn linear meters. The Company accounts for 25% of domestic development drilling, 29% of exploratory drilling, and as much as 40% of exploration wells constructed in Russia.

Long term and intensive efforts to expand mineral reserve base ensure stable reserves growth. Over the last few years, the resource base has remained unchanged at nearly 2 bn tons of oil equivalent. The Company’s license portfolio comprises 199 licenses for use of subsoil resources. Due to reached level of annual production output, the Company’s production to reserve ratio is nearly thirty years.

To optimize oil production in view of the growing amount of hard-to-recover reserves, Surgutneftegas is actively improving oil reservoir engineering technologies using world experience in reservoir stimulation. Choice of the right method depends on characteristics of geologic structure and stage of a reservoir development.

Surgutneftegas has implemented 12 hydrofracturing technologies adjusted to the oil fields of Western and Eastern Siberia and continues fulfilling large-scale program on physicochemical reservoir simulation with more than 6,000 well-operations to be performed annually. Depending on the characteristics of geologic structure and stage of a reservoir development, the Company applies 10 types of sidetracks and as much as 30 technologies based on polymers, emulators, acids, alkalies, disperse systems, etc.

In 2011, reservoir stimulation methods allowed the Company to produce 60% of additional oil. Surgutneftegas keeps maintaining the stock utilization at high level of over 0.93 due to the advanced technologies being used.

To ensure long-term dynamic development, Surgutneftegas counts on cutting-edge technologies, active scientific, engineering and technical breakthroughs within every area of its operations, including prospecting, developing, construction, mechanic engineering and transportation, automation and teleautomation of production.

The annual economic effect from implementation of new technologies and re-equipment totals over RUB 9 bn. Due to innovations made by its employees, the Company is able to save over RUB 500 mn every year.

Surgutneftegas is the leader among its peers in terms of associated petroleum gas (APG) utilization, power generation and in-house gas processing.

Intensive investments in APG utilization fixed assets in line with modern technical and technological base focused on improvement of the gas sector allowed the Company to reach a record high gas utilization rate of 97.8%.

Gas turbine power plants and gas piston plants cover 35% of the Company’s electricity consumption. Total plant capacity of 715 MW produced by 20 gas turbine plants and 7 gas piston plants makes it possible to utilize over 4 mn cub m of associated petroleum gas daily and generate as much as 12 mn kWh of power energy per day.

Surgutneftegas has been implementing annual energy saving efficiency program since 1997. Today, it covers all areas of the Company’s activities – from drilling to raw material processing. For last three years, the amount of energy saved increased by 5 times and reached 300 mn kWh per year.

The Company is striving to ensure environmental safety and develop resource saving technologies. Significant environmental investments (of about RUB 20 bn/year for the last periods) make it possible not only enhance production efficiency, but also sustain favorable environment.

Such results are the benefits the Company has gained due to longstanding production investments. For 35 years, total investments in oil production, refining, processing and marketing amounted to over RUB 1, 246 tn, including over RUB 1,113 tn spent on upstream sector. Today, the Company accounts for 18% of the industry’s investments in oil production.

Surgutneftegas closely cooperates with more than 3.8 thous. enterprises. To implement large-scale projects, the Company attracts top-ranked institutes and scientific centers, as well as world-recognized manufacturers of equipment. Being focused on steady realization of import substitution initiative, Surgutneftegas purchases 92% of equipment from domestic manufacturers.

OIL REFINING, GAS PROCESSING AND SALES OF PETROLEUM PRODUCTS

As part of the facility modernization program, Surgutneftegas increased refining capacity to 20.1 mn tons and expanded gas processing capacity to 7.2 bcm per year.

The Company continues investing in development of refining sector. To this end, Limited Liability Company “Kirishinefteorgsintez” (LLC KINEF) commissioned the first stage of the deeper refining complex based on residue hydrocracking processes. New capacities will make it possible to additionally refine as much as 5 mn tons of mazut and increase conversion ratio from 42% to 59%. Surgutneftegas is expected to commission production facilities of advanced cracking based on izomerization and catalytic reforming, as well as a catalytic reforming complex.

The Company’s subsidiaries engaged in oil refining and sales of petroleum products operate in northwestern and central parts of Russia.

Sales network includes 298 running gas stations, over 20 tank farms and warehouses. Every year, the marketing subsidiaries sell as much as 1,600 mn tons of petroleum products.

THE SCHOOL OF SURGUTNEFTEGAS

The Company’s good reputation and success would be impossible without contribution of its personnel. In 1977, Surgutneftegas employed only 12.5 thous. people. Today, this number has grown to 114.2 thous. of high-skilled employees engaged in oil and gas production, geology and drilling, construction and mechanic engineering, automation and science, material supply and transportation, production and everyday services. The number of employees who have passed through the school of Surgutneftegas for the last 35 years totals 400 thous. persons each of whom has made his or her contribution to the Company’s development.

Surgutneftegas is proud of its pioneers, veterans and front-rank workers, outstanding innovators and scientists, talented leaders, engineers and workers. Efforts of the Surgutneftegas personnel are highly appreciated by the state. Over 35 years, the Company’s employees have received more than 3,000 state awards and 6,000 industrial awards. High potential of the personnel is the most outstanding achievement of Surgutneftegas and the guarantee of its further development.

RESPONSIBLE CORPORATE CITIZEN

From the very beginning, Surgutneftegas has been actively developing the territory of its presence. For the past years, the Company has constructed a large number of community facilities, including pre-school institutions for 13,085 children, schools for 24,324 students, hospitals for 1,540 patients, medical centers for 6,847 visitors per day, and many other facilities. Today, Surgutneftegas continues maintaining its tradition of financing construction of educational, medical, cultural and sport facilities of significant importance for the regions it operates in, as well as fulfilling its social responsibilities in full.

In the course of operation, the Company created a highly developed social amenities complex outfitted with modern office buildings, over 90 accommodations, as mush as 200 recreation rooms for shift workers and over 410 canteens.

Since 1977, Surgutneftegas has been running the Housing Program to improve living conditions of its personnel. Thus, by 2011, the Company has constructed over 3.1 mn sq. m of floor space and provided 54 thous. employees’ families, including 8.1 thous. young families, with better housing conditions.

Surgutneftegas commissioned 22 sport facilities tailored for 895.7 thous. visitors per year. Totally, 330 thous. employees, including their families and retired employees, have attended the Company’s health centers and resorts. The children’s health center has welcomed as much as 100 thous. children.

Collective bargaining agreement is recognized as one of the best agreement in the industry in terms of social security coverage and benefits. For the last decade, Surgutneftegas spent over RUB 100 bn on social programs alone.