Rosneft Delays Field Launch, Cuts Target

Rosneft said Wednesday that the launch of a huge east Siberian field was delayed and cut its output forecast, making it more likely Russia's total production will decline this year.

Rosneft had planned to launch the giant Vankor deposit at the end of this year and the start up was seen as key for Russia to avoid its first fall in output in a decade.

But Rosneft's vice-president Mikhail Stavsky told a conference call on Wednesday that Vankor would not be launched before mid-2009.

"I would like to point out that we will launch the project later because we have decided to expand it," he said. "It is impossible to increase planned peak production by more than two times and to meet the same tight time schedule stipulated in initial field development plans."

Rosneft bought Vankor in 2003 and had estimated the field's reserves at 125 million tons at that time, and peak production at 12 million tons.

Stavsky said extensive exploration works allowed Rosneft to increase Vankor oil reserves more than fourfold to 515 million tons and peak production expected by 2012 to 2013 is now seen at 25.5 million tons per year or over half a million barrels per day.

According to Rosneft's presentation of the project in November 2006, the company had already increased Vankor's reserve estimate and the production targets two years ago.

Rosneft cited unusually warm winters of this and last years as the main reasons for the delay. Equipment can only be brought to the field, which lies in the Arctic marshlands 140 kilometers from the nearest town, by frozen roads during the winter.

The country's second-biggest oil producer, LUKoil, also blamed warm winter as the reason behind a six-month delay to the launch of a major new deposit, South Khylchuyu in the northern Timan-Pechora oil region.

LUKoil launched production at the field -- whose reserves are some seven times smaller than Vankor's -- about three years after it started the project.

Two major Sakhalin oil and gas projects, Exxon's Sakhalin-1 and Sakhalin-2, led by Shell and Gazprom, took 11 and seven years, respectively, to come on stream.

Rosneft is now expecting to increase production by 9 percent this year, down from the previous forecast of 11 percent. In 2007, Rosneft produced 101 million tons of oil (2.03 million barrels per day).

National oil production in Russia has been declining since the start of the year, although the government still expects it to grow to at least 492 million tons from 491.5 million tons last year.

The growth outlook looks uncertain given that Rosneft had planned to produce 1.8 million tons at Vankor before the end of this year.

It had expected to increase production at the field to 9.8 million tons next year.

Rosneft vice-president Peter O'Brien told the same conference call the company will announce the revised production plan after it is approved by its board of directors in October.

O'Brien said he expected Rosneft's capital expenditures to rise by around 10 percent this year from $7 billion last year due to higher spending on projects like Vankor and rising production.