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. Last Updated: 07/27/2016

Rosneft Sets Bold 10-Year Plan

Itar-TassBogdanchikov, right, met with Putin at Rosneft's Tuapse oil port on Tuesday.
Rosneft president Sergei Bogdanchikov said on Tuesday that his company was planning to boost production by 70 percent to 128 million tons per year by 2015, in a sign the state-owned oil firm may be considering acquiring new assets.

Bogdanchikov made his forecast at a meeting with President Vladimir Putin at the company's refinery and oil port at Tuapse on the Black Sea.

"I'm sure that the perspectives for the industry are good, and that yours are as well," Putin told Bogdanchikov, according to a transcript of the meeting posted on the Kremlin's web site.

"The capitalization of this company has grown by 15 times in the last five years."

Bogdanchikov's goal may be overly optimistic, analysts said, unless the heavily-indebted company acquires new fields. Rosneft became the country's No. 2 oil exporter after acquiring Yukos' main production unit, Yuganskneftegaz, in a controversial auction of the asset last year.

Rosneft, which currently produces about 75 million tons per year (1.5 million barrels per day), has already said it plans to overtake LUKoil as Russia's No. 1 oil company by 2008.

In recent weeks, there has been intense media speculation that Rosneft has been vying with Gazprom for a stake in Roman Abramovich's Sibneft.

The planned merger of Rosneft and Gazprom fell apart earlier this year after infighting broke out between the companies over control of Yugansk.

"You shouldn't take anything for granted, but the most obvious targets for Rosneft are the remaining upstream assets of Yukos," said Oleg Maximov, oil and gas analyst at Troika Dialog.

His own forecasts put Rosneft's annual production at 83 million tons by 2010, Maximov said, and Bogdanchikov's significantly higher projection "implies that they will grow by acquisition."

Samaraneftegaz and Tomskneft make up the bulk of Yukos' remaining production of about 25 million tons (500,000 bpd) but could produce more with the right investments, he said.

Bogdanchikov, however, said at the meeting that long-term growth would come from developing the company's own 2.5 billion tons of reserves rather than from new acquisitions, RIA-Novosti reported.

Production would have to rise by 7 percent to 8 percent annually, Bogdanchikov said, Interfax reported.

"We think that could prove to be a tall order," said Steven Dashevsky, oil and gas analyst at Aton Capital. According to his own forecasts, Dashevsky said, Rosneft will reach an annual production of 110 million tons to 115 million tons by 2015.

Rosneft's new production goals are "not absurd," said Adam Landes, oil and gas analyst at Renaissance Capital.

"It's going to take a fair bit of spending, but with that kind of time frame, the right kind of oil price, the right contracting arrangements, it's possible," he said.

Bogdanchikov also said the company planned to invest $1.6 billion in its Tuapse facilities, including a $900 million refinery upgrade and $550 million to expand the pipeline network to the port.

Putin's public appearance with Bogdanchikov in Tuapse seemed to put an official stamp of approval on Rosneft's hard-charging plans.

The two men also appeared together last month in the Kremlin, when Bogdanchikov told Putin that Rosneft would boost production to 104 million tons per year by 2010.