0

The Golden Era of Energy:

Protectionism, Free Markets or Micromanagement? Igor Sechin, Rosneft, Chief Executive Officer

St. Petersburg International Economic Forum, June 6, 2019

1

Electric Vehicles and Environment

Record Levels of Sanctions

Strategic Success Factors

The Role of the New Exporter

Industry Response

Market Risk and Volatility

STOP

2

3

Market Risk and Volatility

40

50

60

70

80

90

Mar May Jul Sep Nov Jan Mar

Oil prices are

artificially

Very High! No good

and will not be

accepted!

Oil prices are too

high, OPEC is at it

again. Not good!

Hope OPEC will

increase output

substantially. Need

to keep prices

down!

REDUCE PRICING

NOW!

The OPEC

monopoly must get

prices down now!

Oil prices getting too

high, OPEC, please

relax and take it easy.

…price of Oil

getting too high.

Source: Bloomberg

Evolution of Crude Oil Price

$/bbl

2018 2019

4

4.4

5.1

5.3

5.7 5.8

2017 OPEC ExxonMobil

IHS Markit EIA

Forecasting Crude Oil Demand

2040

Bn tons

+1 Bn tons

+20 MMbpd

5

Environmental Costs of EVs

Co CAGR 6%

Electric

Vehicles

Energy

Storage

Systems

Portable

Electronics Other 2040 2018

Global Lithium1 and Cobalt Demand

MMt

Li CAGR 10%

Source: Wood Mackenzie, Central Tibetan Administration, Environmental Justice Atlas

1 For lithium – MMt of lithium carbonate equivalent

Lithium mining implications,

Sichuan province, China

Cobalt mining implications,

Madagascar

3

2.5

2

1.5

1

0.5

0

6

Fleet of Electric Vehicles

5

294 300 320

350

2018 Wood Mackenzie IEA OPEC ВР

2040

Million units

share in total vehicle stock

15% 15% 16%

0.4%

13%

%

7 Source: US President Administration

US: Ambitions for Energy Dominance

The “Golden Era” of American Energy:

Withdrawal from the terrible Paris Climate Agreement

Getting rid of costly ecological initiatives in environmental

water resource protection

End of war on coal power generation

Signed legislation to accelerate the construction of pipelines

(including by easing regulatory and environmental

requirements)

Exploration in wildlife reserves is now permitted

Thanks to President Trump’s negotiations, the European

Union agreed to import more LNG from the United States

“We are independent. We don’t need anybody. And we don’t need to be ripped off by the rest of the world

either, because those days are over.” (Donald Trump)

8

China’s Share of Global Rare Earth Metals Production

Exceeds 80%

Source: ВР

Share of Global Rare Earth Metals Production

%

80%

13%

3% 2% 1% 1%

China Australia Russia Brazil Thailand India

9

Recovering of Upstream Investments

Source: IEA

Global Upstream CAPEX

$ Bn

780

590

438 457

476 514

2014 2015 2016 2017 2018 2019

“Trough” of

CAPEX cycle

10

United States and China Trade war

New sanctions against Russian companies

US sanctions against Iran renewal

US bans Iranian crude oil imports for all the countries

Sanctions against Venezuela – attempt to change the

government

Proposed sanctions against LNG projects with Russian

participation

Cancelation of Iran crude oil ‘waivers’

…

March

April

May

November

January

February

May

2018

Sanctions Have Reached Record Levels

2019

U.S. moves to stop all nations from buying Iranian

oil. “We’re going to zero” U.S. Secretary of State

Mike Pompeo

April 22, 2019

...the toughest sanctions are yet to come. Unless

Maduro’s usurpation ends, he and his cronies

will be strangled financially

U.S. National Security Adviser

John Bolton

March 21, 2019

33% of world reserves

Under Sanctions:

11

2015 2019 2016 2017 2018 2014 0

2

4

6

8

10

12

14

0

1

2

3

4

5

6

7

8

Geopolitical Risks of “Fragile Five”

Source: Citigroup analytics

“Fragile Five” in Crude Oil Production

Cumulative “Fragile 5” production under risk

(right axis)

Iraq

Nigeria

Iran

Libya

Venezuela

MMbpd

12

Texas vs Sanctioned Production

0

1

2

3

4

5

6

7

2014 2015 2016 2017 2018 2019

Iran

Venezuela

Libya

Texas

Texas & Production of Sanctioned Countries

MMbpd

Note. Texas – conventional and shale oil and condensate production, OPEC countries – oil production only 1 Reduced production of Venezuela and Iran due to US sanctions to the pre-sanctions level of 2017

Source: US DOE, OPEC

1,500

2,500

2018 2019

Production Under Sanctions1

Kbpd

13 Source: US DOE, IHS Markit, Wood Mackenzie, Rosneft

The Role of New Exporter

0.1 0.4

0.5 0.6

1.2

2.0

2.7

5.0

2

7

10

27

34

42

2013 2014 2015 2016 2017 2018 2019(1 Q)

… 2020

US Crude Oil Export

MMbpd

Oil Export Number of Countries Importing from the US

December, 2015

40-year Oil Export Ban

Lifted

14

US Export: Infrastructure Investments

14

Main US Permian

export pipelines

+2.5 MMbpd (new construction and expansions1)

1 Growth by the end of 2020, based on open data May, 2019

Source: IHS Markit, Wood Mackenzie, corporate reports

15

Global Competition of Fiscal Regimes

USA Saudi Arabia

Change in Upstream Taxes

Income Tax Income Tax

1 Ernst & Young assessment of government take in the financial results of the projects in Western Siberia without tax relief. The indicator is calculated as the share of fiscal payments in the net cash flow

of the project before tax

Russia

Government Take1

80%

35%

21%

2017 2018

85%

50%

2016 2017

80%

85%

2013 2018

16

17 22

0

20

40

60

80

100

120

0 10 20 30 40 50 60 70 80 90 100 110

Bre

akeven,

$/b

bl (B

rent)

Capacity in 2030, MMbpd

Efficiency and Reliability of Russian Oil and Gas Industry

Source: Rosneft estimates based on IHS Markit and Wood Mackenzie data

Global Liquid Hydrocarbons Capacity by Breakeven in 2030

Average Breakeven

Biofuels,

NGL,

Other Liquids

Saudi Arabia

OPEC

Iran

Shallow Water OPEC

Russia

Iraq

Brazil

Shallow

Water

Non-

OPEC

USA

(L48)

Onshore

Non-OPEC

Deepwater

Non-OPEC Canada

USA

(L48)

Tight Oil

Deepwater OPEC

Unconventional

Other Tight Oil

17

18

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: Citi, CDU TEK, Interfax, corporate data

High Potential of Russia’s New Projects

Russia’s Greenfield Ramp-ups

MMbpd

+1 MMbpd

0

2.4

2.0

1.6

1.2

0.8

0.4

19

New Horizons

19 32

East-Taymyr Exploration Areas

Yermak Neftegaz Project (JV With BP)

Payakha Cluster

Vankor Cluster

West-Irkin Cluster

Dikson

Dudinka

Severny Port Arctic Cluster

Khatanga

New Horizons: Arctic Oil Cluster

20

21

Rosneft Strategic Priority – 1st Quartile Among Global

Leaders in HSE

-3% LTIF

lost time injury frequency

-20% Oil Spills

spilled oil and petroleum products

per ton of oil produced

-0.3 t СО2-equivalent/kboe GHG relative greenhouse gas emissions

22

Rosneft Strategic Priority – Delivery of Superior

Performance in Sustainable Development

Implementation of 17 UN Sustainable Development Goals

in Strategic Principles with Selection of 5 Strategic Priorities

GOOD HEALTH

AND WELL-BEING

AFFORDABLE AND

CLEAN ENERGY

DECENT WORK AND

ECONOMIC GROWTH

CLIMATE ACTION PARTNERSHIPS

FOR THE GOALS

23

Rosneft – 20 Years in Retrospective

1999

Hydrocarbons production

Share in global oil production

Headcount

17 Bn toe

44 Thousand

33 ₽ Bn

Revenues

Investments

6 ₽ Bn

0.4%

286 Bn toe

339 Thousand

2018

8 ₽ Trillion

1 ₽ Trillion

242 Х

160 Х

17 Х

8 Х

6 % Motor fuels sales share in

Russia 14 Х 3% 38 %

Note. Figures are rounded, but the share and specific indicators are calculated using actual figures before rounding

24

Technological Development (2018)

recoverable reserves of hard-to-recover and high viscosity oil

>3 Bn tons

hard-to-recover and high viscosity oil production

19 MMt (+16%)

with an increased number of hydraulic fracturing stages and horizontal section

of more than 1 km

100 wells

drilled using “fishbone” technology with up to 7 wellbores and a total length of 6 km

(of total 300 existing multilateral wells)

81 multilateral wells

25

Rosneft-2022 Strategy

Enhancing

Yield

Best Project

Management in the

Industry

Transforming

Culture and

Technological

Capabilities

Rosneft-2022

A STEP CHANGE

IN EFFICIENCY

26

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