Bloomberg News

Rosneft to Boost Spending to More Than $11 Billion Next Year

November 16, 2011

(Updates with analyst comment in third paragraph.)

Nov. 15 (Bloomberg) -- OAO Rosneft will probably surpass this year’s record $11 billion capital spending in 2012 as Russia’s largest oil producer invests in production and upgrades refineries, a company official said.

Rosneft will invest in plant upgrades through 2015 when Russia plans to further increase export duties on residual products such as fuel oil, the official said, declining to be identified before the plan is approved. The government in October raised the levy on low-quality products and cut it on fuels including diesel.

“You always have to watch out for excessive spending when adding to production, Alexei Kokin, an oil and gas analyst at UralSib Financial Corp., said by telephone. ‘‘With oil prices likely to average $100 a barrel next year, it probably makes sense to get serious about rebuilding older refineries.’’

Prime Minister Vladimir Putin has sought to spur investment in the world’s biggest oil-producing nation by lowering the export tax rate on crude shipments. The export tax on fuel oil, which makes up about 50 percent of refined-product exports, will rise from 66 percent of the crude duty now to the same level in 2015 as the government seeks to maintain budget revenue.

Rosneft will also continue investments in production sites, including Vankor, Russia’s largest new oil development. The company aims to raise output 67 percent to a peak of 500,000 barrels a day in 2013. Rosneft is spending $2.6 billion this year to push Vankor output to 300,000 barrels a day, according to a presentation on the company’s website.

Rosneft’s press service declined to comment on the spending plan.

--Editors: Torrey Clark, Tony Barrett

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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