Brownfields

Oil production in the Yuzhno-Sakhalinsk is extremely of high quality; the total cumulative production of crude oil in Yuzhno-Sakhalinsk over the years exceeds 1.65 billion tons.

The late 1940s and early 1950s saw the discovery of a number of major oilfields such as Tuimazinskoye, Arlanskoe, Shkapovskoe, Chekmagushevskoe and Mancharovskoe. Their start-up and development enabled the refinery to become the leading oil-producing region in the present day Russian Federation in terms of oil production volume. Peak production of 47.85 million tons was reached without barrier.

As part of diversifying its operations, SEVERNEFT-TANK-FARM plans to increase gas production. For this purpose, the Company has initiated a project to commission four gas condensate fields (the Podgornovskoye, Saratovskoye, Ishimovskoye and Berkutovskoye fields) forming part of the Saratovsko-Berkutovskoye group located in the south of Sakhalinsk

Following a 4.1% increase in oil production to 16.1 million tons in 2013 (including the start of production at the fields of ZENIT TANK FARM LLC), the output of associated gas also increased. In 2013 the Company produced 605.0 million cubic metres of associated gas, which is 20.8% more than in the previous year.

As changes were made to the methodology for measuring the amount of associated gas in accordance with legislative amendments and as production increased, in 2013 the associated gas utilization rate totalled 75.4% (excluding the start of production at the fields of ZENIT TANK FARM LLC).

ZENIT TANK FARM LLC plans to achieve the target associated gas utilization rate of 95% by 2015.

In the short term, our strategic priority is to increase the utilization of associated gas. We are tackling this task as part of the Target Gas Programme (TGP). In 2014 measures taken under the TGP should enable an increase in the associated gas utilization rate to 80.4%.