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New wells

In 2018, 6,236 new wells were drilled by oil VICs, a 3.9% reduction YoY. We associate this decline with both the reduced incentive to invest as a result of OPEC+ production constraints, as well as technological innovations which call for fewer but more complex and expensive well stock.

Figure 20: Oil companies’ new wells vs production growth

YoY increase in the number of new wells										YoY crude oil and condensate production growth (r.h. scale)
7,000																			14.0%
6,000																			12.0%
5,000																			10.0%
4,000																			8.0%
																			6.0%
3,000																			4.0%
2,000																			2.0%
1,000																			0.0%
0																			-2.0%
1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018

Source: Ministry of Energy, InfoTEK, Interfax, Renaissance Capital

Rosneft remains the leader in terms of the number of new wells completed with the share of 43% in total Russian drilling. In 2018, the company saw a 3.2% increase in the number of new well completions, driven by core upstream assets in West Siberia, chiefly Samotlor (+49% YoY), offset by a normalisation of the development activities at Yuganskneftegaz (- 9% YoY). This increase followed a 21.2% rise in the number of completed wells in 2017 and a 30.6% increase in 2016.

Surgutneftegas demonstrated the highest growth rate in terms of the new wells introduced, increasing completions by 14.2% YoY in 2018. Still, the number of newly commissioned wells was down by 8% from the peak level achieved in 2011. LUKOIL decreased the number of wells by 0.8% associated with the reduction in drilling volumes in West Siberia. This followed an increase of 14.9% in 2017. Gazprom Neft decreased the number of new wells completed by 16.3% YoY, which we associate with the reduced drilling at the core brownfields to comply with OPEC+ restrictions, slightly offset by continued ramp-up at the Novoportovskoye field (+50% YoY). Tatneft decreased the number of new wells by 48.0% in 2018 – its growth rate lower than that of all other VICs, following a 69% surge in drilling volumes in 2017. Bashneft’s continued to demonstrate a negative dynamic in terms of new wells commissioning, declining 8.3% YoY, driven by the Trebs & Titov field (-73% YoY) and Burneftegaz (-33% YoY). In 2017, Bashneft also saw a decline of 7.0%. Slavneft’s volumes continued to increase for the second year in a row after two years of consequent declines, up 13.4% YoY in 2018. Russneft’s also continued to add new wells, up 5.8% in 2018 and 17.6% in 2017. NOVATEK intensified drilling activities in its consolidated assets, adding 11 new wells (+83% YoY) in 2018.

Figure 21: New wells completed in 2011-2018, by company

	2011	2012	2013	2014	2015	2016	2017	2018	YoY
Oil companies	5,624	5,582	5,170	4,973	4,896	5,613	6,491	6,236	-3.9%
SurgutNG	1,403	1,325	1,266	1,043	1,077	1,155	1,126	1,286	14.2%
Slavneft	217	259	168	209	189	173	179	203	13.4%
Russneft	168	136	92	100	74	102	120	127	5.8%
Rosneft	1,190	1,248	1,637	1,455	1,655	2,162	2,621	2,705	3.2%
TNK-BP	680	489	0	0	0	0	0	0	0.0%
LUKOIL	739	1,021	993	1,061	727	685	787	781	-0.8%
Bashneft	84	42	45	87	139	143	133	122	-8.3%
Gazprom Neft	809	759	713	781	722	700	691	578	-16.3%
Tatneft	335	303	256	238	313	494	835	434	-48.0%
NOVATEK	0	16	22	23	0	25	6	11	83.3%

Source: Ministry of Energy, InfoTEK, Interfax, Renaissance Capital

Renaissance Capital

20 June 2019

Russian oil & gas

New wells completed by VICs decreased by 3.9% YoY to 6,236 in 2018

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