Petroleum-products sales remained almost flat year on year in 2019 and totalled 45.4 mt. The company focused on improving the efficiency of petroleum-products sales, improving margins on retail and small-scale wholesale distribution of motor fuels, and increasing premium sales of jet and bunker fuels and bitumen materials. Favourable market conditions enabled the company to increase fuel-oil and petrochemical sales.
In 2019, product sales on the Russian and international markets totalled 28.6 mt and 16.8 mt respectively. Sales on foreign markets grew by 3.5% year on year, driven by an increase in jet-fuel, diesel-fuel, bitumen and petrochemicals exports.
In implementing the programme of transferring reciprocal settlements with counterparties using Russian roubles, the company has now switched payments for petroleumproduct exports under export contracts with companies in the EAEU and CIS member states to the currency of the Russian Federation. In April 2019 Gazprom Neft received its first such payment in roubles, totalling almost ₽255 million, for the delivery of 6,000 tonnes of diesel fuel by tanker to Armenia.
Premium salesPremium sales include the following:
— sales of petroleum-products through premium distribution channels, including both retail and small-scale wholesale. This segment includes all sales through filling stations and distribution centres, as well as “wing-tip” and “deck-to-deck” sales, and small wholesale through refuelling terminals at airports and seaports;
— sales of packaged products. This segment includes all sales of oil in barrels and canisters, polymer-modified asphalt cement (PMAC) in Clovertainer® containers, etc;
— sales of premium petroleum products, i.e. value-added products that have certain advantages over other products in the same category in terms of quality. This group includes sales of premium-branded liquid lubricants (Gazpromneft, G-Family, Texaco), premium-branded bitumen materials (PMAC, PMB, bitumen emulsion, etc), all brands of bitumen-based products, and premium-branded motor fuels (G-Drive, etc.) available for wholesale distribution. in 2019 reached 26.5 mt. While premium sales of motor-fuels decreased slightly in the reporting period, the company increased premium sales of aviation and marine fuels, bitumen materials and lubricants. Sales of aviation fuel through premium channels were up 3.2% as a result of growth in volume on both the domestic and international markets. Improved business efficiency in the North-West and Black Sea regions saw a 2.4% year-on-year increase in premium sales of marine fuel. Expanding the geographic range of company’s export routes led to a 20% increase in sales of premium bitumen products.
Sales of motor gasolines and diesel fuels in Russia in 2019 were optimal in view of market conditions, and ensured an increase in the efficiency of retail and small wholesale of motor fuels.
Key areas in developing the company’s retail and small wholesale distribution of petroleum products in 2019 included expanding the company’s retail network, developing new forms of cooperation with independent market players, improving efficiency in fuel sales, digitalising customer services, and developing the company’s product storage facilities.
Filling station network
In 2019, the company accelerated the development of its retail network, having opened 198 new filling stations under Gazpromneft and OPTI brands throughout Russia. Taking partnering outlets into account, the company has increased the geographic coverage of its retail business to now include 46 of Russia’s regions. Gazpromneft filling stations began operating in seven new regions: the Kursk, Lipetsk, and Voronezh Oblasts, Republics of Bashkortostan, Mordovia, Tatarstan, the Chuvash Republic and the Perm Krai.
In addition to conventional filling-station formats developed in recent years (full-service filling stations, stations with a cafe and a shop, automated filling stations), in 2019, the company launched several new filling-station formats that are innovative for the Russian market, including mixed-format filling stations, automated modular filling stations and digitally-enabled interactive filling stations.
In 2019, the Gazpromneft filling station network made a step change in the development of its retail network across a number of business areas. For instance, the network became the first fuel retailer in Russia to introduce mixed-format filling stations. These operate as service stations with a cafe and a shop during the day, and at night as automated stations, where customers refuel their cars themselves using payment terminals. The mixed format helps to improve the efficiency of filling stations by optimising staff workloads. After switching to the mixed format, fuel throughputs at filling stations increased by 2%.
As at the end of 2019 the company’s filling station network comprised 1,458 Gazpromneft and OPTI stations, of which 1,251 stations are directly owned by the company and 207 are franchisee-operated. As the company expanded into new large regional markets—the Republic of Bashkortostan and the Republic of Tatarstan—in the second half of the year, the company’s share of the retail motor-fuels market in those regions in which the network operates decreased from 24.0% to 20.3% as at end 2019.
Outside Russia, the Gazprom Neft retail network comprises 619 filling stations, including 205 filling stations in the CIS countries (Belarus, Kazakhstan, Tajikistan and Kyrgyzstan) and 414 in South-East Europe (Serbia, Bosnia and Herzegovina, Bulgaria and Romania). The number of filling stations in Europe decreased as a result of a retail network optimisation programme that made the network more cost-effective.
The company continued to expand its autogas sales network by increasing the number of filling stations selling liquefied petroleum gas (LPG). The number of autogas filling stations integrated into multi-fuel filling facilities under Gazpromneft brand grew by 11 to 156 stations.
The reporting year saw the completion of the transaction with Gazprom Gazomotornoye Toplivo LLC for the sale of the main portion of the company’s compressed natural gas (CNG) production and distribution assets. Under this deal Gazprom Neft sold its gas-filling compressor station network.
2019 marked an important milestone in the development of the infrastructure of the company’s fuel-supply terminals. The new and the most technologically advanced in Russia “Gladkoye” fuel terminal in the Leningrad Oblast was commissioned, allowing the transshipment of up to one million tonnes of petroleum products every year.
Despite the challenging market environment, we invest in the development of this project and support our partners, because we believe that OPTI is a promising model for modern fuel retailing. It is based on a platform solution and the principles of fair profit distribution and business transparency.Alexander Krylov Head of Regional Sales Directorate, Gazprom Neft PJSC
Motor-fuel and natural-gas motor-fuel sales
Total small-scale wholesale and retail sales of motor fuels decreased by 4.4% year on year to 19.5 mt. This change in motor-fuel sales volumes was shaped by current conditions in the Russian market, as well as those measures taken to improve sales efficiency and maximise profit margin. Despite the decrease in sales volumes, operating profit from this business grew by more than 20% thanks to the improved cost-effectiveness of retail sales and small-scale wholesale of motor fuels.
In 2019, retail sales of motor fuels through filling stations declined by 7.5% year on year to 10.5 mt, including 8.3 mt in Russia. A deteriorating market environment and the company’s focus on improving retail sales margins resulted in average per-station sales in Russia decreasing to 18.5 tonnes per day (tpd). The Gazprom Neft filling station network nevertheless maintained its market-leading position in Russia in terms of this metric. In Europe, average daily sales increased by 6.5% to 6.6 tpd in 2019.
Despite this trend in motor-fuels sales, sales of G-Drive premium branded fuel were maintained at 2018 levels. In 2019, branded-fuel sales throughout Russia and the CIS totalled 722,000 tonnes (-1% on 2018), with the share of G-Drive fuel in total sales growing from 7.3% to 7.9%. Year-end results show the G-Drive-brand family accounting for every third litre of AI-95 or higher grades of gasoline sold at filling stations, with the number of filling stations offering this fuel reaching 1,235 outlets.
The market environment caused LPG sales to decline by 11,300 tones, to 108,000 tonnes – a drop of 10%.
The more sensitive customers are to fuel pieces at filling stations, the more relevant are marketing programmes and campaigns aimed at retaining various customer segments and increasing customer loyalty towards the Gazpromneft filling station network. In 2019, the penetration of the “On Our Way” loyalty programme grew, with about 800,000 new members joining the programme.
At year-end 2019, the number of loyalty card holders throughout Russia and the CIS increased by 7% year on year, to 11.9 million. Participants in the loyalty programme accounted for 79% of total sales to individuals through the filling station network. According to Ipsos data, “On Our Way” is Russian motorists' favourite loyalty programme, with popularity
Marketing campaigns and sales promotions conducted by the company in the reporting year to stimulate sales of petroleum-products reached a total of 14.3 million customers and generated additional sales exceeding 200,000 tonnes.
An important focus of the company's customer-relations initiatives is the development of digital sales channels and digitalisation of customer services. In 2019, the share of digital channels (the virtual loyalty card, the virtual co-branded card and the AGS.GO app) in total retail sales through the Gazpromneft filling station network was about 6%. The number of active users of the Gazpromneft filling station network’s mobile app reached 1.6 million.
As the company expanded its range of additional goods and services offered at shops across the Gazpromneft filling station network, non-oil sales increased by 6.1% year on year. In 2019, revenue from non-oil sales totalled ₽20.6 billion (including value-added tax).
In addition, the Gazpromneft filling station network has for several years been offering opportunities for the management of its own filling stations to third-party retailers. In 2019, 117 stations were transferred to partnership-based management models. By changing filling-station management models, the company has been able to improve operational efficiency and increase revenue across the Gazpromneft network by reducing the fill-up costs. As a result of putting filling stations under various management models, the company’s 2019 year-end results will see EBITDA increase by ₽222 million.
The company uses the following partnership-based filling-station management models:
- COPO (company-owned, partner-operated): a filling station is managed by a network employee acting as an individual entrepreneur;
- CODO (company-owned, dealer-operated): a station is managed by a professional dealer selling fuel supplied by Gazprom Neft and benefiting from the company’s brand, and growth is driven by a high volume of petroleum-products sales;
- CORO (company-owned, retailer-operated): filling stations are managed by a non-fuel retailer under its brand name, and the retailer earns revenue from non-oil sales.
Strategic priorities for the development of our network include diversifying management models, developing filling stations as hubs offering additional services, introducing specialised station formats, and digitalising customer experience.Alexander Krylov, Regional Sales Director, Gazprom Neft PJSC
Aviation fuel supplies
Growth in premium sales is the result of both higher sales on the internal market, and higher «wing-tip» sales abroad.
At year-end 2019, the Gazpromneft-Aero distribution network covered 283 airports in 67 countries, including Russia. In 2019, the network grew by 17 units, including two airports in Russia (Tunoshna and Gagarin) and 15 airports abroad (nine in China, two in Saudi Arabia, one in each of Egypt, France, Italy and Tunisia). At end-2019, the Gazpromneft-Aero distribution network comprised 61 refuelling terminals in Russia and another in Kyrgyzstan. In addition, Gazpromneft-Aero supplies aviation fuel to its customers at 10 Russian airports through third-party refuelling terminals and at 211 airports abroad.
Under its long-term business development strategy to 2030, Gazpromneft-Aero is committed to becoming one of the top-10 companies on the international aviation refuelling market, expanding its international sales network to cover 350 airports, and increasing direct sales of aviation fuels to 5.3 million tonnes per year.
|Premium sales, mt||2.80||2.62||2.83||3.12||3.22|
|Number of airports at which the company has a presenceIn 2020, the company changed its procedure for calculating the number of airports/aerodromes at which it has a presence. Figures on airports where the company has a presence have been adjusted accordingly for all reporting periods.||213||239||254||266||283|
|Number of refuelling terminalsIn 2020, the company changed its procedure for calculating the number of airports/aerodromes at which it has a presence. Figures on the company’s own refuelling terminals have been adjusted accordingly for all reporting periods.||40||45||46||46||47|
|Russian market share, %In 2020, the company reviewed its market-share calculation procedure, taking into account Petromarket data with respect to market volumes, as well as other internal adjustments.||26.6||26.8||25.9||26.7||26.3|
Gazpromneft-Aero is a technological leader in Russia’s aviation refuelling industry. We are implementing the concept of full automation in technological process management at Gazprom Neft’s state-of-the art aviation refuelling complexes. In addition, the company is implementing another two projects that are important for the industry. The first involves implementing – together with IATA – XML standards to enable paper-free document management. The second is a transition to a new form of contracts, and a new form of settlements based on blockchain technology. It will accelerate settlements, reduce operating expenses and make cash transactions transparent. Airlines will be able to pay for fuel instantly when refuelling aircraft, without any prepayment, bank guarantees or financial risks for the parties to the transaction.Vladimir Egorov, CEO, Gazpromneft-Aero
Gazpromneft Marine Bunker, the operator of the Gazprom Neft bunkering business, provides bunkering services at all key ports in Russia (including 20 sea and 12 river ports), as well as in the ports of Constanța (Romania), Riga (Latvia) and Tallinn (Estonia). The company’s clients include major Russian and international shipping companies. The company's own fleet comprises:
- 12 bunkering vessels, including one Arctic-class vessel for refuelling ships in the White and Barents Seas;
- four Arctic-class shuttle tankers and two icebreakers to ensure uninterrupted oil shipments from the Novoportovskoye field.
Improved business efficiency across the key markets in the North-West and Black Sea regions enabled the company to increase bunkering volumes by 2.4% year on year to 2.99 mt in 2019. An important area of focus in the development of the company’s bunkering business concerned bunkering of vessels transporting oil from the company’s fields in the Arctic.
2019 saw the keel of Russia's first LNG-bunkering vessel, the Dmitry Mendeleev, laid down as part of the implementation of the company's development strategy in LNG bunkering. This pilot LNG-bunkering vessel with a cargo-bearing capacity of 5,800 cubic metres is expected to be commissioned in 2021. In addition to its flagship vessel, Gazpromneft Marine Bunker plans to commission two additional LNG bunkers by 2030.
At the end of 2019, the company started selling a new marine fuel with sulphur content not exceeding 0.5%. It is in demand with shipowners, especially in light of a new version of the International Convention for the Prevention of Pollution from Ships (MARPOL 2020) taking effect from 1 January 2020, setting a limit on sulphur content in emissions from vessels in international waters.
|Premium sales (bunkering, million tonnes)||3.92||2.77||2.71||2.92||2.99|
|Ports at which the company has a presence||36||36||37||34||35|
|Russian market share, %||21.0||19.1||16.6||15.8||15.7|
Thanks to the advanced infrastructure of terminals at its refineries, Gazprom Neft will meet the growing demand for environmentally friendly marine fuels on the Russian market. Following completion of the construction of the deep processing complexes at the Moscow and Omsk refineries, we expect to abandon fuel-oil production completely.Alexey Medvedev CEO, Gazpromneft Marine Bunker
Oils and lubricants production and sales
The company has an extensive modern production base for the manufacturing of oils and lubricants, and a widespread sales network in the B2C and B2B segments. Oils and lubricants are sold through the Gazpromneft filling station network, retail outlets and online shops, and service stations, as well as supplied directly to enterprises, including car assembly lines. Gazpromneft-Lubricants aims to become a top-10 global lubricants manufacturer by 2030.
Its continuously growing product line currently includes over 950 oils, grease lubricants and service fluids. Over the past year, 70 new premium products were launched on the market. Furthermore, in 2019, the company increased by 26,000 tonnes per year the capacity of its facilities producing oils packaged in large and small plastic containers at the Moscow Lubricants Plant.
In 2019, oils and lubricants sales totalled 0.47 mt, with premium sales totalling 0.32 mt. The Gazprom Neft share of the packaged-oils and lubricants market in Russia increased by 1.4 percentage point year on year to 23.4%. The company exported oils to 80 countries.
In 2019, the Gazprom Neft Omsk Lubricants Plant started producing new Gazpromneft Drill Flow drilling fluids, with 4,000 tonnes of these products supplied to drilling services companies. The company was awarded a prize by Gazprom PJSC as part of its annual competition for projects in science and technology for designing a production method and base formulation used in Gazpromneft DrillLine drilling fluids.
Over the past year, Gazprom Neft expanded its international Gazpromneft Ocean marine-oils business, as it launched production and subsequent sales in Singapore, the Netherlands, Turkey and South Korea. The company established a subsidiary in Singapore in 2019 to enable further efficient development of its international marine-oils production and logistics network.
Thanks do the development of its international marine-oils business, Gazprom Neft is already present at more than 250 ports worldwide. Further expansion of the production and logistics network will allow Gazprom Neft to build up production volumes significantly, expand its distribution coverage and, by 2030, secure a 4% share in the global marine-oils market.
The company also continues to develop a network of its own premium-brand G-Energy Service service stations. In 2019, 40 new service stations were added to the network, with the total number of branded service stations reaching 210 at year-end.
|Total oils and lubricants sales (mt)||0.43||0.45||0.41||0.49||0.47|
|Premium sales (mt)||0.23||0.27||0.29||0.31||0.32|
|G-Energy Service network (outlets)||26||70||120||170||210|
|Share of the Russian packaged-oils and lubricants market, %||17.1||20.0||21.3||22.0||23.4|
Gazprom Neft’s development strategy to 2030 includes expanding the international geographical reach of marine-oil sales. The company plans to increase its production and sales of specialised lubricants significantly. An operating company established in Singapore, a centre of international shipping where one of the world's largest port hubs is located, will enable Gazprom Neft to develop its production and logistics network in the most efficient way, including its own lubricant production plants in Russia and partner blending facilities abroad.Alexander Trukhan CEO, Gazpromneft-Lubricants
Gazprom Neft is one of the largest manufacturers and suppliers of bitumen products in Russia. Gazprom Neft has its own bitumen production facilities in Russia (in Moscow, Omsk, Yaroslavl, Ryazan, Vyazma, and Salsk), Serbia and Kazakhstan.
In 2019, sales of bitumen materials exceeded 2.9 mt. Premium sales of bitumen materials reached 0.42 mt, up 20% year on year. The growth was driven by the development of the distribution network (ensuring availability of bitumen-derived products throughout all Federal Okrugs of Russia), growth in exports, as well as by cooperation with regions to introduce modern bitumen materials into construction.
2019 marked the start of premium product sales in Latvia, Lithuania and Armenia. Supplies to Latin America, under strategic transnational projects, saw a 2.5-fold growth. In 2019, Gazprom Neft expanded the geography of bitumen-products sales to cover all 85 Russian regions, and 57 countries worldwide.
In 2019, the range of products manufactured at the Moscow Refinery’s large bitumen unit was expanded to three types of bitumen binders, and the maximum daily capacity was maintained at 5,500 tonnes per day. A high-technology production and logistics terminal in Salsk also demonstrated strong performance, with more than 172,000 tonnes of bitumen shipped during the first year of the asset’s operation under Gazprom Neft’s management. Expanding geography and entering new global markets enabled the company to increase the productivity of its Ryazan Bitumen Binders Plant significantly by as much as 33% to 109,000 tonnes, with binder shipments in Clovertainer containers and other types of packaging from the Ryazan Plant rising by 60% year on year to 64,000 tonnes. Key markets for packaged products include remote regions of Russia, Europe, and countries of Latin America.
The company continues to make steady progress towards the introduction of products for a new volumetric asphalt-mix design system currently being implemented in Russia. In addition to facilities in Ryazan and Vyazma, the bitumen terminal in Salsk and a processing site in Omsk have also started manufacturing products graded in accordance with the PG (Performance Grade) classification (based on performance at different temperatures).
In expanding the product range and areas of application, the specialists at the Gazprom Neft bitumen-business operator have developed an innovative bitumen sealant, Brit BPG-50 Plus, intended for use in the Arctic, at temperatures ranging from -50 to +30°C. The properties of this sealant will ensure the stability of piles supporting storage tanks in the construction of facilities in the Arctic.
|Total sales of bitumen materials, mt||2.05||2.17||2.65||2.97||2.92|
|Premium sales, mt||0.18||0.23||0.29||0.35||0.42|
Many of the products in our bitumen-products line have no equivalents in Russia or anywhere else. This competitive advantage – alongside technologies, modern production capacity, an extensive logistics network, and scientific and technical expertise – mean we can expand geographic coverage of our business and be involved in implementing major international infrastructure projects.Dmitry Orlov CEO, Gazpromneft Bitumen Materials
|Total petrochemicals sales (mt)||1.45||1.35||1.25||1.35||1.55|
Gazprom Neft is Russia’s largest producer of a number of basic petrochemicals: aromatic hydrocarbons (benzene, paraxylene, orthoxylene, toluene) and the propane-propylene fraction (PPF, propylene-containing LPG). Basic petrochemicals are produced at all Gazprom Neft refineries (in Omsk, Moscow and Yaroslavl). Downstream petrochemical products (polypropylene) are produced at integrated enterprises: NPP Neftekhimiya (Moscow) and Poliom (Omsk).
The development of petrochemical production is a growth area that is strategically important to the company. In order to strengthen Gazprom Neft’s position on the petrochemicals market, the company, together with SIBUR Holding, consolidated a 100% shareholding in Poliom LLC in 2019.
In 2019, polypropylene production totalled 139,000 tonnes at Neftekhimiya (+4% year on year) and 213,000 tonnes at Poliom (flat year on year). In addition, Neftekhimiya achieved a maximum hourly production rate of 17.4 tonnes per hour in 2019.
Developing the petrochemicals business is part of the Gazprom Neft’s long-term strategy to 2030. By that time, the share of petrochemicals in the product mix is expected to increase to 15%.
Increasing the holding in Poliom is an important milestone in implementing Gazprom Neft’s long-term strategy, the key priorities of which include developing the petrochemicals business. The integration of refining and petrochemical assets will allow the company to improve efficiency in using feedstocks supplied by our own refineries to produce high value-added products. Strengthening the company’s technological partnership with SIBUR will, at the same time, give our products a competitive advantage on the Russian and international markets.Levan Kadagidze Head of Commercial Affairs Directorate, Downstream Division, Gazprom Neft
The new production facility will allow us to reduce our heavy dependence on the supply of imported catalysts. Gazprom Neft catalysts will outstrip foreign alternatives on a number of criteria. Eventually, the company’s share of the cat-cracking and hydroprocessing catalysts market may exceed 70%. Theoretically, the company is in a position to fully meet domestic demand. Any surplus will be exported.Alexander Chembulaev CEO, Gazpromneft Catalytic Systems