ROSNEFT'S OPTIMISTIC PERCEPTION
FT wrote, Rosneft is "pretty optimistic" about the outlook for oil consumption in south Asia and is considering several downstream investments in the region, Russia's state-controlled oil group said on Wednesday.
Pavel Fedorov, Rosneft's first vice-president for economics and finance, said the company saw "serious macroeconomic upside potential" in several countries in south Asia, including India. "We have a pretty optimistic perception of those markets," he added.
His comments came as Rosneft, the world's largest listed oil producer by output, reported a 75 per cent drop in net profit in the first quarter, to Rbs14bn ($200m), reflecting how crude prices hit a 13-year low during this period.
Rosneft is betting that south Asia will be a fast-growing market for its oil, and is keen to increase its profits from the region by investing in downstream infrastructure such as refineries and petrol stations.
The company provisionally agreed last year to buy a 49 per cent stake in India's second-largest refinery from Essar Oil, as part of a supply deal.
India is in the process of taking over from China as the main driver of global oil demand growth this year, with rising car ownership propelling imports of crude and refined products.
Meanwhile, Rosneft last month discussed investing in a new refinery project in Indonesia worth up to $13bn with Pertamina, the country's state-controlled oil and gas company.
Mr Fedorov cautioned Rosneft had not made a final decision on the Indonesian deal, but the company's willingness to consider large scale international investments is a sign of its confidence in spite of the tumble in oil prices.
Russian oil producers have been relatively sheltered from the collapse in crude prices by the decline of the rouble, which has helped them to reduce costs. A progressive taxation system under which the Russian government has absorbed most of the decline in oil prices has also boosted the producers.
However, Rosneft's net profit plunged in the first quarter as the price of Brent, the international oil benchmark, dropped as low as $27 a barrel in January. It has since rebounded to about $52.
Rosneft raised capital expenditure 20.3 per cent in the three months to March 31 compared with a year earlier, as it implemented a strategy of increasing investment at ageing Soviet-era fields in order to mitigate a sharp decline in production.
The strategy appeared to have some success. Yuganskneftegaz, Rosneft's largest production subsidiary, reported a decline in daily production of 0.9 per cent in the first quarter, compared with a 3.2 per cent fall last year.
Eric Liron, another first vice-president at Rosneft, said production at Yuganskneftegaz was up 1 per cent in April and May and the increase would continue to the end of the year.
Rosneft's overall oil production was down 1 per cent in the first quarter compared with a year earlier.
The group said falling costs had helped it to improve the group's margin at the level of earnings before interest, tax, depreciation and amortisation to 26 per cent, from 24 per cent a year earlier.
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