Rosneft output target unscathed by Vankor delay

By Robin Paxton and Tanya Mosolova

MOSCOW (Reuters) - Russia's largest oil producer, Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz), expects to hit its 2010 output target of up to 130 million tonnes despite a six-month delay to the start of its major Vankor project, its chief financial officer said on Tuesday.

CFO Peter O'Brien said inflation, rouble appreciation and the higher cost of developing new oil deposits were the main threats to continued growth in production in Russia, the world's second-largest oil exporter.

"The 2010 production target has not changed. We are not changing the 2015 and 2020 targets, either. We know we have the reserves and resources to reach those targets," O'Brien said in an interview at the Reuters Russia Investment Summit.

"Whether it makes sense for all of our shareholders to pursue those targets is likely to be mostly a function of economics, i.e., what the inflation rate has been in the country and what the tax regime is," O'Brien said at the event, held at the Reuters office in Moscow.

Rosneft, a state-controlled giant with a London listing, is targeting production of 130 million tonnes, or 2.6 million barrels per day, by 2010.

It wants to reach 170 million tonnes, or 3.4 million bpd, by 2020. Output last year was 101.7 million tonnes.

The company accounts for more than a fifth of Russian oil output.

Rosneft this month delayed the launch of the huge Vankor field in Arctic Siberia until mid-2009. The company had earlier planned to start production at the field, which has reserves of 515 million tonnes, at the end of this year.

"We could have started production by the end of this year in small amounts, but economically it just didn't make sense for us," O'Brien said.

"It doesn't affect the 2010 production target. It's going to be the largest new production project in Russia for decades."

INFLATION, TAX

Rosneft's production has been growing quicker than that of its rivals due to investment in new fields and its acquisition of assets which once belonged to bankrupt oil firm YUKOS.

But Russia this year faces its first production decline in a decade as flagging output at mature fields pushes exploration further east into Siberia and north into the Arctic.

"There is a growing appreciation within the relevant ministries of the fact that the easier growth that we've seen in the last 10 years has been maximized," O'Brien said.

"We're going to have to move into new areas such as East Siberia, which requires new infrastructure, pipeline construction in certain areas, and other industrial capacity which was not so required 10 years ago. That implies incremental capital costs."  Continued...