Production and manufacturing expenses

Production and operating expenses (RUB mn)
Indicator 2016 2017 ∆, %
Upstream expenses 106,765 111,837 4.8
RUB per toe 1,782 1,767 (0.8)
USDTranslated to USD at the average exchange rate for the period. per boe 3.63 4.13 13.8
Consolidated subsidiaries inside Russia including 80,392 85,898 6.8
RUB per toe 1,647 1,653 0.4
USDTranslated to USD at the average exchange rate for the period. per boe 3.35 3.87 15.5
Brownfields 65,960 67,923 3.0
RUB per toe 1,692 1,812 7.1
USDTranslated to USD at the average exchange rate for the period. per boe 3.44 4.24 23.3
Greenfields 14,432 17,975 24.5
RUB per toe 1,470 1,242 (15.5)
USDTranslated to USD at the average exchange rate for the period. per boe 2.99 2.9 (3.0)
Consolidated subsidiaries outside Russia (including PSA) PSA refers to production sharing agreement. 9,655 8,381 (13.2)
RUB per toe 4,144 3,059 (26.2)
USDTranslated to USD at the average exchange rate for the period. per boe 8.43 7.15 (15.2)
Joint operations 16,718 17,558 5.0
RUB per toe 1,924 2,061 7.1
USDTranslated to USD at the average exchange rate for the period. per boe 3.92 4.82 23.0
Downstream expenses 53,132 55,318 4.1
Refining expenses at own refineries 30,619 31,191 1.9
RUB per tonne 893 966 8.2
USDTranslated to USD at the average exchange rate for the period. per bbl 1.82 2.26 24.2
Refining expenses at refineries of joint ventures Refining expenses of joint ventures is based on processing agreement. 12,453 12,259 (1.6)
RUB per tonne 1,639 1,568 (4.3)
USDTranslated to USD at the average exchange rate for the period. per bbl 3.33 3.67 10.2
Lubricants manufacturing expenses 10,060 11,868 18.0
Transportation expenses to refineries 29,561 29,265 (1.0)
Other operating expenses including 12,404 20,110 62.1
Total 201,862 216,530 7.3

Hydrocarbon production expenses include the cost of raw materials and supplies, maintenance and repair of equipment used for the production of hydrocarbons, expenses on payroll, fuel, and lubricants, the cost of enhanced oil recovery measures, and other similar expenses at the Group's production enterprises.

The 0.4% YOY increase in specific operating expenses for hydrocarbon production at subsidiaries in the Russian Federation was due to growth in costs at mature fields, which in turn increased as a result of:

  • a reduction in production volumes given the restrictions of OPEC+;
  • growth in natural monopoly tariffs;
  • an increase in the share of rolling equipment for electric centrifugal pumps (ECPs);
  • inflationary pressure on the cost of services and resources;
  • an increase in the cost of refining associated petroleum gas (APG).

The 15.2% YOY decrease in specific operating expenses for hydrocarbon production by subsidiaries outside the Russian Federation in U.S. dollars per barrel is the result of increased production in Iraq and cost optimization for the repair of wells at fields in Serbia.

Specific operating expenses for hydrocarbon production at joint operations increased by 7.1% YOY primarily due to:

  • a reduction in production given the restrictions of OPEC+;
  • growth in natural monopoly tariffs;
  • an increase in the share of rolling equipment for ECPs and the cost of its maintenance;
  • inflationary pressure on the cost of services and resources.

Oil refining costs at the oil refineries of subsidiaries include the cost of raw materials and supplies, the maintenance and repair of equipment used for processing hydrocarbons, payroll and electricity costs, and other similar expenses at the Group's refining facilities.

Specific operating costs on oil refining at the refineries of subsidiaries increased by 8.2% YOY due to:

  • a decrease in production volume due to scheduled repairs;
  • an increase in the purchase of MTBE to maintain the level of gasoline production in connection with the repair of ‘big ring’ facilities at the Moscow Refinery;
  • an increase in expenses on natural gas for the refinery’s internal needs.

Specific operating costs on oil refining at the refineries of joint ventures decreased by 4.3% YOY due to the optimized consumption of reagents, chemical reagents, and additives.

The 62.1% YOY increase in other operating expenses was primarily due to growth in the provision of services to joint ventures.

Selling, general and administrative expenses

Selling, general and administrative expenses include general business expenses, wages, salaries (except wages and salaries at production subsidiaries and own refineries), insurance, legal fees, consulting and audit services, and other expenses.

Commercial, general, and administrative expenses decreased by 2.2% YOY, primarily at foreign subsidiaries as a result of the rouble’s appreciation.

Transportation expenses

Transportation expenses include costs to transport crude oil and petroleum products to final customers. These costs consist of pipeline transportation, sea freight, rail, shipping, handling, and other transportation costs.

Transportation expenses increased by 6.8% YOY mainly due to higher export crude sales volumes.

Depreciation, depletion and amortization

Depreciation, depletion and amortization expenses include depreciation of oil and gas properties, refining and other assets and impairment provision.

Depreciation, depletion and amortization expenses increase by 8.6% YOY in line with an increase in depreciable assets driven by implementation of the investment program and increased production.

Taxes other than income tax (RUB mn)
Types of tax 2016 2017 ∆, %
Mineral extraction tax 237,300 329,579 38.9
Excise tax 112,102 128,229 14.4
Social security contributions 18,530 20,433 10.3
Other taxes 13,199 14,028 6.3
Total taxes other than income tax 381,131 492,269 29.2

Taxes, excluding profit tax, grew by 29.2% YOY. The 38.9% increase in mineral extraction tax expenses resulted from growth in the tax rate under the Tax Code of the Russian Federation, the introduction of an additional mark-up factor as well as an increase in oil production volumes and oil prices. Excise tax expenses increased by 14.4% YOY due to higher rates.