Incomes and Expenses
Transneft Group’s revenue for 2018 compared to 2017 increased by 10.8%. This was due to increased revenues from transportation of oil and petroleum products, oil sales for export, as well as revenues from the provision of stevedoring services, additional port services and fleet services (due to the acquisition of controlling stakes in NCSP Group and NFOT in September 2018). Revenue excluding oil sales for export increased by 4.9% compared to 2017 and amounted to 79.6% of the total revenue in the reporting period.
The growth of revenue from oil transportation services was 3.2% and was caused by changes in tariffs, transported volumes of crude and freight flows. The growth of revenue from petroleum products transportation services was 9.3% and was caused by changes in tariffs, transported volumes of petroleum products and freight flows.
Revenue from oil export was influenced by oil supplies to China within an agreement with China National United Oil Corporation for crude oil supplies in the amount of 6 MTPA, signed for 20 years, effective since 1 January 2011. The said agreement was concluded to repay the loan provided by the China Development Bank. The required amounts of crude are purchased from Rosneft.
The 42.3% increase in revenue from oil sales for export was mainly due to an increase in the average price per barrel of oil in US dollars. The 35.2% decrease in revenue from sale of crude oil on the domestic market year-on-year was caused by a reduction in oil sales.
The increase in revenue from sales of petroleum products in 2018 by 35.1% compared to last year was due to an increase in sales of petroleum products, as well as the inclusion of the corresponding amounts of NCSP Group in the consolidated indicators (Transneft Group acquired the controlling stake in NCSP Group in September 2018).
The 5.7% decrease in revenue from oil compounding services in 2018 was caused by a 8.8% decrease in the volume of compounded oil to 39,883.6 thousand tonnes.
|Indicator||2018||Share of the total revenue, %||2017||Share of the total revenue, %||Absolute change||Change, %|
|Revenue from oil transportation services||651,887||66.5||631,459||71.4||20,428||3.2|
|on the domestic market||260,428||26.6||257,307||29.1||3,121||1.2|
|Revenue from petroleum products transportation services||72,167||7.4||66,035||7.5||6,132||9.3|
|Revenue from the stevedoring services, additional port services and fleet services||14,444||1.5||–||0.0||14,444||–|
|Revenue from compounding services||5,849||0.6||6,201||0.7||−352||−5.7|
|Revenue from sales of oil on the domestic market||6,122||0.6||9,445||1.1||−3,323||−35.2|
|Revenue from sales of petroleum products||6,899||0.7||5,108||0.6||1,791||35.1|
|Total revenue (excluding the revenue from oil export)||779,672||79.6||743,600||84.1||36,072||4.9|
|Revenue from oil export||200,286||20.4||140,737||15.9||59,549||42.3|
The Other Revenue indicator includes revenues from rendering the following services: storing oil and petroleum products, communications, inspection, construction, technological connection to trunk pipelines and information services related to oil transportation, as well as revenue from leasing property, resale of goods, freight transportation and other services. The decline in Other Revenue in 2018 by 12.0% compared to 2017 was due to a decrease in the amount of revenue from the sale of services for technological connection to trunk pipelines as a result of applying the new International Financial Reporting Standard 15 “Revenue from Contracts with Customers” (IFRS 15)In accordance with the previous International Financial Reporting Standard 18 «Revenue» (IFRS 18), revenue from services for the transportation of oil and petroleum products at long-term (agreed) tariffs was recognised as part of the revenue from transportation of oil or petroleum products during the period of validity of such tariffs. In accordance with the previous International Financial Reporting Interpretation Committee Standard 18 “Transfer of Assets from Customers” (IFRIC 18), revenue from provision of services of technological connection to the trunk pipeline system was recognised as part of other revenue progressively as the costs of building assets financed under such contracts were recognised. As a result of applying the new International Financial Reporting Standard 15 “Revenue from Contracts with Customers” (IFRS 15), revenues from the provision of services for the transportation of oil and petroleum products at long-term (agreed) tariffs and contracts for the provision of services for technological connection to trunk pipelines are recognised based on the useful life of facilities built at the expense of funds received under corresponding contracts. .
|Operating expenses (costs)||2018||Share in the total expenses, %||2017||Share in the total expenses, %||Absolute change||Change, %|
|Employee remuneration, insurance premiums and social expenses||163,591||30.0||149,878||31.5||13,713||9.1|
|Pipeline network maintenance and repair services||19,175||3.5||17,790||3.7||1,385||7.8|
|Taxes (income tax not included)||36,843||6.7||28,494||6.0||8,349||29.3|
|Cost of commercial oil export (including the export customs duty)||199,847||36.6||141,156||29.7||58,691||41.6|
|Cost of oil sales of oil on the domestic market||5,873||1.1||8,497||1.8||−2,624||−30.9|
|Cost of sales of petroleum products||6,350||1.2||4,639||1.0||1,711||36.9|
|Cost of other sold goods for resale||3,902||0.7||2,512||0.5||1,390||55.3|
|Other operating expenses||36,155||6.5||36,044||7.5||111||0.3|
|Operating expenses, depreciation and amortisation exclusive||546,083||100.0||476,062||100.0||70,021||14.7|
|Cost of oil export (including the export customs duty)||−199,847||−36.6||−141,156||−29.7||−58,691||41.6|
|Taxes (income tax not included)||−36,843||−6.7||−28,494||−6.0||−8,349||29.3|
|Operating expenses (excluding depreciation and amortisation, oil export and taxes)||309,393||56.7||306,412||64.3||2,981||1.0|
In 2018, operating expenses excluding depreciation and amortisation, taxes and oil export increased by an insignificant 1.0% compared to 2017. The growth in operating expenses excluding depreciation and amortisation can mainly be explained by the following factors:
- Increase in the cost of oil export
- Increase in other taxes
- Increase in employee remuneration outlay
|Operating expenses||2018||Share of the total expenses, %||Inflation rate (forecast for 2018 vs 2017), %*||2017 (inflated to 2018)||Share in the total expenses, %||Absolute change||Change, %|
|Employee remuneration, insurance premiums and social expenses||163,591||30.0||2.7||153,925||29.2||9,666||6.3|
|Pipeline network maintenance and repair services||19,175||3.5||4.9||18,662||3.5||513||2.7|
|Taxes (income tax not included)||36,843||6.7||4.1||29,662||5.6||7,181||24.2|
|Cost of commercial oil export (including the export customs duty)||199,847||36.6||25.8||177,574||33.7||22,273||12.5|
|Cost of sales of oil on the domestic market||5,873||1.1||25.8||10,689||2.0||−4,816||−45.1|
|Cost of sales of petroleum products||6,350||1.2||22.1||5,664||1.1||686||12.1|
|Cost of other sold goods for resale||3,902||0.7||4.1||2,615||0.5||1,287||49.2|
|Other operating expenses||36,155||6.5||4.1||37,523||7.2||−1,368||−3.6|
|Operating expenses, depreciation and amortisation exclusive||546,083||100.0||–||526,732||100.0||19,351||3.7|
|Cost of oil export (including the export customs duty)||−199,847||−36.6||−25.8||−177,574||−33.7||−22,273||12.5|
|Taxes (income tax not included)||−36,843||−6.7||−4.1||−29,662||−5.6||−7,181||24.2|
|Operating expenses (excluding depreciation and amortisation, oil export and taxes)||309,393||56.7||–||319,496||60.7||−10,103||−3.2|
Reasons for Changing the Items on the List of Operating Expenses (Excluding Inflation)
The 9.1% growth of expenses on employee remuneration, insurance premiums and social expenditures in 2018 was mainly caused by the growth of insurance premiums paid to non-budgetary state funds in view of an increase in the maximum amount of their base as well as by indexation of salaries in the second half of 2017, the increase in the average number of employees, which is associated with the construction and commissioning of new facilities of trunk pipelines.
The decrease in the amount of pension expenses for the year ended 31 December 2018 compared to last year was due to changes in legislation made in 2019. In accordance with the changes, the age when a person has the right to a state pension in the Russian Federation is gradually increasing: from 55 to 60 years for women and from 60 to 65 years for men. This led to a one-time recognition of income as of 31 December 2018 for a total of RUB 13,831 million as a result of a decrease in obligations under the pension plan.
The increase in electrical energy (electricity) costs by 5.6% was mainly due to the increase in the weighted average price (tariff) for electrical energy (electricity) and the commissioning of new trunk pipeline facilities. The outlay on pipeline network’s repair and maintenance increased by 7.8% because of scheduled overhaul.
Cost of oil export includes the cost of sale of oil bought from Rosneft under the RUB 151,586 million agreement signed in April 2009 and crude oil export customs duties in the amount of RUB 48,261 million.
The 30.9% decrease in the cost of sale of oil on the domestic market was caused by a reduction in oil sales by companies of Transneft Group. The increase in the cost of sales of petroleum products on the domestic market by 36.9% was due to an increase in the average price of petroleum products, as well as Transneft Group’s acquisition of a controlling stake in NCSP Group in September 2018.
The amount of other taxes paid by the Group listed in the operating expenses includes, above all, property tax, land and transport taxes. A 29.3% increase of this item of expenses was mainly caused by growing expenditure on property tax.
Other operating expenses include outlay on communication services and rent, transport and secondment expenses, as well as expenses and revenues resulting from disposal of fixed assets and other assets, change in reserves to match expected credit losses on receivables, fines and penalties received and paid, as well as other revenues and expenditures.