Annual reportAnnual 2019

20annual report 19Competent for success 1

CONTENTS

ABOUT THE COMPANY STRATEGY REPORT COMPANY PERFORMANCE IN 2019 CORPORATE GOVERNANCE APPENDICES

Statement from the general director ...... 2 Market conditions...... 16 Consolidated indicators Information on holding the general Official information Information on related-party transactions of Zarubezhneft group...... 70 meeting of shareholders...... 136 about Zarubezhneft JSC...... 164 concluded by Zarubezhneft JSC Production and financial indicators...... 2 Corporate development strategy...... 19 in the financial year...... 189 Expansion...... 3 Steady achievement Tax obligations of Zarubezhneft group The board of directors of the company, The company history...... 166 Technological leadership...... 4 of strategic focuses...... 20 companies...... 72 committees attached to the board Information on participation List of programs implemented of directors...... 137 by Zarubezhneft JSC as part of its Corporate evolution...... 5 Technological leadership program...... 21 Hydrocarbons exploration of Zarubezhneft JSC development strategy and production (E&P)...... 74 Audit committee...... 144 in other companies The company and its main areas The expansion program...... 23 and long-term development program...... 190 Interaction of internal and external (as of december 31, 2019)...... 168 of activity...... 8 Corporate evolution program. Socialist Republic of Vietnam...... 80 auditors...... 147 List of the bylaws governing the annual Creation of adaptive business system... 25 Republic of Cuba...... 90 List of the licenses held Consolidated corporate and project report preparation...... 190 Information about meetings by Zarubezhneft group structure of Zarubezhneft group...... 9 Talent management program. Uzbekistan...... 92 of the board of directors...... 150 in the Russian Federation...... 170 Information on the auditor Personnel development...... 27 Russian Federation...... 93 Map of Zarubezhneft group activity...... 10 of Zarubezhneft JSC accounting The revision commission Report on the execution of the instructions Long-term development program...... 28 Oil refining and sales (ORS)...... 102 statements for the financial year...... 191 Key events of 2019...... 12 of Zarubezhneft JSC...... 154 of the president of the russian federation System of key performance indicators Service and other assets...... 110 and the decrees of the government Extract from the consolidated financial Ensuring internal control within of Zarubezhneft group of companies...... 29 of the russian federation...... 171 statements of Zarubezhneft group Arcticmorneftegazrazvedka JSC...... 111 Zarubezhneft group...... 155 and information on the auditor, Investment portfolio Giprovostokneft JSC...... 113 Information about the non-core management system...... 34 Management of Zarubezhneft JSC...... 156 asset disposition program for the financial year...... 191 VNIIneft JSC...... 114 of Zarubezhneft JSC...... 184 Extract from the consolidated financial Risk management Dividend policy and information RMNTK nefteotdacha JSC...... 116 statements of Zarubezhneft group prepared system of Zarubezhneft group...... 36 on profit allocation Information on claim administration Zarubezhneftestroymontazh LLC...... 118 under the ifrs, for the year ended of Zarubezhneft JSC...... 160 of Zarubezhneft JSC...... 188 Implementation of intracorporate Zarnestserviсe LLC...... 120 on december 31, 2019, mm rub...... 192 improvement projects...... 40 Information on major transactions Glossary...... 194 Overview of Zarubezhneft’ JSC concluded by Zarubezhneft JSC Improvement projects financial performance...... 122 in the financial year...... 189 Contact details...... 195 statistics...... 42 Workforce productivity...... 123 Energy efficiency...... 44 Investment activities Environmental protection...... 46 of Zarubezhneft JSC...... 124 Gross atmospheric emissions Innovative activities...... 125 for Zarubezhneft group of companies in the “upstream” segment Digital transformation...... 128 for 2015-2019, thousand tons...... 47 Procurement Production and use of associated activity...... 130 petroleum gas by the Zarubezhneft group of companies in 2019 Perspective and expansion (the russian segment), mm m3...... 47 of the activity area...... 131 Environmental protection expenses Renewable energy sources (res)...... 132 for 2015–2019, mm rub...... 49 Occupational health and industrial safety...... 50 Human resources policies and corporate culture...... 53 Personnel composition of Zarubezhneft group in 2019 by area of activity, people...... 53 Social policies in the regions of presence...... 65 Country-by-country reporting...... 66 2 3 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

STATEMENT FROM THE GENERAL DIRECTOR

DEAR COLLEAGUES,

THE PRECEDING YEAR 2019 WAS A PERIOD OF SIGNIFICANT CHANGES, NEW PROJECTS AND CHALLENGES FOR ZARUBEZHNEFT JSC. ON THE WHOLE, WE MAY CALL IT SUCCESSFUL BECAUSE THE MAIN BUSINESS GOALS WERE ACHIEVED, MODERATE OIL SERGEY KUDRYASHOV PRICE FLUCTUATIONS WITHIN THE RANGE OF 59.5-71.4 USD/BBL AND THE ABSENCE OF HIGH MARKET VOLATILITY PREDETERMINED GENERAL DIRECTOR HIGH REVENUE AND OPERATING PERFORMANCE INDICATORS. OF ZARUBEZHNEFT JSC THE COMPANYʼS DEVELOPMENT, IN THIS REGARD, WAS BASED ON THREE STRATEGIC FOCUSES: “EXPANSION”, “TECHNOLOGICAL LEADERSHIP” AND “CORPORATE EVOLUTION”.

PRODUCTION EXPANSION AND FINANCIAL INDICATORS For Zarubezhneft JSC, this focus These results have made it possible a production sharing agreement implies, first of all, a development to start the next stage of the Boca de for the South East Ras El Ush The total production volume production level was 3.3 MM t.o.e., All the results achieved by Zarubezhneft strategy in foreign markets. Until Jaruco field project - drilling horizontal and East Gebel El Zeit blocks was in the efficient ownership share which is 1.7% higher than in 2018. JSC fully secure growing dividend recently, the Company was represented wells and testing our developed signed in Cairo between Zarubezhneft of Zarubezhneft JSC as of the end In 2020, the Company plans to maintain payments to the state budget established in countries such as Vietnam, Bosnia in-house technology for “catalytic JSC, the Ministry of Oil and Mineral of 2019 amounted to 4.77 MM t.o.e., production at the level of 2019 by the shareholder of the Company - and Herzegovina and the Republic aquathermolysis”. Drilling started Resources of Egypt, the Egyptian state oil which exceeds the planned figure in the amount of more than 3 MM t.o.e. the Federal Agency for State Property of Cuba, as well as Russia. Last year, in October 2019 in the presence holding company GANOPE and Pacific by 5.6%. This effect was achieved through Management (Rosimushchestvo). the Company entered new markets of the then Prime Minister of the Russian Oil Limited. The blocks are situated efficient well interventions (WI) carried Despite the late life cycle In 2019, the Company paid in Uzbekistan and Egypt. Federation Dmitry Medvedev. in the Gulf of Suez with a distance out in accordance with the approved of the Companyʼs main field, JV dividends to the state in the amount of 10 km between them. The estimated production program. Vietsovpetro exceeded the plan for oil of RUB 5.9 billion, which is 31% more than Zarubezhneft JSC is implementing In March 2019, JV ANDIJANPETRO geological resources at both blocks production by 15% and gas production in 2018 at RUB 4.5 billion. a project to introduce enhanced oil LLC was established in Uzbekistan are over 200 MM barrels. This laid the foundation by 12% over 12 months. At the same time, recovery methods at the Boca de Jaruco in cooperation with the enterprise for the Companyʼs high financial the Company remains the foundation heavy high-viscosity bituminous oil field Uzbekneftegaz. The enterprise With regard to South East Ras performance. Thus, Zarubezhneft’s of the Russian-Vietnamese energy in Cuba. Bitumen resources amounting operates in the territory of the Republic El Ush, Zarubezhneft JSC aims RAS-based net profit for 2019 amounted cooperation that is the largest to about 3 billion tons have been of Uzbekistan with production at three to drill an exploration well and construct to 12 billion rubles, which is 12.5% higher production asset in Vietnam, accounting discovered here. operating oil fields - Southern Alamyshyk, a pilot, main and side hole, as well than in 2018. Consolidated IFRS-based for about 30% of the countryʼs total Khartoum and East Khartoum. as to perform reprocessing and complex revenue amounted to 92.9 billion, which production. Owing to the application of unique reinterpretation of the previously is 0.9% more than in 2018. technologies and innovative approaches, ANDIJANPETRO LLC aims to more conducted 2D and 3D seismic In addition, Zarubezhneft JSC the Company has achieved very good than triple current oil production levels survey. At the East Gebel El Zeit Speaking about the success ensures a stable level of profitability results: production infrastructure for oil at the fields. In addition, the specialists block, it is planned to carry out works of our companies, I would like from production sharing agreements production and steam injection has been involved are currently undergoing in the exploration and production sites, to note that JC RUSVIETPETRO LLC, both in the Russian Federation created; for the first time ever heavy oil professional development. including drilling an exploration well a joint venture with Petrovietnam and the Socialist Republic inflows with starting flow rates exceeding in 2020. Corporation, showed excellent of Vietnam. In 2019, the first income 20 tons/day have been received Project development in Egypt results in the Nenets Autonomous from participation in the Vietnamese from the M formation; the steam-oil has become one of the key areas Area - revenues from participation Block 09-3/12 in the amount factor has decreased 7 times. of Zarubezhneft JSC’s international in the Company increased of RUB 0.4 billion was received. activity. On December 24, 2019, by 23% compared to 2018. The JC’s 4 5 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

TECHNOLOGICAL LEADERSHIP CORPORATE EVOLUTION

This focus entails the creation wells drilling - the performance exceeded Digitalization is a key area of innovation Corporate evolution is another of quality and performance management The Company is also optimistic and development of new advanced 80%, as well as implementation of Zarubezhneft JSC. In the near future, part of the overall Strategy was patented in the Russian Federal about its expansion prospects, technological expertise. It’s of paramount of the action plan aimed at stabilizing the Companyʼs Digital Transformation of Zarubezhneft JSC. A key decision Service for Intellectual Property and its development strategy includes importance both when Zarubezhneft base oil production. Strategy will allow for integrated was made to synchronously improve (Rospatent). entering markets in other countries JSC enters new projects and when planning and quick adoption of optimal processes and develop corporate culture and continents. The Middle East, the Company expands into regions where The stable condition of the resource managerial, technological and operational and personnel, taking into account As for improvement of corporate North Africa and CIS countries it is necessary to level out the possible base indicates a balanced portfolio decisions. external challenges and market trends communications, the most significant sector are of particular interest advantages of major players and local of Zarubezhneft JSC’s assets, consisting such as centralization and digitalization. event was the establishement to Zarubezhneft JSC; preparatory work market representatives. of prospecting sites and fields, In terms of data transmission, of the Global Info project, under which is already underway for the successful which allows for stable investment digitalization ensures transparency The performance management system all employees, including those working implementation of activities, including The Company’s technological advantage in exploration works (EW) and putting and reliability of the information provided. has been implemented in Zarubezhneft at the most remote regional locations, the establishment of a production center also lies in the fact that Zarubezhneft JSC new fields into development while In 2019, the Company became the first JSC since 2014. In 6 years, key have the opportunity to learn and development of the service. often takes on projects that other market maintaining financial stability. organization to obtain a comprehensive instruments of performance about the Company’s global initiatives, players have refused to participate environmental permit in this area improvement have been gradually new projects, key achievements, Sergey Kudryashov in because they considered them The audit also confirmed (CEP, a single permit that approves all integrated into it. Efforts are primarily and current results. This adjustment General Director unprofitable. These projects achieve the high projected economic profitability environmental impact regulations). aimed at improving existing business of the communications system means of Zarubezhneft JSC economic results owing to the application of field development and the availability processes. Work in this area started a transition to a more efficient way of advanced solutions and innovative of hydrocarbon reserves at the adopted The CEP project is implemented with the introduction of an internal audit of conveying corporate ideas, which, approaches. production levels until 2034. by the Federal Service for Supervision and risk management system, IFRS- in turn, positively impacts the organization of Natural Resource Usage based financial and accounting reporting, of all business processes. According to the results of the international At the same time, Zarubezhneft JSC (Rosprirodnadzor) within the framework a planning and budgeting system, a matrix audit conducted by Miller and Lents Ltd. focuses not only on innovations of the “Implementation of the best of corporate interaction, and the Integrated Overall in 2019, Zarubezhneft JSC consulting company, the 1P (proved) in the oil segment. In spring 2019, available technologies” federal project, Labor Payment System (ILPS), which demonstrated a high performance category reserves of Zarubezhneft JSC the Board of Directors of Zarubezhneft which is part of the “Ecology” national includes the principles of grading level, and in 2020 the Company increased by 13.7 MM tons to 74,800 JSC considered the development project. It includes online transmission establishment and project incentives. intends to continue moving towards thous. Tons by the end of 2019, which of renewable energy sources of the indicators showing negative the goals stated in the Strategy, provided 140% replenishment of oil (RES) as a new business direction. environmental impact from production To date, all introduced performance focusing on qualitative transformation, production volumes. The growth of 2P As with the main business, a gradual to the Federal Service for Supervision improvement tools have been integrated best practices and market trends. (proved + probable) category reserves expansion is planned in this direction, of Natural Resource Usage. into a unified comprehensive system The Companyʼs aim is not only amounted to over 7 MM tons. starting with the most familiar regions. of continuous improvement and provide to maintain its leading positions among The first power generation facilities - for a closed cycle of continuous Russian state companies, but also The Company achieved these indicators three solar power plants - will be built improvement of business processes. to reach a fundamentally new level owing to high efficiency of exploration in Vietnam. In 2019, the comprehensive system of development. 6 7 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE Sustainable

development RANKED 2-ND IN THE ENVIRONMENTAL and rich history RESPONSIBILITY RATING OF RUSSIAN OIL & GAS COMPANIES 01 ABOUT THE COMPANY 8 9 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

THE COMPANY CONSOLIDATED CORPORATE AND ITS MAIN AREAS AND PROJECT STRUCTURE OF ACTIVITY OF ZARUBEZHNEFT GROUP

Zarubezhneft JSC is a diversified state The assets and projects of Zarubezhneft Zarubezhneft Group is a sustainably oil and gas holding company serving Group are located in the Russian developing Russian oil and gas company the interests of the state. The Company Federation, the Socialist Republic of strategic importance with more EXPLORATION AND PRODUCTION OIL REFINING SERVICE has a rich history and unique experience of Vietnam, Bosnia and Herzegovina, than 30 subsidiaries and joint ventures SEGMENT AND SALES SEGMENT AND OTHER ASSETS SEGMENT in foreign economic activity. the Republic of Cuba, Uzbekistan, in various segments of the oil and gas and Egypt. industry:

49 % JV Vietsovpetro (Block 09-1) 95 % OPTIMA Group LLC 100 % RNMTK Nefteotdacha JSC

49 % Block 04-3 76 % Brod oil Refinery JSC 100 % Zarnetservice LLC

100 % VRJ Petroleum Co (Block 09-3) 82 % Oil refinery Modrica JSC 100 % Zarubezhneftestroumontazh LLC

30 % Block 09-2/09 76 % Nestro Petrol JSC 70,3 % VNIIneft JSC – A.P. Krylov All- Russian Oil and Gas 50 % JV ANDIJANPETRO LLC 95 % Neftegazincor JSC 60,1 % Research Institute 51 % JC RUSVIETPETRO LLC Giprovostokneft JSC

40 % Kharyaga PSA 100 % Explon JSC

100 % Ulyanovskneftegaz LLC XX% Arktikmorneftegazrazvedka JSC 100 % Orenburgnefteotdacha JSC

Exploration projects 100 % Block 12/11

100 % Boca de Jaruco

100 % Severo-Karasevskoe Petroleum Enterprise LLC

HYDROCARBONS EXPLORATION OIL REFINING AND SALES SERVICE AND OTHER ASSETS 50 % SEREU block AND PRODUCTION (DOWNSTREAM) (ORS) (SERVICES) (UPSTREAM) (HEP) 25 % EGZ block

Exploration, development Refining capacities, wholesale Construction and drilling services. and operation of oil and gas and retail sales of petroleum fields in the Russian Federation products, network of fuel stations. Application of advanced domestic and abroad, onshore technologies in oil and gas field and offshore. development.

Rich experience in developing Testing of modern methods complex reservoirs. to increase oil recovery in order to expand exports of high-tech services. 10 11 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

MAP OF ZARUBEZHNEFT GROUP ACTIVITY In 2019 the Company entered the new markets of Uzbekistan and Egypt

“EXPANSION” +4%

PROGRAM Hydrocarbons reserves Production assets THE FOUNDATION increase in 2019 MURMANS OF THE COMPANY’S Downstream Arktikmorneftegazrazvedka JSC +3,6 ММ t.o.e.

PROSPECTIVE Service assets GROWTH IS THE CONTINUOUS EFFORT TO EXPAND THE ASSETS PORTFOLIO AND TO SEARCH FOR NEW ASSETS ABROAD

YAMALONENETS AUTONOMOUS ORUG Severo-Karasevskoe Petroleum Enterprise LLC Reserves structure as of January 1, 2020 NENETS AUTONOMOUS ORUG EGYPT JC RUSVIETPETRO LLC SEREU block ZARUBEZHNEFT- Dobycha Kharyaga LLC 16 EGZ block UBEISTAN 5 JV ANDIJANPETRO LLC

9 37 Zarubezhneft-Dobycha Samara LLC Giprovostokneft JSC Orenburgnefteotdacha JSC MOSCO VIETNAM Ulyanovskneftegaz LLC BOSNIA AND HEREGOVINA Zarubezhneft JSC JV Vietsovpetro 33 OPTIMA Group LLC VNIneft JSC (Block 09-1) JC RVP LLC Brod Oil Refinery JSC RMNTK Nefteotdacha JSC VRJ Petroleum Co JV VSP Zarubezhneftestroymontazh LLC (Block 09-3) KhPSA CUBA Oil refinery Modrica JSC Samara group Boca de Jaruco Nestro Petrol JSC Zarnestservice LLC Block 04-3 Other Explon LLC Block 12/11 Block 09-2/12 12 13 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

KEY EVENTS OF 2019

Zarubezhneft JSC and Uzbekneftegaz The General Director of Zarubezhneft On the sidelines of The first Russia- Drilling on the first horizontal well JSC established a joint venture called JSC Sergey Kudryashov took part Africa Summit and Economic Forum at the Boca de Jaruco field in Cuba was ANDIJANPETRO LLC for operation in the meeting of two presidents: in Sochi, Sergey Kudryashov, Director launched in the presence of Russian at currently active fields South Vladimi Putin (the Russian Federation) General of Zarubezhneft JSC, took Premier Minister. This is one og Alamyshik, Khartum and East Khartum and João Lourenço (the Republic part in the meetings of Vladimir Putin, three horizontal wells where steam- in Uzbekistan. of Angola), that was held in Moscow. President of the Russian Federation, cycling treatment and steam-gravity The first persons of the two countries with Abdel Fattah el-Sisi, President drainage technologies, which have discussed the future of relationship of the Arab Republic of Egypt already proved themselves in the world between Russia and Angola and Matemela and Cyril Ramaphosa, practice in the deposites of extra- and international and regional sensitive President of the South African viscous oils and bitumen are tested. It agenda, as well as encouraged Republic. is currently planned to use advanced Zarubezhneft’s interest in building Russian technology of catalytic water bridges with Angolan partners. Zarubezhneft JSC management thermolysis, which will increase participate in the visit of Russian the performance of the Boca da Jaruco Premier Minister to Cuba. During field. the visit, Russian Premier Minister visited the Boca de Jaruco fields.

2019January February March April May June July August September October November December 2020

Production events Start-up of the Beluga field offshore At the meeting with President of Croatia Zarubezhneft JSC, NOVATEK PJSC, JV Vietsovpetro launched wellhead On December 1, Andijanneft JSC Vietnam. This start-up became Kolinda Grabar-Kitarović, a Cooperation Total Gas & Power Business Services platform No. 20, which is located actually transferred its operatorship International possible thanks to the commissioning Agreement was signed between S.A.S, and Siemens Aktiengesellschaft in the southwestern part of Block to JV ANDIJANPETRO LLC. The objectives cooperation events of the STS-1 wellhead platform. Croatian company LLC Crodux Plin, signed a Memorandum 09-1? The White Tiger field. Drilling set for JV ANDIJANPETROL LLC In the end of December 2018, Zarubezhneft JSC, and Oil refinery of Understanding (MOU) on cooperation and development of exploration to operate in Uzbekistan are production Corporate events JV Vietsovpetro completed its Brod JSC as part of the project aimed in Vietnam. The MOU envisages wells MTD-1X amd MTD-2X resulted from the existing oil fields – South organizational and technical activities at supplying gas to Oil refinery Brod. the development of an integrated in the discovery of an oil deposit Alamyshyk, Khartoum and Eastern related to the reconstruction of the RP-2 electricity generation project associated with rocks of Lower Miocene Khartoum. wellhead platform at the Dragon field, At top level, strategic documents were with the use of liquefied natural gas age. In total, there are 17 oil deposits which made it possible to connect signed for the continuous operation (LNG) in the country. at the site. A production sharing agreement to the STS-1 wellhead platform of Zarubezhneft JSC in Vietnam, for South East Ras El Ush and East at the Beluga field in due time including the Agreement for the Transfer At Kharyaga field, the first cubic Zarubezhneft was ranked second Gebel El Zeit blocks was signed in Cario and start it up. of PVEP Corporation’s 30% participation meters of associated petroleum gas in the rating of environmental between Zarubezhneft JSC, the Ministry interest to Zarubezhneft JSC regarding (APG) under the Kharyaga PSA passed responsibility of oil and gas companies of Oil and Mineral Resources of Egypt, the production sharing agreement (PSA) through the custody transfer meter in Russia. the Egyptian state oil holding company for oil and gas Block 09-2/09 offshore and were directed to the gas processing GANOPE and Pacific Oil Limited. Vietnam, the Agreement of Intent plant of LLC LUKOIL-Komi. The delivery between Zarubezhneft JSC and PVEP of gas began ahead of schedule. Zarubezhneft was the first Russian Corporation in respect of their further According to the business plan, it was company to obtain a comprehensive cooperation in the implementation supposed that the implementation environmental permit from the Federal of joint oil and gas projects in Russia, would take place in 2022. Service for Supervision if Natural Vietnam and other countries. Resources Usage (Rosprirodnadzor).

The Zarubezhneft JSC management participated in a number of meetings with President of Congo Denis Sassou Nguesso, where the parties discussed the potential cooperation in the oil and gas industry. 14 15 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Building up

expertise INVOLVEMENT OF COMPLEX in complex areas AND RESIDUAL RESERVES INTO DEVELOPMENT BY MEANS OF INNOVATIONAL GEOLOGIC EXPLORATION METHODS 02 STRATEGY REPORT 16 17 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

MARKET CONDITIONS Oil prices dynamics by year Name 2017 2018 2019 +/– % Q1 Q2 Q3 Q4 Total Brent (Dtd) (USD/bbl) 54.2 71.3 63.2 68.8 61.9 63.3 64.3 -7.0 -10 The average price of Urals grade of oil-exporting countries and increased The peak in Urals grade oil prices was Urals (Rdam) (USD/bbl) 52.9 69.9 63.0 67.6 60.8 60.9 63.0 -6.8 -10 oil as of January-December 2019 pressure from sanctions. reached on April 25 at 75.05 USD/bbl. Urals (MED) (USD/bbl) 53.3 70.2 63.5 68.1 61.8 62.1 63.9 -6.4 -9 amounted to 63.9 USD/bbl. In addition Oil quotations in 2019 ranged from 60 to the extension of the OPEC+ deal Amid the U.S. sanctions on Venezuelan oil to 65 USD/bbl, and lows were recorded USD rate (RUB) 58.4 62.6 65.8 64.5 65.0 63.7 64.7 +2.0 +3 on July 2, 2019, the price stabilization and OPEC+ measures, the price of Brent at 54.31 USD/bbl in January. Urals (Rdam) price (RUB/bbl) 3,086 4,377 4,143 4,361 3,947 3,879 4,083 -294.3 -7 factors in 2019 included the deterioration crude oil for most of the year remained Urals (MED) price (RUB/bbl) 3,109 4,398 4,177 4,394 4,013 3,959 4,136 -262.1 -6 of the political situation in a number above 65 USD/bbl. In 2019, the average price of Urals grade oil turned out to be 9% lower than the average value in 2018. During the decline in global prices by 9%, the price in ruble equivalent decreased by 6%. Oil price and US dollar to ruble exchange rate

90 75.1 80 67.2 Oil prices dynamics by year in dependence to duties and taxes 70

60 Name 2017 2018 2019 +/– % 61.8 Q1 Q2 Q3 Q4 Total 50 54.3 Urals (MED) (USD/bbl) 53.3 70.2 63.5 68.1 61.8 62.1 63.9 -6.4 -9 40 64.7 RUB/USD USD rate (RUB) 58.4 62.6 65.8 64.5 65.0 63.7 64.7 +2.0 +3 30 63.9 USD/bbl Export duty (USD/t) 86.7 128.5 87.0 104.1 95.0 88.7 93.7 -34.8 -27 20

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Mineral extraction tax (RUB/t) 8,134 12,455 12,953 14,160 12,404 12,638 13,039 +584 +5 Price net of duties and taxes (RUB/t) 9,282 11,294 11,521 10,889 10,440 10,331 10,758 -536 5

Brent (DTD), USD/bbl Urals, USD/bbl USD rate, RUB/USD Average values for 2019

Global oil production and demand, MM bbl per day

103

102 The increase in calculating the mineral extraction tax in the tax burden relative to 2018 (K ) – a factor characterizing premiums 101 MET COMPARED is mainly related to the introduction to motor gasoline and diesel fuel, which 100 of an additional multiplying factor averaged to 252 RUB/t in 2019. TO FIGURES 99

98 FROM 2018, 97 NEGATIVE TREND 96

95 IS OBSERVED 94 IN THE MARKET Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 OF PETROLEUM Oil production Oil demand PRODUCTS

The OPEC+ agreement production by 1.2 million barrels per day weeks. In December, the oil price again IN THE REGION and the U.S. sanctions policy against Iran since the beginning of the year. However, exceeded 65 USD/bbl, when OPEC+ and Venezuela contained the oil supply the market experienced a downward participants agreed to a further reduction WHERE in the market in 2019. pressure on prices throughout in production. the summer, and the price fell to below ZARUBEZHNEFT Oil prices were highly volatile in 2019. 60 USD/bbl by early autumn. In mid- The end of 2019 was marked GROUP At the beginning of the year, the barrel September, Saudi oil infrastructure was by conservative forecasts based of Brent went up from 55 USD/bbl attacked by drones, which resulted on expectations for the oversupply ENTERPRISES in January to 75 USD/bbl in April owing in a sharp price increase, which was of liquid hydrocarbons. to the OPEC+ agreement to cut oil completely offset during subsequent ARE PRESENT. 18 19 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

The decrease in furnace fuel oil to other areas. Meanwhile, the gap spread in the 4th quarter of 2019 was with the North American market, which CORPORATE DEVELOPMENT STRATEGY predetermined by the introduction was reduced in the first quarter of 2019, of the 0.5% limit on the sulfur content climbed again to the level of 2018 in fuel consumed by ships as of January by the end of the year. IN 2019, ZARUBEZHNEFT JSC The Zarubezhneft JSC Corporate Zarubezhneft JSC focuses on the fields 1, 2020 by the International Maritime CONTINUED TO IMPLEMENT Development Strategy until where the Company can expand Organization (IMO). In general, the 2019 results demonstrate STAGE 2 OF ITS CORPORATE 2030 was approved by the Board existing competencies. Primarily, Zarubezhneft Group’s efficient use DEVELOPMENT STRATEGY of Directors in 2014 (Minutes No. this refers to fields with an out-of- It is worth noting that the marginality of dynamically changing macroeconomic UNTIL 2030, ENTITLED 85 dated June 26, 2014). According balance development system and fields of petroleum refiner in the region conditions with a view to maximize its “READINESS FOR GROWTH to the strategy, the Company is mainly with complex reservoirs similar to those of Zarubezhneft JSC’s presence remains financial performance. AND FIRST SUCCESSES”. focused on the Geological Exploration developed in the regions of presence. at one of the lowest levels compared and Production segment, in which

Quotations for oil and petroleum products, USD/t

850

750

650

550

450

350

250

150

50

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

Urals Euro-5 diesel fuel Euro-5 petrol Fuel oil 3.5% 3 STAGES OF CORPORATE DEVELOPMENT STRATEGY IMPLEMENTATION: Marginality of petroleum refiner, USD/t

25 STAGE I STAGE II STAGE III 23

21

19 2014―2016 2017―2020 2020―2030

17

15 “PREPARING FOR GROWTH” “READINESS FOR GROWTH “INTENSIVE GROWTH” 13 9.60 AND FIRST” • Active work at existing assets • Entry into 5 or more new projects 11

10.80 • Development of expertise • Business development team has 9 and efficiency of all organizational been formatted 8.10 8.50 7 procedures • 3-5 new assets have been entered

5 as part of acquired expertise

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

NWE MED USNW USMW Australia 20 21 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

STEADY ACHIEVEMENT OF STRATEGIC FOCUSES

FOUR STRATEGIC PROGRAMS

Taking into account the objectives set • The Corporate Evolution Program for Stage 2 of the Corporate Strategy, is aimed at creating a flexible, adaptive the management determined 4 strategic business system to ensure efficient focus points of the Company’s work with underlying assets and quick development and elaborated Strategy integration of new assets, providing Development Programs: maximum speed and flexibility • The Technological Leadership in the management, execution Program represents a set of projects and decision-making processes. and initiatives aimed at developing • The Talent Management Program key technological expertise to improve includes objectives for creating the performance of current assets a personnel reserve (talent pool) and implement international and rotation programs for key expansion. positions to staff new international • The Expansion Program includes a set projects. of project objectives for searching, evaluating and entering new projects, as well as creating efficient tools for searching for and evaluating projects, and mechanisms for conducting efficient work in new countries and regions.

KEY OBJECTIVES OF THE SECOND STAGE OF CORPORATE STRATEGY

FURTHER TECHNOLOGICAL ENTERING CONTINUOUS COMPLETION TECHNOLOGICAL EXPERTISE NEW PROJECTS MANAGEMENT OF COMPETENT DEVELOPMENT 1 ABROAD 2 IMPROVEMENT 3 PERSONNEL TRAINING 4 LEADERSHIP PROGRAM

The Company and the Group GEOLOGICAL EXPLORATION detailed field appraisal, localization prioritize the Geological Exploration WORKS PERFORMANCE and development of residual 4 STRATEGIC FOCUSES OF ZARUBEZHNEFT DEVELOPMENT and Production segment, IMPROVEMENT – RESOURCE reserves through innovative methods which generates a major part BASE EXPANSION for exploration works. TECHNOLOGICAL EXPANSION CORPORATE EVOLUTION TALENT MANAGEMENT of the consolidated net profit LEADERSHIP PROGRAM PROGRAM PROGRAM PROGRAM and cash flow. The Company focuses Within the framework Development and implementation on the development of competitive of the Technological Leadership Program, of advanced technologies The program consolidates The program consolidates In provides a flexible, adaptive It includes a package advantages and technologies a comprehensive innovation project for comprehensive interpretation and synchronizes key and synchronizes business environment to work of comprehensive programs in this segment in accordance titled “Opening” has been initiated of seismic materials and well-logging millestones and KPIs the objectives of different effectively with current to identity, develop with the existing and prospective assets. and implemented. data (neural networks, machine learning, of the developed and tested blocks and subsidiaries. underlying assets, quickly and promote talented artificial intelligence), geological technologies portfolio: In search of new projects integrate new assets employees in the group • Catalytic water and expansion of the resource and improve the efficiency of Companies: In 2019, the comprehensive The purpose of the project is to ramp and basin modeling, automation thermolis technologies base in Russia, the CIS of expansion processes. • Formation of employee Technological Leadership program up the resource base and to transform of repetitive manual labor while improving (for Informational oil and the priority countries, Including the targets: pool and rotation programs was set up to develop key areas it into commercial reserves in order performance standards – all these rank upgrading) as well as projects • Maximum speed for key positions in new of technological expertise and implement to achieve a production level of more high in the Company’s activities related • Chemical methods of oil objectives to create of decision making foreing projects recovery enhancement effective tools for search • Management processes • Development of an experts the best technical solutions along than 15 MM t.o.e. by 2030, in accordance to geology and exploration. (begening of pilot works) and evaluation of new projects automation with parallel and methodologists the entire process chain. It includes with Zarubezhneft JSC’s Corporate • Development of mobile and mechanism for effective re-engineering system projects in the following areas: Strategy. A high-priority objective of the Opening solutions for remote field work. In new countries • Service model • Gradual improvement • Technology to upgrade geological Project for the period until 2025 development and the region. implementation of personnel expertise • Production digitalization throught internal training exploration performance; Achievement of this goal is ensured is to create and automate a continuous projects schools (Oil Engineering • Increased oil recovery factor (ORF); by performance gains in searching chain from digital core, petrophysics, School, Project • Technologies for efficient for promising features at the existing well-logging data, seismic survey, Management School, development of small fields. assets as well as in complex traps; and regional and basin modeling to digital Leadership School) 22 23 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

geological models, as well as to update tool, which makes it possible • To elaborate technological The NESTRO-TEC Project includes • To cut specific energy costs associated • A Russian-made oil-fueled power them in an automated fashion based to assess the impact of each measure processes for bitumen production a set of technological initiatives aimed with production of oil-containing liquid; plant running on all types of oil — on the new data that are constantly and their interaction with the peripheral and processing; at developing mobile process solutions • To cut operating costs associated this is a diesel power plant equipped received. Application of Big Data and Data formation area. One of the solutions • To develop technologies and equipment, as well as cutting with energy-consuming equipment; with fuel equipment developed Mining technologies (acquisition of new is intermittent injection aimed to increase for monitoring development the cost of existing components, • To improve the quality of scheduled by Zarubezhneft JSC, to be operated knowledge based on the data – machine the performance of displacement (when by thermal methods; which contributes to the end product repair operations involving surface using class 3 oil; learning, artificial intelligence, etc.) the volume of injected water is decreased) • To develop specialists’ expertise recovery at the pilot field operation equipment; • Energy Performance of Oil and Gas will improve the accuracy of planning due to a non-steady impact and injected in the area of thermal EOR. stage, with the possibility to influence • To ensure efficient operation of wells Enterprise Analytical Information and decision-making time. water breakthrough risk minimization. the performance of technological of a complex profile; System (EPOGE AIS); Zarubezhneft JSC together with Kazan operations. • To reduce capital costs associated • Oilfield Equipment Integrity The experience with application of 3D/4C Also in 2019, a large-scale revision (Volga Region) Federal University with field facilities installation. Management Information System seismic surveys using seabed recorders of the formation pressure maintenance carried out R&D work on technology The objectives of the comprehensive (OEIMIS) — an automated system on the Vietnamese offshore fields (FPM) system continued on the central for enhanced oil recovery of high- innovation NESTRO-TEC Project are: Within the framework of the NESTRO-TEC for areal oil production, preparation is an example of how the information arch segment of the Lower Miocene viscosity oil fields using the catalytic • To develop fields with mobile Project, it is planned to carry out complete and transportation facilities. content of seismic data can be improved. of the White Tiger field while a line-drive aquathermolysis method. The technology preliminary water discharge units testing and reproduction of technologies When longitudinal and converted waves water flooding was being developed. will allow for intensifying in-situ at the early stage of construction developed in 2016-2018, including: are jointly used, not only the lithological Overall, the measures carried out upgrade of heavy oil during thermal- and development; • MWDU for small fields (NESTRO- composition of rocks can be predicted, in 2018-2019 allowed to reduce the base steam treatments, which will enhance • To generate electric power using oil KSI/Kickoff Surface Infrastructure) — but also the fluid saturation of the reservoirs. production decline rate at terrigenous the produced oil quality, decrease instead of diesel fuel; Mobile Water Discharge Unit (MWDU) facilities from 25% to 20%. oil viscosity and, ultimately, improve • To cut capital and operating costs is deployed directly at the field INCREASED the energy and economic performance of APG processing associated for the period of pilot production OIL RECOVERY FACTOR (ORF) Implementation of hydraulic formation of the Boca de Jaruco field development. with electrical power generation; and it can be quickly relocated using fracturing (HFF) program on the offshore • To reduce the APG flared volumes; road and rail transport; The Company successfully implements field of the Socialist Republic of Vietnam Technology development for exploration technologies to increase the oil recovery of low-permeable and unconventional factor and maintain the base production By applying the knowledge and expertise reservoirs. The TIGHT OIL Project levels: of the Russian Participant in 2019, THE EXPANSION • Application of technologies aimed a program was successfully carried out Global trends in recent decades show that PROGRAM at developing previously non-drained the application of hydraulic formation oil companies introduce assets with hard- reserves in the development (Kcov); fracturing (HFF) at JV Vietsovpetro to-recover reserves concentrated in low- • Application of technologies fields (Blocks 09-1 and 09-3/12). permeability reservoirs into production. In accordance with the Zarubezhneft aimed at increasing performance The total actual growth in production While understanding the importance JSC Corporate Strategy, the basis of displacement from hydrophobic at the wells amounted to more than 600 of this phenomenon, Zarubezhneft for the Companyʼs long-term growth reservoirs (Kdisp); t/day. The successful outcomes allow JSC expanded its resource base based is entering new oil and gas projects. • Selection of technologies for efficient us to count on development of up to 40 on unconventional reservoirs, having The Company is constantly working development of previously million tons of non-drained geological acquired the Lutseyakhskoye field to expand its portfolio of assets unprofitable reserves. reserves of the Upper and Lower with residual recoverable reserves and search for new assets abroad. Oligocene on the offshore field in Vietnam. of 11 million tons. Positive production dynamics Zarubezhneft JSC adopts the following are ensured through implementation Technology for enhanced oil recovery TECHNOLOGIES underlying principles intended to expand of the following measures. of high-viscosity oil fields by the method FOR EFFICIENT its global reach: of catalytic aquathermolysis. The Enthalpy DEVELOPMENT OF SMALL • Application of proprietary technologies Optimization of formation pressure Project FIELDS. THE NESTRO-TEC and expertise; maintenance (FPM) system at terrigenous PROJECT • Establishing partnerships primarily reservoirs of the White Tiger field The Company initiated and implemented with state-owned oil and gas a comprehensive innovation project The NESTRO-TEC project is being companies. In 2019, a successful building of the FPM entitled “Enthalpy” to systematize work implemented as part of the “Technological system at the terrigenous features in this area. The project objectives are: Leadership” strategic focus of Block 09-1 fields on the Vietnamese • To achieve target production levels in order to ensure efficient oil production offshore fields was resumed. Block- at the Boca de Jaruco field; with minimal capital and operating costs, by-block development analysis elicited • To develop SAGD modeling and design increase mobility based on production some problem sites and an individual technologies; of modular aerial equipment, increase approach to the FPM operation was • To develop characterization energy performance, and introduce new developed for each of them. Geological approaches for bituminous product-processing technologies. and hydrodynamic models are used formations; as a FPM optimization and calculation 24 25 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

In 2019, the Company continued In cooperation with Uzbekneftegaz JSC, The beneficial cooperation between CORPORATE EVOLUTION Implementation Stages of Performance Enhancement Tools searching for and assessing new Zarubezhneft JSC began to actively the companies and the Egyptian state PROGRAM. CREATION at Zarubezhneft JSC projects within the Russian Federation explore the possibility of joint operation authorities, which was established in the traditional regions of presence in the Republic of Uzbekistan to pursue through negotiation, contributes OF ADAPTIVE BUSINESS in order to achieve maximum synergy. these plans. In the course of operation, not only to achieving high performance SYSTEM 2014 Improvement project implementation On July 19, 2019, a license was obtained three fields of the Ferghana Valley of the participants in the framework for geological survey, exploration were identified with an out-of-balance of production indicators, but also and production of mineral resources development system at the licensed to strengthening Russian-Egyptian A performance management system 2015 Goal setting system implementation at the Zapadno-Yareyaginsky site sites of Andijanneft JSC (a subsidiary cooperation in general. has been implemented in Zarubezhneft (Zapadno-Yareyaginskoye field) of Uzbekneftegas JSC) to carry out work JSC since 2014; in the past six years, key for 25 years. The site is located to increase performance of existing RENEWABLE ENERGY performance improvement instruments 2016 Business processes system implementation in the Nenets Autonomous Area oil fields: South Alamyshyk, Khartoum SOURCES (RES) have been gradually integrated into it. of the Russian Federation, the nearest and East Khartoum. IS A NEW AREA OF ACTIVITY fields being developed: the Severo- FOR ZARUBEZHNEFT JSC Today, all implemented performance Khosedayuskoye oil field (15 km NW), In 2019, JV ANDIJANPETRO LLC (joint enhancement tools are integrated 2017 Regulation system re-engineering the Syamayuskoye field adjacent venture) was established between For the purpose of ensuring sustainable into a single comprehensive system to it in NE, and the Kolvinskoye field Zarubezhneft JSC and Uzbekneftegaz development of the national economy of continuous improvements and provide (12 km to the south). JSC, the state company of Uzbekistan. as well as solving escalating a closed loop for continuous improvement 2018 Implementation of businesses processes maturity assement, focus In December 2019, licenses climate issues, advanced states of business processes (PDCA cycle). on benchmarking One of the key regions of presence and production claims for the right are strengthening their energy efficiency is traditionally Vietnam, where to use subsurface mineral resources policy in production and increasing In 2019, a comprehensive quality 2019 Re-engineering and automation of processes: BPM, FAST TRACK the Company successfully entered new at the fields of South Alamyshyk, the share of renewable energy sources and performance management system projects in 2019. Khartoum and East Khartoum were in the total energy balance. was patented with the Federal Service • On May 22, 2019, an Agreement transferred to the joint venture. for Intellectual Property (Rospatent) was signed in Moscow between At the same time, the Shareholders When diversifying their businesses, oil of the Russian Federation. PVEP and Zarubezhneft JSC Agreement, the Participants Agreement, and gas companies rely on their unique to transfer 30% participating interest the Oil Supply Contract and other experience in onshore and offshore Zarubezhneft Quality and Performance Management System regarding the production sharing documents necessary for the joint drilling, oil and gas refining, transport agreement (PSA) for Block 09-2/09 venture were signed. and installation operations, and trading Business processes data sheets to Zarubezhneft JSC. operations. Oil and gas companies DEVELOPMENT • In May 2019, Zarubezhneft In 2019, the Company focused expand the activity area of renewable STRATEGY JSC joined a consortium on entering projects in Egypt with a view energy sources through developing Knowledge maps Authority distribution of participants in the Сana Project to developing business and establish their own expertise, purchasing core (reports on lessons learned/ order Processes regulation, along with recognized leaders presence in the Middle East and North assets, as well as through cooperating best practices) job descriptions in their areas, international companies Africa. with leading suppliers of technological Business NovaTek PJSC, Total and Siemens. equipment and project developers. processes The purpose of the project On December 24, 2019, a production Sessions Structure is to meet the growing demand sharing agreement for the South East Ras Knowing the potential of renewable on lessons (powers of the Vietnamese market for gas El Ush and East Gebel El Zeit blocks was energy sources in the future learned and responsibility) and electricity in an environmentally signed in Cairo between Zarubezhneft and their increasing competitiveness

friendly, reliable and efficient JSC, the Ministry of Oil and Mineral versus fossil fuels, the Board of Directors Change IRD/Interal Regulatory way by creating the necessary Resources of Egypt, the Egyptian state oil of Zarubezhneft JSC addressed (improvement) projects Zarubezhneft change Documents Optimization plan (regulations/techniques) infrastructure, including an LNG holding company GANOPE and Pacific the issue of developing RES projects Changes implementation and business processes Regulation management regasification terminal and a power Oil Limited. The blocks are situated in March 2019. A few months later, system plant. in the Gulf of Suez at a distance in June 2019, the new Department • Zarubezhneft JSC considers business of 10 km from each other. Estimated for Development of Renewable Energy development in CIS countries as one geological resources at both blocks Sources was created as a structural unit BP maturity level Labor intensity assessment following of operations of the key areas of its international are over 200 MM barrels. of the Company in order to implement changes activities. stage-by-stage development of its own Development of the projects in Egypt expertise as a related business, which Analysis BP of levers to increase performance is one of the key areas of Zarubezhneft would be an additional factor in improving BP performance control

JSC’s international activities. the sustainability of its own structures. BP maturity level Number rationing

Organisational KPIs, analytical reports on BP, benchmarketing KPIs, ratings, BP deadlines 26 27 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

TALENT MANAGEMENT Balance between interests of employees and company PROGRAM. PERSONNEL DEVELOPMENT EMPLOYEES’ INTERESTS COMPANY INTERESTS

HR management’s key strategic focus is to train talent for new projects. With this in mind, the Talent Management Program was initiated and is being implemented.

MAIN PROGRAM OBJECTIVES:

• To carry out systematic work to identify, develop, and use human potential for solving the Company’s DEVELOPMENT AND CAREER EFFICIENT PROJECT TEAMS strategic objectives. (growth of professional For evaluation and entry into new • To build cross-functional teams and managerial expertise, projects with expertise and skills for efficient appoitmats, rotations) work in various regions, taking MOTIVATION RESPONSIVE PERSONNEL into account cultural and national (fair evaluation of performance, (high level of readiness to work characteristics. effective feedback, recognition) on foreing projects)

To implement the objectives, key tools POSITIVE ENVIRONMENT APPLICATION OF HIGH-TECH SOLUTIONS, for the Talent Management Program CONTINUOUS DEVELOPMENT (comfortable working conditions, are in three areas: high level of automation, positive (skilled specialists having high • development of technological atmosphere) competence and motivated for further Based on the strategic goals of Zarubezhneft’s JSC adopted • implementation of complex digital competencies; development) of the Company to increase current strategic planning documents, including projects and pilot testing of digital • identification and development assets performance and to implement the corporate development strategy technologies and solutions available of leaders; international expansion, further and long-term development program, on the market; • training of teams for new international development of processes and systems and is closely linked to the Company’s • building of a training system projects. is seen in building an adaptive business innovative development program for the Group of Companies system that is characterized by decision- and the IT strategy. employees and their involvement A training and development system making time, change rate, and uniform in implementing the Digital has been created to prepare personnel operating standards. During Stage 1implementation Transformation Strategy; to participate in new projects, which of the Strategy, the Company already • targeted search and use of digital includes: In 2019, the Corporate Evolution Program implemented many projects to automate technologies for quick search, • corporate petroleum engineering was elaborated and implemented production and management processes; identification, and evaluation of new school, in which more than 700 to pursue this objective. overcame fragmentation of source assets; participants were trained in 17 information flows in all segments, • transition from predictive production courses; Zarubezhneft’s JSC Corporate Evolution which increased convenience and ease to prescriptive analytics. • corporate project management Program is implemented according of data use; ensured the fastest possible school, in which 18 specialists were to the following key activity areas: reception, processing, and analysis The priority focuses of Zarubezhneft’s trained; • creation of adaptive business of data; and outlined efficient JSC strategic development determined • corporate leadership school, processes; management mechanisms data. the digital project portfolio included which trained more than 290 • creation and development of digital in the Digital Transformation Program. participants in three basic programs: organizational decisions; Starting from 2020, Zarubezhneft These are mainly the key projects “Modern Management Practices”, • creation of efficient communication JSC has begun implementing Stage 2 that have had the greatest impact “Management Potential Development”, system, tools, and uniform of the Digital Transformation Strategy. Its on Zarubezhneft JSC business due and “Efficient Leader”; • the NestroLead program, in which management standards. key objectives will be: to the introduction of digital solutions • rotation system, which rotated 756 Group employees expressed • corporate data management and projects in the Company’s priority 62 of the Group’s key employees their willingness to develop In 2019, the Company elaborated automation; areas for technological and innovative internally; and participate in new projects. and approved the Digital Transformation • ensuring data quality development. Strategy. The Digital Transformation and its compliance with corporate Strategy takes into account requirements; and comprehensively supplements • automated formation of corporate the goals and objectives reporting based on source data; 28 29 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

LONG-TERM DEVELOPMENT SYSTEM OF KEY PERFORMANCE PROGRAM INDICATORS OF ZARUBEZHNEFT GROUP OF COMPANIES THE ZARUBEZHNEFT JSC LONG-TERM DEVELOPMENT PROGRAM (LDP) WAS ELABORATED PURSUANT TO DIRECTIVES FROM THE GOVERNMENT OF THE RUSSIAN FEDERATION DATED JULY 17, 2014, NO. 4955П-П13. THE ZARUBEZHNEFT JSC BOARD OF DIRECTORS APPROVED THE LDP ON NOVEMBER 20, 2014 (MINUTES OF MEETING NO. 91). THE SYSTEM OF ZARUBEZHNEFT JSC’S KEY PERFORMANCE INDICATORS (KPIS) IS INTENDED TO MOTIVATE THE MANAGEMENT OF THE COMPANY AND SUBSIDIARY Three principal KPI COMPANIES TO FULFILL THE TASKS SET BY THE STATE (AS THE 100 PERCENT categories can be delineated The LDP was agreed upon Zarubezhneft carries out targeted work in integrated project implementation, SHAREHOLDER OF THE COMPANY), ZARUBEZHNEFT STRATEGY KEY INDICATORS, within the Company’s KPI with the following supervisory bodies: in several key areas intended to improve namely Southeast Asia, the Russian THE LDP, ZARUBEZHNEFT BUSINESS PLAN INDICATORS, AND ONGOING system: 1. The Strategic Planning Committee performance in the main Geological Federation, and the Middle East. ZARUBEZHNEFT JSC INVESTMENT PROJECTS. of the Zarubezhneft JSC Board Exploration and Production segment: The strong points of existing Company of Directors, Minutes of Meeting No. 1, • Maximizing synergy of the Group’s expertise are the considerable experience dated September 19, 2014. existing assets with new projects. gained in increasing current assets 2. The Expert Council of the Government • Expertise enhancement in efficient value by expanding the current assets of the Russian Federation, Letters development of complex reservoirs resource base, enhancing development CORPORATE FUNCTIONAL PROJECT No. ЭС-2909/02 dated September 29, through development of scientific performance by increasing the oil (financial and industrial (operational indicators (strategic initiatives 2014, and No. ЭС-1211/02 dated assets of the Company, VNIIneft JSC, recovery factor for fractured basement indicators) for business areas) for business areas) November 12, 2014. and Giprovostokneft JSC. deposits, and active involvement 3. The Federal Agency for State Property • Development of a full cycle service in development of terrigenous block Management (Rosimushchestvo), for fields at any development stage structures of low thickness. • Main indicators • The functional business areas • Top business initiatives Letter No. 05/43392 dated by arranging for appropriate full- of the Company’s activities indicators are established and project tasks performance October 10, 2014. scale internal construction and drilling are approved and supervised for the Deputies General indicators are established 4. The Ministry of Energy contractors based on the service by the Board of Directors, Audit Director, department heads for the Deputies General of the Russian Federation, segment. Zarubezhneftestroymontazh Committee under the Board and subsidiaries’ general Director, department heads Letter No. KM-11835/05 (KM) LLC has continued operating of Directors. directors in accordance and subsidiaries’ general dated October 20, 2014. as a full-scale construction contractor • Included into with the authorities directors. 5. The Ministry of Economic for Zarubezhneft Group, and work the General Director’s cards and responsibilities matrix. • Approved and supervised Development of the Russian on expanding its own capacities and are accounted for when • Approved and supervised by the General Director. Federation, Letter No. 26273 НП/Д07 is in process. RMNTK Nefteotdacha summarizing the KPI results by the General Director. (NP/D07) dated October 24, 2014. JSC is proceeding with projects of all Deputies General 6. The Government Commission to develop services for sidetracking Director, department heads, on the Fuel and Energy Complex, operations, with further replacement are broken down in the KPI the Reserve Replacement, of third-party contractors of the subsidiaries’ general and Improving the Economy’s Energy and supervision of JC RUSVIETPETRO directors. Performance, Minutes of Meeting LLC remote fields and other assets No. 2 dated October 23, 2014. of the Group of Companies.

It is envisaged to develop the existing The primary task for the Company’s enterprises with an outlook up to 2030 future development is not only intensive MAIN OBJECTIVES OF THE KPI SYSTEM: and two perspective development development of current production options (upside), with the purpose assets but also active exploration of a comprehensive evaluation of and joining promising large oil and gas • Monitoring and control over the Company’s Corporate strategy implementation of the Company’s assets under the LDP: production investment projects. • Assessment of the strategic goal’ achievement geological exploration projects in which • Employees’ commitment to the achievement of the Group of Companies’ priority goals Zarubezhneft JSC participates, either First of all, potential regions • Development of a tool contributing to the improvement of the managerial decisions’ directly or indirectly, and potentially are considered in which the Company efficiency attractive investment projects. has accumulated significant experience 30 31 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Internal regulatory documents that • Executive Order of the Government • Directives of the Government • The Zarubezhneft JSC Board • In accordance with the Rules Consolidated revenue, govern the Zarubezhneft JSC KPI system: of the Russian Federation dated of the Russian Federation No. 1472п- of Directors reviewed the KPI and Regulations of the Zarubezhneft MM RUB • Regulation on Zarubezhneft KPIs June 27, 2019, No. 1388-р(r) “On П13 (p-P13) dated March 3, 2016, “On performance interim results for 1st KPI system, KPI implementation approved by the Board of Directors, approval of guidelines for use of key innovative development.” Quarter 2019 (Board of Directors by Zarubezhneft management (Deputy 120 % Minutes of Meeting No. 131 performance indicators in business Minutes of Meeting No. 169 dated General Directors, department heads) 97,508 dated November 25, 2016; entities (companies) activities The KPI system indicators June 11, 2019), the report on corporate and general directors of subsidiaries • Zarubezhneft KPI registration in authorized capitals of which are synchronized with the LDP KPIs. KPI achievements as per end-of-year was defended before the General certificates approved by the Board the share of the Russian Federation forecast taking into account the actual Director on a semi-annual and annual 63,598 of Directors, Minutes of Meeting or a constituent entity of the Russian In 2019, the following measures were value for First half 2019 (Minutes basis. No. 131 dated November 25, 2016 Federation exceeds 50 percent, carried out regarding KPI operation of Meeting No. 173 dated September (the certificate of integral KPIs and performance indicators and improvement: 30, 2019), and the report on corporate Therefore, the Company’s KPI system for innovation activities was approved of state unitary enterprises • In accordance with the Guidelines KPI achievements as per end-of- covers all key management levels on August 21, 2017, Minutes in order to determine the amount for Use of Key Performance Indicators year forecast, taking into account of the Group of Companies in 2019: 2019 2019 Target (Performance) of Meeting No. 141). of remuneration for their senior by State Companies, the Board the actual value for nine months • Corporate center management executives”; of Directors approved the Report of 2019 (Minutes of Meeting No. 174 (Deputy General Directors External control of corporate KPIs • Directives of the Government on Achievement of Corporate KPI dated November 26, 2019); and heads of directorates/ EBITDA, MM RUB is carried out by the following documents: of the Russian Federation No. 7389п- Target Values for 2018 (Board • In accordance with Directives departments) – 38 persons; • Directives of the Government П13 (p-P13) dated October 31, 2014, of Directors Minutes of Meeting of the Government of the Russian • General Directors of subsidiaries – 120 % of the Russian Federation No. 2579п- “On increasing workforce productivity No. 168 dated May 29, 2019), Federation No. 9054п-П13 (p-P13) 16 persons; П13 (p-P13) dated April 25, 2014, “On in the company”; and the corporate KPI values were dated October 2, 2019, Zarubezhneft • Deputy General Directors

approval of key performance indicators • Directives of the Government updated for 2020 (Board of Directors JSC analyzed the internal regulatory of subsidiaries – 71 persons. 26,433 of the Company’s activities” (taking of the Russian Federation No. 2303п- Minutes of Meeting No. 175 dated documents related to formation 21,748 into account the accompanying П13 (p-P13) dated April 16, 2015, “On December 26, 2019); of KPIs and remuneration Total amount of controlled indicators – guidelines on the use of KPIs); reducing operating expenses (costs) for the Company’s senior over 400. by at least 2-3 percent annually”; executives based on the results of their achievement for compliance KPI performance is monitored 2019 2019 with the “Guidelines on use of key on a quarterly, semiannual, and annual Target (Performance) performance indicators in business basis. entities activities in authorized capitals in which the share of the Russian To summarize, the planned indicators In terms of the EBITDA indicator, Federation or a constituent entity were normalized taking into account the actual value amounted of the Russian Federation exceeds changes in external macroeconomic to 26.433 MM RUB, which 50 percent, and performance conditions, such as exchange rates corresponds to 120% achievement indicators of state unitary and global prices for oil and petroleum of the KPI. Zarubezhneft Group operating enterprises in order to determine products. Normalization was carried out efficiency is traditionally ensured the amount of remuneration according to the approved procedure by positive results in the Exploration for their senior executives” (hereinafter for normalization of the Zarubezhneft and Production segment, which referred to as the Guidelines). Group activities’ key indicators is mainly due to the performance of JC The Zarubezhneft JSC Board (Order No. 402 approved on September RUSVIETPETRO LLC and JV Vietsovpetro of Directors reviewed and took note 21, 2016). during the fiscal year. of the Analytical Report. In order to comply with the Guidelines, In terms of the Consolidated As per Zarubezhneft JSC Dividend weights were redistributed between Revenue indicator, the actual value Policy approved by the Board the Zarubezhneft corporate KPIs. amounted to 97.508 MM RUB, which of Directors (Minutes of Meeting In addition, in 2019 the registration corresponds to 120% achievement No. 134 dated February 16, 2017), certificates of Zarubezhneft corporate of the KPI. The indicator is generated the amount of dividends is at least KPIs were updated (Minutes based on consolidated financial 25% of the highest of two values: net of Meeting No. 175 dated December statements in accordance with the IFRS, profit as per the RAS adjusted to reflect 26, 2019); while income from JV Vietsovpetro income/expenditures from revaluation • The KPI system has been transferred recognized in the IFRS statements of the subsidiaries’ publicly traded to the level of Deputy General is excluded, and including income securities and the associated income tax, Directors of subsidiaries, a production from participation in JV Vietsovpetro and net profit as per the IFRS. In terms contract has been developed (a single that is recognized in the Company’s of the Dividends Amounts indicator, set of indicators for top managers statements according to the RAS. the actual indicator value was equal of the subsidiary); 32 33 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

to 5.918.5 MM RUB in 2019. The indicator the hydrocarbon reserves were increased OPEX decrease dynamics Achievement of KPI Target Values in 2019 was achieved. The dividends due mainly due to geological exploration for 2019, MM RUB Indicator Indicator weight, % Target Actual Implementation, % to the Russian Federation on the shares and reassessment of the existing assets owned by the Russian Federation were in Vietnam and the Kharyaga field, Consolidated revenue, mln RUB 5 63,598 97,508 120.0 paid on August 9, 2019, in accordance as well as due to entering new projects −3 % EBITDA, mln RUB 5 21,748 26,433 120.0 with the Federal Agency for State in Vietnam, Egypt, and Uzbekistan. Dividends amount, mln RUB 20 4,603 5,918.5 100.0 49,967 48,399 Property Management’s Order No. Return on equity (ROE), % 10 5.0 9.2 120.0 409-р dated June 30, 2019, “On For actual calculation of integral 30,543 Workforce productivity, thsd RUB/manhour 10 67.7 81.8 120.0 resolutions of the annual general meeting KPI for innovations, a 100% limit of shareholders of Zarubezhneft JSC.” was established for each indicator Reduced operating expenses (costs), % 10 2.0 3.1 120.0 component; the overall indicator Gross production volume, thsd TOE 15 4,515 4,770 120.0

The actual value of the Share Capital achievement was fixed at 100%. 2018 2018 (Norm) 2019 Reserves, thsd TOE 15 99,071 103,815 119.2 Profitability indicator amounted to 9.2% Integral KPI of innovative activity, % 10 100 100 100.0 with the target level of 5.0%. Zarubezhneft The bonus reduction includes two Group’s net profit increased by 16% indicators: Non-Exceedance of NetDebt/ Compilance with corporate KPIs 113.9 and amounted to 13.5 bln RUB in 2019. EBITDA Limit and Revenue Target The overall final degree of the KPIs Non-exceedance of NetDebt/EBITDA indicator limit Bonus reduction 2.0 0.0 Bonus reduction Achievement. Both indicators have achieved for 2019 is estimated at 113.9%. indicator indicators were achieved The Workforce Productivity indicator been achieved and the bonus reduction Each achieved indicator of the chart is estimated as Zarubezhneft’s factor is equal to one. The NetDebt/ exceeded the established target levels; Achieving revenue target, % Bonus reduction 70 153 Bonus reduction indicator index equals 1 JSC revenue as per the RAS, EBITDA indicator in the financial most of the indicators reached ambitious calculated in conditions comparable year is equal to zero, which is due values (six of the nine main indicators). FINAL PERFORMANCE 113.9 to 2018 and correlated to the decrease of the debt burden Excluding normalization of the planned with the number of person-hours worked and the efficient management indicators, the overall achievement of all by the Company’s employees. In 2019, of the liquidity of Zarubezhneft Group. KPIs is also estimated at 113.9%. the indicator value was RUB 81,800 RUB/ person-hour with the established target value of 67,700 RUB/person-hour.

Operating costs reduction was approved with the target value of –2% (Directives No. 2303п-П13 (p-P13) dated April 16, 2015). As per the Cost Performance Improvement and Optimization Report for 2019, the actual value of the Operating Expenses Reduction indicator at the year-end made up 3.1%, which exceeded the value established by the Directive of the Government of the Russian Federation. The primary factor for normalization in the amount of 16.4 bln RUB was the emergence of a new type of activity, trading oil and petroleum products with Zarnestservice LLC in 2019.

Zarubezhneft Group’s gross hydrocarbon production in 2019 amounted to 4.77 t.o.e. with a target value of 4.515 t.o.e. The growth in the actual value was provided by an increase in the production of JV Vietsovpetro.

As a result of efficient geological exploration, the actual amount of reserves by the end of the reporting period amounted to 103,815 t.o.e. with a target value of 99,071 t.o.e. In 2019, 34 35 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

NPV dynamics of Zarubezhneft Group, INVESTMENT PORTFOLIO MM RUB

MANAGEMENT SYSTEM +3 %

146,626 150,860

IN 2019, THE DEVELOPMENT OF THE INVESTMENT PLANNING SYSTEM WAS MAINLY FOCUSED ON OPTIMIZING PROCESSES TO IMPROVE THE QUALITY AND SPEED OF DECISION-MAKING AMID THE CONSTANTLY INCREASING VOLUME OF INFORMATION.

LTDP 2018 Cur. LTDP (Norm) A separate area of development The ELMA BPM system was introduced As part of updating and monitoring is to optimize the comprehensive in the corporate center to increase processes, high results were achieved appraisal process within the context the efficiency of the investment process. in terms of reducing process effort The results of updated investment of monitoring existing projects This system enables continuous and increasing the level of automation: projects within the framework and entering into new ones. In 2019, optimization of the business process of a forecast for implementing vectors for further elaboration of project along with its automation, using a single the Zarubezhneft LDP show that appraisal tools were identified. information field for operation, monitoring the positive dynamics of the net present execution, and receiving the necessary value in the current Zarubezhneft Group analytics. investment portfolio are maintained.

Apart from investment project The sphere diameter demonstrates the level of labor intensity of the process, FTE monitoring, the Company carries out regular implementation control of well interventions (WI) on a monthly basis. High Area of the target automation Each WI is subject to rapid evaluation 7 FTE level and share of support according to the investment analysis processes principles. The specified interventions Average provide for mandatory determination Before of the minimum viable oil price for a zero the implementation economic outcome for each project of Fast Track activities and initial screening out of projects

Automation level Automation Low not capable of positive implementation 14 under the targeted macroeconomic FTE conditions.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Additionally, the exchange rate and oil prices are regularly monitored, compared Share of support activities with approved indicators, and assessed on how they impact the investment Based on the results in the corporate Monitoring is the main tool for investment The existing investment decision- project portfolio in order to manage center, the decision was made to replicate portfolio management during elaboration making system with high requirements the macroeconomic parameter rate risk. the system for the subsidiaries and implementation of investment projects. for elaboration of each project allows of the Group. It is mainly intended to obtain accurate achieving the maximum possible Combined application information on investment projects’ results accuracy of costs planning at each stage of the tools presented allows and prospects for justified and timely of investment project implementation. for achieving the maximum performance management decisions. All projects of the Company’s investment activities approved by the Company’s Investment at each stage of the investment planning Committee are subject to monitoring. process. 36 37 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

RISK MANAGEMENT RISK COMMITTEE GROUP LEVEL MOST SIGNIFICANT BUSINESS SYSTEM OF ZARUBEZHNEFT GROUP RISKS SEGMENT RISKS DEVELOPMENT UNIT RISKS

Curators: Curators: Curators: Deputy Directors General Directors General supervising Deputy Directors General Zarubezhneft Group intends to maximize • To ensure the maximum performance Responsibility for risk management for Economics and Finance, Deputy the segment (upstream, for Business Development its shareholder value and works of risk management measures during and reporting is determined in accordance Directors General for Organization downstream, services) to improve its activities’ performance implementation of the decisions made. with the system of linear and functional Development and Corporate by ensuring its sustainable development management: an Owner is assigned Communications and enhancing its competitiveness while The Company’s tasks in the risk for each risk, who is responsible for its meeting state interests. Zarubezhneft management field are: management. In each Segment and in all pursues long-term objectives; analyzes • To provide cross-functional key business processes, risks coordinators Identification method: Identification method: Identification method: current issues, threats, and opportunities review of information on the risks are determined among the managers, “top-bottom”, “bottom-top” in business “top-bottom” across all areas of activities; in the Group’s structural units and joint who distribute and support application the management planning (risks and “bottom-top” and considers potential risks when development of risk management of the corporate risk management strategy is determined consolidated by assets) making decisions. measures; principles. Terms and objectives for risks by the corporate center. • To apply a systemic approach analysis take into account the features Zarubezhneft Group has developed to identification, analysis, and requirements of each business and is constantly improving a unified and evaluation of the risks specific process, at the level at which risk Current Exploration approach to the risk management for the Group’s activities; management is carried out. Responsibility assets risks projects process, which, together with the unified • To develop a risk management for methodological support, development, risks tools and methods of risks analysis, forms culture in the Group with a view and maintenance of the risk management a risk management system integrated for the management and employees system is reserved to the Perspective with management processes. to achieve common understanding and Organizational Development of the basic principles and approaches Department. RISK MANAGEMENT SYSTEM RISK MANAGEMENT SYSTEM ACCEPTABLE RISK LEVEL Internal regulatory documents that to risk management; DEVELOPMENT PERFORMANCE EVALUATION govern the risks management system: • To provide information to support This approach allows for forming areas Zarubezhneft JSC defines the preferred • Zarubezhneft Group Risks the decision-making process at all of responsibility for risk management The risks management system According to the Guidelines on Internal risk level as acceptable – the maximum Management Policy dated June 27, levels of the Group management. and monitoring at all levels is improved according to the applicable Audit Arrangement in a JSC Partially acceptable risk level to which 2016 (approved by Board of Directors of the Company’s management as well legal requirements, international Owned by the Russian Federation the Company and its subsidiaries seek Minutes of Meeting No. 125); Zarubezhneft Group’s risk management as ensuring development of targeted standards, and the best risk management approved by Order No. 249 or are ready to maintain (in accordance • Zarubezhneft Group Procedure system provides for a structured plans to respond to significant risks both practices. of the Federal Agency for State Property with the Risks Management Policy for Risks Management Business approach to evaluating the opportunities in each subsidiary and in Zarubezhneft Management dated July 4, 2014, in 2019 of Zarubezhneft Group approved Process dated May 24, 2019 (Order and risks, which allows for making Group as a whole. Zarubezhneft Group’s risk management the Internal Audit department evaluated by resolution of the Zarubezhneft JSC No. 147); well-considered managerial decisions system is continually developed the performance of Zarubezhneft Group’s Board of Directors, Minutes of Meeting • Zarubezhneft Regulation on Corporate and represents a set of processes, and improved. The Group’s key risks risk management system. As part No. 125 dated May 27, 2016). Committee for Risks (Order No. 159 policies, and procedures integrated into are addressed systematically. These of the audit, the risk management system dated April 26, 2016). Zarubezhneft Group’s business processes, are used for quantitative evaluation was positively evaluated related to its Zarubezhneft establishes and documents including business planning strategic of impact on the Company’s key maturity and performance (the audit the acceptable risk level and the risk The Company’s objectives in the risk processes carried out by the Board performance indicators, while monitoring was carried out according to criteria accountability requirements in respect management field are: of Directors, management, and employees is carried out quarterly by the Committee defined in Letter of the Bank of Russia to financial and operating performance • To enhance performance at all management levels, and aimed for Risks chaired by the General Director. on the Corporate Governance Code, No. indicators. of managerial solutions by analyzing at achieving Zarubezhneft goals. 06-52/2463 dated April 10, 2014). the intrinsic risks; 38 39 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

This approach is governed by the following • Occupational Health and Safety, • Procedure for Zarubezhneft Risk internal regulatory documents: Environmental Protection, Security, Management Business Process БП • Regulation on the key performance and Social Responsibility Policy ОБ-06 (BP OB-06) “Risk Management” indicators of Zarubezhneft JSC (Minutes of Meeting No. 133 of (approved on May 24, 2019). approved by the Zarubezhneft dated December 27, 2016) as part JSC Board of Directors (Minutes of the Regulation on the Zarubezhneft of Meeting No. 131 dated November Quality Management System; 25, 2016);

Description of the Most Significant Risks to the Company’s Activities and Response Measures

Risk group Risk name Production safety risks Industrial safety risks form the most significant group due to legal Industrial safety risks (including with damage to the environment, requirements and presence of a large number of hazardous human life and health). production facilities. These include: • Accidents involving employees and third parties; • Industrial accidents and disasters; • Non-compliance with legal requirements for industrial safety; • Failure to comply with environmental security legislative requirements. Subsurface uncertainties Risks (uncertainties) associated with insufficient information Insecurity of production volume by reserves. about geological structure of fields, reserves volumes, etc. Failure to comply with the planned production volume based Corporate fraud and corruption on the current assets. Involvement of the Company or employees in corruption activities Corporate fraud and corruption. Risks of investment projects implementation as well as non-compliance with the legislation of the Russian Federation and countries of presence entails the imposition All risks of the Company’s investment projects, including lack Reduction in performance of oil and gas projects (new projects of legal sanctions and/or other corrective actions by supervisory of infrastructure ensuring year-round activities, lack of experience and oil and gas exploration projects). authorities, which will lead to significant financial losses and loss in implementing similar projects in similar conditions, growth Exceeding the cost of developing infrastructure facilities in major of the Company’s reputation. of technological complexity level of projects, different vision construction. of the project development strategy among participants, etc. Failure to complete transactions upon entering new projects. Political risk Disagreements with partners in managing joint projects, where Likelihood of damage to assets (loss of control over them) Political risk. influence is limited. or constraining the activities of Zarubezhneft Group’s enterprises License risks due to political, economic, and social factors in the countries of operation. Risks of claims raised by state regulatory authorities due Failure to comply with license obligations. Likelihood of damage to national interests of the Russian Federation to infringement of license terms (licenses for hydrocarbon and/or the country of current/potential presence. exploration and production), up to and including license revocation. IT risks Logistical constraints Risks associated with operation of IT systems (primarily production Risk of loss (leakage) of confidential data when using IT services. Breaks/disruptions in oil transportation due to infrastructure Infrastructure risk. and settlement), with projects for their development, as well Risk of failure or malfunction of information systems, software, constraints Lack of possibility to sell oil. as the risk the inability to purchase and use foreign software. and IT equipment. Change in macroeconomic parameters Likelihood of changes in cross rates of major currencies Negative change in macroeconomic parameters: oil price, and their negative impact on financial statements indicators and/or Ruble/USD rate. cash flow. All risks were evaluated, responsible persons were appointed at the level of the Deputy General Director, and the persons responsible for the measures and management strategy were defined. Preventive and response measures were developed and taken into account in the Group’s production program. 40 41 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Expansion of the resource base of JV Vietsovpetro’s Block 09-1 based on new 3D/4C drilling and seismic data IMPLEMENTATION OF INTRACORPORATE The project goal is to use new data on 3D/4C seismic and exploration drilling results to search for new satellite deposits available at the fields of Block 09-1. Achievements: IMPROVEMENT PROJECTS • The Concept of the program for systemic expansion of the vertical seismic profiling (VSP) resource base has been developed; • About 100 hydrocarbon traps with a total of 160 MM tons of P50 resources were prepared for terrigenous deposits of Lower Miocene (LM), Upper Miocene (UM) and Lower Oligocene (LO); THE KEY TOOL FOR INTRODUCING CHANGES WITHIN THE COMPANY IS A SYSTEM FOR IMPROVING PROJECT • The new 3D/4C seismic data and use of neural networks made it possible to substantially refine the fault-block structure of the basement and to distinguish decompression zones based on new attributes. 33 areas of keen interest on the basement were IMPLEMENTATION SYSTEM THAT HAS BEEN TRIED AND TESTED THROUGH MANY YEARS OF EXPERIENCE. identified and 5 traps with a total of 13.5 MM tons of resources were prepared; • According to the 3D/4C seismic data, 23 facilities were prepared within Block 09-1, both for development of existing deposits and for individual facilities. Ranking by volume of resources and by geological efficiency was performed. Implementation of the target information telemetry program “well repair” at Zarubezhneft-Dobycha Kharyaga facilities The portfolio of improvement projects of the second stage of the Strategy, The project goal is to improve performance of operational management regarding well development, maintenance and workover (DMW). in Zarubezhneft JSC has been formed and included 66 change projects: Key innovations of 2019 The production time factor was achieved by the DMW teams in 2019 at a rate of not less than 0.95. since 2013, expanding its perimeter, • 24 projects were included Achievements: and today it has already completed 115 in 4 strategic focuses, 8 of them were UPDATED PROJECTS CLASSIFICATION • вThe DMW planning package was introduced; projects (taking into account technological successfully completed in 2019; • An accounting and reporting package was introduced; development projects, or TDP). • 42 projects were aimed at supporting As part implementing the Company’s • The DMW analysis and management package was introduced; existing processes and systems; Strategic Objectives, four key • Industrial operation of the Well Repair Telemetry Information System (WRT IS) started; • Based on the system functioning results, a 51% decrease in idle time was recorded, the accident rate was reduced by 45%, and process Annually in the beginning of the year, 21 were completed in 2019. focuses were identified: Expansion, flow disruptions were reduced from 46 to 36 hours. a project pool is created and vectors Technological Leadership, Corporate Evolution, and Talent Management. for further development of the Company At all stages of the change projects life Since 2019, special attention has been are determined following the results cycle, there is: paid to projects entered or initiated of the Strategic Management Session, • Monthly monitoring and reporting as part of the strategic focuses. Projects Improvement projects annual KPI defense, and adopting of draft revisions; continuing from last year were classified Fast track decisions on distribution of successful • Expert support for projects, including as additional initiatives aimed to support projects. In 2019, the project portfolio encouraging participation of external the existing processes and systems. The project goal is to apply a combination of organizational and informational measures at the same time as we perfect workflow was specified and ranked taking experts and those of the subsidiaries; algorithms and queries between the Corporate Center and the subsidiaries, with a view to reducing the degree of formalism. Identification and elimination of TOP destructors at all reporting levels, reduction of excessive document workflow. into account four strategic focuses • Polling/feedback for qualitative aimed at successful implementation evaluation and results validation. Achievements: • Labor costs of development and approval of documents and for routine operations was reduced by 30%; • The amount of ancillary documents in the total process workflow was reduced by 15%; • The number of reports was reduced by 25%; • The qualitative evaluation of the process IT systems was strengthened to ensure consistency of information and the absence of gaps and duplicate data entries . Automation of business processes using bpm class it systems The project goal is to built a pilot end-to-end process within a unified IT system. Achievements of the investment process automation: Key results of improvement projects and technology development projects • The proportion of non-automated operations was reduced by 40%; • Labor costs were reduced by 50%; Technology development projects • All documents are generated by the BPM system; • Increased transparency and implemented online monitoring of the progress; Elaboration of PRE-FEED for subsea production system of Block 12/11 • The necessary analytics and automated calculation of indicators for each process node were received; The project goal is to increase the economic performance of gas field development at Block 12/11. • The possibility to build an end-to-end process between the Corporate Center and the subsidiaries has been ensured. Achievements: Legally relevant electronic document workflow • PRE-FEED is done as per the Technical Assignment; The project goal is to reduce paperwork when executing contracts, improve performance and cut labor costs, and optimize access • The final report on the PRE-FEED elaboration for the maximum permissible concentration (MPC) of Block 12/11 was adopted and storage of original documents. by the Council for Science and Engineering (CSE); Achievements: • An alternative concept for arranging facilities at Block 12/11 using the MPC was developed; • The project team carried out an express evaluation of the project’s economic performance, taking into account the costs of the PRE- • The period of a contract approval and signing was reduced from 11 days to 3; FEED with the MPC. • Transition to electronic document workflow between the Group enterprises was achieved; • The procedure for access and storage of original documents was optimized. Elaboration of concepts on involvement of Block 09-1 marginal sites in the development Manager’s work standard (MWS) The project goal is to suggest technical and process measures for cost-efficient development of low-margin/marginal fields/sites of JV Vietsovpetro. The project goal is to create a uniform operational procedure for managers of different levels and ensure integrity and coherence of managerial actions in all the Company units. Achievements: Achievements: • The resource base of Block 09-1 marginal sites was analyzed, productivity of previously drilled exploration wells and their technical condition were evaluated; • A series of Application of practices in the Corporate Center and the subsidiaries were supervised; • Prospectivity of additional drilling at the marginal sites was evaluated. Development and sites arrangement options have been • Annual enquiry on the MWS application was carried out; generated; • The growth of the integrated practices application index was 14%; • The proposals on involving Block 09-1 marginal sites in the development were approved by the Company’s Council for Science • The growth in the quality of the practices application was 9%; and Engineering. • The action plan for the MWS implementation in the Corporate Center and the subsidiaries was fully executed. 42 43 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

IMPROVEMENT PROJECTS STATISTICS

115 total 88 implemented 27 in progress 94 total 63 implemented 31 in progress 62 total 38 implemented 24 in progress EXPANSION 49 total Direct search system 25 implemented Extension of the resource base Replication of the “Production 24 in progress of Block 09-1 (JV Vietsovpetro) Communications and partnerships 33 total System” of Zarubezhneft JSC based on new 3D4C drilling when entering new financing in subsidiaries and seismic data 19 implemented TECHNOLOGICAL Establishment of Zarubezhneft 14 in progress Inclusion of Block 09-1 marginal LEADERSHIP 22 total JSC regulation system areas in the development Smartflooding 6 implemented Creation and development Development of “Well Repair” 16 in progress of unique technological telemetry system Tight Oil 13 total expertise 2 implemented Introduction of a unified Opening Establishment Establishment of a School Establishment of a process “Technological Framework” 11 in progress of a comprehensive of Petroleum Engineering to manage commodity risks Enthalpy system of motivation of the corporate center Knowledge management system Development of the digital and training Establishment of a School development of Project Management Creation and implementation transformation Strategy Improvrmrnt of planning of Corporate cooperation A competitive selection and Program and budgeting system Establishment of a number principies of the most promising NestroLead IFRS implementation management system employees CORPORATE EVOLUTION Establishment of a unified Establishment of an anti- Centralization and digitalization Audit of international system of financial Establishment corruption and anti-fraud Introduction of the key personnel of treasury functions reserves and tax accounting of a “Production System” system rotation system Automation of business processes Electronic Document Establishment of “Unified Establishment of processes Development of the “Manager Increasing the efficiency using BPM class IT system Management System Treasury” for standartization Work Standard” of interaction with foreing and optimization introduction partners Fast Track KPI system improvement of business processes Standardization of the process Risk management Internal audit for searching and evaluating IT strategy development Global info process organization organization Improvement of internal Establishment new projects regulatory documents of an information system Improvement of the management TALENT MANAGEMENT Procurement activity Capital construction regulating corporate for remote drilling Optimization of accounting reporting system in JV optimization information system management monitoring (tax) reporting deadlines Vietsovpetro Nestroleed development 2013 2014 2015 2016 2017 2018 2019 44 45 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

ENERGY EFFICIENCY

THE ENERGY SAVING AND ENERGY PERFORMANCE IMPROVEMENT The following main principles The energy resource-saving activities Actual values of power resources consumption in 2015–2019, PROGRAM FOR 2019 WAS DEVELOPED IN DECEMBER 20181. were applied in the development and the program measures introduced reference fuel tons, “Service and other assets” segment of the program: in all Zarubezhneft JSC subsidiaries • implementation of a lean production in the fiscal year made it possible −9 % −14 % policy based on introduction to reduce OCF production specific 772 of measures with a payoff period energy consumption costs to the level 748 670 636 659 655 of 3-5 years; of 2015 in the Exploration and Production 601 565 565 • development of measures intended segment, and consequently to increase 516 to decrease specific energy costs per the energy efficiency indicators of each unit of production, oil containing fluid individual subsidiary and of Zarubezhneft treatment and formation of the FPM Group as a whole. in the Exploration and Production segment, raw materials refining In 2019, 61 measures were introduced. in the Oil Refining and Sales segment Due to the shutdown of plants of Modriča Giprovostokneft VNIIneft and decrease of annual power Motor Oil Plant A.D. and Brod Refinery resources consumption in the Service A.D. for repairs and due to the lack of raw 2015 2016 2017 2018 2019 and Other Assets segment; materials, only organizational measures The decrease in energy resources consumption of the enterprises in the Service and Other Assets • engagement of all personnel were implemented in 2019. segment equaled 6% year-to-year, including: Giprovostokneft JSC = -9%, VNIIneft JSC = -14%. In the fiscal year, reduction of unit costs for oil-containing fluid production by the oil production enterprises of the enterprises in the power of the Russian segment equaled 24.8% as compared to 2015. resources saving process; The overall economic benefit due • inclusion of secondary power to the Energy Saving Program resources and production waste (APG, implemented by Zarubezhneft Group • implementation of generator • power supply of vessels moored spent oil waste, etc.) in the production in 2019 in was equal to 1,908 MM RUB, equipment overhaul repairs (gas- sidewise from the electrical power process. or 57,983 tons of oil equivalent (toe), turbine plant, gas piston generator supply system while docked at a port; including: unit, diesel generator unit), transition • connection of Tam Dao-1 jack-up This program is a continuation • savings in the Russian segment were of gas piston generator unit to operate to the unified centralized power of the Power Saving and Energy 1,377 MM RUB (46,692 toe); on purified gas. system. Performance Improvement Program that • JV Vietsovpetro — 72.2 MM RUB was implemented in Zarubezhneft Group (2,116 toe); ZARUBEZHNEFT-Dobycha In general, the activities carried out Changes in the specific power resources costs in 2018. The main goal of developing • Brod Refinery A.D. and Modriča Kharyaga LLC: in 2019 contributed to the stabilization for the development of oil-containing fluid for the oil producing and implementing the program Motor Oil Plant A.D. — 18.5 MM RUB • construction of a 6 kV overhead line of the enterprises’ energy costs enterprises of Zarubezhneft JSC, for 2019 is to decrease production (772 t.o.e). for a new shift camp with a view and the further development of energy ref.fuel t/thous. m3 (Russian segment) costs in the manufacturing (operational) to arranging the electrical heating conservation and the improvement business segments of Zarubezhneft MAIN ENERGY EFFICIENCY of buildings when gas is supplied of energy performance within JSC, and consequently enhance MEASURES IMPLEMENTED IN 2019 to the boiler room; Zarubezhneft Group. −25 % competitiveness within the domestic • optimization of the operating mode and global markets. JC RUSVIETPETRO LLC: of pumping equipment control 3.5 • Industrial implementation stations (ground-based electrical 3.19 3.13 The program provides for a decrease of the EPOGE AIS (Energy equipment (GEE); 2.98 3.0 in unit costs for production of oil- Performance of Oil and Gas Enterprise • deployment containing fluid (OCF) in the oil-producing analytical information system); of the EPOGE AIS at the process assets of the Russian segment • commissioning of low-pressure facilities of the enterprise. 2.40 2.5 2.34 by at least 4.0% as compared to 2015. compressor station at the Central The target milestones of the 2019 Energy Production Facility (CPF) “Severnoye JV Vietsovpetro:

2.0 Saving Program include development Khosedayu” to use additional gas • Installation and use of the fuel flow and introduction of new measures (along for power generation; and power generation metering 2015 2016 2017 2018 2019 with the measures introduced in 2016- system at the jack-up rig; In the fiscal year, reduction of unit costs for oil-containing fluid production by the oil production 2018) with due regard to the peculiarities enterprises of the Russian segment equaled 24.8% as compared to 2015. of the segmented activity, organizational structure, and the specifics of Zarubezhneft Group’s activity 1 Order dated December 18, 2018, No. 424. as a whole. 46 47 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

One of the most important environmental Observation data are compared of gas metering units. The level of APG ENVIRONMENTAL PROTECTION challenges that the Company faces with the background values of natural value-added use in the Russian segment is minimizing the effects of drilling waste indicators. During the reporting period, of the Group (JV RUSVIETPETRO LLC, through their neutralization and use, the maximum permissible concentrations Zarubezhneft-Dobycha Samara within followed by elimination of sludge pits. (MPC) in the territory of the Russian ONO and UNG) in 2019 was 92.5%, which THE OCCUPATIONAL HEALTH, SAFETY, ENVIRONMENTAL PROTECTION, SECURITY AND SOCIAL In 2019, two drilling fluid pits were Federation were not exceeded. is higher than the planned indicators RESPONSIBILITY POLICY OF ZARUBEZHNEFT JSC DEFINES ECOLOGICAL WELL-BEING AS THE BASIS reclaimed. There are no oil-contaminated embodied in the Gas Program for 2019 FOR THE COMPANY’S ECONOMIC STABILITY. soils on Zarubezhneft Group’s balance Implementation of the Gas Program (actual in 2018 — 87.5%, planned sheet. for rational use of associated petroleum for 2019 — 92.0%). gas (APG) for 2019–2023 was a priority In general, regular measurements of the Zarubezhneft Group in 2019. The Occupational Health, Safety, at the end of 2019, a Cooperation In accordance with the Standard of the air environment, soil and snow, Environmental Protection, Security Agreement was signed between Procedure for Search and Evaluation surface water and bottom sediments Owing to activities completed as part and Social Responsibility Policy the Ministry of Natural Resources of New Projects, the Company pays were carried out on the territory of the Gas Program of 2019, use of APG of Zarubezhneft JSC defines ecological and Environment of the Russian special attention to environmental of all licensed sites of Zarubezhneft for our own needs for heat and electric well-being as the basis for the Company’s Federation and Zarubezhneft aspects and environmental risk Group’s enterprises, as part of local energy generation has increased. economic stability. JSC, providing for joint activities evaluation. All projects undergo environmental control and industrial The volume of production and use under the federal project on Biodiversity Environmental Audit, the main criterion environmental management. of APG is calculated based on readings In 2019, a supervision audit of the CC Preservation and Development of which is the absence of any nature of Zarubezhneft JSC, JC RUSVIETPETRO of Ecotourism in the context preserves within the contract area. LLC, ZARUBEZHNEFT-Dobycha of the Ecology National Project. During the project, environmental impact Kharyaga LLC, RMNTK Nefteotdacha is evaluated and measures are developed JSC, Zarubezhneftestroymontazh LLC, Caring for the Far North’s fragile to reduce fragmentation of landscapes and Modriča Motor Oil Plant A.D. was ecosystem has traditionally been one and the size of the disrupted territories. successfully conducted to confirm of the Company’s priorities: in 2019, the Certification for compliance JC RUSVIETPETRO LLC released Zarubezhneft JSC has uniform to international standard ISO 14001:2015. about a thousand juvenile fish of valuable HSE requirements to contractor Gross atmospheric emissions for Zarubezhneft Group of Companies in the “Upstream” segment for 2015-2019, The subsidiaries Zarubezhneft-Dobycha species into the Usa River (the Pechora organizations. The regulations thousand tons Samara LLC, Ulyanovskneftegaz River basin). Since 2014, more than 801 adopted within the Company establish LLC, Orenburgnefteotdacha JSC, thousand juvenile fish of valuable species similar requirements to compliance Air emissions 2016 2017 2018 2019 +/– and Giprovostokneft JSC were introduced have been released into the Pechora with environmental standard norms Solids 0.865 0.549 0.437 0.280 -0.157 into the HSE Management System River basin due to the efforts of JC both by the contractors operating Sulfur dioxide 3.309 7.507 6.909 6.841 -0.068 certification perimeter. RUSVIETPETRO LLC. within the Company and Zarubezhneft Carbon oxide 9.697 8.874 7.914 6.375 -1.539 JSC’s subsidiaries. Collecting Nitrogen oxide 1.138 1.391 1.213 1.225 0.012 In 2019, the subsidiaries of Zarubezhneft Starting from 2014, Zarubezhneft mushrooms and berries, hunting Group performing their production JSC has undergone an independent and fishing is prohibited in the area where Hydrocarbons (without volatile organic compounds) 8.952 10.115 8.804 7.015 -1.789 activities in the Arctic zone of the Russian Ecological Openness assessment the Company implements its projects. Volatile organic compounds 3.337 4.069 3.900 3.251 -0.649 Federation (ZARUBEZHNEFT-Dobycha as per the World Wildlife Fund (WWF) Other gaseous and liquid 0.186 – – – – Kharyaga LLC and JC RUSVIETPETRO rating criteria. Among the 20 largest oil On a monthly basis, Zarubezhneft Group’s Gross emission of harmful sunstances into the atmosphere 27.48 32.51 29.18 24.99 -4.19 LLC) continued working on biodiversity and gas companies, Zarubezhneft JSC subsidiaries run controls of the integrity preservation as per the approved took second place in 2019, maintaining of intrafield oil pipelines, which is one Programs. In 2019, ZARUBEZHNEFT- its position from the previous year. of the priorities of the Environmental Dobycha Kharyaga LLC updated The nomination organizers noted Policy of the Company. Production and use of associated petroleum gas by the Zarubezhneft Group of Companies in 2019 the Program of Biological Diversity Zarubezhneft JSC’s great work (the Russian segment), MM m3 Preservation (BDP) at the Kharyaga in preparing and carrying out tabletop In 2019, the level of current financing licensed site based on inventory exercises complicated by winter period of environmental protection activities Enterprise APG APG use APG usage % production for own needs of biota and identification of the species conditions, with the involvement in the subsidiaries located in the Russian that are indicators of the sustainable of the general public, as well Federation amounted to about 218.04 JC RUSVIETPETRO LLC 120.80 111.54 92.4 state of ecosystems of the Kharyaga as the Companyʼs initiative of biodiversity MM rubles, which is significantly higher Orenburgnefteotdacha JSC 2.37 2.35 99.4 field. Works under the BDP Program preservation programs that will become than in 2018. Ulyanovskneftegaz LLC 0.53 0.50 94.4 are scheduled for 2020-2021. Also, mandatory in the future. TOTAL 123.70 114.39 92.5 48 49 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

The associated petroleum gas produced from 6.09 to 5.13 tons per thousand tons provided by the Kyoto Protocol Investment into fixed assets was Waste generation, Water intake, at the Kharyaga field is sour, which of oil produced in comparison to 2018, to the United Nations Framework reduced in 2019 due to the end t/thous. t thous. t/thous. t of oil hinders its value-added use. According as well as specific emissions of greenhouse Convention on Climate Change remains of construction of the waste landfill at JC to the project for facilities construction gases, from 0.17 thousand tons one of the most serious incentives RUSVIETPETRO LLC block in 2018. −3.5 +2 % at the Kharyaga field, ZARUBEZHNEFT- of CO2 equivalent per thousand tons of oil for implementation of associated 7.98 1.70 Dobycha Kharyaga LLC plans produced to 0.16 thousand tons of CO2 petroleum gas disposal projects and other INTERACTION 1.60 1.67 to proceed with commissioning of gas equivalent per one ton of oil produced. projects aimed at reducing greenhouse WITH THE STAKEHOLDERS 5.12 4.50 desulfurization equipment, a gas-turbine gas emissions. plant, and necessary infrastructure In 2019, drilling volumes decreased Zarubezhneft JSC strives for interaction for purified gas compression. Following as compared to 2018, which led As per the Guidelines and Instructions with all stakeholders to maintain the results of 2019, the level of APG use to a decrease in the drilling waste for Quantitative Calculation of Volume and establish constructive relations during 2017 2018 2019 2017 2018 2019 in ZARUBEZHNEFT-Dobycha Kharyaga generated at the fields of JC of Greenhouse Gas Emissions projects implementation. LLC amounted to 41.2%, with target RUSVIETPETRO LLC and ZARUBEZHNEFT- by Enterprises Conducting their Business emergency response team (NPERT) Dynamics of GHG emissions,

indicators of 32.4%. The level of use Dobycha Kharyaga LLC. Specific indicators or Other Activities in the Russian Since 2009, the cooperation agreement and to train the field services groups MM t of СО2 equivalent increased due to additional measures of waste generation decreased from 7.98 Federation (approved by Order between JC RUSVIETPETRO LLC in containing and liquidating a conditional for advance deliveries of associated tons per 1 thousand tons of oil in 2018 of the Ministry of Natural Resources and the Administration of the Nenets oil spill as a result of depressurization −6 % gas to the gas transportation network to 4.5 tons per 1 thousand tons of oil and Environment of the Russian Autonomous Area has been in force of the export pipeline at segment “Well 0.954 of LUKOIL-Komi LLC starting from June in 2019. In terms of the composition Federation No. 300 dated June 30, regarding interaction with indigenous Cluster 108 – Head Oil Gathering Plant”. 0.836 0.790 6, 2019 and due to the scaling up of the waste, more than 90% by weight 2015) registered with the Ministry minorities of the North. Since More than 50 persons and 10 units of electricity generation using APG. is waste of hazard class IV, i. e. sludge. of Justice of the Russian Federation 2017, the Guidelines on Conduct of special-purpose vehicles participated By 2023, we plan to reach 95%. As per the Company’s current internal on December 15, 2015, registration No. in the Territories of Traditional Use in the tabletop exercises. The Company regulations, all sludge was processed 40098, Zarubezhneft JSC determined of Natural Resources by Indigenous clearly demonstrated its commitment In 2019, Zarubezhneft JSC took part to inert material. In 2019, a slight the atmospheric greenhouse gas Minorities of the North have been in force to minimizing the risk of oil spills 2017 2018 2019 in the pilot project of the Federal Service increase (2%) in water consumption was emission volume for 2019 as a result at ZARUBEZHNEFT-Dobycha Kharyaga and protecting the environment. Due to implementation of the gas program, for Supervision of Natural Resource associated with a decrease in reservoir of the production activities of the oil- LLC. Among those invited there were the volume of emissions in 2019 amounted to about 0.79 MM t.o.e of CO2 equivalent, which Usage on issuing all-in environmental pressure during field development producing enterprises. representatives of the Reindeer Herders is 6% lower than last year. permits, as part of the federal at ZARUBEZHNEFT-Dobycha Kharyaga On August 6, tabletop exercises (TE) Union of the Nenets Autonomous Area project “Implementation of the Best LLC block. Investments in fixed assets allocated were held at the Kharyaga field to check and the regional social movement Available Technologies” in the context for environmental protection in 2019 the readiness of ZARUBEZHNEFT- “Yasavey Association of the Nenets of the Ecology National Project. GREENHOUSE GAS EMISSIONS are associated with the scheduled Dobycha Kharyaga LLC’s non-professional People”. Following the results of this project, DECREASE construction of a waste landfill at JC ZARUBEZHNEFT-Dobycha Kharyaga LLC RUSVIETPETRO LLC block. The costs (subsidiary of Zarubezhneft JSC) received Zarubezhneft JSC considers of other environmental protection Environmental protection expenses for 2015–2019, MM RUB a positive conclusion by the ecological the entry into force of the Kyoto measures (necessary scheduled expert commission and became the first Protocol to be an important step maintenance of water treatment systems, Investments 2015 2016 2017 2018 2019 +/– company among the Russian companies towards expanding the efficient use costs of environmental monitoring Investments in fixed capital for environmental protection 41.36 97.80 270.22 228.21 60.30 -167.91 to receive an all-in environmental permit. of associated gases. The mechanism in terms of implementation of Biodiversity Charges for adverse impact on the environmental 19.89 27.28 28.51 20.38 17.30 -3.08 of the Joint Implementation Projects Preservation Programs) are shown Imposed penalties for the environmental pollution 0.94 0.09 0.32 0.51 0.94 0.43 As part of automation of environmental (JIP) on Greenhouse Gas Reduction in the table. Current environmental protection costs, including: 196.95 142.63 154.79 163.80 218.04 54.24 protection processes in the group of companies belonging to the Geological • Water bodies protection 3.00 4.58 7.68 23.00 10.31 -12.69 exploration and production segment, Air emissions, GHG emissions in the Russian • Air protection 1.58 1.65 3.50 3.70 7.72 a solution for environmental indicators t/tous. t of oil Federation, • Protection of land from industrial waste 155.00 111.66 131.52 118.90 181.70 62.80 thous. t/thous. t of oil accounting was implemented in the ECOURS • Land reclamation 31.19 12.99 12.09 17.40 18.31 automated control system (ACS). −16 % −6 % • Other environmental protection activities 6.18 11.75 0.00 0.00 0.00 0.00 SPECIFIC INDICATORS TOTAL 259.14 267.80 453.84 412.90 296.58 -116.32 0.20 IN ENVIRONMENTAL 6.94 0.17 6.09 0.16 PRESERVATION FOR THE GROUP 5.13 IN THE RUSSIAN FEDERATION

Implementing the gas program in 2019 enabled us to cut the specific indicators 2017 2018 2019 2017 2018 2019 of pollutants emissions. They decreased 50 51 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

OCCUPATIONAL HEALTH AND INDUSTRIAL SAFETY

THE OCCUPATIONAL HEALTH, INDUSTRIAL SAFETY, ENVIRONMENTAL PROTECTION AND SOCIAL projects, seminars on the “Vision Zero with an emphasis on implementation LTIFR dynamics RESPONSIBILITY POLICY IS THE BASIS FOR STRATEGIC PLANNING AND MANAGEMENT OF CURRENT ACTIVITIES (Zero Accident) Concept. Development of the Vision Zero Concept principles AT ZARUBEZHNEFT JSC, FOR SETTING AND ACHIEVING GOALS, FOR CARRYING OUT EFFICIENT MONITORING of Personal Responsibility” were held within the contractor organizations. AND CONTROL, AND FOR CONSTANT IMPROVEMENT. at JV VIETSOVPETRO (in the Socialist 1.38 1.27 Republic of Vietnam) and at the enterprises In 2019, JV VIETSOVPETRO and 24 of the downstream segment (Bosnia contractors officially joined the Vision and Herzegovina). Zero Concept. 0.71 In 2019, a supervision audit • to constantly improve its At All-Russian Labor Protection 0.62 0.54 of Zarubezhneft JSC, JC RUSVIETPETRO Occupational Health, Industrial Week V held in Sochi The project “Industrial Safety Training The Lost Time Injury Frequency Rate LLC, ZARUBEZHNEFT-Dobycha Safety and Environmental Protection on April 22 to 26, 2019, representatives System. Safety Culture School” (LTIFR) is accepted by international Kharyaga LLC, RMNTK Nefteotdacha Management System. of Zarubezhneft JSC participated was approved by Order No. 286 practice as the main indicator

JSC, Zarubezhneftestroymontazh LLC, in meetings of the International Council of S. I. Kudryashov, General Director of a company’s performance in the area 2015 2016 2017 2018 2019 and Modriča Motor Oil Plant A.D. was In 2019, implementation of the Vision for Implementation of the Vision of Zarubezhneft JSC, dated September of occupational health and industrial successfully passed. The goal of the audit Zero (zero accidents) Concept continued Zero Concept (chaired by Hans-Horst 18, 2019, in order to establish safety. The LTIFR has been applied The Rate value in 2019 was 0.54, which was more was to confirm the HSE (Occupational according to the Unified Program Konkolewski), and also held a meeting a unified corporate system of training in Zarubezhneft JSC since 2015. than 2.4 times lower than in 2015 (1.27). Health, Industrial Safety, Environmental for Implementation of the Zero Accident on the “Unified Approach to Interaction in occupational safety for employees Protection) Management System’s Concept, Vision Zero, in Zarubezhneft with Contractors Taking into Account of Zarubezhneft Group. The subsidiaries regularly held training Corresponding reports on occupational compliance with the international standard Group in 2018–2021, approved the Implementation of Zarubezhneft’s and examinations in occupational health health and safety and the improvement OHSAS 18001:2007. The perimeter by S. I. Kudryashov, General Director Vision Zero Concept” and a round table The project envisions training 26 and safety according to the following of working conditions were submitted of the HSE Management System’s of Zarubezhneft JSC. on the “Best Practices of Development internal coaches from among programs: to the relevant governmental, supervisory Certification includes: Zarubezhneft- of Safety Culture of Zarubezhneft JSC. the employees of the Corporate Center • Industrial safety; and statistics authorities in due time. Dobycha Samara LLC, Ulyanovskneftegaz On March 22, 2019, a strategic session Experience Exchange”. and the subsidiaries, developing • Occupational Health and Safety LLC, Orenburgnefteotdacha JSC, entitled “Responsible Leadership 5 corporate courses as part and Premedical First Aid; In 2019, the Company’s employees and Giprovostokneft JSC. in Development of Safety Culture Meetings of the International Council of an educational and methodical • Basics of Fire Safety; were provided with safety footwear and Implementation of the Vision for Implementation of the Vision complex, and having internal coaches • Knowledge of Regulations and Rules and personal respiratory protective Recognizing its responsibility Zero Concept at Zarubezhneft JSC” Zero Concept were attended, where train pilot groups of attendees of Work in Electrical Installations; equipment, as well as special overalls for maintaining a healthy environment was conducted for Company’s top the methods of the International on the following topics: • Safe Operation of Electrical complying with the unified corporate and sustaining the life, health managers and the Directors General Social Security Association • Introduction to the Occupational Installations. style of Zarubezhneft Group. and wellbeing of people, Zarubezhneft of the subsidiaries. on determining the criteria for evaluating Health And Safety Management JSC undertakes the following obligations: sufficiency of preventive measures, System; Moreover, 377 people underwent medical All necessary emergency response • to pursue the “Zero Goal” Within the session, as well as the topics of cooperation • On-Site Safety (production facilities); examinations (mandatory preliminary and consequences mitigation plans of preventing injuries and deterioration the “Their Route” program was presented on the implementation of the Vision Zero • Vision Zero Concept. Seven Golden and scheduled medical examinations, were developed and approved of human health and environmental to the management of the Company Concept in the course of international Rules; additional medical examinations as part in the subsidiaries (oil spill contingency contamination; and the subsidiaries with a view projects and cooperation with contractors, • Accident Investigation Procedures; of wellness checks (screening), medical plan (OSCP), emergency response plan • to use natural resources, materials to empowering managers to develop were discussed. • Managing the Safety of Contractors. certifications before traveling abroad). (ERP)). and power in a reasonable and rational and maintain others’ responsibility 97 people received vaccination against manner; in a positive and substantial way (the Conferences on the “Experience Also, cascade on-site Strategic Sessions yellow fever, hepatitis A, hepatitis B, Expert evaluations of industrial safety • to respect the interests and rights second part of the “My Route” program). in Implementing the Vision Zero Concept were conducted on “Leadership tetanus and diphtheria, meningitis, at hazardous production facilities (HPF) of local populations in regions of its at Zarubezhneft Group and its Contractors” in HSE: Managerial Responsibility. measles, and tick-borne encephalitis were carried out. Industrial safety presence; Following the results were held in Usinsk, Moscow and Samara Implementation of the Vision of workers seconded abroad. 79 people statements for the HPF were developed • to comply with Russian of the work, the participants made to involve contractors in implementing Zero Concept” at the subsidiaries received special assessment of working within the established deadlines. and international laws, and to fulfill proposals on the Vision Zero Roadmap the Vision Zero Concept. and contractors’ organizations conditions (SAWC) at their places the undertaken obligations before for 2019, taking into account arrangement in the regions of presence (Samara, of work. All personnel of the Company In-process control (monitoring) is one local communities, state authorities, of the School of Safe Production Culture Within the Vision Zero Concept Modriča). As a result of the Sessions, HSE and the subsidiaries are insured of the essential elements of efficient foreign and Russian business partners supported by the Companyʼs internal implementation in the course Road Maps were formed with the key under the voluntary medical insurance operation of the HSE Management and other stakeholders; coaches. of Zarubezhneft JSC’s international tasks for the subsidiaries for 2019, program with SOGAZ LLC. System. When carrying out in-process 52 53 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

control over occupational health Constant and systematic interaction Dobycha Kharyaga LLC, where and industrial safety, personnel with the contractors carrying out a third-party organization acted HUMAN RESOURCES POLICIES of the subsidiaries was guided their activities at production facilities as the contractor, and the remaining by the relevant legislative and regulatory of Zarubezhneft JSC as per the laws subsidiaries of the Russian segment documents of the Russian Federation of the Russian Federation and approved were distributed by the subsidiary AND CORPORATE CULTURE and the Company’s regions of presence, internal requirements of the Company Giprovostokneft JSC. as well as internal regulatory documents, is an integral part of Zarubezhneft JSC’s including the “Regulation on the procedure personnel operations in the framework In order to maintain preparedness IN 2019, THE UPDATED HUMAN RESOURCES POLICIES OF ZARUBEZHNEFT for in-process control over the HSE of the Occupational Health and Industrial for emergencies, the Company takes GROUP FOR 2019–2023 WERE APPROVED. condition of the Zarubezhneft Group” Safety Management System. preventive measures aimed at minimizing and the Procedure for HSE Risk the risk of natural and man-made Management. This procedure The Company pays special attention emergencies, preparing to protect The Human Resources Policies are based Personnel composition of Zarubezhneft Group in 2019 by area of activity, is an integral part of the common to enhancing production culture, and actually protecting the Company’s on the Corporate Development Strategy people corporate risk management system leadership and personal involvement personnel and material assets of Zarubezhneft JSC, which determines and regulates the procedure for HSE risk of the managers, as well as improvement from hazards arising from or due the primary objectives and areas Activity 2016 2017 2018 2019 +/– Dynamics, % management in relation to: of internal cooperation in respect to military conflicts, as well as in case of development of Zarubezhneft Management 322 326 317 315 -2 -1 • violation of the facilities’ integrity to HSE. These are facilitated by practical of emergencies. Tabletop trainings Group, and are aimed at supporting company (emergencies); implementation of target programs are held on a regular basis implementation thereof. Zarubezhneft JSC 26 25 24 24 0 0 • injury caused to workers, contractors in the course of production: as per the approved schedule. These representative offices and branches or visitors; • 12 Life Saving Rules; are emergency response drills and drills The primary objective of the Human • environmental harm during works • Leadership in HSE; on interaction between the Emergency Resources Policies is to achieve Exploration 9 402 8 813 8 415 8 408 -7 0 and production performance; • HSE Risk Management; and Fire Safety Commissions the maximum return on investment • environmental harm due • 5S System in the framework of Zarubezhneft JSC and its subsidiaries. in personnel (talents) through shaping Downstream 2 127 2 073 2 029 1 833 -190 -9 to technological processes. of Zarubezhneft JSC’s Production a system to: Service and other 1 969 2 008 1 896 2 002 106 6 System. • motivate each employee to achieve assets The Company maintains preparedness the objectives set by the Corporate TOTAL 13 846 13 245 12 681 12 588 -93 -1 to abnormal and emergency situations 145 people from the Corporate Center Development Strategy; through an integrated approach that and the subsidiaries were trained • enable an unbiased evaluation includes: in the 5S System and arranged of the extent to which results have • testing of protective facilities into groups of internal coaches been achieved; • application of an objective business performance. The number and training of persons in charge in the framework of the 5S System • provide fair reward and transparent performance of employees in the downstream of civil defense and emergencies development at Zarubezhneft Group. and encouragement evaluation system; segment in Bosnia and Herzegovina in training centers; for the employees’ achievements. • creation of a favorable Corporate decreased by 9.4%. Despite the decrease • timely development and approval Following the results of 2019, investment Culture; in the personnel of JV Vietsovpetro by the state supervisory authorities costs allocated for provision of safe The Human Resources Policies • unconditional compliance due to the establishment in August of response plans in case working conditions at Zarubezhneft Fundamentals: with the labor legislation 2019 of JV ANDIJANPETRO LLC of oil and petroleum products spills Group amounted to 504,235.125 thous. • meeting the needs of Zarubezhneft of the Russian Federation in the Republic of Uzbekistan, at the fields; rubles. Group’s business lines for high- and the countries of presence. the number within the upstream • training and attestation of non- qualified professionals (both internal segment remained substantially professional emergency response The Monitoring HSE Indicators and external candidates); PERSONNEL NUMBER unchanged. The growth in the number teams at the fields; Information System was modified, • continuous development and training AND STRUCTURE of employees in the segment “Service • conclusion of agreements and the Technosphere Safety Information of the most active and promising and Other Assets” is associated of drills to be carried out twice a year System (TS IS) was introduced employees (Talented Personnel In 2019, the number of employees with RMNTK Nefteotdacha JSC’s by professional emergency response over the course of 2019 as part Pool, Nestro Lead, Professional Skill of Zarubezhneft Group was 12,588 and Zarubezhneftestroymontazh LLC’s teams belonging to gas rescue service of automation of the occupational Contests); people, 1% lower than in 2018. In general, business expansion. and well-kill safety service; health and industrial safety processes. • continuous improvement the average number of employees • drills on possible emergency response Introduction of the TS IS took place in two of the compensation system of Zarubezhneft Group tends to decrease, actions conducted for personnel. stages piloted by ZARUBEZHNEFT- and benefit plan; which is due to measures to enhance 54 55 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

The upstream segment traditionally Personnel composition by age Personnel structure by educational • identification of key groups • Provision of accommodation; Pursuant to the Regulation remains a priority development area as of December 31, 2019 background as of December 31, 2019 of employees and the positions • Refund of expenditures on Zarubezhneft JSC’s General Director’s for Zarubezhneft Group, as it makes up for which the Group is ready to ensure on kindergartens and schools; Annual Compensation, the annual 67% of the total personnel. wages/salaries higher than average • Provision of voluntary health insurance compensation amount is determined across the respective labor market; to employees and their family based on the extent of corporate KPI Oil production activities are associated 10 10 • for other employees, the Group members; target values achievement, subject with heavy physical loads, work at remote is ready to provide average salaries • Pension fund scheme. to the indicators of bonus cancellation fields and shift work; therefore, 82% 12 as in the respective labor market. and implementation of the Corporate of the Group’s personnel are male. The key components of the Relocation Business Initiative “Challenge”, 28 Therefore, Zarubezhneft JSC consistently Policies are as follows: as approved by the Board of Directors PERSONNEL MOTIVATION develops the following areas: • guaranteed employment of each of the Company. AND INCOME STRUCTURE • improving the system of employee Zarubezhneft Group employee after 62 21 57 payment and motivation; having completed his/her work SOCIAL PROGRAMS Among the tools of the HR Policies • improving and developing an integrated at the Project; adopted in Zarubezhneft JSC, there headcount planning system. • in the absence of an opportunity An integral part of the Group’s is a differentiated approach applied to provide the above employment, compensation system is a social 30 to 50 Higher education in determining the compensation amount Over 50 Average Within the Group, the Integrated Labor the Group shall pay the employee support program for employees Under 30 University not completed based on the extent of employees’ Secondary professional education Payment System (ILPS), introduced a monetary compensation. and their family members, which is taken involvement in achieving the Group’s in 2013, remains in place and in force. into account when evaluating the overall strategic goals, which allows us to attract, The personnel composition by age More than half of Zarubezhneft Group’s In order to attract and retain key attractiveness and competitiveness retain and motivate employees is traditionally shaped in such a way that two employees, 57%, have a higher education. The ILPS determines a uniform managers at Zarubezhneft Group, of the compensation to be proposed. thirds of the employees are in their 30–50s, The employees having secondary and vocational with the expertise and performance which shows the best balance of physical secondary education certificates also make procedure for setting employees’ a complex system of motivation levels required for Zarubezhneft Group’s abilities and professional experience. up a significant portion of the total personnel salaries based on a single grading was built, comprising the following Zarubezhneft Group has approved number. business objectives to be achieved line, reflects the Company’s business components:: the Integrated Vision of Lump- with minimal costs. interests and priorities, and ensures that • fixed compensation (title wage, sum Payments and Social Policies, each employee’s annual compensation increments and supplements the purpose whereof is to provide The Group implements flexible motivation is linked to his or her achievement of key in accordance with the law); a decent level of medical services, programs covering both tangible Personnel composition by position Personnel composition performance indicators (KPIs). • month-end bonuses based assistance to the employees facing and intangible incentives. category of position as of December of Zarubezhneft Group in 2019 on the performance targets various adverse circumstances, 31, 2019 by area of activity The IPLS provisions are formalized achievement; compensation for the earnings lost upon The amount of fixed and variable portions in the Model Regulation on the Employees’ • year-end bonuses based on the KPI retirement, and support to the Group of employee compensation depends Labor Payment and Motivation; newly achievement. retirees. 16 3 on the following factors: established subsidiaries develop • the position level as expressed 16 their regulatory documents while taking The Group regularly analyzes inflation Uniform requirements to the subsidiaries’ by the corresponding pay grade; account of the standard requirements, and consumer price index dynamics, benefits plans are formalized in the Model • the level of professional expertise 41 as they join the system. on the basis of which decisions Regulation on Social Securities and labor efficiency as reflected are made as to revision (indexation) for the Subsidiaries’ Employees. Each 14 12,588 through granting a certain professional people In 2019, due to massive business of the employees’ salary level. subsidiary selects and approves, based status to an employee; expansion and entering new projects (in on its employees’ needs and its own • the work performance Uzbekistan and Egypt), Zarubezhneft SOLE EXECUTIVE BODY (GENERAL financial capacity, the optimal package 42.7 67 and achievement of the objectives 0.3 Group Personnel Relocation Policies were DIRECTOR) REMUNERATION of benefits, securities and refunds set for the reporting period, developed and approved, establishing attributable to the employees. as reflected in the amount of variable Executives unified rules to govern personnel All payments to the sole executive Specialists Exploration and production compensation for that period; Employees Downstream relocation, compensations and benefits, body are made as per the employment In order to take measures to maintain Workers Service and other assets • the level of remuneration Management company as well as protection of interests contract and on the basis of the following employees’ health, the Company arranges for comparable positions in the labor of the Group employees, and their family documents:: reservations in Russian and Crimean market (competitor companies), members, at rotation to new projects. • Regulation on Zarubezhneft JSC health resorts. Employees are given and Zarubezhneft Group’s target The personnel composition by position From 2016 to 2018, the average age Employees’ Payment and Motivation; the opportunity to purchase health resort position in the labor market category is designed to ensure balance between of Zarubezhneft Group’s personnel remained The basic securities and compensations • Regulation on Zarubezhneft vouchers for themselves and their family managers, specialists and operating personnel. as high as 42 years; however, in 2019, due for this position level. to the ongoing headcount optimization included in the Relocation Policies JSC’s General Director’s Annual members, which are to be partially measures in force at the enterprises of Bosnia are as follows:: Compensation (Minutes No. 155 dated refunded by Zarubezhneft JSC; large and Herzegovina and at JV Vietsovpetro, When determining the Group’s target the average age of the personnel increased • Travel allowance and relocation May 30, 2018); families, along with families with children position in the labor market, we apply to 43. allowance; • Regulation on the Social Securities under 14, are given priority in this regard. the following approaches: • Visa support, ticketing, securing work for Zarubezhneft JSC Employees • selection of a labor market appropriate permits; and Retirees. The year 2019 saw a positive trend for a certain group of personnel in welfare benefits. In 2019, the amount (Moscow, regional, and international labor markets); 56 57 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

of welfare benefits increased by 8% including “New Employee’s Guidebook”, Dynamics of social payments per one types of testing to identify the level against 2018; and excluding retirement “Corporate Code of Ethics”, and other employee of Zarubezhneft Group, RUB of professional knowledge and skills, benefits from JV Vietsovpetro, documents. professional and personal qualities, the increase in welfare benefits amounted and verbal and numerical abilities. to 10%, as shown below. PERSONNEL EVALUATION, TRAINING +8 % +10 % In the fiscal year, as part 17,447 Intangible incentives constitute AND DEVELOPMENT 16,160 16,034 of the annual employee assessment, an inherent part of the personnel 14,584 an additional 360-degree survey of top motivation system. In order Pursuant to the Company’s Human and middle management was conducted to encourage employees and labor Resources Policies, personnel in order to identify the current situation collectives for significant contribution evaluation (assessment) is a flexible as to compliance with corporate to Zarubezhneft JSC’s development and transparent system of managing governance principles, and to further and for the achievement of prominent employees’ performance, aimed at timely shape an action plan to develop 2018 2019 production, financial and economic and high-quality fulfillment of strategic and promote these principles. Social payments indicators, as well as for the purpose objectives through providing unbiased Social payments excluding retirement benefits of JV Vietsovpetro of improving corporate culture, evaluation and ensuring efficient In order to implement uniform HR the Company established titles development of employees’ performance Policies in personnel assessment, of honor such as “Honored Employee and professional expertise. assessment activities are carried out of Zarubezhneft JSC”, “Long-Service • level of the employee’s potential throughout Zarubezhneft Group. Worker of Zarubezhneft JSC”, and such The Company conducts annual for further career growth awards as Zarubezhneft JSC Certificate personnel assessment on an ongoing and development; The Company employee training of Appreciation and Zarubezhneft JSC basis, which allows us to systematically • total performance of the employee. and professional development system Certificate of Acknowledgment. and objectively evaluate employee is designed not only to increase Training structure in 2019, performance indicators, identify the most Based on the results of annual the required level of the employees’ % Over the last year, 236 employees promising employees, encourage evaluation, employees are provided professional and technical competence, The Company provides of Zarubezhneft Group won departmental Company employees for prominent with detailed and substantiated but also to meet obligatory state for the following training and corporate awards. labor results and high professionalism, information on the performance requirements for oil and gas sector 9 areas: and determine the potential areas for both and level of development personnel in terms of level of training • corporate training in management RECRUITMENT professional and personal development of the employee’s expertise. Proposals in industrial safety, occupational health, and professional training programs AND ONBOARDING of employees. are then formed and a decision anti-corruption and fraud prevention. in accordance with high-priority is made as to the expediency of raising 30 goals and objectives, which is aimed The Group’s priority in the area Employees are evaluated against the professional status, changing The Company applies all modern at developing corporate, managerial of recruitment is to meet the business the following indicators: the grade/position, promotion types, forms and methods of training, and professional competencies need for highly qualified professionals • achievement of individual objectives/ of the employee to a higher position, hosted by the best Russian and foreign 61 among employees; through maximizing the use of internal tasks by the employee over the past inclusion of the employee into organizations and corporate training • vocational training aimed candidates and personnel rotation. year; the talented personnel pool, and priorities centers engaged in educational activities at developing the knowledge, skills • level of professional expertise in the development of key expertise areas under a wide range of professional and abilities required for performance Corporate training Zarubezhneft JSC widely applies development; and individual objectives for the next year development and retraining programs. Vocational training of job duties; the employees’ onboarding system: • level of development of corporate are determined for each employee. When implementing the training process, Mandatory training • obligatory training conducted for new employees, an onboarding and managerial competencies; long-term and short-term training under the requirements workshop is held, supervision • implementation of the development The Company implements are used, both in-person and remotely, of governmental authorities and on-the-job training are practiced, map/individual development plan external assessment activities, including specialized courses delivered and legislation of the Russian and an individual onboarding plan for the past year; such as the Assessment Center, through the automated system Federation, certified with relevant for each employee is drawn up. 180/360-degree review, and various “WebTutor”. documents. For successful onboarding purposes, since 2018 at Zarubezhneft JSC, the automated personnel management Awards system “WebTutor” has been functioning: on the first day of employment, a new Types of awards Number of the awarded Including employee of the Company gets access (persons) foreing citizens to his/her personal account, receives Departmental 34 33 an invitation to take mandatory Corporate 202 - introductory courses and get familiar TOTAL 236 33 with the materials about the Company, 58 59 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

In the fiscal year, under Zarubezhneft • implementation of corporate In 2019, the School of Petroleum The objectives of the Nestro Lead procedures are implemented online, an in-house rotation program. JSC’s development strategy, training and development programs Engineering trained 203 people, including training and development programs as well as organize training on a remote The talented personnel pool includes the key areas of personnel training for the Group’s key technical employees of the Corporate Center, for competition winners and finalists basis. A training portal that includes all 134 of the Company’s most promising and development were as follows: specialists. subsidiaries, and JV Vietsovpetro; are to form an efficient and cohesive types of training provided by the Company employees. Each of them is assigned • implementation of individual training the corporate knowledge base has been team to perform work on foreign assets, has been developed to foster employees’ a mentor from among the top managers. programs aimed at professional For planning and implementation continuously complemented with materials taking into account the Company’s professional and personal development. development in accordance of corporate training, a Unified Corporate from previously completed courses. strategic interests; to assess and develop In order to promptly plan and schedule In 2019, 23 employees from among with current and strategic tasks Programs Menu for top and middle the personal potential of each team employees’ training, the procedure the talented personnel pool were and changing legislative requirements; managers, specialists, the talented Zarubezhneft JSC pays special attention member; and to improve communication for posting training applications online appointed to management positions, • joint implementation with leading personnel pool and young specialists to promoting talented and purposeful skills in an international environment. has been introduced, which has reduced and 59 in-house employee transfers took Russian and foreign universities has been formed and is currently used, specialists with solid professional labor costs for creating and analyzing place across Zarubezhneft Group. of the training process to train and this Menu includes programs and managerial expertise to work The Company seeks to keep pace proposals for arranging training professionals in the areas most on strategic management, management- on both the Company’s new and existing with the times and apply modern activities submitted by employees. For the purpose of continuously developing in demand in the Company; related, vocational, and distance training, projects. The winners of the Nestro Lead automated HR technologies. Using In 2020, the WebTutor automated HR the talented personnel pool, the concept • implementation of a corporate and English language training. competition — the first open competition the WebTutor software program, all management system will be further of modular training for the talent training and development program for Zarubezhneft Group employees that assessment, training and development developed through the introduction pool members is being implemented for the most promising employees, The priority area of the employee training started a comprehensive corporate tools are automated and aligned of a new training module entitled “Talent and hosted by the Company’s own aimed at improving knowledge system is the development of key personnel development program — were in a single system governed under a single Management and Career Development”. School of Leadership and Managerial in the field of managerial potential professional and technical expertise trained under the integrated program logic. The system’s introduction has Potential Development. The main tasks development; in geology, development, drilling, oil and gas “Modern Leader in the International significantly reduced labor and time ROTATION PROGRAM AND of the School are as follows: • implementation of the Lean Six production, and project management. Environment” hosted by the International spent on preparing and conducting TALENTED PERSONNEL • рdeveloping key promising employees; Sigma corporate training program School of Business of the National assessment procedures and analyzing POOL • improving governance on production system and lean Vocational training is hosted University of Oil and Gas “Gubkin the results thereof. It has also increased and management culture; production; by the in-house School of Petroleum University” and the Moscow School the number of employees undergoing In order to retain and motivate key • enhancing professional/business • implementation of programs for teams Engineering. The School of Petroleum of Management “Skolkovo”. The winners’ training simultaneously at the Company employees, develop the necessary and personal qualities; to train under international projects; Engineering attracts both external development program included internships through remote training courses. This expertise and reduce the costs • increasing leadership potential • implementation of a corporate English lecturers and in-house ones belonging in Norway and Japan, with 40 winners system is integrated in all but a few of personnel recruitment and onboarding, and teamwork performance. language training program; to Zarubezhneft Group. having participated in the program. of the Company’s subsidiaries and makes the Company has created a Talented it possible to ensure the assessment Personnel Pool and implemented 60 61 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

During the financial year, the School and Economics and Management In 2019, the Council of Young Specialists, In 2019, the Councils of Young of Leadership and Managerial Potential in the Oil and Gas Sector); a peer public and professional Specialists of the Corporate Center Development had 129 talent pool • Lomonosov Moscow State University association of active youth employed and the subsidiaries held over 200 events. members take part in training (fields of education: Economics, with the Company, continued its events under the programs aimed Vietnamese and English translators/ systematic work. The Council was CORPORATE COMMUNICATIONS at developing managerial skills interpreters); established in 2013 as one of the tools AND ORGANIZATIONAL and personal qualities, such as innovation • Moscow State Institute of International to implement the Company’s youth IMPROVEMENTS in the Company management system, Relations (MGIMO University) (field policies. system thinking, cross-functional of education: International Economic Within the framework of the area management, core leadership values, Relations); The Council of Young Specialists of activity on Corporate Communications and performance management. • Tomsk Polytechnic University is part of the Company’s HR Policies and Organizational Improvements, On-the-job programs for developing (fields of education: Development and performs the following functions: Council members took part managerial and corporate expertise and Operation of Oil and Gas Fields, • providing onboarding and involving in brainstorming sessions, business were developed to further develop talent training at Heriot-Watt); young employees in the Company’s cases, and meetings of the Youth Council pool members and implement individual • Ukhta State Technical University production and social activities; of the Ministry of Energy of the Russian development plans. An electronic library (field of education: Development • shaping a pro-active attitude Federation. Every year, a team of Young was also created to provide self-study and Operation of Oil and Gas Fields); and loyalty to the Company and its Specialists visits the Russian Energy and self-development opportunities. This • Samara State Technical University development strategy; Week exhibition. In the second quarter library provides users with the ability (fields of education: Development • unifying the employed youth, forming of 2019, the Group’s youth team to download and browse books online. and Operation of Oil and Gas efficient communication among placed second in the inaugural case Fields, Machinery and Equipment different generations of employees; championship in the city of Almetyevsk. WORK WITH YOUNG in Oil and Gas Industries, Economics • involving employed youth In 2019, the work of the Council of Young SPECIALISTS AND INTERACTION and Management in Fuel & Energy in innovation, R&D and project Specialists was first announced WITH EDUCATIONAL Complex); activities; at the Board of Directors, where INSTITUTIONS • Lomonosov Moscow State University • developing and maintaining the course for the Group’s youth intensive (fields of education: Geology, Law, the Company’s corporate culture development was set. In order to implement the innovative Economics, Mathematics, Physics) through cultural and sporting events; development and youth policies program, • Lomonosov Moscow State University • assisting in creating conditions R&D INVOLVEMENT Zarubezhneft JSC intensively cooperates of Fine Chemical Technologies for developing young employees’ with the Russian Federation’s leading higher (MITHT) (field of education: managerial and creative potential. The first event that represents the R&D education institutions to attract and select Chemistry) area is the Competition of R&D Works the most promising undergraduates, • Moscow Institute of Physics In addition to Zarubezhneft JSC, of Young Specialists, which acts as a tool provide these students with work and Technology (fields of education: the Councils of Young Specialists to enhance performance in technical experience internship, and organize Mathematics, Physics). operate in seven companies. and process solutions by revealing employees’ retraining and professional They are JC RUSVIETPETRO LLC, the young employees’ potential development. Cooperation agreements The Group regularly attracts students ZARUBEZHNEFT-Dobycha Kharyaga through the preparation of their own have been concluded with each university from leading universities for practical LLC, VNIIneft JSC, Giprovostokneft JSC, projects aimed at addressing key partner, and R&D interaction has been training and work experience internships. RMNTK Nefteotdacha JSC, Modriča production challenges. Furthermore, organized to promptly address training In 2019, the Group granted work Oil Plant A.D., and OPTIMA Group Young Specialists actively participate priorities for Zarubezhneft Group employees experience internships to 205 students. d.o.o.. There are 95 total members in external events organized and the young specialists selected. of the Councils of Young Specialists. by the Company’s partners and peers The areas of cooperation cover education, In 2018-2019, Zarubezhneft JSC funded in the fuel and energy sector. Among research and development, and social training at higher educational institutions The Council’s work agenda comprises these events, the following deserve and cultural activities.. in the Russian Federation for 43 children six areas of activity: corporate special mention: the International Youth of Russian nationals employed at JV communications and organizational Scientific Conference “Oil and Gas – Top priority is given to graduates Vietsovpetro. improvements, R&D involvement 2019”, the All-Russia Competition “New of the following universities: of Young Specialists, intellectual events, Idea” (Rus.: “Novaya Ideya”) regarding • National University of Oil and Gas The priority area of the Company’s development of corporate sports, the best R&D solution among young “Gubkin University” (priority fields activities is to work with young specialists volunteering, and work with Young people employed at enterprises of education: Oil and Gas Engineering, employed with the Group. Working Specialists. The working plan is approved and organizations in the fuel and energy Development and Operation of Oil with them makes it possible to identify annually by the General Director. sector, and the international engineering and Gas Fields, Physical Processes promising young people and encourage championship “CASE-IN”. of Oil and Gas Production, Geology, their professional development. 62 63 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

INTELLECTUAL EVENTS management from both the Corporate of corporate interaction were developed • Employee – Employee: efficient Throughout the year, about 400 and commitment to the Company’s Center and subsidiaries. This annual and implemented in 4 areas with 3 interaction between and among of the Group’s employees took part common goals and values. In 2019, there were four corporate “What? event is always capped off with a gala principles in each area. They reflect employees (“teamwork”, “constructive in such round tables and business games. Where? When?” tournaments between match between the Ministry of Energy the desired behavioral indicators that discussion of issues”, “business-style In 2019, the Best in Profession the teams of the Corporate Center (by and the management of Zarubezhneft JSC. affect the positive dynamics of both communication”). The primary objectives of these activities Contest was held at the production DDG blocks) and subsidiaries. Another teamwork and efficient communication • Manager – Employee: efficient were to develop expertise in interacting facilities of Zarubezhneft-Dobycha impressive fact was that Zarubezhneft VOLUNTEERING and the enhancement of the Company’s interaction between a manager with peer co-workers, the external Samara LLC in the city of Samara. JSC team won the Spring Intellectual performance as a whole, as follows: and an employee (“one-man environment, and subordinate employees, Participants from Zarubezhneft Cup on “What? Where? When?”, awarded The volunteer movement, • Company – Employee: efficient management”, “peer discussion as well as to sharpen feedback skills. Group subsidiaries, the winners in the category for “The Most Intellectual under the guidance of the Council interaction between an employee and unconditional execution of the enterprise-level selection stage, Company in the Fuel & Energy, and Oil of Young Specialists, also continues and the Company (“initiative of the decision”, “open doors”). In order to ensure a smooth immersion showed off their knowledge and skills & Gas Sectors”. The team also ranked to actively develop. In 2019, young and pro-active attitude to life”, into the Company’s culture, an interactive in the theoretical and practical parts among the top three teams for the year. employees from VNIIneft JSC, “striving for continuous improvement In order to develop and systematically adaptation course on the principles of the contest in the following six The same year, Zarubezhneft JSC’s Zarubezhneft JSC and LLC JC and professional development”, implement the above principles of efficient of corporate interaction has been categories: representative team took part in the 19th RUSVIETPETRO took part in greeting “fair assessment (evaluation) interaction, the Integrated Program developed for newly recruited employees. • Operator of Oil and Gas Production; Russian Championship on “What? Where? and thanking World War II veterans. of performance and motivation for Promoting Corporate Cooperation • Operator of Dehydrators and Desalters; When?” for the first time. The group of activists visited of employees”). Principles was approved in 2019. Currently, the project’s execution • Electrical/Gas Welder; the Gagarinskaya Special Boarding School • Company – External Environment: is ongoing. Its progress will be manifested • Maintenance technician; In order to maintain team spirit on Child Protection Day. In collaboration efficient interaction between That same year, the emphasis was laid by introducing these principles into • Passenger Vehicle Driver; and intellectual promptness, with Company management, a branded the Company and its external on involving employees through round the Company’s corporate life so that they • Chemical Analyst. representative team training sessions container for collecting the Company’s environment (“overachiever tables and business games. are not just observed and implemented have been organized on a permanent employees’ unwanted things was before the government”, “honesty in a directive manner, but become a good In addition, the winners were determined basis, as well as open training sessions installed at Zarubezhneft JSC’s office. and transparency”, “tolerance tradition and assist in achieving joint in the following additional categories: for all comers, with a professional coach As the container is filled, the things and mutual respect”). results. Furthermore, the aim is for them • Best in Production System; and a member of the “What? When? are sent for further sorting, cleaning to help all employees become one • Best in HSE. Where?” Elite Club involved. and distribution. team characterized by strong cohesion

Among other things, Zarubezhneft Also in the financial year, employees JSC teams participate and take prize- of Zarubezhneft JSC, ZARUBEZHNEFT- winning places every year in Oil Owl Dobycha Kharyaga LLC, (Rus.: “Neftyanaya Sova”), an intellectual and Zarubezhneftestroymontazh LLC game for youth involved in the oil took part in the Ecological Volunteer and gas industry, and E&Y Club’s EnergiYa Event at the Lomonosov Moscow intellectual tournaments. State University’s Botanical Garden, supported by the Zapovedniki Eco- CORPORATE SPORTS Center. The group of activists consisting DEVELOPMENT of employees of Zarubezhneft JSC and ZARUBEZHNEFT-Dobycha Kharyaga Each year, training takes place LLC visited the Gagarinskaya Special for the corporate football Boarding School on New Year’s Eve. and volleyball teams, and corporate billiard and bowling tournaments are held. BUILDING CORPORATE In 2019, the corporate volleyball team CULTURE AND ETHICS ranked 3rd in the Brands Cup (Rus.: “Kubok Brendov”), two platoons represented The potential for enhancing the Company at the Race of Heroes (Rus.: the Company’s performance largely “Gonka Geroev”), and over 80 people went depends on positive growth in production through the Ready for Labor and Defense indicators, well-coordinated teamwork, program (Rus.: “Gotov k Trudu i Oborone”), functional interaction, and positive Russian physical training standard). communications between employees For the first time in the Council’s history, both within and outside the structural the Athletics Team took part in running units, as well as on well-coordinated competitions organized with support partnership with the external from the Ministry of Energy of the Russian environment. Federation. The corporate football tournament is traditionally considered to be The Company pays considerable the largest event of the year, as it brings attention to its corporate ethics. together active young people and all top In this regard, 12 principles 64 65 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Traditionally, foreign employees of Oil, Gas, Water Treatment Zarubezhneft JSC holds The Best of Zarubezhneft Group take part and Transportation and Petroleum Employee contest on a quarterly basis SOCIAL POLICIES in the Contest. In the financial year, Production. The contest contributes to determine the employees the specialists of JV Vietsovpetro to shaping a responsible attitude to work, with maximum influence on the result from the Socialist Republic of Vietnam increasing labor performance and quality of the events in the Company in three IN THE REGIONS OF PRESENCE supported the international character of work, improving labor discipline focus areas: developing technological of the event by participating in three and developing a corporate labor culture, competencies, enhancing organizational categories of the Contest and taking as well as promoting environmental performance, and fulfilling Within the framework of its activities, The regulations state the areas Care for the environment and rational use prizes in two of them. As for the team protection. the Shareholder’s requirements Zarubezhneft Group significantly of charitable and sponsorship activities of resources also remains an important competition, the winners were once and expectations. At the end of the year, impacts the social and economic as follows: area of corporate volunteering. In 2019, again employees of ZARUBEZHNEFT- In 2019, the title of Facility of High- the Best Employees with a pro-active development of the regions where • supporting culture, sports and a healthy the Zarubezhneft Group employees held Dobycha Kharyaga LLC as they continued Standard Operating Practices was attitude to life are selected. it is present. Therefore, the Company lifestyle; a series of activities and volunteer days the tradition of exhibiting a high level awarded to the following facilities: adheres to a policy of extensive social • preserving cultural and historical to clean up regional territories. That’s of training. The winners of the Contest • in the category of Oil, Gas, Water responsibility towards local communities heritage, supporting military how the employees of Zarubezhneft JSC, were awarded diplomas, cash prizes Treatment and Transportation: and society as a whole. and patriotic activities and events; ZARUBEZHNEFT-Dobycha Kharyaga and gifts. the Chemical Analysis Testing • assisting creative teams and artists; LLC, and Zarubezhneftestroymontazh Laboratory of ZARUBEZHNEFT- Zarubezhneft JSC contributes • supporting poor and low-income LLC took part in the Ecological Volunteer Another significant event is The Best Dobycha Kharyaga LLC to the sustainable development social classes, orphans, war veterans, Action in the Lomonosov Moscow Facility annual review contest among • in the category of Petroleum of the regions of its presence and disabled; State University’s Botanical Garden, Zarubezhneft Group facilities that claim Production: Well Cluster No. 5 as an employer, a taxpayer • developing scientific and educational supported by the Zapovedniki Eco- the title of Facility of High-Standard of Zapadno-Khosedayuskoye oil field and an essential economic actor. programs and professional development Center. In addition, the employees Operating Practices in the categories of JC RUSVIETPETRO LLC. programs; from the Kharyaga field organized In terms of cooperation with the regions, • organizing events timed to coincide a volunteer clean-up day on the banks the emphasis lies on developing with significant events of in the fuel of the Lek-Kharyaga River flowing along local initiatives and social activism. and energy sector. the road to the EP-2 well cluster pad. Zarubezhneft Group has been The event was arranged as part of the All- cooperating constructively with local In 2019, Zarubezhneft Group allocated Russian Environmental Action Clean authorities and public organizations. a total of 149 MM RUB to charities Shores for Our Rivers and Lakes (Rus.: Each year, the subsidiaries conclude and sponsorship in the Russian “Nashim Rekam i Ozeram – Chistye agreements with regional administrations Federation (including social and economic Berega”). Every year, the employees that govern their joint activities agreements executed with administrations of RMNTK Nefteotdacha JSC continue on regional development. of the regions where the Group subsidiaries to participate in the River Ribbon (Rus.: and joint ventures operate), with 136 MM “Rechnaya Lenta”) ecological action. The Group provides support to socially RUB thereof for charity and 13 MM RUB vulnerable groups, implements social for sponsorship programs. Volunteer and charitable activities and charitable projects in health care, help employees develop a sense education, improving housing conditions, In 2019, the volunteer movement continued of personal responsibility and willingness culture and sports, and developing social to develop as part of the Councils of Young to participate in public events. This infrastructure. Specialists’ agenda. Providing assistance is a unique part of the corporate culture to children from orphanages and residents that is supported and encouraged For the purpose of forming unified of facilities for the elderly and disabled, by the Company. approaches within the framework as well as thanking war veterans have of implementing charitable become traditional actions of Zarubezhneft and sponsorship activities, Zarubezhneft Group on Victory Day. JSC has adopted corresponding regulations. In addition, the Commission Employees of subsidiaries, for Consideration of Social Applications in addition to participating in joint actions received both by the Corporate Center with the Corporate Center, continue and the subsidiaries meets on a regular organizing and conducting local events basis. These tools are aimed at creating to help socially vulnerable groups, as well the most efficient, simple and transparent as arranging donor and charitable sports mechanism for providing assistance events. on the part of Zarubezhneft Group. 66 67 ГОДОВОЙ ОТЧЕТ 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

COUNTRY-BY-COUNTRY REPORTING

Zarubezhneft JSC’s development legislative requirements (the Tax Code ventures located in these countries priorities include enhancement of the Russian Federation (Part 1), whose figures are accounted of corporate reporting transparency. Chapter 14.4-1). for in the consolidated statements using Zarubezhneft Group operates the participating interest method. in many different countries. Financial The Capital Expenditures Disclosure and economic details are presented and Amount of Public Contributions/ The list of indicators has been defined in the table below by the regions in which Charitable Donations indicators subject to the recommendations it has a footprint. are prepared based on management of the Transparency International reporting (statements). movement. The Income Disclosure, Profit for the Year and Income Tax Costs The figures for the Russian Federation indicators are based on the country- and the Socialist Republic of Vietnam by-country report prepared per are based on the figures for the joint

Zarubezhneft JSC Indicators for the Year Ended December 31, 2019, MM RUB1

Indicator Total Russian Federation Socialist Republic Republic of Cuba Bosnia Other of Vietnam and Herzegovina (Republika Srpska) Income disclosure 249,182 152,290 63,571 501 32,470 350 Capital expenditure 39,110 19,152 18,719 861 261 117 disclosure Profit for the year 7,252 16,445 2,485 –1,047 –10,278 –353 Income tax costs 13,740 3,790 9,898 20 31 1 Amount of public 244.4 149 95 – 0,4 – contibutions/ charitable donations

1 As of March 16, 2019. 68 69 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Entering

PRODUCTION SHARING new markets CONTRACT FOR SOUTH EAST RAS EL USH (SEREU) BLOCKS AND EAST GEBEL EL ZEIT (EGZ) 03 COMPANY PERFORMANCE IN 2019 70 71 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

CONSOLIDATED INDICATORS OF ZARUBEZHNEFT GROUP

Gross hydrocarbon production Volume of Zarubezhneft Group’ Volume of exploration drilling Zarubezhneft Group’s consolidated Consolidated EBITDA dynamics Consolidated FCF dynamics by Zarubezhneft Group (share reserves (share is taken into account), by Zarubezhneft Group, revenue dynamics, bln RUB of Zarubezhneft Group, bln RUB of Zarubezhneft Group, bln RUB is taken into account), thous. t.o.e. thous. t.o.e. thous. m

−7 % +4 % +49 % +7 % +24 % +20 %

1 6,000 120,000 60 98.3 97.5 1 53.2 35.7 25.91 91.2 23.0 5,500 5,343 110,000 50 5,208 103,815 26.4 5,149 67.7 5,041 100,193 60.9 56.6 19.1 5,000 100,000 40 35.7 4,770 13.5 16.4 21.3 92,041 90,455 31.9 15.9 15.2 90,999 29.8 10.2 4,500 90,000 30 27.3 8.6

4,000 80,000 20

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Based on the reporting period, In 2019, the hydrocarbon reserves in the share The scope of exploration drilling in 2019 was In 2019, Zarubezhneft Group maintained Despite the deteriorating macroeconomic environment1 and the decrease of global oil prices, the gross production of hydrocarbons was of Zarubezhneft JSC increased by 3.6 MM 53.2 thous. m, which is 49% higher than in 2018. the high level of consolidated revenue the implementation of stabilizing measures allows showing high level of operational efficiency. 4.8 MM t.o.e.. The primary production assets RUB because of entering into new projects The primary goals of the work were to perform achieved in 2018. are JV Vietsovpetro, JC RUSVIETPETRO LLC in Vietnam, Egypt and Uzbekistan, as well an additional study of hydrocarbon traps and ZARUBEZHNEFT-Dobycha Kharyaga LLC. as exploration activities and re-assessment at the active fields and recognition of inferred of reserves in the active assets. reserves at new blocks.

1. Hereinafter, the impact on indicators that show changes in macroeconomic factors and in the tax legislation. 72 73 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

TAX OBLIGATIONS OF ZARUBEZHNEFT GROUP COMPANIES

TAX PAYMENTS

In addition to such macroeconomic factors Structure of tax and other compulsory Structure of tax and other compulsory Structure of tax and other compulsory as changes in oil prices and the Ruble’s payments of the Exploration payments of the Service and Other payments of the Downstream exchange rate, taxation has a substantial and Production segment, % Assets segment, % segment, % effect on the activity of Zarubezhneft Group. The tax and other compulsory 8 1 3 accruals in the revenue of the Exploration 15 6 and Production segment is 45%.

20 Zarubezhneft Group’s tax and other 45 7 40 21 compulsory payments are calculated and paid in strict compliance with the applicable legislation of the Russian Federation, Bosnia 17 69 and Herzegovina, and Vietnam. 36

10 The subsidiaries of Zarubezhneft MET VAT Excise taxes JSC completely fulfill their obligations Export duty Social contributions VAT Profit tax Profit tax Social contributions to pay taxes, levies, duties, insurance State profit oil Income tax Other taxes contributions to local, regional and national Other Other budgets and to non-budgetary funds of the Russian Federation. Tax and other compulsory payments Companies in the Bosnian region ton, which was previously valid until 2022 going to the Russian Federation of Zarubezhneft Group are cumulatively the largest taxpayers to the budget system A substantial increase of tax payments and was implemented as a temporary budget system, MM RUB of Bosnia and Herzegovina. Payments in 2019 is primarily related to the growth measure to replenish the Russian to the budgets of all levels in 2019 amounted to 87.64 MM EUR. The primary burden of expenditures on mineral extraction Federation’s budget. of the companies is indirect taxes (69% excise taxes, 21% VAT), social contributions are 6 %, tax (MET) under the current tax policies. 13,586 while other taxes are 3%. Furthermore, in 2019 a new damper The structures of tax payments 11,420 2,174 1,948 mechanism was implemented, which for the Exploration and Production 39,923 increases the tax burden by more than segment and the Service and Other 31,434 Mineral extraction tax, income tax, 250 RUB per ton on average in case of no Assets segment have significant and royalty make up the highest Downstream segment in the Company. differences, which is related to branch- 2018 2019 share in the structure of compulsory specific taxes in the Exploration Federal budget payments of production companies Non-budgetary fund It should be separately noted that and Production area (MET, export Consolidated budget under the Kharyaga PSA (KPSA). in the second half of 2019, per customs duties on oil, royalty amendments to the Russian Tax Code, and profit petroleum of the country The primary burden of the service the MET was permanently modified under the Kharyaga production sharing The total amount of tax and other compulsory segment companies is VAT, social to add a Kk coefficient of 429 RUB per agreement (PSA)). payments in the Russian Federation in 2019 contributions and income tax. was 55,683 MM RUB, which is 24% higher than in 2018, with 72% of the aforementioned payments going to the Russian Federation federal budget (FB), 24% to consolidated budgets (CB) of constituents, and 4% to non- budgetary funds (NBF). 74 75 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

HYDROCARBONS EXPLORATION AND PRODUCTION (E&P)

Operator/Substoil user Projects Life cycle stage THE EXPLORATION AND PRODUCTION SEGMENT IS ZARUBEZHNEFT GROUP’S KEY SEGMENT. Socailist republic of Vietnam THE COMPANY’S STRATEGIC DEVELOPMENT IS BASED ON IMPROVING ASSET PERFORMANCE JV Vietsovpetro Block 09-1, oil fields: White Tiger, Dragon, White Hare, White Exploration and production AND DEVELOPING NEW PROMISING PROJECTS. Bear, White Cat Block 04-3, Thien Ung gas condersate field Production Block 09-3/12 Exploration and production Block 12/11 Exploration We also saw a significant reduction EBITDA, bln RUB SUMMARY SEGMENT Block 16-1/15, field: Gold Tiger Exploration INDICATORS of investments compared Block 42 Exploration, project exit to 2018 amounting to -2.7 bln RUB >30 bln RUB Revenue in 2019 was 3 bln RUB, for JC RUSVIETPETRO LLC as a result 2 ND-DM field joint site Production or 7%, lower than in the previous year. of resulted from the completion 36.5 PVEP (operator) Block 09-2/09, prospective structures:KTN, KNT Exploration

This is primarily due to the decline of the active phase of exploration works 33.4 30.5 VRJ Petroleum Co. Block 09-3 Production

in the average 5% annualized decline and drilling of Block 4 fields. 23.9 Republic of Cuba of the Ruble price of oil (in 2018, it was 17.8 Zarubezhneft JSC branch Boca de Jaruco Oil field Enhanced oil recovery 4,387 RUB/bbl; in 2019, it was 4,135 RUB/ Investment volumes in 2019 increased 16.0 Arab republic of Egypt bbl). Another negative factor affecting by 1.8 or 5% compared to 2018. We saw revenue is the decrease in production growth for ZARUBEZHNEFT-Dobycha ZN BV LLC South East Ras El Ush block Exploration volumes and oil sales compared to 2018: Kharyaga LLC’s assets of +2.1 bln East Gebel El Zeit block Exploration

oil sales decreased by 519 thous. tons RUB (increased pace of construction 2015 2016 2017 2018 2019 Republic of Uzbekistan (-13%) for JV Vietsovpetro Block 09-1 of facilities and increased number JV ANDIJANPETRO LLC Fergana region, fields: Khartoum, East Khartoum and South Production and by 11 thous. tons (-12%) for Block of wells completed by drilling, +2 Alamyshek 09-3. The decline in this indicator wells), +1.1 bln RUB for JV Vietsovpetro Russian Federation is partially offset by additional revenue Block 09-1 due to commissioning JC RUSVIETPETRO LLC Central Khoreyver Uplift block 1, the Severo-Khosedayuskoye Exploration of 2.4 bln RUB from supplies of third- of the new wellhead platform WHP-20, oil field party oil via Orenburgnefteotdacha JSC. completion of the reconstruction project and evaluating hydrocarbon reservoirs Central Khoreyver Uplift block 2, oil fields: Exploration and production and expansion of compressor capacities. and 6 for geological survey, exploration Visovoye, Verkhnekolvinskoye EBITDA for this segment in 2019 and production of hydrocarbons. Central Khoreyver Uplift block 3, oil fields: Exploration and production exceeded 30 bln RUB and dropped CURRENT PORTFOLIO Zapadno-Khosedayuskoye, Sikhoreyskoye, 16% compared to 2018. This indicator OF ASSETS/PROJECTS A license auction took place Severo- Sikhoreyskoye has also been negatively affected OF THE SEGMENT on June 27, 2019, for the purpose Central Khoreyver Uplift block 4, oil fields: Syurkharatinskoye, Exploration and production by lower oil prices, the sales volumes of geological survey, exploration Zapadno-yareyaginskoye, Severo-Oshkotynskoye, of the Vietnamese assets, and decreased In 2019, Zarubezhneft Group and production of hydrocarbons Pyuseyskoye, Yuzno-Syurkharatinskoye, Uremyrdskoye, Vostochno-Yanemdeyskoye effect of concession for export owned 17 licenses, 9 of which were at the Zapadno-Yareyaginsky site. JC duty for JC RUSVIETPETRO LLC for prospecting and exploration RUSVIETPETRO LLC was the successful Zapadno-Yareyaginskoye Exploration due to the reduced volume covered of hydrocarbons, 2 for prospecting bidder. ZARUBEZHNEFT Dobycha- Kharyaga oil fields Production Kharyaga LLC by the concession. Orenburgnefteotdacha JSC Pashkinskoe oil field, Kirsanovskoye oil field Exploration and production Chernovskoe oil field Production Ulyanovskneftegaz LLC Ruzhevskoye oil field, Slavkinskoye oil field, Kondakovskoye Production oil field, Sulakskoye oil field Radishevsky site, Yuzhno-Pcheliny site Exploration Severo-Karasevskoye Petroleum LLC Ivtseyakhskoye field Exploration Enterprise 76 77 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

CONDITION OF RESOURCES Dynamics of current recoverable Reserves structure 1 AND FEEDSTOCK reserves (АB1+C1+2Р) of Zarubezhneft as of January 1, 2020 Group taking into account As of January 1, 2020, the total remaining the participating interest, thous. t.o.e. 16 geological reserves of А+В1+C1

and 2Р* category hydrocarbons 33 of Zarubezhneft Group in Russia +4 % 5 and abroad are 1,072.7 MM t.o.e. with no regard to the Company’s participating 120,000 9 interest, and 548.3 MM t.o.e. with regard 110,000 to the participating interest. The amount 103,815 of total remaining recoverable reserves 100,193 is 200.07 MM t.o.e. with no regard 100,000 90,999 92,041 90,455 to the Company’s participating interest 37 90,000 and 103.815 MM t.o.e. with regard JV Vietsovpetro to the participating interest. JC RUSVIETPETRO LLC 80,000 Kharyaga PSA Samara group 2015 2016 2017 2018 2019 Other (04-3, 09-3/12, 12/11, 16-1/15) 37% of А+В1+С1 reserves are JC RUSVIETPETRO LLC reserves. The primary share of the hydrocarbon reserves is concentrated at the blocks Gold Tiger structure (Block 16-1/15, The balance of the hydrocarbon reserves of Severo-Khosedayuskoye and Zapadno- Socialist Republic of Vietnam), KNT for Zarubezhneft Group in 2019 also Khosedayuskoye fields. and KTN structures (Block 09-2/09, included the hydrocarbon reserves Socialist Republic of Vietnam), West for new assets: Block 09-2/09 (structures The share of JV Vietsovpetro reserves Ashrafi, North Ras El Ush (Arab КTN and KNT under exploration), West is 33%, primarily concentrated Republic of Egypt), Verkhnekolvinskoye, Ashrafi and North Ras El Ush fields (Arab at the White Tiger and the Dragon fields. Vostochno-Sikhoreyskoye, Pyuseyskoye, Republic of Egypt), South Alamyschyk, Yuzhno-Syurkharatinskoye, Zapadno- West Khartoum and Khartoum fields As of January 1, 2020, the balance Yareyaginskoye, Nizhnemazinksoye, (Republic of Uzbekistan).

of Zarubezhneft JSC includes oil, Lutseyakhskoye. Structure of current recoverable reserves (АB1+C1+2Р) of Zarubezhneft Group taking into account the participating gas and condensate reserves of 26 JC RUSVIETPETRO LLC won interest, thous. t.o.e. fields under development: White Tiger, Pilot commercial development was the bid in 2019 in the license tender 2019 Deviation Enterprise plan/actual Dragon, Southern Dragon – Sea Turtle, carried out at the Boca de Jaruco field for the purpose of geological Plan Actual White Bear, White Rabbit, Beluga, in 2019 for implementing enhanced oil survey, exploration and production JV Vietsovpetro 24,766 32,189 7,423 Severo-Khosedayuskoye, Visovoye, recovery methods. of hydrocarbons at the Zapadno- JV RUSVIETPETRO LLC 35,795 36,440 645 Vostochno-Yanemdeyskoye, Zapadno- Yareyaginsky site in the Nenets Khosedayuskoye, Severo-Oshkotynskoye, As a result of prospecting drilling in 2019, Autonomous Area. ZARUBEZHNEFT-Dobycha Kharyaga LLC 7,860 8,396 536 Severo-Sikhoreyskoye, Sikhoreyskoye, the increment of Zarubezhneft JSC Block 09-3 1,810 976 –834 Urernyrdskoye, Syurkharatinskoye, hydrocarbons reserves without regard Orenburgnefteotdobycha JSC 2,166 2,212 46 Pashkinskoye, Kirsanovskoye, to the share was: Ulyanovskneftegaz LLC 1,717 1,613 –104 Chernovskoye, Kondakovskoye, • 6,841 thous. tons in JV Vietsovpetro; Block 04-3 3,367 3,364 –3 Ruzhnevskoye, Slavkinskoye, Sulakskoye, • 321 thous. tons Severo-Karasevskoye Petroleum Enterprise Kharyaga; fields of South Alamyshyk, in JC RUSVIETPETRO LLC; Recoverable reserves LLC 1,056 1,037 –19 East Khartoum and Khartoum • 22 thous. tons of JC RUSVIETPETRO LLC in 2019 Block 09-3/12 2,058 1,811 –247 (Republic of Uzbekistan), and 15 in Orenburgnefteotdacha JSC. increased by fields under exploration: White Cat, • 1,082 thous. tons at the Kharyaga Block 12/11 6,003 9,182 3,179 Thien Ung-Mang Cau, Thien-Nga, field. 899 thous. tons Block 16-1/15 260 32 –228 Block 42 381 0 -381 New assets 11,833 6,563 -5,270 TOTAL 99,071 103,815 4,743

1. The reserves are taken into account by category 2P for the fields of the Socialist Republic of Vietnam (Vietnamese classification) and by category 1P for the fields of the Arab Republic of Egypt (SPE-PRMS international classification). 78 79 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

GEOLOGIC EXPLORATION Exploration drilling volume, thous. m Project, operator Site Legal form and participation Project results in 2019 The Companyʼs strategic goal interest is to ensure a stable growth of HCs +49 % Vostochno-Sikhoreyskoye JS Onshore Intergovernmental agreement Drilling and testing of 1 exploration well resulted in a growth production in the medium- and long-term RUSVIETPETRO LLC between Petrovietnam Oil of oil reserved amounting to 321 thsd TOE perspective by exploring and expanding 60 The scope of exploratory drilling in 2019 was and Gas Corporation (49%) 53.2 and Zarubezhneft JSC (51%) the hydrocarbons resource base. about 53.2 thous. m. The primary goal was to specify structures containing non-drilled 50 Zapadno-Khosedayuskoye Onshore Intergovernmental agreement An appraisal well was drilled reserves at the active fields and to recognize inferred reserves at new blocks. JC RUSVIETPETRO LLC between Petrovietnam Oil In 2019, exploration works were carried and Gas Corporation (49%) 40 36 out at the facilities of the Socialist In the fiscal year, the construction of seven and Zarubezhneft JSC (51%) 32 exploration wells was completed offshore Republic of Vietnam and in the Russian 30 Pyuseyskoye JC Onshore Intergovernmental agreement An appraisal well was drilled 30 27 the Socialist Republic of Vietnam, as well as two Federation. wells in the Nenets Autonomous Area and one RUSVIETPETRO LLC between Petrovietnam Oil well in the Orenburg Region. and Gas Corporation (49%) 20 and Zarubezhneft JSC (51%) 2015 2016 2017 2018 2019

HYDROCARBONS Primary results of the exploratory drilling in 2019 PRODUCTION Project, operator Site Legal form and participation Project results in 2019 interest In 2019, the Company focused 34 new wells have been commissioned The primary production assets in 2019 Social republic of Vietnam on the production stabilization by taking at the Russian segment fields, a number still were JC RUSVIETPETRO LLC, Block 09-1 JV Vietsovpetro Shelf Intergovermental agreement 7 wells were drilled, including 1 multiateral well (2 a number of geological, organizational of successful well interventions have JV Vietsovpetro, ZARUBEZHNEFT- between Petrovietnam Oil wellbores from one wellhead). Exploration work was and technical measures as per been completed (side-tracking, hydraulic Dobycha Kharyaga LLC. and Gas Corporation (51%) carried out at the White Tiger and Dragon fields. Completed the production program. fracture, re-completion), as well and Zarubezhneft JSC (49%) with the construction of 6 wells. As of December 31, 2019, as 117 other WIs. 2P reserves growth in the amount of 2,582 thsd TOE was achieved. Block 09-3/12 Shelf Oil and gas contract between Tests on well CT-6X – structure Ca-Tam were completed. JV Vietsovpetro JV Vietsovpetro (55%), PVEP Dynamics of production share (30%), Bitexco (15%) Production structure in 2019 Taking into account the share of Zarubezhneft JSC, as per Zarubezhneft JSC activity the HC production in 2019 was 4,770 K t.o.e., which Block 42 Shelf Oil and gas contract between Drilling of the 1st exploratoey well was completed, negative 1 3 1 geography is less than in previous year by 7.4%. The target JV Vietsovpetro JV Vietsovpetro (49%) results were obtained and the decision to exit the project was 2 indicator (4,515 K t.o.e.) was exceeded by 5.6%. and PVEP (51%) taken. The decline in production was caused by large fields 13 43 of JV Vietsovpetro, the White Tiger and the Dragon, Block 12-11 Shelf Zarubezhneft JSC oil and gas Construction of 1 dual lateral well was completed. Oil entering the complex final stage of development. JV Vietsovpetro contract (100%) reserves increased by 4,131 TOE 44 47 49 55 51 Russian Federartion 4,770 Pashinskoye Onshore Zarubezhneft JSC license The construction of 1 exploration well resulted in a growth thous. t.o.e. Orenburgnefteotdacha JSC (100%) of oil reserves amounting to 22 thsd TOE Kharyaga Onshore Production sharing agreement, 3 production wells with exploratory liad were drilled, total 35 56 53 Zarubezhneft-Dobycha consortium structure: growth of oil reserves amounted to 1082 thsd TOE. 51 49 45 Kharyaga LLS Zarubezhneft JSC (20%), Zarubezhneft- Dobycha Kharyaga LLC (20%), JV Vietsovpetro Statoil Sverige Kharyaga JC RUSVIETPETRO LLC AB (30%), Total Exploration Kharyaga PSA Block 09-3 (VRJ) and Production Russie (20%), Block 04-3 2015 2016 2017 2018 2019 Nenets Oil Company JSC (10%) Block 09-3/12 ONO JSC Foreing assets UNG LLC Russian assets 80 81 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

SOCIALIST REPUBLIC OF VIETNAM

BLOCK 09-1

Block 09-1 is developed as per Ownership structure, % CAPITAL CONSTRUCTION the Inter-Governmental Agreement dated December 27, 2010. The White Tiger Capital construction activities in 2019 were OPEX, MM USD Capital investment, MM USD and the Dragon as well as the White Hare related to the commissioning of WHP- and the White Bear fields, developed 20, valving of the X-mas tree for new by JV Vietsovpetro, are located 150 km Hanoi wells and the installation of additional +6 % +6 % from the shore on the southern Vietnam 51 B 09-1 cells on WHP-20. A number of necessary shelf. operations were completed: reconstruction 399 49 363 and expansion of compressor capacities 298 DEVELOPMENT AND PRODUCTION at Block 09-1, modernization of the gas lift 274 275 256 253 249 264 system at RP-2, reconstruction of CPF-3 228 The actual production of hydrocarbons for reception of WHP-20 production,

at Block 09-1 in 2019 was 4,138 K Zarubezhneft JSC installation of an auxiliary power supply t.o.e., which is lower by 14.6% than that Petrovietnam Oil and Gas Corporation system at Tamdao-1 jack-up drilling rig in the previous year. This reduction to connect it to the common grid of Block is related to decline of production Hydrocarbon production, 09-1, and other activities. in base wells due to the White Tiger thous. t.o.e. 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 and the Dragon fields entering the final FINANCIAL INDICATORS stage of development. +18 % Completion of the efficiency gain To maintain the production levels in 2019, and cost optimization program of the offshore infrastructure increased For the base wells, it is planned 35 32 an extensive well intervention program in the reporting period failed to fully due to the dismantling of equipment to implement electrical centrifugal 30 27 was completed with an additional constrain the costs growth. The growing at the small compressor station. pumps (ECP) under the pilot development 25 production of 214.0 thous. tons of oil. expenditures on fuels and lubricants were program, which will reduce expenditures A new block site in the area of WHP- Vung Tau 20 caused by increased scope of exploratory DEVELOPMENT PROSPECTS on gas lift and increase flow rate 20 was commissioned. After re-entry 15 12 12 drilling and WIs. The increased of the existing wells. 11 of MTD-2X well, the oil flow rate Block 09-1 10 expenditures on personnel were caused Taking measures to compensate

at startup was 311 tons/day. 2015 2016 2017 2018 2019 by the decision taken at the 51th Meeting production rate drops at the Block In 2019, the profitability of Zarubezhneft of the Participants to re-adjust position fields is the main task for the asset. JSC reduced by 31% relative Measures were developed salaries of employees by 4%, in order Therefore, it is planned to complete to the previous period and amounted and implemented in 2019 to form of 2018 HFF campaign results. A specific 5 new wells were drilled and 10 side to increase the offshore facilities 69 well interventions, including to 135 MM USD. The primary factor the FPM system at the Block fields. startup growth for wells with HFF in 2019 tracks were completed in 2019 at Block surcharge from 30 to 40 USD/day, drilling and commissioning of wells of the profitability reduction is related The comprehensive program includes exceeded 50 tons/day. 09-1 fields. The completed scope totaling 7.2 MM USD. The workover at the existing facilities of the White to reduced production and sales the conversion to injection and use of development and exploration drilling upgrade was completed in 2019, Tiger and the Dragon fields, and side- of oil (-15%) and decline in oil prices of non-fixed waterflooding. Completion The industrial exploitation of the Dragon complies with the approved production and costs of Chí Lin single-point mooring tracking to involve the remaining reserves to 67.3 USD/bbl in the reporting of the FPM program reduces the drop field gas condensate reservoir continued program. unit were undertaken in the amount of 3 of the White Tiger, the Dragon period as compared to 2018 (-10% rates for Block 09-1 to 20.7%. in 2019. Natural gas production was MM USD, and expenditures on overhaul and the White Bear fields’ wells. or -7.2 USD/bbl). 132.4 MM m3, with the planned level Development and approval of 117.8 MM m3. The overproduction of an algorithm for the search of natural gas was due to increased and selection of optimal designs production in order to maintain and laboratory studies supported the pressure in the Dragon field gas lift the development and consolidation system. 82 83 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

BLOCK 09-3

Works at Block 09-3 (VRJ) are carried out as per the Petroleum Contract for development and exploitation of Block 09-3 reserves at the shelf of the Socialist Republic of Vietnam dated January Hanoi 19, 2002, and the Joint Development Agreement (JDA) on the Southern Dragon – Sea Turtle field (SD-ST) dated June 26, 2009. According to the JDA, the share participation and allocation of production of Block 09-1 and Block 09-3 in the development of the joint SD-ST block is 50% and 50%, respectively.

In 2017, Idemitsu (15%) and PVEP (35%) withdrawn from the Petroleum Contract and transferred their shares to Zarubezhneft JSC from January 1, 2017. The Government of the Socialist Republic of Vietnam issued an investment certificate on September 6, 2018 for Block 09-3 entitling oil and gas activities, in accordance with which Zarubezhneft JSC is the Contractor Vung Tau with 100% of participating interest starting from January 1, 2017. Block 09-3 DEVELOPMENT AND PRODUCTION

Primary production activities at the Block are carried out in fractured rocks of the crystalline basement. FINANCIAL INDICATORS as compared to the previous year. Ownership structure, % DEVELOPMENT PROSPECTS OPEX, MM USD The specific actual indicator for 2019 was In 2019, the asset production was As the result of shifting 94.0 USD/ton as compared to 106.5 USD/ To stabilize the production in 2020, 81.17 K t.o.e. (-13% as compared to 2018). the WIs program to 2020 in 2019, control ton in 2018 (-11.7%). works are planned to install ECPs in two −25 % Production decline for the Southern over the expenditures on procurement wells (No. 2Kh, No. 422); a candidate 17 Dragon – Sea Turtle field is mainly of chemical reagents, and works The primary factor of Zarubezhneft to remedial cementing has been defined related to the reduced formation intended to reduce prices of tariff JSC profitability decline by 2 MM USD (well No. 406). 12 B 09-3 11 pressure. Despite this, measures operations (operation and maintenance, as compared to the previous year 10

intended to optimize the development oil treatment, gas lift and formation is a reduction of revenue by 8.8 MM 7.4 wells resulted in overachievement pressure maintenance), we see USD (-18%) as the result of sales volume

of the planned production (+10 K t.o.e.). a decline in the OPEX in absolute terms decrease by 10.8 thous. tons (-12%). 100

2015 2016 2017 2018 2019 Zarubezhneft JSC 84 85 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

BLOCK 04-3 Ownership structure, % BLOCK 12/11 Ownership structure, %

Block 04-3 is located in the northern Block 12/11 is located within the Nam Con Hanoi part of the Nam Con Son basin Son gas condensate basin, 350 km south- Hanoi on the southern shelf of the Socialist east from Vũng Tàu. Republic of Vietnam, 280 km south-east from Vũng Tàu. The Thien Ung - Mang 51 B 04-3 Oil and gas occurrence perspectives B 1211 Cau structure is located within Block 04-3. 49 are related with the Oligocene and Lower Miocene deposits within the identified Thien A Petroleum Contract was signed Nga-Hai Au structures and the group of E on June 26, 2009, based on a commercial structures, whose hydrocarbon resources 100 discovery between Petrovietnam Oil belong to category Р3.

and Gas Corporation and Zarubezhneft Zarubezhneft JSC Zarubezhneft JSC JSC concerning Block 04-3 of the Socialist Petrovietnam Oil and Gas Corporation The PSA on Block 12/11 was signed Republic of Vietnam shelf. JV on December 19, 2012. The PSA term Vietsovpetro is the project operator. is 25 years for oil and 30 years for gas Hydrocarbon production, with a prolongation option for 5 years, Thien Ung WHP was commissioned thous. t.o.e. including 5 years of exploration works on December 20, 2016 after with a prolongation option for 2 years. for profitable development of Block 12/11 the completion of drilling and testing −20 % The minimal license obligations suggest before infrastructure development and start of the 6-TU gas condensate well. drilling of 3 exploration wells. of production. Negotiations were undertaken

200 with KNOC as to the rates of preparation Vung Tau 169 Vung Tau DEVELOPMENT AND PRODUCTION 144 EXPLORATION AND DEVELOPMENT and transportation of Block 12/11 production 150 135 and possible procurement of Block 11-2; key

Total gas production after the operation 100 The following activities were completed arrangements with KNOC were achieved. start was 387.9 MM m3, gas condensate Block 04-3 at Block 12/11 in 2019: After trilateral negotiations with Petrovietnam 50 production was 104 thous. tons. 5 Oil and Gas Corporation and KNOC – There are 3 active production wells. 0 Geological and geophysical works. Block 12-11 on December 21, 2019, the agreement

Gas condensate mixture is produced 2015 2016 2017 2018 2019 Interpretation of 3D PrSDM seismic data (HOA-Heads or Agreement) was signed in limited conditions of gas reception Total gas production after for TN-HA-E structures in the amount as to the general principles and conditions by the purchaser (PVGas) due to the quality the operation start was The volume of HC production of 630 km2, reports: “the summary of drilling of further negotiators on gas prices in 2019 was 135 K t.o.e., including natural of gas and condensate (high CO2 3 results for 3rd EF-1Х exploration well”, “the of Block 12/11 and conditions of Block 11-2 3 gas of 108.5 K t.o.e. (120.5 MM m ) and gas concentration) in the production. These 387.9 MM m condensate of 26.7 K t.o.e.. report on completion of exploration works, WorleyParsons Group of Companies). procurement. limitations will be in force until the new stage 1”, “the calculation of HC reserves The report has been approved pipeline Nam Con Son-2 is commissioned. and resources for the block structures”; by Zarubezhneft Council for Science DEVELOPMENT PROSPECTS design documentation was developed and Engineering on May 16, 2019; works FINANCIAL INDICATORS is a reduction in revenue by 8.7 MM DEVELOPMENT PROSPECTS for the construction of a TN-4Х multilateral have been completed on the designing As for 2020, it is planned to complete drilling USD (-18%) as the result of sales exploration well. of ОDP and simulation model development and testing of the TN-4X well and recalculate The primary factor of Zarubezhneft volume decrease by 36.2 K t.o.e. (-22%) Development of the Thien Ung field for Thien Nga-Hai Au by VNIIneft JSC HC reserves for Thien Nga-Hai Au structures JSC profitability decline by 1.9 MM and growth of the profit tax rate from 16% suggests development drilling during Drilling works. Construction of a TN-4Х consortium (VPI). JV Vietsovpetro Council after drilling (TN-HA commissioning USD as compared to the previous year in 2018 to 32% in 2019. 2020–2022 and reaching the maximum multilateral exploration well. Testing along for Science and Engineering meeting is scheduled for the fourth quarter of 2022). design production. the ST2 well bore (Thien Nga structure) adopted the document on December 24, showed commercial inflow of HCs 2019 and recommended it for approval The work program for a mid-term period from Oligocene deposits (gas, condensate) by Petrovietnam Oil and Gas Corporation. suggests preparation for infrastructure and of oil (Miocene). After a number development of TN-HA structures, as well of studies, on November 6, 2019, the ST1 Other works. Work is ongoing on approval as development and approval of FDP, FEED pilot well bore (Hai Au structure) was of the layout and the transportation price for TN-HA structures. The decision taken abandoned as having served its purpose of Block 12/11 production to the Rong on the commercial discovery on the TN-HA and giving no inflow of HCs. Doi platform with KNOC, the owner structure is followed by engineering of neighboring Block 11-2. Negotiations were and survey activities for the construction Design and facilities. Works have undertaken in 2019 between representatives of WHP and pipelines from Thien Nga – been completed on PRE-FEED of Zarubezhneft JSC, JV Vietsovpetro, Hai Au structure to Rong Doi. Development with the underwater production unit and Petrovietnam Oil and Gas Corporation and exploration of other structures for Block 12/11 (the contractor is INTECSEA, on approval of the gas selling price sufficient of the Block are planned. 86 87 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

BLOCK 09-3/12 BLOCK 09-2/09

Block 09-3/12 is located 160 km Ownership structure, % Block 09-2/09 belongs to the so-called Ownership structure, % south-east from Vũng Tàu. The Block small blocks of the Vietnamese shelf. borders with Block 09-1 on the north- The Block is located near Blocks 09-1 Hanoi 15 Hanoi west. The PSA on Block 09-3/12 was and 09-3/12 (adjoins them). Several 30 30 signed on September 12, 2012 between structures have been explored at the Block Petrovietnam Oil and Gas Corporation, site, with two best of them (KNT, KTN) PVEP, JV Vietsovpetro and Bitexco having potential geological resources Group. JV Vietsovpetro is the project B 09-312 of 30 MM m3. B 09-209

operator. The PSA term is 25 years 55 with a prolongation option for 5 years. 30 The PSA between Petrovietnam Oil The minimum work obligations in respect and Gas Corporation (as the State of geological exploration activities Representative) and PVEP was signed 40 under the project include two phases. on August 6, 2009. Zarubezhneft JSC JV Vietsovpetro The minimum work obligations of two JV Vietsovpetro Oil and Gas "Petrovietnam" PVEP PSA stages were fulfilled in full. Bitexco Group The FoA agreement was signed in 2019 for assignment of the share owned The Ca Tam (Beluga) oil field by PVEP (on May 17, 2019, between PVEP was discovered within the Block. and JV Vietsovpetro; and on May 22, The discovery took place in 2014 after 2019, between PVEP and Zarubezhneft drilling СТ-2Х and СТ-3Х exploration JSC). Investments of the project wells. The commercial discovery was partners are made in accordance Potential geological resources announced in 2017. In 2018, CTC-1 WHP Vung Tau with their participating interest. Current Vung Tau support unit was installed and all pipelines distribution (allocation) of shares 3 were routed. is shown in the diagram. The efficient 30 MM m share of Zarubezhneft JSC is 49.6%. DEVELOPMENT AND PRODUCTION Block 09-3/12 DEVELOPMENT PROSPECTS EXPLORATION AND DEVELOPMENT Block 09-2/09 The Beluga field was commissioned in January 2019. Production for 2019 was One of the primary tasks for the Beluga Two best structures of the Block (KNT, 452.85 K t.o.e. The field is being developed field is updating design solutions, KTN) have potential geological resources two oil and gas discoveries. In case DEVELOPMENT PROSPECTS in natural conditions. taking into account the obtained actual of 30 MM m3. Inflows up to 600 m3/day of commercial oil discoveries, exploration Production for 2019 was data and implementation of measures were obtained from the primary horizon works are advantageous to develop The mid-term budget for Block 09-2/09 The extensive WI program has been to stabilize the production and reduce at the fields (E70). Extensive exploration these discoveries because they adjoin suggests the installation of a manned completed for the field: 4 exploration wells 452.85 K t.o.e. production decline rates. Perspective works have been completed at the Block: the existing oil fields near Block 09-2/09: wellhead platform (WHP) at the KNT have been re-entered into production, measures include the construction 11 exploration wells have been drilled. the Rang Dong - Phuong Dong (JVPC) structure and an unmanned wellhead 7 production wells have been drilled and optimal placement of the second field, and the White Tiger (JV Vietsovpetro). platform at the KTN. ODP, FEED, FDP and commissioned, 3 HFFs have been First income from taking part WHP, development drilling, HF program, According to the G&G data and exploration The Block is located in the area are planned to be developed in 2020. made, bottom hole treatment (BHT) has in Block 09-3/12 was received in 2019 FPM system arrangement, optimization drilling, there are 3 prospective structures with existing producing and transport The planned field commissioning date been performed in one well. in the amount of 6.5 MM USD. of gas lift well operating conditions. (COD, KND, SON) with high prospective infrastructure with intense oil and gas is 2022. The maximum level of production resources at Block 09-2/09 beyond activity. is planned to be achieved in 2023. 88 89 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

BLOCK 16-1/15 BLOCK 42

Block 16-1/15 with an area of 3,117 km2 Ownership structure, % Block 42 is located on the continental Ownership structure, % is located in the western part of the Cuu shelf of Vietnam, 350 km south- Long basin of the Vietnamese continental west from Vũng Tàu and 60 south 10 shelf, 80 km south-east from Vũng Tàu. Hanoi from Phu Quoc Island. The seabed depth Hanoi

The Block’s eastern border adjoins Block 10 is 25–30 m. 8 perspective structures 09-1. The PSA was signed on May 16, have been identified at the Block 2016 under the Vietnamese Shelf Block with an area of 4,659 km2. The PSA was 51 B 42 49 16-1/15 Exploration and Development B 1-115 signed on March 29, 2013 between project between Petrovietnam Oil and Gas 51 PVEP (51%) and JV Vietsovpetro (49%), Corporation, JV Vietsovpetro, PVEP, the project operator is PVEP. The PSA BITEXCO and SOVICO. JV Vietsovpetro 29 term is 30 years with a prolongation was selected to be the project operator, option for 5 years, including 7 years and the investment certificate was of prospecting and exploration. JV Vietsovpetro received. The PSA term is 25 years JV Vietsovpetro PVEP with a prolongation option for 5 years, PVEP EXPLORATION AND DEVELOPMENT SOVICO including 5 years of exploration works BITEXCO with a prolongation option for 2 years. In 2019, the 1st exploration well contractor party, agreed to complete The minimum work obligations in respect PQ-1X was drilled (3,060 m) all procedures to quit the project as per of geological exploration activities on the PHU Quoc structure. During the PSA Provisions for Block 42 and Joint under the project include two phases. construction of the well, a geological Operating Agreement. The resolution Currently, Phase I of the exploration rock section was identified differing was approved by the Minutes of the 51st works stage is being implemented, that from the predicted section, with the rocks Meeting of the JV Participants dated Vung Tau suggests seismic surveys and drilling strongly compacted and subject Vung Tau July 11, 2019. PVEP ROS Block operator of two prospecting and exploration to volcanic activities in the adjacent prepared a report on the results of drilling Area of block wells. The Ministry of Industry and Trade area. Irrespective of the attraction of the 1st exploration well and completion of the Socialist Republic of Vietnam of this structure since it accumulates of the exploration works Phase 1. 2 Block 42 and Petrovietnam Oil and Gas Corporation Block 16-1/15 3,117 km migrating oil flows, and proximity approved the extension of the exploration of hydrocarbons generation areas, DEVELOPMENT PROSPECTS works Phase I from June 11, 2019 no reservoirs in prospective horizons for one calendar year. The project funding and no significant seals prevented Area of block In 2020, JV Vietsovpetro plans in the share of JV Vietsovpetro is carried from the HC field to form. Taking into to complete all procedures to quit the PSA 2 out from the JV Production Development and studies of the fracture screen of Block DEVELOPMENT PROSPECTS account the signs of hydrocarbons 4,659 km on Block 42; the contractor is expected Fund. 16-1/15. Works have been continued absence and the identified geological to return the original investment certificate on the special processing of 3D seismic The work program for 2020 provides section, the decision was made On March 15, 2019, the Block operator to the Ministry of Industry and Trade EXPLORATION AND DEVELOPMENT data by the inversion method (300 km2): for design, geological and engineering to abandon the well without string RIH PVEP ROS proposed suspending main of the Socialist Republic of Vietnam primary interpretation of the data has been exploration, drilling and testing due to geological reasons. All minimal activities under the project due to negative as per Clause 2 (d), Article 43 of Decree Works were completed in 2019 related obtained. Works have been completed of the 2nd exploration well in the Soi obligations of the exploration works results while drilling the 1st exploration of the Government of the Socialist Republic to the testing of the first exploration on geological justification of selection Vang structure. It is planned to complete Phase I have been fulfilled. well. JV Vietsovpetro, as Block 42 PSA of Vietnam No. 95 dated October 16, 2015. well CV-1X; no commercial inflows were and evaluation of geological drilling the exploration works in a mid- obtained within the Oligocene and Miocene conditions of the second well, the site term period, to develop and produce horizons, the well was abandoned. Works of the 2nd exploration well on the SV hydrocarbons using the unmanned WHP, were completed on evaluation of increment structure was preliminary defined along to drill 10 development wells, and re-enter of oil and dissolved gas reserves with the well structure (the main bore 2 exploration wells. It is planned to start upon the results of CV-1X well drilling and side tracks). the development in 2023. 90 91 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

REPUBLIC OF CUBA

BOCA DE JARUCO

The Boca de Jaruco field is located Boca de Jaruco plants are planned to be constructed, on the north coast of Cuba, 30 km the suggested sites have been inspected. from Havana. The contract area A preliminary scheme of the project of 37 km2 is located in the north-western implementation was prepared. part of the field on the sea shore, 3.7 km west from the village of Boca de Jaruco. DEVELOPMENT PROSPECTS The field was discovered in 1969 and has been operated by the Cuban state oil Plans for 2020–2022: company CubaPetroleo. • completion of the drilling of three horizontal wells (CSS+SAGD) in 2020 Zarubezhneft JSC carries out its and of the fourth (additional) well BKh- activities as per the International 3007 with the aim to test the upper Economic Association Agreement (above the M formation) bitumen- (IEAA) on increasing of oil recovery saturated zones with drilling of the M and share production dated June 24, Ownership structure, % • two (out of three) horizontal wells formation; 2011, as the contractor. The Agreement have been drilled — 3004 (with • continued steam treatment of current term is 25 years and includes two stages: cutting samples that revealed wells; Pilot Commercial Development Stage — bitumen saturation of a section above • testing of the cyclic steam treatment commercial development stage 4 years the M formation) and 3006 (with technology in a horizontal well (with a prolongation option for 4 years) sampling 180 m of core in the pilot and the steam assisted gravity and the Exploitation Stage. The primary B J borehole), where two technologies drainage (SAGD); method of enhanced oil recovery is well will be tested: cyclic steam • pilot testing of the intraformational steam treatment. treatment and steam gravity drain. oil upgrading by catalytic Drilling of the first horizontal well aquathermolysis; In August 2018, Addendum No. 4 100 for the M formation was started • definition of the 100 MW SPP to the IEAA came into effect, which on October 4, 2020 by D. A. Medvedev, construction project.

provides financing of local services Zarubezhneft JSC Chairman of the Russian Federation and materials and equipment during Government; Until August 2020, the project the pilot commercial development • drilling of the third horizontal well 3006 is being implemented with co-financing Capital investment, on the M formation for 2 years by means • steam to oil factor in the BKh-3003 started; by the Special Account for local costs; MM RUB of the Special Account, a non-written-off well reached 3.9 tons of steam/ • total penetration in 2019 was 3,650 m; an agreement has been reached part of Cuba debt as per the Agreement tons of oil (reduced by 7 times • a base for reserves calculation was to prolong these conditions until the end +166 % between the Government of the Russian from the initial level); prepared as part of the scientific of the production testing. 1,314 Federation and the Government • workover completed for wells 3002 support and researches.

of the Republic of Cuba on adjustment and 3001 to include bitumen-saturated Since 2023, full-scale development 1,025 of the debt of the Republic of Cuba tight streaks; When implementing renewable energy of the M formation starts, with drilling towards the Russian Federation for loans • tests of the innovative development source projects in Cuba, an agreement of 7 wells in 2023 and further switching

granted in the former USSR period, dated started — intraformational was signed with the Union Nacional to more prospective reserves 501 530 October 25, 2013. oil upgrading by catalytic Electrica (UNE), and Zarubezhneft with additional exploration 385 aquathermolysis at the BKh-3003 well; JSC was registered as a participant of the formation (increasing the formation EXPLORATION AND EXPLOITATION • gas well cluster development started, of the Solar Power Frame 100 MW coverage to 60 horizontal wells). OF FACILITIES the following facilities were built: OHV project. Agreements were signed 2015 2016 2017 2018 2019 33kV; Cluster M — GW Cluster oil with Norsk Solar (Norway), EMPower In 2019: pipeline, Cluster M — GW Cluster gas and UNE, as well as the Consortium • 8 cyclic steam treatments out of 8 pipeline to supply gas to the mobile Basic Conditions between Zarubezhneft planned treatments were performed; single-flow steam-generating plant JSC, Norsk Solar and EMPower. Cuba • 23 thous. tons of steam were injected (MSFSGP); and water line to supply have provided for technical information into the M formation; MSFSGP; on 17 locations where solar power 92 93 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

UZBEKISTAN RUSSIAN FEDERATION

JV ANDIJANPETRO LLC JC RUSVIETPETRO LLC

JV ANDIJANPETRO LLC is an oil JC RUSVIETPETRO LLC is the primary producing asset with Zarubezhneft JSC Russian producing asset of Zarubezhneft share of 50%, that carries out its activities JSC. JC RUSVIETPETRO LLC in cooperation with Uzbekneftegaz JSC. JC RUSVIETPETRO LLC carries out its Three fields (South Alamyshyk, Khartoum, JV Andijanpetro LLC activities on hydrocarbons production East Khartoum) are located in the Fergana at the facilities of the Central Khoreyver Region of the Republic of Uzbekistan. Uplift in the Nenets Autonomous Area They were brought to development since September 2010. in 1945, 1957, and 1973, respectively. Primary development features have been Ownership structure, % DEVELOPMENT AND PRODUCTION fully drilled and are at the later stage of development. In 2019, production of hydrocarbons exploration and performance evaluation Ownership structure, % by JC RUSVIETPETRO LLC was 3,257 completion, it is planned to take DEVELOPMENT AND PRODUCTION K t.o.e., which is higher than the level a decision on distributing the technology. of the previous year by 1.7% and than In 2019, the production of JV DEVELOPMENT PROSPECTS the target level by 1.9%. The production Apart from well interventions, enhanced 50 JV A 50 ANDIJANPEТRO LLC was 0.8 thous. tons, LLC was carried out at the following oil recovery methods are evaluated taking into account that the operating As for 2020, it is planned to drill 86 fields of the Central Khoreyver Uplift: for performance: thermal gas treatment, 49 JC R

activity started from December 1, wells at the Khartoum field, as well Severo-Khosedayuskoye, Visovoye, surfactant polymer treatment, use of smart LLC 51 2019. Measures are undertaken as sidetracking in well 27 of the Khartoum Verkhnekolvinskoye, Zapadno- water, selective isolation of bottom for 98 development wells (comprising field and 22 other WIs with a total Khosedayuskoye, Sikhoreyskoye, waters. The stage of field tests has been the production fund) for reworking idle production increase of 15.5 thous. tons. Vostochno-Sikhoreyskoye, completed for a number of operations. Zarubezhneft JSC and inactive wells. Uzbekneftegaz JSC Severo-Sikhoreyskoye, Severo- Oshkotynskoye, Syurkharatinskoye, JC RUSVIETPETRO LLC production Zarubezhneft JSC Yuzhno-Syurkharatinskoye, program is traditionally performed Petrovietnam Oil and Gas Corporation Pyuseyskoye, Urernyrdskoye, in close cooperation with the companies Vostochno-Yanemdeyskoye. of the Service and Other Assets segment: RMNTK Nefteotdacha JSC meets In order to fulfill the production plan the demand in integrated services FINANCIAL INDICATORS over the course of the reporting period, when drilling wells and during workover 10 new wells were commissioned at the Central Khoreyver Uplift fields; JC RUSVIETPETRO LLC sells and 4 sidetrackings made Zarubezhneftestroymontazh LLC carries produced oil at the internal with the incremental production of 206.2 out construction and installation activities and external markets under commission thous. tons. for the fields infrastructure development; agreements as well as supplies VNIIneft JSC and Giprovostokneft JSC oil for process needs of the field With a view to improve the development carry out researches and development under direct agreements. Through of low-density reserves based on detailed to search for new technologies constant monitoring of the market geological flow simulation and risks and reagents in order to improve situation on the international and internal analysis, an optimal development performance and enhance oil recovery oil markets, the Company can flexibly option has been selected — lateral of formations in the Central Khoreyver respond to changes in demand thereby drilling with further intensification. After Uplift conditions. increasing its profitability. 94 95 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Hydrocarbon production, REVENUE FROM SALES, INCLUDING KHARYAGA PSA thous. t.o.e OTHER SALES, FOR 2019 GREW BY 0.2% Zarubezhneft JSC entered the Kharyaga +2 % PSA project on January 1, 2010 TO 75,343 MM RUB AS COMPARED with the participating interest of 20%. 3,500 TO 2018, SINCE THE INCREASE IN OIL In accordance with Schedule 3 3,375 3,301 3,293 to the Product Sharing Kharyaga Field Oil Kharyaga PSA 3,257 SALES IN PHYSICAL TERMS (+1.0%) Development and Production Agreement 3,250 3,202 dated August 1, 2016, Total Exploration 3,114 AND GROWTH OF RATE OF EXCHANGE and Production Russie transferred 20% 3,125 of its participating interest and the project ARE COMPENSATED BY THE OIL operator functions to Zarubezhneft JSC 3,000 subsidiary — ZARUBEZHNEFT-Dobycha 2015 2016 2017 2018 2019 PRICE DROP. Kharyaga LLC. As a result, the parties to the Kharyaga PSA are Statoil Kharyaga AS (30%), Zarubezhneft JSC (20%), Revenue from sales, including other piping system by chlororganic compounds EBITDA, MM RUB ZARUBEZHNEFT-Dobycha Kharyaga LLC sales, for 2019 grew by 0.2% to 75,343 and absence of opportunity to transport oil (20%), Total Exploration and Production Hydrocarbon production, MM RUB as compared to 2018, since in this direction since July 2019. Russie (20%), Nenets Oil Company JSC Ownership structure, % −8 % thous. t.o.e. the increase in oil sales in physical terms 42,690 (10%). (+1.0%) and growth of rate of exchange As a part of the tax burden reduction 40,383 37,294 32,537 33,468 20 20 +2 % are compensated by the oil price drop. in 2019, the Company successfully DEVELOPMENT AND PRODUCTION exercised the right to apply a preferential 2,000 21,096 Growth of revenue from oil sales rate for export duty for the Zapadno- In 2019, ZARUBEZHNEFT-Dobycha in far-abroad countries by 14% resulted Khodesayuskoye field for the volume Kharyaga LLC reached the maximum 1,875 from the supply volume growing by 22% equal to 366 thous. tons of oil. production for the last six years — 10 K PSA and rate of exchange rising by 5%, which 1,599 K t.o.e. This result exceeded 1,750 compensated for the drop of global In 2019, the tax burden on the Company 2015 2016 2017 2018 2019 the level of 2018 by 2.3% and the planned 1,599 1,625 oil price by 11%. The growth of supply was about 56%, with the tax concessions level by 6.3%. High results are associated 30 1,564 1,549 1,549 1,543 volumes to far-abroad countries being 26.5 bln RUB. The ratio between In 2019, EBITDA decreased by 5,396 MM RUB with the permanent optimization 20 is caused by reduced opportunities taxes and revenue was about 47%. as compared to the same period of 2018 to 37,294 and integrated control 1,500 MM RUB, or 49.5% of the revenue (56.8% for 12 2015 2016 2017 2018 2019 of supply to the CIS countries (the months of 2018). Apart from oil price reduction, of the FPM system which allowed Zarubezhneft JSC Republic of Belarus). Capital expenses for 2019 were 7,369 MM EBITDA decreasing for 12 months of 2019 reducing water breakthrough rate STATOIL as compared to the same period of 2018 is related TOTAL RUB, which is by 27% lower than the last to an increased tax burden and reduced qualifying for wells, and with implementation NNK JSC Zarubezhneft Dobycha Kharyaga LLC In 2019, sales to the Republic of Belarus year indicator. The Company completed oil volume. of the program for further drilling were 124 thous. tons (62% reduction the active phase drilling of Block 4 of the field. as compared to the same period fields, which resulted in reduced costs apparatuses, smart tracer packages of the previous year) or 4% of the total of drilling, surveying and infrastructure 4 new wells were commissioned are integrated. To evaluate performance sales volume. The volume reduction development of new fields of western in the financial year, 2 sidetracking of using low-mineralized water injection, is related to contamination of the Druzhba and north-western areas. activities were undertaken, 2 hydraulic works were done in field conditions fractures made along with 6 other WIs at a single well using Single Well with the additional production of 111 Chemical Tracer Test (SWCTT) method. thous. tons. Surfactant/polymeric formula were selected for injection into formation D3-III In 2019, the third campaign for injection in order to enhance oil recovery. In 2019, of water diverting agents was completed the optimal formula was synthesized under the project of injecting cross- and filtration experiments completed linked polymeric compositions based to evaluate the marginal coefficient of oil on polyacrylamide. To control the profile displacement by surfactant-polymeric and composition of the producing wells composition. Proppant HFF work inflow without any additional tripping was undertaken; first oil was received operations for survey bottom-hole from the prospective facility Alpha. 96 97 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

COMMISSIONING EBITDA, MM RUB Capital investment, (excluding state profit oil) MM RUB In 2019, all registration procedures for Stage 1 facilities were documented +11 % +25 % and completed. Furthermore, the following facilities were commissioned: 17,990 18,052 • Office building; 12,219 16,291 10,630 • Control center building; 13,490 11,609 • Testing chemical and analytical 11,046 8,532

laboratory; 5,610 • Well cluster 108. Reconstruction 4,789 (organization of the production metering system).

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 In 2020, it is planned to complete works on facilities of well clusters, CPF facilities and the New Field Camp.

FINANCIAL INDICATORS volumes (CAPEX -101 MM RUB, -1%, DEVELOPMENT PROSPECTS OPEX -216 MM RUB, -6%, G&A -200 MM By means of increasing the sales volume RUB, -14%). Primary attention in the mid term is paid (+86 thous. tons) in 2019 and taking to maintaining the production level into account that the successful EBITDA was negatively affected of 1,500 thous. tons. A respective program program of performance improvement by the growth of commercial has been formed for that purpose, and optimization of costs is continued, expenditures due to increased oil sales and it is planned to continue optimization the results for all economical indicators volumes as well as an insignificant of the waterflooding system and use have been improved compared growth of mandatory payments the EOR methods. to the planned level. under the PSA (contributions for reworking of work sites due In order to establish the center of expertise Revenue is 6% above the planned level to increased oil production rates for development of carbonate reservoirs, (+2.5 bln RUB), EBITDA is +0.9 bln RUB, and revision of the calculation rate). it is planned to test and implement reimbursable costs for 2019 are by 357 enhanced oil recovery methods. To involve MM RUB lower than the planned level In 2019, specific operating expenses reserves of low-productive reservoirs, (-2%). were 2,134 RUB/ton, which is by 11% it is intended to drill horizontal wells below the planned level. Cumulative with multi-stage acid-proppant HFF CAPEX changes in the reporting period operational costs were 3,269 thous and multilateral well drilling. To improve For the nearest 5 years, the investment Special attention will be paid to improving Structure of the state’s revenues, relative to the 2018 level are related RUB in total, which is by 6% below the ORF, it is planned to test the surfactant- activity provides for construction drilling results, production performance, MM RUB to increased construction rates the planned level. The stable dynamics polymeric flooding and reduplicate of infrastructure facilities, arrangement reduction and optimization of costs, of infrastructure facilities and increased of the indicator is maintained as a result injection of large-volume polymeric rims. of new well clusters, facilities necessary development of measures to re-involve Government revenue 2019 number of drilled completed wells (+2 of the increased share of Russian suppliers for optimization of injected liquid materials into production. Royalty 3,624 wells). after the operator function is transferred and implementation of the gas program State profit oil 12,858 to ZARUBEZHNEFT-Dobycha Kharyaga under Stages 3, 4А, 4В, 4С, and 5. Profit tax 2,598 Reduction of expenditures is noted for all LLC and an opportunity to constantly Total 19,080 categories except for commercial costs implement the Performance Improvement By 2022, it is planned to reach the associated and mandatory payments under the PSA, and Costs Optimization program has been petroleum gas utilization of 95%. related with increased oil production obtained. 98 99 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

ZARUBEZHNEFT-DOBYCHA ULYANOVSKNEFTEGAZ LLC SAMARA LLC Ulyanovskneftegaz LLC is an oil Zarubezhneft-Dobycha Samara LLC producing asset engaged in prospecting, is established in order to improve exploration and production at five license performance of production and economic sites located in the Ulyanovsk Region. Oil activity of the companies within and gas are produced from sediments Samara group. The company of Lower and Middle Carboniferous was registered on July 2, 022015 period predominantly represented and assigned the Management Company by terrigenous reservoirs. functions. Oil and gas production assets of Ulyanovskneftegaz LLC, Recovery of reserves Ulyanovskneftegaz LLC Samara Orenburgnefteotdacha JSC and Severo- from Ulyanovskneftegaz LLC fields Karasevskoye Petroleum Enterprise LLC is from 1% and 5% at the Nizhnemazinskoye are transferred under its control. In May and Kondakovskoye fields 2017, a license was granted for using to 52% and 55% at the Slavkinskoye subsoil of the Yuzhno-Pcheliny license and Sulakskoye fields, respectively. site under development. 100% participant OPEX for Samara Group, Ownership structure, % Recovery of reserves at the Ruzhevskoye Hydrocarbon production, Ownership structure, % of the Company is Zarubezhneft-Dobycha RUB/t field is 99%. Average water-cut of well thous. t.o.e. LLC. production for the fields is 73%. 169 60 +4 % 163 152 PRODUCTION 143 55 52 119 The actual production of hydrocarbons

3,108 Z- of Ulyanovskneftegaz LLC in 2019 was 50 UNG 2,885 47 2,725 During the operation activity of Zarubezhneft- 2,644 2,505 D S 47.3 K t.o.e. which exceeds the planned 44 Dobycha Samara LLC, it became possible level by 15%. 45 43 to ensure the stable growth of production LLC 42 for Samara group assets (+42% in 2019 100 40 as compared to 2015) and keep the level 100 DEVELOPMENT PROSPECTS of specific operational costs within 2,600– 2015 2016 2017 2018 2019 2,900 RUB/ton. Operating expenses are fully Zarubezhneft JSC covered by the Company’s revenue. 2015 2016 2017 2018 2019 The primary task of the Company Zarubezhneft-dobycha LLC Oil production of ONO + UNG is to take measures intended to keep There were no workover operations ensuring the achieved hydrocarbons production additional oil production volumes in 2019. Overproduction was ensured by reducing volumes and take additional steps the drop rates in the base wells relative to reduce operational costs. to the planned production indicators (drop rate was 3% with the planned level of 27%).

FINANCIAL INDICATORS relative to the plan. Due to reduced EBITDA for the reporting period was production relative to the actual level 309 MM RUB, which exceeds the planned of 2018, operational profit for 2019 level by 36% due to increased production is lower by 126 MM RUB than in 2018. 100 101 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

ORENBURGNEFTEOTDACHA JSC SEVERO-KARASEVSKOYE PETROLEUM ENTERPRISE Orenburgnefteotdacha JSC is an oil LLC producing asset engaged in prospecting, exploration and production at three license The Lutseyakhskoye oil field sites located in the Orenburg Region. Oil with the area of 360.8 km2 is located is produced from sediments of Lower in the Nadymsky District of the Yamalo- Severo-Karasevskoye Petroleum Enterprise LLC Carboniferous period and Upper Devonian Nenets Autonomous Area in the Tyumen period predominantly represented Orenburgnefteotdacha JSC Region. The District center — Nadym — by carbonate reservoirs. is located 45 km to the North-W-est, the village of Pangody is located 90 km Recovery of reserves to the North-Wnorth-est. from Orenburgnefteotdacha JSC fields is 43% at the Chernovskoye field, 25% The Lutseyakhskoye field was at the Kirsanovskoye field and 39% FINANCIAL INDICATORS discovered in 2011 after drilling at the Pashkinskoye field with the average a prospecting appraisal well No. water-cut of 32%. Capital investment, MM RUB Ownership structure, % 70-Lutseyakhskaya. A subsoil use license dated March 1, 2013 is owned PRODUCTION +5 % by Severo-Karasevskoye Petroleum Ownership structure, % Capital investment, MM RUB Enterprise LLC. In June 2016, a Sales The actual hydrocarbons production 605 and Purchase Contract was concluded by a factor of 2.7 of Orenburgnefteotdacha JSC in 2019 was between DEDACI ENTERPRISES LIMITED 446 124.2 K t.o.e. which exceeds the previous and Zarubezhneft JSC (Zarubezhneft- S- 561 year level by 9.7% and the planned level ONO Dobycha Samara LLC) for acquiring 211 222 K by 20.8%. 175 of 100% participating interest of Severo- Karasevskoye Petroleum Enterprise LLC. P

100 Recoverable reserves are 11.2 MM tons E 2015 2016 2017 2018 2019 as of January 1, 2016. LLC 205 100 Zarubezhneft JSC Hydrocarbon production, thous. t.o.e. Increase of CAPEX in 2019 as compared In 2019, a project document was 69 to the previous period is caused by increased approved which regulated production – 8 volume of development drilling. Zarubezhneft JSC +10 % testing of the Lutseyakhskoye field; 2015 2016 2017 2018 2019 the decision was recorded by the Minutes

150 EBITDA, MM RUB DEVELOPMENT PROSPECTS of the Central Oil and Gas Commission

124 meeting dated July 15, 2019 (Central 120 110 113 The primary task of the Company Commission for HC Reserves). Complex Development of the Yamalo- • In June 2019, the operative 100 ~600 mln RUB 2 is to take measures intended to maintain Surveys are completed for on-site Nenets Autonomous Area dated re-estimation of HC reserves 637 90 the achieved hydrocarbons production and linear facilities and the infrastructure February 11, 2019). CPF facilities of the Lutseyakhskoye field was 77 598 602 volumes and take additional steps development project is formulated of the Khulymskoye field (RITEK) completed (Minutes of the Federal

60 396 to reduce operational costs. for the period of production testing and the Yarudeyskoye field (YARGEO Agency on Subsoil Usage No. 358 2015 2016 2017 2018 2019 under the Lutseyakhskoye field project. LLC) were examined in order to select 03-18/201-пр(pr) dated June 4, 2019). 240 The expert opinion of the General the optimal location of the oil discharge Primary factors of production increase Directorate for State Environmental station. DEVELOPMENT PROSPECTS in 2019 were commissioning of 2 new Review of the Russian Federation wells at the Pashkinskoye field (cumulative oil production as of the end of the year 2015 2016 2017 2018 2019 on the infrastructure development project EXPLORATION AND DEVELOPMENT Work program 2020 suggests well drilling was 16 K t.o.e.) and completion of 4 WIs of the Lutseyakhskoye field for the period under production testing of the field, at the Pashkinskoye and the Kirsanovskoye fields (cumulative growth of production EBITDA for 2019 was at the actual level of 2018 of production testing is planned to be Geological survey activities in 2019 start of field infrastructure development was 3.9 K t.o.e.). with comparable prices. received in 2020. The Land Plot Lease included: for production testing. In the mid term, Agreement (55.2 ha) has been concluded, • Field seismic 3D SMP surveys it is suggested to stage-wisely implement land use and cadastral plans are being for 270 sq. m, the works completed the exploration works program, drill developed. A positive opinion was in April 2019; exploration and development wells, received towards the sand reserves • Since May 2019, 3D SMP seismic data and construct the field infrastructure. in open pit No. 2 at the Lutseyakhskoye has been processed and interpreted, First oil inflow is expected during field in the amount of 321,903 m3 with preliminary location of exploration production testing in 2021. (Minutes No. 1382 of the Department wells No. 71R and 72R; the final report of Resources Regulation and Oil and Gas is planned for January 2020; 102 103 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

MARKET OF OIL PRODUCTS, Oil refinery Brod OIL REFINING AND SALES (ORS) PRICING, COMPETITION Banja Luka Enterprises of the segment located Modriča Motor Oil A.D. in the Republic of Srpska are engaged in wholesales of oil products (including SUMMARY SEGMENT THE SEGMENT STRUCTURE EBITDA, MM EUR own production) on the market of Bosnia INDICATORS and Herzegovina and adjacent countries, Zarubezhneft JSC project 6.4 as well as in the retail market segment 4.6 Upon the results of the segment of reconstruction and modernization 2.5 of Bosnia and Herzegovina. 4 Saraevo operation in 2019, the segment of the Oil Refinery and Sales segment 0.3 revenue dropped by 28% as compared enterprises in Bosnia and Herzegovina The market of Bosnia and Herzegovina to the previous year level due to reduction started on February 2, 2007 after signing is highly marginal, however financial of oil product prices and volume of oil the agreement with the Government solvency of contractors and population products wholesales because of reduced of the Republic of Srpska (Bosnia remains low. Along with OPTIMA Group production volumes of Brod Refinery A.D. and Herzegovina) on procuring d.o.o., large suppliers of oil products and Modriča Motor Oil Plant A.D. the Bosanski Brod Oil Refinery producing -18.8 in BH are INA, NIS, Petrol BH that motor oils in the city of Modriča, 2015 2016 2017 2018 2019 supply oil products from the adjacent The cumulative indicator of operational and a retail chain of Nestro Petrol A.D. areas. Therefore, BH market is open performance of the segment that owned 85 fuel stations at the time for foreign (alternative) product. Pre- in the reporting period was +0.3 MM EUR. of the purchase. requisites for the current situation are no period. Reduction of OPTIMA Group’s Structure of BH market in terms The indicator is positive for the last 4 years. legal barriers for entry of imported fuel share on BH market is caused by no of primary wholesale suppliers of oil and a simple procedure of company production for sales in 2019 as a result products registration for sales of oil products of forced emergency shutdown of Brod The segment includes the following enterprises:: requiring no licensing. Refinery A.D. on October 10, 2018 due 21 18 to no stable external sources of supply. Company name Basic parameters BH market is flooded by oil products In the reporting period, the remaining fuel Bosnia and Herzegovina, Republika Srpska imported from far-abroad countries of Brod Refinery A.D. were sold and oil by small trading companies. Points products were traded. 6 Purchase of crude, oil, raw materials for motor oil production, wholesale and small wholesale OPTIMA Group LLC of petroleum products, motor oils and lubricants in domestic and export markets of delivery from Ploce, Zadar, etc, intensify competition in the South Primary factors for formation Brod Oil Refinery JSC Oil refining, petroleum products manufacture and South-East of BH where the primary of wholesale prices of oil products 14 Oil refinery Modrica JSC Manufacture of base oils and paraffins, motor oils and greases demand for oil products is formed. on the market of Bosnia and Herzegovina 43 Nestro Petrol JSC Retail sale of petroleum and related products and in the entire region are as follows: Sales volume of oil products by OPTIMA • quotes for oil products in Platts Russian Federation OPTIMA Group LLC Group d.o.o. in 2019 was 18% European Marketscan; INA Petrol BH Neftegazincor JSC The main borrower of loan funds for the Project, owner of the controlling interest in BH enterprises of BH market, which is 8% lower than • price premiums for each type of oil NIS the same indicator over the previous products. Other 104 105 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Price premiums on the oil product Premiums for pool of oil products Premiums for oil products BROD REFINERY A.D. Ownership structure, % market are defined based on demand over the reporting period, USD/ton on the national market, USD/ton

and supply and by alternative opportunities Brod Refinery A.D. has been engaged 20 Oil refinery Brod for the customer in the conditions +52 % +56 % in oil refining in Bosnia and Herzegovina of sever competition of several producers 50 since 1968, and as part of Zarubezhneft and traders in Bosnia and Herzegovina. 73 Group — since 2007. Unlike Russia, the market of BH B 35 53 and the region is the buyersʼ market rather 32 50 OPERATIONAL INDICATORS O R 47 26 43 than sellers’ market which significantly 24 reduces opportunities to form prices Due to shutdown of Brod Oil Refinery on the part of the manufacturer/seller. late in 2018, there was no oil refining 80 in the reporting year. In 2019, the refinery

An average price premium for the pool gas infrastructure development project Neftegazincor JSC Other shareholders of oil products sold by OPTIMA Group 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 was initiated and has been implemented. d.o.o. in 2019 increased by 92% as compared to 2018. Premium increment During 2019, the refinery personnel (improvement) occurred on the internal were engaged in repair of equipment, market and in the export sales of oil OPTIMA Group d.o.o. and NIS (Gazprom Premiums for exported oil products, dismantling of non-used units products due to a significant change Neft Serbia PJSC) signed an agreement USD/ton and infrastructure development. The following measures were undertaken The total amount of investments in the structure of the sold pool of oil for supply of oil products in the financial during the 2019 investment program: products by means of substantial decline year. 182 thous. tons of oil products +136 % FINANCIAL INDICATORS • construction completed, pre- MM EUR of oil product sales. were sold under this agreement. Trading 7 commissioning and commissioning 2.7 in other areas (Ploce, Pancevo) was In 2019, a significant reduction of salaries of the “New Boiler House” facility Oil products are sold with a positive additionally developed in 2019, the volume expenditures was achieved due completed; premium on the internal market of sold fuel was 64 thous. tons. to reduced personnel count. Furthermore, • primary activities on “Reworking of Bosnia and Herzegovina. The internal The revenue was about 229 MM EUR, expenditures on power and online of Section 05, 06”; market is the primary channel of selling with the marginal income of 2.1 MM EUR. maintenance of primary equipment were • project “Construction of fences the segment’s production. reduced due to the altered production and embankment pads for tanks В-27, -18 -19 Taking into account the positive dynamics -21 -20 program and adjusted operating schedule Т-01” commissioned;

In 2019, premiums for export selling of oil of cooperation, it is planned to develop 2015 2016 2017 2018 2019 of the refinery units. The major part • design documentation developed for: products were positive, but still greatly this profile in 2020. of investments in 2019 was intended “SCADA modernization for old refining inferior to the internal market. to complete the new boiler house project line units (sections 04,05,06)”, “Closed and conduct examination of units drainage system in section 31”, damaged during the accident in 2018. “Tanks drainage system”, “Installation The total amount of investments of the branded fuel preparation was 2.7 MM EUR. and offloading unit”. 106 107 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

MODRIČA MOTOR OIL OPTIMA GROUP D.O.O. PLANT A.D. of production activity. A project has OPTIMA Group d.o.o. is a commercial Modriča Motor Oil Plant A.D. has been been developed to replace additives asset of the Oil Refinery and Sales Ownership structure, % operating in Bosnia and Herzegovina heating with electrical heating to improve segment that is engaged in wholesale Banja Luka since 1957, and as part of Zarubezhneft Modriča Motor Oil A.D. energy efficiency. The project is planned of oil products in Bosnia and Herzegovina Group — since 2007. for 2020. and the adjacent countries.

The oil refinery in the city of Modriča FINANCIAL INDICATORS OPERATIONAL INDICATORS is the only refinery producing oils and lubricants in Bosnia and Herzegovina. Due to no refining of lube distillate, In 2019, OPTIMA Group d.o.o. OPTIMA G the oil refinery revenue goes down. implemented the policy of oil product The production range includes 220 The reduction of personnel expenditures sales intended to maintain the fuel sales items. Currently the Company produces resulted in total decline of operating share in the internal market. 100 the following production: expenses. • base oils, paraffins; The total volume of oil products Neftegazincor JSC • lubricants and liquids for vehicles Ownership structure, % Investment focus in 2019 was wholesale in 2019 was 325 thous. tons. and machinery; on maintaining equipment availability • lubricants and liquids for industrial 11 and procurement of the minimally According to the chimerical activity Share of motor oils and lubricants Share of oil products market in Bosnia units; required equipment. in 2019, the share of the refinery market in Bosnia and Herzegovina, % and Herzegovina, %

• motor oils for gasoline and diesel 13.1 production sold by OPTIMA Group d.o.o. motors; The 2019 investment program included on the market of Bosnia and Herzegovina 36 18 • industrial oils and liquids for metal O R the following actions: was 18%. treatment; • worn-out equipment was regularly M 75.7 • greases. replaced at production facilities; • design documentation was prepared The products of Modriča Motor Oil Plant for installation of electrical heating A.D. are certified by primary motorcars for additives, which will be realized and industrial vehicles manufacturers and commissioned in 2020 as a part Neftegazincor JSC (Audi, Volkswagen, BMW, Daimler- Nestro Petrol JSC of energy saving measures. Sales volume of base oils 82 Chrysler, Opel, Scania, Volvo, MAN, Other shareholders and paraffins was 64 Caterpillar, Jonh Deere, etc.) and South- Company investments are fully funded OPTIMA Grupa Korean companies Hyundai и KIA Motors OPERATIONAL INDICATORS by means of own assets of the Company. OPTIMA Grupa 6,2 thous. tons Other suppliers Other suppliers actively operating on the European market, which significantly improves In 2019, the Company continued taking The production volume of motor oils competitive ability of its production. measures intended to improve reliability and lubricants was 11.3 thous. tons of equipment operation and performance in 2019. 108 109 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

NESTRO PETROL A.D.

Nestro Petrol A.D. is a commercial asset Ownership structure, % FINANCIAL INDICATORS Revenue, MM EUR FCF (to %), MM EUR of the Oil Refinery and Sales segment Banja Luka engaged in the retailing of primary Primary indicators of Nestro Petrol A.D. 20 −2 % +386 % production types manufactured operational performance show positive 3.9 by Modriča Motor Oil Plant A.D., as well dynamics in 2019 relative to 2018. 131.1 126.1 3.4 as oil products procured from external 115.4 111.9 128.9 104.2 manufacturers. Revenue from sales in 2019 is 2% lower than in 2018, the reduction being related

Nestro Petrol A.D. has its own production with the decreased sales volume. 1.5 1.5 assets in the Republic of Srpska

and in the Federation of Bosnia 80 The absolute amount of operating 0.6 0.7 and Herzegovina. The filling station retail expenses in 2019 corresponds to the level

chain was established in 1945, and has of 2018. 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Neftegazincor JSC been a part of Zarubezhneft Group since Other shareholders 2007. The Company investments The Nestro Petrol A.D. net cash flow in 2019 Number of fuel stations, Revenue from selling additional goods in the financial year are fully funded OPEX, MM EUR exceeds the previous year level by 2.7 MM EUR. Oil products and additional goods units (AG), MM EUR by means of own assets.

are retailed via a retail chain that 7.6 7.4 7.2 7.2 has included 85 active fuel stations Primary investment areas in 2019: 7.1 as of the end of 2019. +5 % • fuel stations reconstruction; • installation of vending equipment 87 87 87 86 85 OPERATIONAL INDICATORS 17.9 in shops and cafes at fuel stations; 16.6 17.1 15.5 • beginning to finance the construction 14.8 The sales volume of oil products of a new petrol station in Zalužani. in 2019 is 5% lower than in 2018 due to the increasing number of competing fuel stations (about 20 new stations 2015 2016 2017 2018 2019 per year). As a result of changes in participation conditions in the state 9 9 9 9 9 program of agricultural producer support, 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 the number of enterprises that could have On lease Structure of 2019 investments, MM EUR participated in the program has reduced In operation two times. This resulted in reduced sales Name Amount of Nestro Petrol in this area by 1.5 thous. Capital costs for maintaining the filling station network 0.29 tons relative to 2018. The number of operating fuel stations The primary reasons for sales decline per as of the end of 2019 has been reduced single filling station is active development Reconstruction and purchase of technological equipment 0.25 Revenue from selling additional by 1 station as compared to the previous of competitors. Other 0.05 goods at fuel stations increased period. Development of the basic network of filling stations 0.16 by 5% as compared to the previous Retail equipment for shops and cafes 0.16 period, which had a positive effect The level of daily fuel sales per single Filling station network enlargement 0.24 on the company’s operational filling station in 2019 was 2.8 tons/day, Filling stations construction 0.24 performance. which is by 0.1 tons/day less than in 2018. TOTAL 0.69 110 111 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

SERVICE AND OTHER ASSETS ARCTICMORNEFTEGAZRAZVEDKA JSC

Arcticmorneftegazrazvedka JSC is an enterprise providing services SUMMARY SEGMENT Revenue, MM RUB EBITDA, MM RUB in the oil and gas sector. INDICATORS +103 % +87 % Summary indicators for the segment Ownership structure, % are formed based on the actual financial 31,584 1,844 statements. Murmansk 1,250

According to the operating results 988 15,572 855 of the segment in 2019, the segment 13,437 11,920 revenue grew by 103% as compared 8,675 556 to the previous year level. Primary AMNGR increase of the revenue is related

to the activity of RMNTK Nefteotdacha 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 JSC, Giprovostokneft JSC 100 and Zarnestserviсe LLC. Operating performance (EBITDA) significantly FCF, MM RUB Average headcount, persons exceeds the level of 2018. Zarubezhneft JSC +1,637 % +5 % A 5% rise of the average stuff number 7,491 relative to 2018 is related to formation 2,250 ACTIVITY AREAS of a drilling team and an additional 1,969 2,008 1,995 well servicing and workover team 2,000 1 896 A high-priority area of the company’s The primary area 1,853 in RMNTK Nefteotdacha JSC for works activity is the South-East Asia of Arcticmorneftegazrazvedka JSC at ZARUBEZHNEFT-Dobycha Kharyaga 1,750 where it takes part in prospective development is implementing projects LLC facilities. projects for drilling wells on the shelf of Zarubezhneft JSC for construction of wells 1,500 1,015 of the Socialist Republic of Vietnam. on the sea shelf as a drilling contractor. The segment includes the following 441 295 431 2015 2016 2017 2018 2019

enterprises: 2015 2016 2017 2018 2019 Arktikmorneftegazrazvedka JSC assets Brief description

Company name Basic parameters 1. Murmanskaya self-elevating drilling rig Year of manufacture/Upgrading 1991/2013 Arktikmorneftegazrazvedka JSC Construction of offshore wells as a drilling contractor Self-elevating drilling rig (SPBU) for drilling wells up to 6,000 m deep Dimensions 109 x 68 m with a maximum sea depth of 100 m Giprovostokneft JSC Design, survey and engineering organization of the industrial level performing comprehensive Living spaces 84 studies and general design of facilities at all stages of field development 2. Valentin Shashin drilling vessel Year of manufacture/Upgrading 1982/2014 VNIIneft JSC Industry institute in the area of oil and gas field development Drilling vessels (BS) to drill wells up to 7,000 m deep with a maximum sea depth Dimensions 149 x 28 m of 1,715 m RMNTK Nefteotdacha JSC An organization offering a wide range of oilfield services Living spaces 116 Zarubezhneftestroymontazh LLC The enterprise organization construction, reconstruction, workover, construction control, 3. The onshore infrastructure of Arktikmorneftegazrazvedka JSC includes: preparation of design documentation • Operational and technical site (ETU) – (Kola, Kidinskoye sh., 2), Zarnestservice LLC Am enterprise which sells oil produced by Zarubezhneft Group of Companies, supplies equipment and materials • School of Industrial and Technical Education (GTGO). 112 113 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

PERFORMANCE IN 2019 GIPROVOSTOKNEFT JSC

In 2019, Arcticmorneftegazrazvedka JSC showed the following performance: Giprovostokneft JSC is a surveying • Supporting the operation and engineering company of industry of the Murmanskaya jack-up drilling level engaged in integrated studies rig for 225 days for construction and general designing of facilities and testing of exploration wells 1903 at all stages of field development (Block 09-1) and EF-1X (Block 12/11). (geological explorations, development, • The Russian flag was again raised facilities, production) in order to ensure at the Valentin Shashin drill ship the maximum efficient extraction of HC and its historical name was reinstated. resources. Moscow • Optimization of operating expenses by reducing personnel expenditures ACTIVITY AREAS at the rig, transport expenses and other production expenditures; The primary activity of Giprovostokneft • Development of the Vocational JSC is designing and engineering Education and Training (VET) School survey of oil production, treatment business line: 4,496 people trained and transportation facilities. (2% growth relative to 2018), including The Company possess a wide Ownership structure, % OPEX, MM RUB 1,042 persons trained remotely (7% experience in various areas: elaboration growth relative to 2018), the basic of development concepts for oil and gas scope of remote training courses companies assets (individual fields 22 −17 % enlarged from 19 to 26 disciplines. Average headcount, persons OPEX, MM RUB and groups of HC fields), researches 2,403 in the area of drilling and development 40 2,216 DEVELOPMENT PROSPECTS 300 +17 % of well construction projects, consulting services for construction 256 2,433 1,592 The primary development 250 project management; it is also a R&D 1,325 objective is stabilization 192 competencies center of Zarubezhneft 1,159 of Arcticmorneftegazrazvedka JSC 200 183 183 Group in the following areas: drilling 177 1,522 financial position ensuring a basis engineering, integrated design, 38 1,127 for reaching the maximum possible 150 1,054 development of technically complex 903 Zarubezhneft JSC 2015 2016 2017 2018 2019 production and economically efficient facilities, development of methodological RMNTK JSC performance and minimization of during material in the area of oil and gas Other 2015 2016 2017 2018 2019 by Zarubezhneft JSC in a long-term In 2019, Arcticmorneftegazrazvedka JSC production, pricing and standardization perspective.: maintained the Company target personnel count in engineering and construction. defined by the corporative center. 2015 2016 2017 2018 2019 1. Ensuring loading of the Murmanskaya rig; PERFORMANCE IN 2019 DEVELOPMENT PROSPECTS Revenue, MM RUB 2. Transportation of the Valentin 3. Providing educational services In general, operating expenses have shown Shashin ship to the Russian by the VET School during the entire a declining trend since 2015. Increased operating In 2019, the total volume of revenue Key development areas: expenses in 2019 are related to the upgrade repair +8 % Federation and transfer of the ship planned mid-term period. of the Murmanskaya jack-up drilling rig; this factor on survey, R&D, designer supervision • general designing for Zarubezhneft to the Federal Agency for State 4. Optimization of general was partially compensated for by reducing and other works (services) JSC, Gazprom Neft PJSC, Irkutsk 2,969 expenditures on maintenance of the Valentin 2,741 Property Management; and administrative expenditures. Shashin ship during downtime. in Giprovostokneft JSC area of activity Oil Company LLC, KTK-R, and other was 1,733 MM RUB, including services facilities in conventional designing

for the amount of 1,286 MM RUB regions of the Russian Federation; 1,733 1,609 completed using own resources, • development of evaluation 1,510 and 447 MM RUB by engaging and re-engineering area; subcontractors. • surveying in the Republic of Kazakhstan; EBITDA indicator in 2019 was 71 MM • development of the manufacturing RUB, which is higher than in 2018 execution system (MES). 2015 2016 2017 2018 2019 by 28 MM RUB (66%) and is related to the increased scope of works and improved performance by means of increasing the workforce productivity (+13% by 2018). 114 115 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

VNIINEFT JSC

VNIIneft JSC is the leading industry Their primary tasks were aimed OPEX, MM RUB Average headcount, persons institute in the area of oil and gas field at alanyzing and optimizing the current development.. development status, building operating geological flow simulation models, +4 % 200 ACTIVITY AREAS and forming the WI rating; 489 471 173 • evaluation and definition were 175 166 167 396 161 161 Primary activities of VNIIneft JSC performed for the Middle East are scientific support of Zarubezhneft projects, which ensured entrance 150 279 JSC projects, R&D activities intended Moscow to these assets; 249 2015 2016 2017 2018 2019 to overcome current technical • an institute development strategy was and economic limits for displacement prepared and approved (including In 2019, the average headcount was at the level efficiency and sweep efficiency a series of measures within the 75th of 2018, but the output per 1 person was up by 15% due to improved qualification in hydrophobic carbonate reservoirs, anniversary to form the image of production personnel and respective growth development and upgrading of enhanced of VNIIneft JSC); 2015 2016 2017 2018 2019 of labor productivity. oil recovery methods, laboratory • more than 10 students completed studies of core and formation fluids, Ownership structure, % Revenue, MM RUB internship with further employment. removal of license risks of the Company, The growth of operating expenses calculation of oil and gas reserves In the structure of income in the fiscal year is related with the higher and designing oil and gas field +10 % from all types of activity, the highest volume of subcontractor services. 785 development, along with training 30 share is traditionally taken by income 32 712 under the further vocational education 623 from R&D deliverables (production). DEVELOPMENT PROSPECTS program. VNII 475 Revenue increase in 2019 as compared The primary focus of VNIIneft JSC PERFORMANCE IN 2019 379 to 2018 is caused by the growth is to ensure additional production of R&D activities by means of changing of Zarubezhneft Group by entering The following strategically important the structure and volume of the order new assets and implementing new tasks and projects were completed portfolio, including that for Zarubezhneft technologies, including EOR, when

in 2019: 38 Group. developing current assets. 2015 2016 2017 2018 2019 • R&D for studying the structure of pore Zarubezhneft JSC RMNTK JSC volumes; Other • testing of the compositions of surfactant-polymeric flooding (in cooperation with BASF, Solvay, RSU, and KFU); • work aimed to calculate geological • works on gas injection reserves of oil, dissolved gas to assess the performance at JC and associated components; RUSVIETPETRO LLC fields; and the development flow chart • laboratory-confirmed potential wasDevelopment Flow Chart prepared performance of smart water used for the Vostochno-Yanemdeyskoye in order to optimize injection field; in carbonate reservoirs; • the operating calculation was provided • three-phase filtration testing, for reserves of oil and dissolved gas linear model configuration, as well of the Yuzhno-Syurkharatinskoye field as definition ofconfigured, combustion of JC RUSVIETPETRO LLC; parameters; • the Exploration Works Department • a program was compiled for polymer of the research and development injection at the Kharyaga field; center provided the operating • high oil recovery factors were acquired evaluation of reserves for exploration when using steam in the core of the M drilling, including an exploration formation at the Boca de Jaruco field; works program for Block 09-1, taking • support of innovative activity into account the results of seismic and the innovative development inversion; program (IDP) of Zarubezhneft JSC; • project teams of JV Vietsovpetro, • new focus area was arranged to study ZARUBEZHNEFT-Dobycha Kharyaga reagents for chemical treatment LLC, and JC RUSVIETPETRO LLC of fields of Zarubezhneft Group; were sufficiently staffed (95%). 116 117 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

RMNTK NEFTEOTDACHA JSC

RMNTK Nefteotdacha JSC is a company PERFORMANCE IN 2019 that provides a wide range of oil- related services (workover and routine A 63% growth in revenue repair of wells, integrated drilling as compared to the previous year services, geological and engineering is the result of drilling works geologicstudies, flow simulation, etc.), and well reconstruction at the facilities including technical and personnel of ZARUBEZHNEFT-Dobycha Kharyaga, support of service works. Furthermore, JC RUSVIETPETRO LLC, and Boca de the Company acts as the operator Moscow Jaruco; and with the increased scope in pilot commercial development of works on the maintenance and well and implementation of steam workover, well interventions were carried and thermal methods of enhanced oil out with the use of wire lines. recovery at the fields of Zarubezhneft Group and beyond it. DEVELOPMENT PROSPECTS

ACTIVITY AREAS Ownership structure, % Revenue, MM RUB In the mid-term perspective, the primary scope of works of RMNTK Nefteotdacha Production activity of RMNTK +63 % JSC are related with the integrated Nefteotdacha JSC is focused provision of drilling services and workover 3,256 on the following areas. of wells at the fields of JC RUSVIETPETRO LLC and ZARUBEZHNEFT-Dobycha Zarubezhneft Group: RMNTK Kharyaga LLC. 1,898 1,999 • In the Arkhangelsk Region (Nenets 1,347 Autonomous Area), at the fields 1,184 The primary focus of the Company of JC RUSVIETPETRO LLC and within is oriented towards the loading of its 100 the area of the Kharyaga PSA, own production capacities, improvement at the facilities of ZARUBEZHNEFT- of well servicing and workover Dobycha Kharyaga LLC, oil services Zarubezhneft JSC 2015 2016 2017 2018 2019 teams’ efficiency, reduction of non- are provided (integrated drilling productive time, control over operational services, workover and regular repair performance, and entering foreign of wells, geological andgeologic • In the Republic of Uzbekistan, OPEX, MM RUB markets. engineering studies, flow simulation, works have been commenced formation testing, drilling supervision, on engineering supervision remedial cementing, and enhanced oil and control over the maintenance +70 % recovery methods). and overhaul repairs of wells, 2,585 • In the Republic of Cuba, the Company field geophysical tests, dynamic meets the need of construction works well testing and well wireline for the development of wells, provides interventions at the facilities 1,524 engineering and supervision services of JV ANDIJANPETRO LLC. 1,411 1,084 and control over well construction, • At the sea shelf of the Republic 908 as well as carries out a range of Vietnam (Block 12/11), drilling of pilot commercial development supervision is provided. to implement thermal and steam methods for enhanced oil recovery External customers: 2015 2016 2017 2018 2019 at the Boca de Jaruco field. • At the facilities • At the facilities of Zarubezhneft- of RN-Yuganskneftegaz LLC, Dobycha Samara LLC (Orenburg works are performed related and Ulyanovsk Regions), integrated to the construction supervision services, supervisionsupervisor in development and exploration and geological support in well wells construction in the conditions construction are provided. of separate service. 118 119 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

ZARUBEZHNEFTESTROYMONTAZH LLC Operating expenses in 2019 totaled DEVELOPMENT PROSPECTS 2,103 MM RUB (-25%, or 717 MM RUB less than in 2018), including In the mid-term perspective, Zarubezhneftestroymontazh LLC subcontractor services as per the overall Zarubezhneftestroymontazh LLC is a company involved in the organization reduction of the scope of works. is focused on improving its competencies of construction, reconstruction, in infrastructure development of fields overhaul, construction supervision, Some construction and installation without subcontracting, and involving development of design documentation, activities were carried out without external customers: in 2019, registration was and engaged by a developer or customer subcontracting by the construction completed on Gazprombank trading platform under a general contractor agreement. and installation unit and the X-ray for tenders of Gazprom JSC and Gazprom and visual inspection laboratory. Works Neft PJSC, as well as registration ACTIVITY AREAS without subcontracting were done on the “TEK-torg” trading platform for tenders at the facilities of the Central Khoreyver of Rosneft PJSC and Bashneft-Polyus Main areas of activity Moscow Uplift and the Kharyaga field. PJSC, works were performed on further of Zarubezhneftestroymontazh LLC training and personnel certification as per in 2019: In 2019, the Company constructed 26 km the requirements of Gazpromneft PJSC. • works on the infrastructure of pipelines, 18 km of overhead lines, development of JC RUSVIETPETRO carried out backfilling of sites and roads LLC fields at the Central Khoreyver in the scope of 377 thous m3, and built Uplift and the Kharyaga field 125 km of winter roads. of ZARUBEZHNEFT-Dobycha Kharyaga LLC; Ownership structure, % • provision of engineering services at and supply of materials 20 to the Boca de Jaruco field, the Republic of Cuba, as a part of the arrangement of the pilot commercial development site. ZNSM

PERFORMANCE IN 2019

In 2019, the construction 80 completion and installation activities continued without subcontracting. Zarubezhneft JSC Zarnestservice LLC Over the year, works were carried out by the construction and installation unit and the visual inspection Total revenue for the fiscal year laboratory. Revenue from the works, amounted to 2,787 MM RUB, which performed without the engagement is 30% lower than in the previous of subcontractors, amounted year due to the changed scope to 634 MM RUB with the yearly target of capital construction of the key of 550 MM RUB (15% growth). customers (JC RUSVIETPETRO LLC and ZARUBEZHNEFT-Dobycha The primary order portfolio Kharyaga LLC), including the backfilling of Zarubezhneftestroymontazh of sites and roads, and the construction LLC is oriented on the customers of oil gathering pipelines, water ducts, within Zarubezhneft Group. overhead lines and winter roads. 120 121 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

ZARNESTSERVIСE LLC

Zarnestserviсe LLC is a company who sales oil produced by Zarubezhneft Group on national and foreign markets, supplies equipment, materials and oil products, and provides services to JV Vietsovpetro, other companies within Zarubezhneft Group, and external parties.

ACTIVITY AREAS

The order portfolio of Zarnestserviсe LLC is oriented on Zarubezhneft Group. Moscow

Primary areas of Zarnestserviсe LLC activities are as follows: • delivery of Russian goods to JV Vietsovpetro; • commission activity on the sale of oil produced by Zarubezhneft JSC subsidiaries on national and foreign Federation. In 2019, 3,621 thous. tons Ownership structure, % markets; of oil were sold, 1,944 thous. tons Additional revenue in 2019 resulted Revenue, MM RUB EBITDA, MM RUB • trading operations of which — on the national market, from the trading operations 20 with oil and oil products and 1,678 thous. tons — for export. such as naphtha, gasoil +245 % 22,428 +333 % from resources of companies and oil supply on foreign markets: 1,636 not included in Zarubezhneft Group; In 2019, apart from the sales 2.7 MM bbl of naphtha for 10,218 • delivery of diesel fuel to support of Zarubezhneft Group’s oilGroup, MM RUB and 0.62 MM bbl of gasoil trading operations of OPTIMA Group; contracts were concluded for the sale Z for 2,726 MM RUB to the Emirates • commission activity on the freight of oil produced by NK Yangpur OJSC National Oil Company (ENOC), as well 6,501 of a supply vessel/tug for JV and INTEK-Zapadnaya Sibir LLC as 0.92 MM bbl of Djeno oil (Republic 4,036 4,175 4,153 378 202 222 Vietsovpetro needs; under the relevant purchase and sale of Kongo) for 3,704 MM RUB. 112 • delivery of goods to Zarubezhneft JSC conditions. 80 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 subsidiaries. The revenue volume in 2019 stood Zarubezhneft JSC In terms of materials and equipment Zarubezhneftestroymontazh LLC at 22.4 bln RUB, which was significantly PERFORMANCE IN 2019 delivery, the scope of production higher than in 2018. The revenue growth supplied was extended. Spare parts is first of all can be explained by export Zarnestserviсe LLC is a commissionaire for repair of vessels, pipes, string wedges, Group): Sibirsky Promyshlenniy Holding supplies of oil and gasoil. The growth in oil sales from resources centralizers and drill rods were delivered. Trading House, ASDM Trading House, of operating expenses is directly related of subsidiaries who produce oil Furthermore, tubulars were delivered and Zavod Sovremenniye Tekhnologiyi to higher revenue on purchase and sales in the territory of the Russian to 3 entities (beyond Zarubezhneft Izolyatsiyi LLC. transactions. 122 123 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

OVERVIEW OF ZARUBEZHNEFT’ JSC WORKFORCE PRODUCTIVITY FINANCIAL PERFORMANCE

Zarubezhneft JSC has a wide experience of geological survey (Block 12/11, Severo- As a part of the performance improvement The Workforce Productivity indicator Management in the Sector of Non- as per RAS, calculated in conditions in the delivery of international oil Karasevskoye Petroleum Enterprise LLC, and cost optimization program, (WPI) is included in the system Financial Corporations with Public comparable to 2018 and correlated and gas projects, stable long-term ties Boca de Jaruco). Zarubezhneft JSC constantly monitors of key performance indicators (KPI) Ownership, dated September 23, 2014. with the number of man-hours worked with leading oil companies in Russia the level of general and administrative of the Group’s activity. In accordance with this order, the revenue by the Company’s employees, was and globally, and has founded a structure In 2019, Zarubezhneft JSC demonstrated (G&A) expenditures. Costs are evaluated used to evaluate the achievement 81,8 thous. RUB/man-hour. of R&D and project companies. high production and financial in comparable conditions taking The Passport of the Workforce of this indicator is calculated The expertise in the area of shelf performance. Zarubezhneft JSC RAS- into account the consumer price Productivity Indicator has been approved based on the income accounted The workforce productivity development tried and tested during based net profit for 2019 amounted index in order to annually reduce by the resolution of Zarubezhneft for under the Russian Accounting in Zarubezhneft JSC is monitored long-term experience of Zarubezhneft to 12 bln RUB, which is 12% more than those relative to the previous year JSC Board of Directors (Minutes Standards (RAS). To calculate monthly for the purpose of timely JSC in foreign countries is the primary in 2018. by at least 2%. The calculation is done No. 131 dated November 25, 2016) the workforce productivity change identifying and eliminating risks competitive advantage of the Company. as per the Guidelines for Formation and is based on the calculation index, the revenue is given in the prices to fail to achieve this indicator. Great results are shown by the joint of Operating Expenses and Determination procedure defined by Order of the previous year. The Company efficiently uses the count Zarubezhneft JSC is the Corporate ventures with Petrovietnam Corporation: of OPEX Reduction Indicator (approved of the Federal State Statistics Service management system, regularly conducts Center, a head company that provides JC RUSVIETPETRO LLC in the Nenets by the decision of Zarubezhneft JSC No. 576 On Approving Statistical Tools The WPI target for 2019 within re-engineering of business processes efficient management and interaction Autonomous Area and JV Vietsovpetro Board of Directors, Minutes No. 127 dated for Organization of Federal Statistical the KPI was 67,7 thous. RUB/man-hour. and respective analyses, which for more than 30 subsidiaries at the Vietnamese shelf. September 14, 2016, and No. 163 dated Monitoring of Workforce Productivity The actual value of the indicator estimated identify areas that require optimization and 3 joint ventures in the interests January 28, 2019). by the Federal Agency for State Property as the revenue of Zarubezhneft JSC and improvement. of the state. Zarubezhneft JSC shares The fiscal year was successful the accumulated management for the Kharyaga PSA, that has Costs in 2019 were reduced relative experience with its subsidiaries, providing been managed by the Company to the previous years in comparable them with consultation services in all since mid-2016. The Company’s gas conditions by 3.0% and amounted areas of activity. sector is dynamically developing to 4,023 MM RUB. on the Vietnamese shelf — Block 04-3. Apart from management Primary areas of the general Indicators 2019 of the subsidiaries at all stages, The achieved financial results fully and administrative expenditures the Corporate Center manages a number compensate for the dividends payout optimization are as follows:: Actual In prices of 2018 of foreign projects (Blocks 09-1, 09-3, to the state budget in the amount • consulting, audit and legal services; Revenue (mln RUB) 40 405 42 254 04-3), as well as one project (Kharyaga established by the Company’s • maintenance and repair of buildings, Number of manhours workwd (thsd) 516 524 516 524 PSA) in Russia at the stage of production shareholder — the Federal Agency vehicles, rental of premises, Workforce productivity (thsd RUB/manhour) 78.23 81.80 and three projects at the stage for State Property Management. representation, and other costs. 124 125 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

INVESTMENT ACTIVITIES INNOVATIVE ACTIVITIES OF ZARUBEZHNEFT JSC The updated Innovative Development • leading universities of the Russian plant passed pilot testing with diesel Program (IDP) of Zarubezhneft JSC Federation (Kazan (Volga Region) fuel and switched to oil for oil pilot for 2016–2020 (for the period up Federal University (KFU), Skolkovo testing and further testing of upgraded Projects are financed in accordance program for 2019 has been approved of the CC primary funds) — 0.3 bln RUB, to 2030) has been developed as part Institute of Science and Technology equipment and assemblies as a part with adopted investment decisions by Zarubezhneft JSC Board of Directors and funding of investment decisions of the instruction of the Russian Federation (Skoltech), etc.); of the R&D activity. and intended to ensure the Company’s (Minutes No. 162 dated December 20, for the downstream segment — 0.2 bln Government and approved by the Board • SMEs and other scientific development as per the approved 2018). RUB. The intra-group borrowings of Directors on September 14, 2016 and production organizations. In 2019, the oil pilot testing was Long-Term Development Program. amounted to 2.9 bln RUB. The investment (Minutes No. 127). continued. According to the R&D, In 2019, Zarubezhneft’s JSC investment The actual funding program was funded in the fiscal year INNOVATIVE PROJECTS OF 2019 two applications were submitted activity was related with continuing of the investment program totaled taking into account the optimization According to the independent expert AND PERFORMANCE ACHIEVED to the Russian Agency for Patents the previously initiated investment 1.9 bln RUB, including investments into measures and current demand evaluation of the IDP development WITHIN THEIR SCOPE and Trademarks for patenting unique projects — prospecting and exploration the survey activities of Zarubezhneft of the subsidiaries. and implementation quality, the Company technical solutions intended to upgrade of fields in the Socialist Republic JSC — 1.6 bln RUB, investments consecutively received highest Development of a plant powered the power plant assemblies for stable of Vietnam, Cuba, and modernization of the Corporate Center (expansion ratings among oil and gas and energy by Russian oil of any class operation with oil up to class 3 inclusively. of assets in Russia. The investment of the influence zone and modernization companies with public ownership — An innovative project was initiated due The Russian Agency for Patents for the IDP development in 2016 and its to significant costs of procurement and Trademarks has approved implementation in 2016 and 2017. of diesel fuel for power generation the issuance of patents for the inventions. of JC RUSVIETPETRO LLC fields In 2019, Zarubezhneft JSC worked and the delivery challenges. It is intended Technology of enhanced oil recovery on updating its IDP for 2020–2024 to use Russian equipment (engines at high-viscosity oil fields by catalytic (for the period up to 2030) in response by the Kolomna plant) for oil classes up aquathermolysis to the instruction of the Government to 3 (inclusively) (high viscosity and sour) Since 2017, the Company together Commission for Economy Modernization and to increase the time between with Kazan Federal University has and Innovative Development of Russia. overhaul of power machinery. carried out R&D on technology The Concept of Zarubezhneft JSC of enhanced oil recovery at high-viscosity Innovative Development Program The existing power machines oil fields by the method of catalytic for 2020–2024 (hereinafter, manufactured abroad aquathermolysis. The technology the Concept) was developed and approved and by the Kolomna plant require a high intensifies intra-formation treatment by Zarubezhneft JSC Board of Directors degree of oil treatment and are designed of heavy oil during steam treatment, (Minutes No. 65 dated March 27, for operation with class 1 oil (light which increases the oil quality 2019). The updated Draft IDP, prepared and sweet). A bottleneck of oil power and reduces its viscosity. Improvement based on the Concept, was approved machines is fuel equipment (injection of oil properties in formation conditions by the Strategic Planning Committee nozzles, the piping system). will improve the energy and economic of Zarubezhneft JSC Board of Directors performance of the Boca de Jaruco (Minutes No. 63 dated October 30, 2019) Within the scope of the innovative field development (and potentially other and duly directed for consideration project, in 2017–2019, R&D and designing similar fields in the zone of heavy oils to the federal authorities. Approval activities were undertaken to improve in Cuba and other countries). of the updated IDP of Zarubezhneft JSC the power plant equipment that operates for 2020¬¬¬–2024 (for the period up with class 3 oil, to develop design In 2017–2018, at the premises to 2030) by Zarubezhneft JSC Board documentation, to bring the power of Kazan Federal University, a number of Directors will take place in 2020. plant to a level of oil industry standards of experiments were conducted to select and to conduct pilot testing in JC the most efficient catalyst using Primary contractors engaged in the 2019 RUSVIETPETRO LLC. a reactor. The selected nickel catalyst innovative projects were design and R&D ensures the maximum conversion of oil organizations: The diesel oil power plant was and significant reduction of viscosity • within Zarubezhneft Group (VNIIneft manufactured and delivered to JC with an additional advantage of low price JSC, Giprovostokneft JSC); RUSVIETPETRO LLC field. The power as compared with the cobalt catalyst. 126 127 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

In 2018, the second research stage was out in Russia. The primary idea behind of testing and implementation completed to address the remaining SWCTT is the application of chemical of new technologies (NTS) offered issues: evaluation of catalytic activity tracers to determine the residual oil by the market but not yet emodied and coking of the catalyst during saturation when oil is displaced by water by the Group. Pilot testing of new aquathermolysis processes, catalyst and surfactants. SWCTT is intended equipment and technologies was adsorption on the rock (displacement to comparably quickly find the rise performed by JC RUSVIETPETRO LLC, in the combustion pipe), study of displacement efficiency for surfactant Zarubezhneft-Dobycha Samara LLC, of solubility, thermal stability and filtration and water. ZARUBEZHNEFT-Dobycha Kharyaga performance of the developed catalyst LLC, and Zarubezhneft JSC Branch solution. A test batch of the catalyst has The testing results proved an efficient in Cuba. A positive economic effect has been manufactured for pilot testing. performance of the selected composition. been achieved according to the results. In accordance with the analytical In 2019, the catalyst was delivered interpretation, the displacement In 2019, JC RUSVIETPETRO LLC to Cuba by sea. Preparations for pilot efficiency growth was 0.07 (when conducted 16 tests in the following key testing of the technology were completed, exposed to surfactant) as compared areas: improvement of the technology as well as basic cyclic steam treatment to that of water. of secondary drilling by a slot perforator, was provided for the candidate well testing of the well clean-up highly (without catalyst). In November¬– Pilot testing of diverter technologies efficient system, as well as other modern December 2019, Zarubezhneft JSC in ZARUBEZHNEFT-Dobycha drilling equipment and devices. experts successfully injected the catalyst Kharyaga LLC into the formation with further cyclic ZARUBEZHNEFT-Dobycha Kharyaga Zarubezhneft-Dobycha Samara LLC steam treatment. Currently, the pilot LLC successfully continues pilot also assessed the performance testing continues during oil production. testing of the diverter technologies of the adaptive input gravity module used (injection of cross-linked polymeric to operate equipment in horizontal wells In August 2019, a joint application (with compositions based on polyacrylamide). and testing of pump-jack linear drive. KFU) was submitted to the Russian The project has been under way since Agency for Patents and Trademarks 2017. Its primary objective is to test In 2019, ZARUBEZHNEFT-Dobycha for patent registration for the method the technology of re-distributing filtration Kharyaga LLC completed pilot testing of developing bituminous carbonate flows of injected water using polymeric of the technology for prevention reservoirs using cyclic steam soaking compositions injected into active wells. of bottomhole zone clogging during well and aquathermolysis catalyst. servicing and evaluated performance The Russian Agency for Patents The project covers wells of D3-III of ball valves used in the X-mas tree 15 applications were sent to the Russian proves mutual interest of Zarubezhneft Dynamics of R&D costs to revenue and Trademarks has approved the patent formation of the Kharyaga field’s Devon and dynamic power compensators Agency for Patents and Trademarks JSC and the MSU in active training in 2014–2019, % issuance. sediments. 13 wells were treated in 2017– at a substation 35/6/0.4 kV. In total, for the registration of intellectual and re-training of personnel in the field 2019, with 18,215 m3 of cross-linked 8 tests were made by the subsidiary property. 36 scientific articles and papers of scientific and innovative activity.

Pilot testing of surfactants compositions injected. in 2019. were published. 0.62

in a single well by swctt method in JC As part of the Innovative Development 0.53 0.52 0.50 0.49 RUSVIETPETRO LLC Additional oil production is evaluated In 2019, Zarubezhneft JSC Branch Zarubezhneft JSC continues Program, Zarubezhneft JSC actively 0.42 In 2019, at the Zapadno-Khodesayuskoye upon pilot testing results using common in Cuba continued testing of the heat- developingdevelopment and expanding develops mutually beneficial cooperation field, JC RUSVIETPETRO LLC methods — displacement characteristics. resistant fiber-optic borehole system formats of interaction with the innovative with universities in order to form plans successfully completed pilot testing The cumulative additional production for monitoring of distributed temperature environment. In June 2019, of joint implementation of innovative for surfactants by BASF in a single well of oil for the given period is estimated and pressure along with testing of heat- a Cooperation Agreement was projects and carry out joint work to improve oil recovery of hydrophobic to exceed 140 thous. tons, with more than resistant progressive cavity pumps concluded between Zarubezhneft JSC in the field of predicting scientific carbonate reservoirs. It should be noted 75 thous. tons of oil produced in 2019. and cyclic steam soaking using such and the Moscow State University n. development, training and re-training 2014 2015 2016 2017 2018 2019 that this pilot testing of Zarubezhneft pumps. a. M. V. Lomonosov. This agreement of personnel. JSC by the SWCTT (Single Well The system of testing and implementation Chemical Tracer Test) method of new technologies (NTS) In 2019, Zarubezhneft Group obtained for carbonate reservoirs was the first In 2019, Zarubezhneft Group continued 1 patent for invention, 2 patents for useful pilot testing of this type ever carried to actively developing the system models, and 9 software certificates. 128 129 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

DIGITAL TRANSFORMATION

Currently, the oil and gas industry • 5 own software systems have been solutions as well as projects in priority follows other capital intensive developed in the area of the Company’s areas of technological and innovative sectors to implement new technological focus; development of the Company. opportunities of complex use • data exchange has been of digital technologies. Digital introduced — 35 information systems The Digital Transformation Program transformation results in substantial of the Company are integrated includes four comprehensive projects: achievements for both the industry with each other. • digital field (improvement of production and the society in general. Zarubezhneft performance); JSC realizes the competition challenges Starting from 2020, Zarubezhneft JSC • digital evaluation of new projects on the domestic and global markers begins the implementation of Stage 2 (accelerated and improved performance in a long-term perspective (for decades of the Digital Transformation Strategy when entering new assets); ahead), and demonstrates its readiness (Digital Harmony). Its key objectives • digital office (performance to all necessary transformations. will be: improvement of organization For a number of priority processes having • development of a data management management business processes); the highest effect on Zarubezhneft JSC automation concept; • digital expertise of personnel (working business, such as reserves management, • ensuring data quality with talents and use of advanced field development, oil and gas production, and its compliance with the corporate technologies to develop employees). search and evaluation of new projects, requirements; the Company excels competitors • automated formation of corporate The highest priority areas and is at the same level with the industry reporting based on source data; for the development and introduction leaders. The total level of maturity • implementation of complex digital of end-to-end digital technologies Stage of key processes in Zarubezhneft JSC projects, pilot testing of digital 2 of the Strategy are machine learning is sufficient for modifying business technologies and solutions available technologies, big data processing, digital processes using digital technologies. on the market; twins and artificial intelligence. In 2019, • building of a training system over 10 projects were implemented, The Company elaborated and approved of the adopted strategic planning to the innovative development program In 2019, the Company successfully for Group employees, their involvement with at least 25 more projects the Digital Transformation Strategy. documents of Zarubezhneft JSC, and the IT strategy of the Company. completed Stage 1 of the Digital in the Digital Transformation Strategy of various scale scheduled for 2020 — The Digital Transformation Strategy including the corporate development Transformation Strategy. During delivery; from implementation of digital solutions takes into account and comprehensively strategy, Long-Term Development Zarubezhneft JSC has defined 3 key the implementation of Stage 1, • targeted search and use of digital available on the market to creation supplements the goals and objectives Program, and is closely linked stages of digital strategic development: the Company overcame fragmentation technologies for quick search, diagnosis of in-house developments, meeting the key of source information flows in all and evaluation of new assets; trends of the Company’s growth. segments, which increased convenience • transition from predictive to prescriptive and ease of the data usageuse, ensured analytics. Implementation of the Digital STAGE I STAGE II STAGE III the fastest possible reception, processing Transformation Strategy will strengthen and analysis of the data, and outlined The priority focuses of Zarubezhneft Zarubezhneft’s JSC position as a digital efficient management mechanisms data. JSC strategic development determined hi-tech participant of the hydrocarbons Key outcomes of Stage 1 of the Digital the contents of the digital project portfolio production market in Russia and abroad 2013―2019 2020―2022 2023―2030 Transformation Strategy are as follows: included in the Digital Transformation for at least 10–20 years. • 93% of wells of Company assets Program; mainly these are the key Acquisition of key production Digital harmony Digital supremacy in Russia have been equipped projects that have the greatest impact information Pilot projects with the telemetry, ensuring real-time on the business of Zarubezhneft data transmission; JSC due to introduction of digital 130 131 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

PROCUREMENT PERSPECTIVE AND EXPANSION ACTIVITY OF THE ACTIVITY AREA

Procurement activities of Zarubezhneft • public accounting of procurements Entering new projects Egypt, is one of the key areas • entering projects in the CIS countries; JSC are carried out in accordance was provided by the consultative body and expanding Zarubezhneft’s JSC areas of Zarubezhneft’s JSC international • entering a project in the area of new with the requirements of Federal Law No. in the area of ensuring performance of activity are the key strategic goals activities. Forming a cluster in Egypt technologies (high-viscosity oils, 223-ФЗ On Procurement of Goods, Works, of procurements by Zarubezhneft JSC; of the Company. Activities are ongoing allowed for the expansion in the region difficult-to-recover oil). Services by Specific Types of Entities • the share of procurements of small in searching, evaluation and entering new and evaluation of new fields. and with the Procurement Regulation. and medium enterprises amounted oil and gas projects in Russia and abroad. New projects in the Russian Federation In 2019, the Tender Commission to 65.79% with the set target of 18% Apart from the operating countries We continue consistently searching are also considered. It is planned to expand of Zarubezhneft JSC arranged and review for that period (Decree of the Russian conventional for the Company (Vietnam for new foreign assets. The main tasks the resource base near the existing assets. 307 procurement procedures for goods, Government No. 1352 dated and Cuba), Zarubezhneft JSC has signed are as follows: The Company considers procuring a gas works and services for the needs December 11, 2014 On Specific a concession for the blocks SEREU • forming a production center asset in the Orenburg Region, a strategic of Zarubezhneft JSC and its subsidiaries Features of SME Participation and EGZ in Egypt, and for oil fields South in the MENA region (Iraq/Kurdistan, region for the Company. A joint venture for a total sum of more than 13 bln RUB. in Procurement of Goods, Works, Alamyshyk, Khartoum and East Khartoum Oman, Algeria); is being arranged with Gazpromneft Services by Specific Types of Entities); in Uzbekistan. The development • the Russian Federation cluster (Volga to work with difficult reserves To bring the openness and transparency • the share of Zarubezhneft JSC of projects and expansion of the operating and Ural Region); in the Khanty-Mansi Autonomous Area. of procurement activity to a new level, procurements made as a result area in the MENA region, including • a cluster in Africa (Gabon, Congo); Entering the assets will make it possible the system of electronic tender platforms of the procedures with participation to cover new regions in the Russian was used and procurement information of small and medium enterprises Federation and substantially increase was also published in the Unified made up 17.15% for the reporting the Company’s resource. Information System and in corporative period with the target of 15%; information sources, which increased • 23 companies joined Zarubezhneft As part of the current innovative the number of procurement participants, JSC Partnership Program development of the global energy expanded the Company’s opportunities for partnership with small and medium sector, our Company constantly strives in selecting quotations with the most enterprises. to accumulate expertise in all areas of its THE COMPANY optimal conditions. activities (exploration and production, In its operation, Zarubezhneft project management, technological CARRIES OUT The Company works with potential JSC employs the agenda adopted leadership, etc.). suppliers/contractors to optimize by the Russian Federation Government CONTINUOUS expenses and reduce costs. The analysis in terms of import phase-out — one Primary focus and development of technical and commercial proposal of the strategic areas in operation of the Company are based ACTIVITIES of bidders and identification of public companies for the nearest on the following key principles: FOR SCHEDULED of possibilities to reduce future. In this connection, the Company • focus on key clusters/regions; the price of goods and services allowed constantly tries to phase out imported • synergy with existing assets; AND STAGES the bidders to improve their commercial production with Russian ones • comprehensive integration into proposals in terms of providing in a scheduled and stage-wise manner. the region (entering projects of various REPLACEMENT the maximum possible discount. As a result, the share of procured scales and in different areas — In this manner, in 2019 a substantial production, works and services conventional reserves, difficultl-to- OF IMPORTED saving of money was achieved — more of foreign origin is consistently reduced, recover reserves, servicing, onshore/ than 1.2 bln RUB. and is below 0.97% in the companies offshore, access and propagation PRODUCTS of the Group operating in the Russian of technologies), and creation of price When taking measures Federation. clusters; WITH RUSSIAN to expand the access of small • application of advanced technologies ONES. and medium enterprises to procurement (unconventional, difficult-to-recover in Zarubezhneft JSC, the following results reserves) and their propagation (EOR, were achieved in 2019: carbonates). 132 133 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

RENEWABLE ENERGY SOURCES (RES)

When diversifying their businesses, oil The principal RES development focus and gas companies rely on their unique are countries of Zarubezhneft’s JSC experience in onshore and offshore presence: drilling, oil and gas refining, • the Socialist Republic of Vietnam transport and installation operations, (strategic development focus: and organization of trading operations. offshore WPPs, taking into They expand their activities in the area account corresponding expertise of renewable energy sources through and production capacities available development of their own expertise with JV Vietsovpetro); and purchase of core assets, as well • the Republic of Cuba; as through cooperation with leading • the Russian Federation; suppliers of process equipment • Bosnia and Herzegovina. and project developers. Following this tendency, Zarubezhneft JSC also During a short period from the moment considers its participation in the RES of creation of the Department projects. for Development of Renewable Energy Sources: During the long history of successful • a funnel of projects was formed as per projects, Zarubezhneft JSC the developed criteria, and primary has accumulated a vast approaches were defined for selecting experience of the communication regions/countries with the potential with management of developing of entering RES projects; countries that are currently motivated • the passport of the “R-8. RES to boost RES in their regions. Development” business process was elaborated and approved Knowing the potential in the framework of integration of renewable energy sources in future of the new area; and their increasing competitiveness • partner relationships were established versus fossil fuels, in March 2019, with both international and Russian the Board of Directors of Zarubezhneft companies to implement the RES JSC addressed the issue of developing projects, as well as cooperation was the projects on RES (Minutes No. 165 established with leading suppliers dated March 27, 2019), and in June 2019 of process equipment and project a new Department for Development developers. of Renewable Energy Sources (DDRES) was created as a structural unit Work is ongoing in the Company of the Company in order to implement on searching and analyzing practicability the phased development of its own of taking part in RES projects expertise, as a related business, which in the territories of its presence will be an additional factor in improving and in new perspective markets the sustainability of its own structures. of the RES core business.. 134 135 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE Atop of all – flexibility SIMULTANEOUS and adaptivity IMPROVEMENT OF MANAGEMENT PROCESSES, DEVELOPMENT OF CORPORATE CULTURE AND PERSONNEL WITH FOCUS ON DIGITALIZATION 04 CORPORATE GOVERNANCE 136 137 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

INFORMATION ON HOLDING THE GENERAL THE BOARD OF DIRECTORS MEETING OF SHAREHOLDERS OF THE COMPANY, COMMITTEES ATTACHED TO THE BOARD OF DIRECTORS The only shareholder of Zarubezhneft • Allocation of Zarubezhneft JSC • The Board of Directors JSC is the Russian Federation profit for 2018 in the amount of Zarubezhneft JSC was elected represented by the Federal Agency of 10,668,603.397 thous RUB was with the composition as follows: THE BOARD OF DIRECTORS “On Resolutions of the Extraordinary for State Property Management. approved as follows: K. V. Karapetyan, S. I. Kudryashov, General Meeting of Shareholders Pursuant to Clause 3 of Article 47 – 5,918,500.000 RUB for dividend E. A. Murov, P. Yu. Sorokin, The Board of Directors of Zarubezhneft of Zarubezhneft Joint Stock Company” of Federal Law No. 208-ФЗ “On payments; A. V. Tikhonov, P. A. Kadochnikov, JSC (prior to the Annual General of the Federal Agency for State Property Joint-Stock Companies” dated – 1,066,860.340 RUB for formation M. Yu. Sokolov. Meeting of Shareholders) was elected Management, dated November 29, 2018, December 26, 1995, in the Company, all of Zarubezhneft JSC reserve fund; • The Revision Commission in accordance with Order No. 822-р with the composition as follows: voting shares whereof belong to the only – 38,448.219 RUB for compensation of Zarubezhneft JSC was elected shareholder, resolutions on issues to the members of the Board with the composition as follows: Full name Information within the competence and expertise of Directors of Zarubezhneft JSC; N. N. Annikova, A. E. Bogashov, Aleksandr Alekseevich Gladkov Director of the Oil and Gas Production and Transportation Department of the Ministry of the General Meeting of Shareholders – 200,000 RUB for compensation A. I. Mozhaeva. of Energy of the Russian Federation shall be made by that shareholder to the members of the Audit • Nexia Pacioli LLC was approved year of birth — 1969 individually and shall be executed Commission of Zarubezhneft JSC; as the auditor of Zarubezhneft JSC holds no Company shares in writing. – 3,644,594.838 RUB for 2019. Karen Vilgelmovich Karapetyan year of birth — 1963 for financing the investment plan • The Regulation on Compensations holds no Company shares In 2019, the Federal Agency for State of Zarubezhneft JSC for 2019, and Refunds to the Members Sergey Ivanovich Kudryashov General Director of Zarubezhneft JSC Property Management issued Order approved by the resolution of the Revision Commission year of birth — 1967 holds no Company shares No. 499-р dated June 30, 2019, “On of the Board of Directors (Minutes of Zarubezhneft JSC was approved Resolutions of the Annual General No. 162 dated December 20, 2018); in a revised edition. Maksim Yurievich Sokolov General Director of LSR Group PJSC year of birth — 1968 Meeting of Shareholders of Zarubezhneft • Resolutions were made holds no Company shares Joint Stock Company covering as to payment of compensations Evgeniy Alekseevich Murov year of birth — 1945 the following resolutions adopted: to the members of the Board holds no Company shares • The annual report of Zarubezhneft of Directors and the Revision Aleksey Leonidovich Teksler First Deputy Minister of Energy of the Russian Federation JSC for 2018 was approved. Commission of Zarubezhneft JSC. year of birth — 1973 • The annual accounting (financial) holds no Company shares statements of Zarubezhneft JSC Anatoliy Vladimirovich Tikhonov General Director for 2018 were approved; FSBI “Russian Energy Agency” of the Ministry of Energy of the Russian Federation year of birth — 1969 holds no Company shares 138 139 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

A list of issues considered by the Board of Directors in 2019 in accordance with the directions of the Government Pursuant to the resolution of the Board Pursuant to Order No. 409-р “On of the Russian Federation and the instructions of Rosimuschestvo of Directors of Zarubezhneft JSC, dated Resolutions of the Annual General December 06, 2018 (Minutes No. 161), Meeting of Shareholders of Zarubezhneft Item Number Number Issue Evgeniy Alekseevich Murov was elected Joint Stock Company” of the Federal No. and date of the directives and date of the Minutes Chairman of the Board of Directors Agency for State Property Management, of the Government/ of the meeting instructions of the Board of Directors of Zarubezhneft JSC. dated June 30, 2019, the Board of the Federal Agency of Directors of Zarubezhneft JSC was for State Property elected with the composition as follows: Management 1 No. 10068п-П13 dated 163 dated 28.01.2019 On transition of Zarubezhneft JSC to preferential use of domestic 06.12.2018 software. Full name Information 2 No. 276п-П13 dated 164 dated 26.02.2019 On updating the Long-Term Development Program of Zarubezhneft Karen Vilgelmovich Karapetyan Advisor to the Chairman of the Management Board of Gazprombank (JSC) 17.01.2019 JSC (hereinafter, the LTDP) and submission of the LTDP audit reports year of birth — 1963 to the Ministry of Economic Development of the Russian Federation, holds no Company shares the Federal Agency for State Property Management, and federal executive authorities coordinating Zarubezhneft JSC activities, in accordance Pavel Anatolievich Kadochnikov Vice-Rector for Research of the All-Russian Academy of Foreign Trade of the Ministry with Decree No. 1870-р of the Government of the Russian Federation dated of Economic Development of the Russian Federation August 30, 2017 year of birth — 1978 holds no Company shares 3 No. 1519п-П13 dated 164 dated 26.02.2019 On development of programs to improve the quality of procurement 20.02.2019 management. Sergey Ivanovich Kudryashov General Director of Zarubezhneft JSC year of birth — 1967 4 No. 584п-П13 dated 166 dated 29.03.2019 On finalizing corporate import phase-out plans for protection against holds no Company shares 26.01.2019 radiation, chemical and biological factors. Evgeniy Alekseevich Murov year of birth — 1945 5 No. 4111п-П13 dated 168 dated 11.06.2019 On expanding the practice of using factoring in the performance of contracts holds no Company shares 08.05.2019 for the supply of goods (performance of work, provision of services). Maksim Yurievich Sokolov First Deputy General Director of LSR Group PJSC 6 No. 4482п-П13 dated 168 dated 29.05.2019 On Zarubezhneft JSC year-end dividends for 2018. year of birth — 1968 23.05.2019 holds no Company shares 7 No. 5051п-П13 dated 170 dated 27.06.2019 On establishing Zarubezhneft JSC subsidiaries. Pavel Yurievich Sorokin Deputy Minister of Energy of the Russian Federation 10.06.2019 year of birth — 1973 8 No. 6387п-П13 dated 171 dated 12.08.2019 On electing the Chairman of the Board of Directors of Zarubezhneft JSC. holds no Company shares 15.07.2019 Anatoliy Vladimirovich Tikhonov Deputy Minister of Energy of the Russian Federation 9 No. 9054п-П13 dated 174 dated 26.11.2019 On implementation of methodological guidelines on KPI application year of birth — 1969 02.10.2019 in state companies and development (updating) of the Company bylaws holds no Company shares governing formation of key performance indicators and compensations to the Company management. 10 No. 9984п-П13 dated 174 dated 26.11.2019 On the purchase of Russian production used to execute national projects The Regulation on the Board of Directors specified in Annex No. 4 to Regulation performance in accordance with Order 01.11.2019 and implement a comprehensive plan of modernization and expansion of Zarubezhneft JSC was approved No. 534-П “On Admission of Securities No. 409-р “On Resolutions of the Annual of the trunk infrastructure. by resolution of the Extraordinary General to Organized Trading” approved by the Bank General Meeting of Shareholders 11 No. 10357п-П13 dated 176 dated 30.12.2019 On expediency of the Company integration into the activities covered Meeting of Shareholders of Zarubezhneft of Russia on February 24, 2016. of Zarubezhneft Joint Stock Company” 14.11.2019 by the national project (program) “International Cooperation and Export”. JSC (Order No. 2253-р of the Federal of the Federal Agency for State Property 12 No. 10464п-П13 dated 176 dated 30.12.2019 On amendments to Zarubezhneft JSC procurement documentation Agency for State Property Management, The Regulation on Compensation Management, dated June 30, 2019, was 18.11.2019 governing competitive procedures. dated October 12, 2005). to the Members of the Board of Directors as high as 38,448,219 RUB, including to: 13 No. 11528п-П13 dated 176 dated 30.12.2019 On the possibility of the JSC transition to tax control in the form of tax of Zarubezhneft JSC was approved • E. A. Murov — 10,000,000 RUB, 13.12.2019 monitoring. In accordance with the instructions by Order No. 243-р of the Federal • A. V. Tikhonov — 9,517,260 RUB, of the Federal Agency for State Property Agency for State Property Management • M. Yu. Sokolov — 9,434,521 RUB, Management, the Company annually sends dated May 18, 2017. According • R. R. Simonyan — 4,219,726 RUB, In 2019, as part of the measures • Annex No. 5 “Demand of Labor • Annex No. 10 “Program proposals on candidates to the Board to the Regulation, the compensation • and K. V. Karapetyan — 5,276,712 RUB. on updating the Long-Term Development Resources under Zarubezhneft JSC Measures to Ensure Achievement of Directors of Zarubezhneft JSC. When payable to the members Program of the Company, the following Long-Term Development Program”; of the LTDP KPIs and Compensation preparing proposals for the candidates of the Board of Directors shall depend In 2019, 14 meetings of the Company’s annexes to the LTDP were updated • Annex No. 6 “Labor Performance to Zarubezhneft JSC Management”. of independent members of the Board on the Company’s achievement of target Board of Directors were held, at which by resolution of the Board of Directors, Enhancement Program”; of Directors, the Company follows values of key performance indicators 78 issues were considered, including subject to the recommendations • Annex No. 7 “Measures to Increase Also, for the purpose of implementation the requirements specified in Clause 8 (1) determined subject to the guidelines 13 issues under the directives given on the results of the LTDP Performance and Transparency of measures on Zarubezhneft JSC of the Regulation “On Management of Joint as delivered by federal executive of the Government of the Russian audit and to the directives received of Zarubezhneft JSC Activities; digital transformation, Annex No. 13 Stock Companies’ Shares Held in Federal authorities, and aimed at fulfillment Federation and instructions of the Federal from the Government of the Russian • Annex No. 8 “Measures to the Long-Term Development Program, Ownership and Use of the Special Right of strategic business objectives Agency for State Property Management Federation, as below: on Planned and Phased Replacement “Zarubezhneft JSC Strategy in Digital to Participation of the Russian Federation of Zarubezhneft JSC. received by the Company in 2019, • Annex No. 3 “Zarubezhneft Group of the Foreign Production, Transformation”, was developed in Management of Joint Stock Companies” as follows: Innovation-Related Activity”; Works and Services Purchased and approved by the Board of Directors. (“Golden Share”) approved by Decree No. In 2019, the total amount of compensation • Annex No. 4 “Action Plan with Equivalent Domestic Products, 738 of the Government of the Russian payments to 5 members of the Board for Zarubezhneft JSC Long- Work and Services”; Federation, dated December 3, 2004, of Directors of Zarubezhneft JSC, Term Development Program Risk • Annex No. 9 “Operating Expenses as well as the Bank of Russia requirements based on the 2018-2019 corporate year Management up to 2030”; Reduction Program”; 140 141 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

In pursuance of directive No. 276п- of the Instructions of the President • The Annex encloses Pursuant to the Regulation on the Strategic During 2019, 17 meetings of the Strategic • approval of the Report П13 dated January 17, 2019 and the Government of the Russian a complete list of issues considered Planning Committee under the Board Planning Committee were held, each on Implementation of Zarubezhneft of the Government of the Russian Federation”. at the meetings of the Board of Directors, the issues lying within its with the participation of all elected JSC Innovation Development Program Federation, in order to implement of Directors of the Company in 2019. competence and expertise include, without members of the Strategic Planning (hereinafter, the IDP) for 2018; the sectoral section of the action The meetings of the Board of Directors limitations, as follows: Committee. • issues regulating the sale of non-core plan for acceleration of the growth also considered the issues aimed The full list of issues considered • determining priority areas, strategic assets of Zarubezhneft JSC (NCA), rates of investments in fixed capital at fulfillment of the strategic business at the meetings of the Company’s objectives and basic principles Following the results of the meetings including the approval of the NCA and increase their share in the gross objectives of the Company, as follows: Board of Directors in 2019 of the Company strategic development; held in 2019, the Strategic Planning Register and the NCA Sale Plan domestic product up to 25 percent, • On approval of the Report is given in the appendix “Information • considering long-term Committee made recommendations for 2019. the Board of Directors of Zarubezhneft on Achievement of Zarubezhneft JSC on the holding of the Board of Directors’ development programs and reports to the Board of Directors of the Company JSC approved Annex No. 14 to the LTDP, Corporate KPI Target Values for 2018; meetings”. on implementation thereof; as to the following issues: Besides, at the Committee physical “Long-Term Development Program • Preliminary approval of the Annual • considering reports on implementation • consideration of the Progress Report meeting (Minutes No. 53 dated Measures to Accelerate the Growth Report of Zarubezhneft JSC for 2018; COMMITTEES ATTACHED of the Company strategy, developing on Implementation of Zarubezhneft March 6, 2019) consideration Rates of the Investments in Fixed Capital • On approval of the Report TO THE BOARD recommendations as to adjustment JSC Corporate Strategy for 2019; of, and recommendations as to, the key of the Exploration and Production on Implementation of Zarubezhneft OF DIRECTORS thereof; • implementation of Zarubezhneft JSC issues related to the implementation segment. JSC Innovation Development Program • developing recommendations Long-Term Development Program of the Corporate Development Strategy for 2018; Three committees were established as to establishing branches (LTDP) as part of the consideration of the Company, were given as follows: Detailed information on the Company’s • Progress report on implementation under the Board of Directors and opening representative offices; of the Report on the LTDP • On the vision embodied compliance with the directives of Zarubezhneft JSC Corporate of Zarubezhneft JSC, as follows: • developing recommendations Implementation, and the audit report in Zarubezhneft JSC Innovation of the Government of the Russian Strategy for 2019; • Strategic Planning Committee; as to approval of the Company key as to the LTDP implementation Development Program. Federation, and with the instructions • On approval of Zarubezhneft JSC KPI • Audit Committee; performance indicators and target inspection in 2018; • On development of renewable energy of the President and the Government target values for 2020; • Compensation and Nominating values thereof; • approval of Zarubezhneft JSC sources projects in Zarubezhneft JSC. of the Russian Federation, is provided • On approval of Zarubezhneft JSC Committee. • considering reports on the Company’s Business Plan for 2020; • On current status of Zarubezhneft JSC in the Section “Report on the Execution Business Plan for 2020. achievement of the target values • approval of the report on achievement as to entering new oil and gas projects of the approved key performance of the KPI target values for 2018 in foreign countries and in the Russian indicators; and establishment of the target values Federation. • developing recommendations for 2020; Strategic Planning Committee as to strategic documents covering • approval of the Performance innovative development issues. Enhancement and Operational Costs Composition of the Strategic Planning Committee under the Board of Directors of Zarubezhneft JSC in 2019 Reduction Program for 2019; The Committee Members, prior to the Annual General Meeting of Zarubezhneft JSC shareholders (January 1, 2019 through June 30, 2019): • Aleksey Leonidovich Teksler – First Deputy Minister of Energy of the Russian Federation (the Committee Chairman); • Karen Vilgelmovich Karapetyan – Advisor to the Chairman of the Management Board of Gazprombank (JSC); • Sergey Ivanovich Kudryashov – General Director of Zarubezhneft JSC; • Anatoliy Vladimirovich Tikhonov – General Director of FSBI “Russian Energy Agency” of the Ministry of Energy of the Russian Federation. The List of Issues Considered at the Meetings of the Strategic Planning Committee under the Board of Directors The Committee Members, subsequent to the Annual General Meeting of Zarubezhneft JSC shareholders of Zarubezhneft JSC in 2019 (August 12, 2019 through December 31, 2019): No. Meeting / form of holding Meeting date Agenda The Strategic Planning • Anatoliy Vladimirovich Tikhonov – Deputy Minister of Energy (the Committee Chairman); Committee Members • Pavel Anatolievich Kadochnikov – Vice-Rector for Research of the All-Russian Academy of Foreign Trade of the Ministry of Economic having participated Development of the Russian Federation; in the meeting • Karen Vilgelmovich Karapetyan – Advisor to the Chairman of the Management Board of Gazprombank (JSC); • Sergey Ivanovich Kudryashov – General Director of Zarubezhneft JSC; 1 Strategic Planning Committee 11.01.2019 1. Consideration of the revised edition K. V. Karapetyan • Pavel Yurievich Sorokin – Deputy Minister of Energy of the Russian Federation. meeting / by correspondence of the Guidelines for Forming Operating S. I. Kudryashov Expenses and Calculating the Operating A. L. Teksler Expense Reduction Indicator. A. V. Tikhonov 2. On updating of Zarubezhneft JSC Long-Term Development Program. 2 Strategic Planning Committee 15.02.2019 1. Consideration of the audit engagement K. V. Karapetyan meeting / by correspondence for auditing the implementation of Zarubezhneft S. I. Kudryashov JSC Long-Term Development Program. A. L. Teksler 2. Consideration of the Report on Sale of Non-core A. V. Tikhonov Assets of Zarubezhneft JSC for Q4 2018. 3. Consideration of the Report on the Implementation of Zarubezhneft Group Performance Enhancement and Costs Optimization Program for 2018. 4. Consideration of Zarubezhneft Group Performance Enhancement and Costs Optimization Program for 2019. 5. On liquidation of Zarubezhneft JSC representative office in the Republic of Belarus. 142 143 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

No. Meeting / form of holding Meeting date Agenda The Strategic Planning No. Meeting / form of holding Meeting date Agenda The Strategic Planning Committee Members Committee Members having participated having participated in the meeting in the meeting 3 Strategic Planning Committee 06.03.2019 1. On the vision embodied in Zarubezhneft JSC K. V. Karapetyan 12 Strategic Planning Committee 05.09.2019 1. Consideration of the Report on the Results P. A. Kadochnikov meeting / by personal Innovation Development Program. S. I. Kudryashov meeting / by correspondence of Implementation of Zarubezhneft JSC K. V. Karapetyan attendance 2. On development of renewable energy sources A. L. Teksler Business Plan for the 1st half of 2019. S. I. Kudryashov projects in Zarubezhneft JSC. A. V. Tikhonov 2. Consideration of the Report on Implementation P. Yu. Sorokin 3. On current status of Zarubezhneft JSC of Zarubezhneft JSC Long-Term Development A. V. Tikhonov as to entering new oil and gas projects in foreign Program Measures for the 1st half of the year countries and in the Russian Federation. 2019. 3. Consideration of information on forecasted 4 Strategic Planning Committee 14.03.2019 1. Consideration of the Report on Implementation K. V. Karapetyan Zarubezhneft JSC dividend payables meeting / by correspondence of Zarubezhneft JSC Innovation Development S. I. Kudryashov to the federal budget in 2019-2023. Program for 2018. A. L. Teksler 2. Consideration of the Report on Sale of Non-core A. V. Tikhonov 13 Strategic Planning Committee 30.10.2019 1. Consideration of the draft Zarubezhneft P. A. Kadochnikov Assets of Zarubezhneft JSC for Q1 2019. meeting / by correspondence JSC Innovation Development Program K. V. Karapetyan 3. Consideration of information on forecasted for 2020-2024. S. I. Kudryashov dividend payables to the federal budget in 2019- 2. Consideration of the Report on Sale of Non-core P. Yu. Sorokin 2021 (based on the 2018-2020 performance). Assets of Zarubezhneft JSC for Q3 2019. A. V. Tikhonov 5 Strategic Planning Committee 15.04.2019 1. Consideration of the Report on Implementation K. V. Karapetyan 14 Strategic Planning Committee 11.11.2019 1. Consideration of the Report on Implementation P. A. Kadochnikov meeting / by correspondence of Zarubezhneft JSC Innovation Development S. I. Kudryashov meeting / by correspondence of Zarubezhneft JSC Long-Term Development K. V. Karapetyan Program for 2018. A. L. Teksler Program Measures for 9 months of 2019. S. I. Kudryashov 2. Consideration of the Report on Sale of Non-core A. V. Tikhonov 2. On functioning of the intellectual property rights P. Yu. Sorokin Assets of Zarubezhneft JSC for Q1 2019. management system in Zarubezhneft JSC. A. V. Tikhonov 3. Consideration of information on forecasted 3. On disposition of a non-core asset “Working dividend payables to the federal budget in 2019- premises, the city of Modriča” 2021 (based on the 2018-2020 performance). 15 Joint meeting of the Strategic 11.11.2019 1. Consideration of the Report P. A. Kadochnikov 6 Joint meeting of the Strategic 26.04.2019 1. Consideration of the Report on Achievement A. A. Gladkov Planning Committee on the Implementation of Zarubezhneft K. V. Karapetyan Planning Committee of Zarubezhneft JSC Corporate KPI Target K. V. Karapetyan and the Compensation Group Performance Enhancement and Costs S. I. Kudryashov and the Compensation Values for 2018 S. I. Kudryashov and Nominating Committee / Optimization Program for 9 months of 2019. P. Yu. Sorokin and Nominating Committee / A. L. Teksler by correspondence 2. Consideration of the Report on Achievement A. V. Tikhonov by correspondence A. V. Tikhonov of Zarubezhneft JSC Corporate KPI Target Values based on the forecast till the end of 2019 7 Strategic Planning Committee 14.05.2019 1. Consideration of the Report on Implementation K. V. Karapetyan subject to the actual performance for 9 months meeting / by correspondence of Zarubezhneft JSC Long-Term Development S. I. Kudryashov of 2019 Program for 2018 A. L. Teksler A. V. Tikhonov 16 Joint meeting of the Strategic 11.12.2019 1. On updating of Zarubezhneft JSC KPI system. P. A. Kadochnikov Planning Committee 2. On updating of Zarubezhneft JSC KPI target K. V. Karapetyan 8 Strategic Planning Committee 17.05.2019 1. Consideration of the Action Plan K. V. Karapetyan and the Compensation values for 2020. S. I. Kudryashov meeting / by correspondence for implementation of proposals on enhancing S. I. Kudryashov and Nominating Committee / P. Yu. Sorokin Zarubezhneft Group performance, A. L. Teksler by correspondence A. V. Tikhonov developed in accordance with the auditor’s A. V. Tikhonov recommendations following the 2018 audit 17 Strategic Planning Committee 24.12.2019 1. Consideration of the Progress Report P. A. Kadochnikov of the Long-Term Development Program. meeting / by correspondence on Implementation of Zarubezhneft JSC K. V. Karapetyan Corporate Strategy for 2019. S. I. Kudryashov 9 Strategic Planning Committee 27.05.2019 1. On updating of Zarubezhneft JSC Long-Term K. V. Karapetyan 2. Consideration of Zarubezhneft JSC Business P. Yu. Sorokin meeting / by correspondence Development Program. S. I. Kudryashov Plan for 2020. A. V. Tikhonov A. L. Teksler 3. On updating of Zarubezhneft JSC Long-Term A. V. Tikhonov Development Program. 10 Joint meeting of the Strategic 27.05.2019 1. Consideration of the Report K. V. Karapetyan Planning Committee on the Implementation of 2019 Zarubezhneft S. I. Kudryashov and the Compensation Group Performance Enhancement and Costs A. L. Teksler and Nominating Committee / Optimization Program for Q1 2019. A. V. Tikhonov by correspondence 2. Consideration of the Report on Achievement of Zarubezhneft JSC Corporate KPI Target Values for 3 months of 2019. 11 Joint meeting of the Strategic 05.09.2019 1. Consideration of the Report P. A. Kadochnikov Planning Committee on the Implementation of Zarubezhneft K. V. Karapetyan and the Compensation Group Performance Enhancement and Costs S. I. Kudryashov and Nominating Committee / Optimization Program for the 1st half of 2019. P. Yu. Sorokin by correspondence 2. Consideration of the Report on Achievement A. V. Tikhonov of Zarubezhneft JSC Corporate KPI Target Values based on the forecast till the end of 2019 subject to the actual performance in the 1st half of 2019. 144 145 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

AUDIT COMMITTEE The List of Issues Considered at the Meetings of the Audit Committee under the Board of Directors of Zarubezhneft JSC in 2019

Composition of the Audit Committee under the Board of Directors of Zarubezhneft JSC in 2019 No. Meeting / form of holding Meeting date Agenda The Audit Committee The Committee Members, prior to the Annual General Meeting of Zarubezhneft JSC shareholders (January 1, 2019 through June 30, 2019): Members having participated • Maksim Yurievich Sokolov – General Director of LSR Group PJSC (the Committee Chairman); in the meeting • Aleksandr Alekseevich Gladkov – Director of the Oil and Gas Production and Transportation Department, Ministry of Energy of the Russian Federation; 1 Audit Committee meeting / 08.02.2019 1. Consideration of the Plan for the RAS Audit A. A. Gladkov • Aleksey Leonidovich Teksler – First Deputy Minister of Energy of the Russian Federation. by personal attendance of Zarubezhneft JSC Accounting (Financial) M. Yu. Sokolov Statements. A. L. Teksler The Committee Members, subsequent to the Annual General Meeting of Zarubezhneft JSC shareholders 2. Consideration of the Plan for the IFRS Audit (August 12, 2019 through December 31, 2019): of Zarubezhneft JSC Consolidated Financial • Pavel Anatolievich Kadochnikov – Vice-Rector for Research of the All-Russian Academy of Foreign Trade of the Ministry of Economic Statements. Development of the Russian Federation (the Committee Chairman); 2 The Audit Committee meeting / 14.03.2019 1. Consideration of the Report on Implementation A. A. Gladkov • Karen Vilgelmovich Karapetyan – Advisor to the Chairman of the Management Board of Gazprombank (JSC); by correspondence of Zarubezhneft Group Audit Plan, M. Yu. Sokolov • Maksim Yurievich Sokolov – First Deputy General Director of LSR Group PJSC. and on Zarubezhneft JSC Internal Audit Section A. L. Teksler Performance, for 2018. 2. Consideration of the Report of the Audit Committee under the Board of Directors Pursuant to the Regulation on the Audit • approval of the Report of the external auditor, following of Zarubezhneft JSC, for 2018. Committee under the Board of Directors, on Achievement of Zarubezhneft JSC the results of the audit of Zarubezhneft 3 Audit Committee meeting / 18.04.2019 1. Consideration of Zarubezhneft JSC annual A. A. Gladkov by personal attendance accounting (financial) statements for 2018. M. Yu. Sokolov the issues lying within its competence KPI Target Values for 2018; JSC accounting (financial) statements 2. On the external auditor’s performance, following A. L. Teksler and expertise include, without limitations, • approval of initial maximum price under the RAS, and consolidated financial the RAS audit of Zarubezhneft JSC accounting as follows: and criteria for selecting an auditor, statements under the IFRS, for 2018 (financial) statements for 2018. • considering annual report for the purposes of holding a tender (Minutes No. 40 dated April 18, 2019). 3. Consideration of Zarubezhneft JSC and financial statements; for selecting an audit company consolidated financial statements under the IFRS, for 2018. • considering the results of the financial to audit, under the IFRS, Zarubezhneft The external auditors presented 4. On the external auditor’s performance, target values achievement, Group consolidated financial to the Audit Committee the main areas following the IFRS audit of Zarubezhneft Group and reasons for deviations therefrom; statements for 2019-2020; and focuses of the audit conducted consolidated financial statements for 2018. 5. Consideration of the results of external quality • considering the organization • payment of compensations for 2018, in accordance with the audit assessment (evaluation) of Zarubezhneft JSC of the risks management system; to the members of the Board engagements, indicated the accounting internal audit function. • considering the procedures of Directors, the Revision Commission, principles used and material estimates 4 The Audit Committee meeting / 14.05.2019 1. Consideration of the Annual Report A. A. Gladkov for selecting an auditor; and the General Director of the financial statements, provided by correspondence of Zarubezhneft JSC for 2018. M. Yu. Sokolov • considering plans and actual results of Zarubezhneft JSC. an evaluation of the Company’s internal 2. Consideration of the Report on Achievement A. L. Teksler of the Company’s Internal Audit control procedures aimed at reducing of Zarubezhneft JSC Corporate KPI Target Values for 2018. Service; In April 2019, within the framework the risk of the accounting (financial) 3. Consideration of the opinion of the Revision • considering the external auditor’s of interaction with the external auditor, statements unreliability. Also the audit Commission, following the inspection performance, and so on. with account taken of Clause 2.1 reports and both accounting (financial) of financial and economic activities of the Guidelines for Organization and consolidated financial statements of Zarubezhneft JSC for 2018. In 2019, the Audit Committee held nine and Conduct of a Statutory Audit of Zarubezhneft JSC for 2018 were meetings, including three physical of Financial (Accounting) Statements properly considered. meetings, each attended by all elected (approved by Order No. 12 of the Federal Audit Committee members. Agency for State Property Management dated January 21, 2016), and Clause 2.5 Following the results of the meetings of the Guidelines for Organization of Work held, the Audit Committee made of Audit Committees under the Board recommendations to the Board of Directors (approved by Order No. 86 of Directors of Zarubezhneft JSC of the Federal Agency for State Property as to the following issues (without Management dated March 20, 2014), limitations): the Audit Committee under the Board • approval of the Annual Report of Directors of Zarubezhneft JSC of Zarubezhneft JSC for 2018; considered the performance 146 147 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

No. Meeting / form of holding Meeting date Agenda The Audit Committee INTERACTION and external auditors of the Company • quality of interaction between Members having OF INTERNAL was carried out on the basis the Company’s responsible employees participated in the meeting AND EXTERNAL AUDITORS of the “Policies of Interaction between and the auditors of Nexia Pacioli LLC the Audit Committee under the Board and Deloitte & Touche CIS JSC during 5 The Audit Committee meeting / 27.05.2019 1. Consideration of information on the results A. A. Gladkov by correspondence of processing the most significant security M. Yu. Sokolov In May 2019, in pursuance of Clause of Directors of Zarubezhneft JSC external audits. hotline messages. A. L. Teksler 2.1 of the Guidelines for Organization and External Auditors”, approved 2. On quality assessment of Zarubezhneft JSC and Conduct of a Statutory Audit by the Company in accordance The Internal Audit Section conducted, interaction with external auditors. of Financial (Accounting) Statements with the requirements of the Federal and submitted (in May 2019) 3. Consideration of criteria for selecting an auditor, for the purposes of holding a tender for selecting (approved by Order No. 12 of the Federal Agency for State Property Management for consideration of the Audit an audit company to audit, under the IFRS, Agency for State Property Management guidelines for organization and conduct Committee, an assessment (evaluation) Zarubezhneft Group consolidated financial dated January 21, 2016), and Clause 2.5 of statutory audit of financial (accounting) of the interaction between the Company statements for 2019-2020. of the Guidelines for Organization of Work statements. and the external auditor, based 4. On the initial maximum price for audit services, for the purposes of holding a tender for selecting of Audit Committees under the Board on the criteria recommended an audit company to audit, under the IFRS, of Directors (approved by Order No. 86 In 2019, the interaction between by the Federal Agency for State Property Zarubezhneft Group consolidated financial of the Federal Agency for State Property internal and external auditors focused Management. The Audit Committee statements for 2019-2020. Management dated March 20, 2014), on the following issues: members were also interviewed to assess 6 Joint meeting 28.05.2019 1. Consideration of proposals on the amount A. A. Gladkov the Audit Committee under the Board • evaluation of non-current assets the quality of the Company’s interaction of the Compensation of compensations to the members of the Board M. Yu. Sokolov of Directors of Zarubezhneft JSC (asset impairment testing); with external auditors. The quality and Nominating Committee of Directors of Zarubezhneft JSC. A. L. Teksler and the Audit Committee / 2. Consideration of proposals on the amounts considered the performance • evaluation of the risks of material of interaction between the Company by correspondence of compensation to the members of the Revision of the external auditor, following misrepresentation of financial and the external auditors was assessed Commission of Zarubezhneft JSC. the results of the audit of Zarubezhneft statements; as “efficient”. 3. Consideration of the Report on Implementation JSC accounting (financial) statements • evaluation of the risk of fraud of the Corporate Business Initiative “Challenge”. 4. On payment of annual compensation under the RAS for 2018. and biased judgments and estimates; to the General Director of the Company • application of new standards when 7 The Audit Committee meeting / 05.09.2019 1. Consideration of the inspection results P. A. Kadochnikov The interaction between the internal preparing consolidated financial by correspondence as to performance of the procedures K. V. Karapetyan audit service (Internal Audit Section) statements; for organizing risks management and internal M. Yu. Sokolov control systems aimed at preventing and combating corruption. 8 Audit Committee meeting / 04.12.2019 1. Consideration of the plan for the RAS audit P. A. Kadochnikov by personal attendance of Zarubezhneft JSC accounting (financial) K. V. Karapetyan statements for 2019. M. Yu. Sokolov 2. Consideration of the plan for the IFRS audit COMPENSATION AND NOMINATING COMMITTEE of Zarubezhneft JSC consolidated financial statements for 2019. Composition of the Compensation and Nominating Committee under the Board of Directors of Zarubezhneft JSC in 2019 9 The Audit Committee meeting / 09.12.2019 1. On defining the initial maximum price of audit P. A. Kadochnikov by correspondence services, for the purposes of conducting K. V. Karapetyan The Committee Members, prior to the Annual General Meeting of Zarubezhneft JSC shareholders (January 1, 2019 through June 30, 2019): an open competition to select an auditor M. Yu. Sokolov • Anatoliy Vladimirovich Tikhonov – General Director of FSBI “Russian Energy Agency” of the Ministry of Energy of the Russian Federation to perform a statutory audit of Zarubezhneft (the Committee Chairman); JSC accounting (financial) statements • Aleksandr Alekseevich Gladkov – Director of the Oil and Gas Production and Transportation Department, Ministry of Energy for 2020-2021. of the Russian Federation; 2. On considering the criteria for selecting • Maksim Yurievich Sokolov – General Director of LSR Group PJSC. an auditor, for the purposes of conducting an open competition to select an auditor The Committee Members, subsequent to the Annual General Meeting of Zarubezhneft JSC shareholders to perform a statutory audit of Zarubezhneft (August 12, 2019 through December 31, 2019): JSC accounting (financial) statements • Pavel Yurievich Sorokin – Deputy Minister of Energy of the Russian Federation (the Committee Chairman); for 2020-2021. • Karen Vilgelmovich Karapetyan – Advisor to the Chairman of the Management Board of Gazprombank (JSC); 3. Consideration of Zarubezhneft Group Audit Plan, • Maksim Yurievich Sokolov – First Deputy General Director of LSR Group PJSC. and the budget of Zarubezhneft JSC Internal Audit Section for 2020. 4. Consideration of the revised edition of the Regulation on Charitable and Sponsorship Activities of Zarubezhneft JSC. 148 149 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Pursuant to the Regulation During 2019, 8 meetings • the amounts of compensation No. Meeting / form of holding Meeting date Agenda The Compensation on the Compensation and Nominating of the Compensation and Nominating to the members of the Board and Nominating Committee Members Committee under the Board of Directors, Committee were held, each of Directors of Zarubezhneft JSC; having participated the issues lying within its competence with the participation of all elected • the amounts of compensation in the meeting and expertise include, without limitations, members of the Compensation to the members of the Revision 4 Joint meeting of the Strategic 27.05.2019 1. Consideration of the Report A. A. Gladkov as follows: and Nominating Committee. Commission of Zarubezhneft JSC; Planning Committee on the Implementation of Zarubezhneft M. Yu. Sokolov • developing recommendations • approval of the KPI target values and the Compensation Group Performance Enhancement and Costs A. V. Tikhonov as to the Company’s HR Policies Following the results for 2020. and Nominating Committee / Optimization Program for Q1 2019. by correspondence 2. Consideration of the Report on Achievement and personnel motivation; of the meetings held, the Committee of Zarubezhneft JSC Corporate KPI Target • supervising the implementation made recommendations to the Board The Compensation Values for 3 months of 2019. of the Company’s compensation of Directors of Zarubezhneft JSC and Nominating Committee also 5 Joint meeting of the Strategic 05.09.2019 1. Consideration of the Report K. V. Karapetyan policies and a range of motivation as to the issues relevant recommended that the Board Planning Committee on the Implementation of Zarubezhneft M. Yu. Sokolov programs; for the compensation system of Directors of the Company approve and the Compensation Group Performance Enhancement and Costs P. Yu. Sorokin • developing recommendations covering the management personnel, the revised edition of the Regulations and Nominating Committee / Optimization Program for the 1st half of 2019. by correspondence 2. Consideration of the Report on Achievement as to the amount of compensation the Board of Directors, and the Revision on Compensation to the General Director of Zarubezhneft JSC Corporate KPI Target payable to the members of the Board Commission of the Company, as follows of the Company, and the data sheet Values based on the forecast till the end of Directors and management (without limitations): of the Corporate Business Initiative of 2019 subject to the actual performance personnel of the Company; • approval of the Report “Challenge”. in the 1st half of 2019. • improving the system on Achievement of the Corporate KPI 6 Joint meeting of the Strategic 11.11.2019 1. Consideration of the Report K. V. Karapetyan Planning Committee on the Implementation of Zarubezhneft M. Yu. Sokolov of key performance indicators Target Values for 2018; and the Compensation Group Performance Enhancement and Costs P. Yu. Sorokin of the Company; • payment of compensation and Nominating Committee / Optimization Program for 9 months of 2019. • considering reports on the Company’s to the General Director; by correspondence 2. Consideration of the Report on Achievement achievement of the target values of Zarubezhneft JSC Corporate KPI Target Values based on the forecast till the end of the approved key performance of 2019 subject to the actual performance indicators. for 9 months of 2019. 7 The Compensation 12.12.2019 1. Consideration of the Report on the Measures K. V. Karapetyan and Nominating Committee Taken to Implement Professional Standards. M. Yu. Sokolov The list of issues considered considered at the meetings of the Compensation and Nominating Committee meeting / by correspondence P. Yu. Sorokin under the Board of Directors of Zarubezhneft JSC in 2019 8 Joint meeting of the Strategic 11.12.2019 1. On updating of Zarubezhneft JSC KPI system. K. V. Karapetyan Planning Committee 2. On updating of Zarubezhneft JSC KPI target M. Yu. Sokolov No. Meeting / form of holding Meeting date Agenda The Compensation and the Compensation values for 2020 P. Yu. Sorokin and Nominating and Nominating Committee / Committee Members by correspondence having participated in the meeting 1 The Compensation 14.03.2019 1. Consideration of the Report on the Measures A. A. Gladkov and Nominating Committee Taken to Implement Professional Standards. M. Yu. Sokolov meeting / by correspondence 2. Consideration of the Report A. V. Tikhonov of the Compensation and Nominating Committee under the Board of Directors of Zarubezhneft JSC for 2018. 2 Joint meeting of the Strategic 26.04.2019 1. Consideration of the Report on Achievement A. A. Gladkov Planning Committee of Zarubezhneft JSC Corporate KPI Target M. Yu. Sokolov and the Compensation Values for 2018. A. V. Tikhonov and Nominating Committee / by correspondence 3 Joint meeting 28.05.2019 1. Consideration of proposals on the amount A. A. Gladkov of the Compensation of compensations to the members M. Yu. Sokolov and Nominating Committee of the Board of Directors of Zarubezhneft JSC. A. V. Tikhonov and the Audit Committee / 2. Consideration of proposals on the amounts by correspondence of compensation to the members of the Revision Commission of Zarubezhneft JSC. 3. Consideration of the Report on Implementation of the Corporate Business Initiative “Challenge”. 4. On payment of annual compensation to the General Director of the Company 150 151 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Minutes number Form of holding Meeting agenda The members and meeting date of the Board of Directors, having participated INFORMATION ABOUT MEETINGS in the meeting No. 166 By correspondence 1. On consideration of the Report on the Results A. A. Gladkov OF THE BOARD OF DIRECTORS 29.03.2019 of Zarubezhneft JSC Procurement Activities for Q4 2018. K. V. Karapetyan 2. On consideration of the Report on Implementation S. I. Kudryashov of Zarubezhneft Group Audit Plan, and on Zarubezhneft E. A. Murov JSC Internal Audit Section Performance, for 2018. M. Yu. Sokolov 3. On consideration of the Report on Performance A. L. Teksler of Zarubezhneft JSC Quality Management System A. V. Tikhonov for 2018. 4. On consideration of the Report on the Measures Taken to Implement Professional Standards. 5. On updating of the Non-core Assets Register In 2019, 14 meetings of the Board of Directors of Zarubezhneft JSC were held as follows. of Zarubezhneft JSC. 6. On approval of the Action Plan for Sale of Non-core Assets of Zarubezhneft JSC for 2019-2020. Minutes number Form of holding Meeting agenda The members 7. On approval of the Action Plan as to transition and meeting date of the Board of Directors, of Zarubezhneft JSC to preferential use of domestic having participated software, for 2019-2021. in the meeting 8. On finalizing corporate import phase-out plans No. 163 By correspondence 1. On transition of Zarubezhneft JSC to preferential use A. A. Gladkov for protection against radiation, chemical and biological 28.01.2019 of domestic software. K. V. Karapetyan factors. 2. On updating of Zarubezhneft JSC Long-Term Development S. I. Kudryashov No. 167 By correspondence 1. On approval of the Report on Implementation A. A. Gladkov Program. E. A. Murov 25.04.2019 of Zarubezhneft JSC Innovation Development Program K. V. Karapetyan 3. On approval of the revised edition of the Guidelines M. Yu. Sokolov for 2018. S. I. Kudryashov for Forming Operating Expenses and Calculating A. L. Teksler 2. On consideration of reports on the performance E. A. Murov the Operating Expense Reduction Indicator. A. V. Tikhonov of the Committees under the Board of Directors M. Yu. Sokolov 4. On approval of Zarubezhneft JSC Board of Directors of Zarubezhneft JSC, for 2018. A. L. Teksler Activity Plan for 2019. 3. On consideration of the Report on Sale of Non-core Assets A. V. Tikhonov No. 164 By correspondence 1. On approval of the audit engagement for auditing A. A. Gladkov of Zarubezhneft JSC for Q1 2019. 26.02.2019 the implementation of Zarubezhneft JSC Long-Term K. V. Karapetyan 4. On results of the auditors’ work on audit of Zarubezhneft Development Program. S. I. Kudryashov JSC accounting statements under the RAS, 2. On consideration of the Report on the Implementation E. A. Murov and Zarubezhneft Group consolidated financial statements of Zarubezhneft Group Performance Enhancement M. Yu. Sokolov under the IFRS, for 2018. and Costs Optimization Program for 2018. A. L. Teksler 5. On the progress of repair and renewal operations in Brod 3. On approval of Zarubezhneft Group Performance A. V. Tikhonov Refinery A.D. Enhancement and Costs Optimization Program for 2019. No. 168 By personal 1. On consideration of annual accounting statements A. A. Gladkov 4. On consideration of the Report on Sale of Non-core Assets 29.05.2019 attendance of Zarubezhneft JSC, and consolidated financial K. V. Karapetyan of Zarubezhneft JSC for Q4 2018. statements under the IFRS of Zarubezhneft Group, S. I. Kudryashov 5. On liquidation of Zarubezhneft JSC representative office for 2018. E. A. Murov in the Republic of Belarus. 2. On consideration of the opinion of the Revision M. Yu. Sokolov 6. On updating the Long-Term Development Program Commission, following the inspection of financial A. L. Teksler of Zarubezhneft JSC (hereinafter, the LTDP) and economic activities of Zarubezhneft JSC for 2018. A. V. Tikhonov and submission of the LTDP audit reports to the Ministry 3. On the preliminary approval of the Annual Report of Economic Development of the Russian Federation, of Zarubezhneft JSC for 2018. the Federal Agency for State Property Management, 4. On consideration of the Report on Implementation and federal executive authorities coordinating of Zarubezhneft JSC Long-Term Development Program Zarubezhneft JSC activities, in accordance with Decree No. for 2018. 1870-р of the Government of the Russian Federation dated 5. On approval of the Report on Achievement of Zarubezhneft August 30, 2017. JSC Corporate KPI Target Values for 2018. 7. On development of programs to improve the quality 6. On the amount, form, and payment procedure of procurement management. as to the distribution of the yearend dividends No. 165 By personal 1. On the Council of Young Specialists and youth policies A. A. Gladkov on Zarubezhneft JSC stock. 27.03.2019 attendance adopted in Zarubezhneft JSC. K. V. Karapetyan 7. On the recommendations of the Board of Directors 2. On the vision embodied in Zarubezhneft JSC Innovation S. I. Kudryashov of Zarubezhneft JSC as to the profit allocation. Development Program. E. A. Murov 8. On payment of annual compensation to the General 3. On development of renewable energy sources projects M. Yu. Sokolov Director of the Company in Zarubezhneft JSC. A. L. Teksler 4. On current status of Zarubezhneft JSC as to entering new A. V. Tikhonov oil and gas projects in foreign countries and in the Russian Federation. 152 153 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Minutes number Form of holding Meeting agenda The members Minutes number Form of holding Meeting agenda The members and meeting date of the Board of Directors, and meeting date of the Board of Directors, having participated having participated in the meeting in the meeting No. 169 By correspondence 1. On consideration of the Report on the Implementation A. A. Gladkov No. 174 By correspondence 1. On consideration of the Report on the Implementation P. A. Kadochnikov 11.06.2019 of Zarubezhneft Group Performance Enhancement K. V. Karapetyan 26.11.2019 of Zarubezhneft Group Performance Enhancement and Costs K. V. Karapetyan and Costs Optimization Program for Q1 2019. S. I. Kudryashov Optimization Program for 9 months of 2019. S. I. Kudryashov 2. On consideration of the Report on Achievement E. A. Murov 2. On consideration of the Report on Achievement E. A. Murov of Zarubezhneft JSC KPI Target Values for 3 months M. Yu. Sokolov of Zarubezhneft JSC Corporate KPI Target Values based M. Yu. Sokolov of 2019. A. L. Teksler on the forecast till the end of 2019 subject to the actual P. Yu. Sorokin 3. On consideration of the Report on the Results A. V. Tikhonov performance for 9 months of 2019. A. V. Tikhonov of Zarubezhneft JSC Procurement Activities for Q1 2019. 3. On consideration of the Report on Implementation 4. On updating of Zarubezhneft JSC Long-Term Development of Zarubezhneft JSC Long-Term Development Program Program. Measures for 9 months of 2019. 5. 5On approval of criteria for selecting an auditor, 4. On consideration of the Report on the Results for the purposes of holding a tender for selecting an audit of Zarubezhneft JSC Procurement Activities for Q3 2019. company to audit, under the IFRS, Zarubezhneft Group 5. On consideration of the Report on Sale of Non-core Assets consolidated financial statements for 2019-2020. of Zarubezhneft JSC for Q3 2019. 6. On the initial maximum price for audit services, 6. On functioning of the intellectual property rights management for the purposes of holding a tender for selecting an audit system in Zarubezhneft JSC. company to audit, under the IFRS, Zarubezhneft Group 7. On development (updating) of the Company bylaws governing consolidated financial statements for 2019-2020. formation of key performance indicators and compensations 7. On expanding the practice of using factoring to the Joint Stock Company management. in the performance of contracts for the supply of goods 8. On disposition of a non-core asset “Working premises, the city (performance of work, provision of services). of Modriča” 8. On approval of a revised edition of the Regulation 9. On the purchase of Russian production used to execute on Procurement of Zarubezhneft JSC. national projects and implement a comprehensive plan of modernization and expansion of the trunk infrastructure. No. 170 By correspondence 1. On establishing Zarubezhneft JSC subsidiaries. A. A. Gladkov 27.06.2019 K. V. Karapetyan 26.12.2019 By personal 1. On consideration of the Progress Report P. A. Kadochnikov S. I. Kudryashov № 175 attendance on Implementation of Zarubezhneft JSC Corporate K. V. Karapetyan E. A. Murov Strategy for 2019. S. I. Kudryashov M. Yu. Sokolov 2. On approval of Zarubezhneft JSC Business Plan for 2020. E. A. Murov A. L. Teksler 3. On updating of Zarubezhneft JSC KPI system. M. Yu. Sokolov A. V. Tikhonov 4. On updating of Zarubezhneft JSC KPI target values P. Yu. Sorokin for 2020. A. V. Tikhonov No. 171 By correspondence 1. On electing the Chairman of the Board of Directors P. A. Kadochnikov 12.08.2019 of Zarubezhneft JSC. K. V. Karapetyan 30.12.2019 By correspondence 1. On approval of Zarubezhneft Group Audit Plan, P. A. Kadochnikov 2. On election of the members of the Committees S. I. Kudryashov № 176 and the budget of Zarubezhneft JSC Internal Audit Section K. V. Karapetyan under the Board of Directors of Zarubezhneft JSC. E. A. Murov for 2020. S. I. Kudryashov 3. On consideration of the Report on Sale of Non-core Assets M. Yu. Sokolov 2. On consideration of the Report on the Measures Taken E. A. Murov of Zarubezhneft JSC for Q2 2019. P. Yu. Sorokin to Implement Professional Standards. M. Yu. Sokolov A. V. Tikhonov 3. On updating of Zarubezhneft JSC Long-Term Development P. Yu. Sorokin Program. A. V. Tikhonov No. 172 By correspondence 1. On consideration of the Report on the Results P. A. Kadochnikov 4. Defining of the initial maximum price of audit services, 20.09.2019 of Zarubezhneft JSC Procurement Activities for Q2 2019. K. V. Karapetyan for the purposes of conducting an open competition to select 2. On consideration of the Report on the Implementation S. I. Kudryashov an auditor to perform a statutory audit of Zarubezhneft JSC of Zarubezhneft Group Performance Enhancement E. A. Murov accounting (financial) statements for 2020-2021. and Costs Optimization Program for the 1st half of 2019. M. Yu. Sokolov 5. On considering the criteria for selecting an auditor, 3. On consideration of the Report on Implementation P. Yu. Sorokin for the purposes of conducting an open competition to select of Zarubezhneft JSC Long-Term Development Program A. V. Tikhonov an auditor to perform a statutory audit of Zarubezhneft JSC Measures for the 1st half of 2019. accounting (financial) statements for 2020-2021. 4. On consideration of the inspection results 6. On approval of the Regulation on Charitable and Sponsorship as to performance of the procedures for organizing Activities of Zarubezhneft JSC. risks management and internal control systems aimed 7. On approval of a revised edition of the Regulation at preventing and combating corruption. on Procurement of Zarubezhneft JSC. No. 173 By personal 1. On consideration of the Report on the Results P. A. Kadochnikov 8. On expediency of the Company integration into the activities 30.09.2019 attendance of Implementation of Zarubezhneft JSC Business Plan K. V. Karapetyan covered by the national project (program) “International for the 1st half of 2019. S. I. Kudryashov Cooperation and Export”. 2. On consideration of the Report on Achievement E. A. Murov 9. On amendments to Zarubezhneft JSC procurement of Zarubezhneft JSC Corporate KPI Target Values based M. Yu. Sokolov documentation governing competitive procedures. on the forecast till the end of 2019 subject to the actual P. Yu. Sorokin 10. On the possibility of the JSC transition to tax control performance in the 1st half of 2019. A. V. Tikhonov in the form of tax monitoring. 3. On the prospects of the Oil Refinery and Sales segment. 154 155 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

THE REVISION COMMISSION ENSURING INTERNAL CONTROL WITHIN OF ZARUBEZHNEFT JSC ZARUBEZHNEFT GROUP

In 2018, pursuant to Order No. 499-р “On Resolutions of the Annual General Meeting of Shareholders of Zarubezhneft Joint Stock The primary objective of the Internal Audit • audit of the business • a revised edition of the “Methodology Company” of the Federal Agency for State Property Management, dated June 30, 2018, the Revision Commission of Zarubezhneft Section of Zarubezhneft JSC is to assess process “Construction for Planning and Conducting Internal JSC was elected with the composition as follows. the risks management system and Facilities Management” Audits” was approved. performance and express an opinion of Zarubezhneftestroymontazh LLC; Full name Position on the reliability and performance • audit of the business process During the year, as part of the internal control and corporate “Management of Procurement of the development and improvement A. E. Bogashov Director of the Department of Corporate Governance, Pricing Environment, and Control-and-Auditing Work in the Fuel and Energy Sector of the Ministry of Energy of the Russian Federation governance system in place in the Group. and Sale of Optional Goods” of Nestro of the internal audit function, and in line Petrol A.D.; with the recommendations of external N. N. Annikova Independent expert In its activities, the Section is guided • audit of production system consultants, the Section implemented A. I. Mozhaeva Administrative Assistant at the Gas and Oil Sector Development Division, the Department for State Regulation of Tariffs, by the Regulation on Internal Audit Infrastructure Reforms and Energy Efficiency, the Ministry of Economic Development of the Russian Federation of Zarubezhneft JSC. the activities as follows: of Zarubezhneft JSC, Methodology • an algorithm was developed for Planning and Conducting Internal As a result of the audits conducted, for evaluation and ranking of the non- The Revision Commission carried out Besides, the Revision Commission • implementation of the Long-Term Audits, and Regulation on the Internal the Internal Audit Section assessed conformities detected in the course an inspection of the Company’s financial regularly inspected the Company’s Development Program; Audit Section. the internal control system as to business of internal audits; and economic activities for 2018. Following compliance with the instructions • review of the directives received in 2018. processes, and made recommendations • efforts were made to develop the inspection, the opinions on reliability of the President of the Russian Federation Functionally, the Internal Audit Section for improvement thereof. the internal audit function in terms of the data presented in Zarubezhneft and the Government of the Russian Pursuant to Order No. 409-р “On is accountable to the Board of Directors of IT-audits; JSC accounting (financial) statements Federation on the issues as follows: Resolutions of the Annual General of Zarubezhneft JSC. The existing In addition to scheduled audits, • a system of annual evaluation and annual report for 2018 were drawn up. • linking the compensation payable Meeting of Shareholders of Zarubezhneft structure of subordination of internal the Internal Audit Section carried out and planning of internal audits (“audit to executive bodies to implementation Joint Stock Company” of the Federal audit service to the Board of Directors a number of unscheduled inspections universe”) was developed and put into As a result of the inspection, of the approved KPIs; Agency for State Property Management, and executive bodies of the Company as instructed by the General Director practice; recommendations were made • disposal of non-core assets; dated June 30, 2019, the Revision provides Internal Audit Section of Zarubezhneft JSC. • online monitoring of procurement to the Company, as reflected • procurement activities; Commission of Zarubezhneft JSC was with independence sufficient to perform activities was conducted. in the corresponding Certificate • operational costs; elected with the composition as follows: the functions assigned thereto. The Internal Audit Section is the owner and opinion of the Revision Commission, • performance enhancement and costs of the business process “Auditing In accordance with the requirements based on the 2018 results. optimization program; The annual plan of internal audits in Subsidiaries”. In accordance of the International Standards and the report on the Section with the “Regulations for Auditing for the Professional Practice of Internal Full name Position performance are subject to review Subsidiaries”, the Section coordinates Auditing, and in line with the best A. E. Bogashov Minister of Property of the Chelyabinsk Region by the Audit Committee, and to approval the processes of auditing, practices, the Section operates: by the Board of Directors of Zarubezhneft and drafting audit reports and opinions. • a procedure to certify the employees’ N. N. Annikova Advisor on Economic and Financial Affairs, to the Rector of the Gnessin State Musical College JSC. The Section continuously monitors independence and freedom A. I. Mozhaeva Administrative Assistant at the Gas and Oil Sector Development Division, the Department for State Regulation of Tariffs, the implementation of recommendations from conflicts of interest; Infrastructure Reforms and Energy Efficiency, the Ministry of Economic Development of the Russian Federation In 2019, the key areas of internal audits based on completed internal audits • a unified system of accounting were set as follows: and auditing activities aimed at improving for violations/breaches/ Pursuant to Order No. 409-р “On Within the period from January 1, 2019 • approval of the Revision Commission • evaluation of the corporate KPIs the systems of internal control, risks faults detected through audits, Resolutions of the Annual General through December 31, 2019, the Revision Work Program and Schedule achievement (on a quarterly basis); management, and corporate governance. and monitoring the remedial Meeting of Shareholders of Zarubezhneft Commission of the Company held for 2019–2020 corporate year. • audit of sale of non-core assets measures; Joint Stock Company” of the Federal 5 meetings with consideration given • development of Zarubezhneft Group (on a quarterly Within the framework of the expert • an internal audit quality management Agency for State Property Management, to the following issues (without limitations): of a request for information basis); function, the Section’s employees carried system (under ISO 9001:2015). dated June 30, 2019, and based • development of an additional request and materials to control certain areas • audit of the risks management out expert review of documents related on the Revision Commission performance for information to audit the Company’s of the Company’s activities; process in Zarubezhneft Group; to BDs/management/organizational Throughout the year, in order to develop in 2018–2019 corporate year, its financial and economic activities • control over compliance • audit of internal control structure/general meetings professional expertise, all employees members were paid compensation for 2018; with the notices issued by the Revision and risks management system, of shareholders of the subsidiaries, of the Internal Audit Section participated in the amount of 200,000 RUB. • approval of the Statement Commission based on the 2018 as to anti-corruption; and took part in the activities of expert in training events such as trainings, and the opinion of the Revision results, as well as with the notices/ • audit of the investment project “Boca groups of Zarubezhneft JSC. seminars and workshops, and strategy The compensation to the members Commission on the results instructions/orders issued by other de Jaruco” performance; sessions. of the Revision Commission who of the inspection of the Company’s external supervisory authorities. • audit of the investment project During the financial year, in order are not public servants is paid as per activities for 2018; “Lutseyakhskoye Field Build-Out”; to improve the internal audit regulatory the Regulation on Compensations • on election of the Chairman The Company has implemented all • audit of the jack-up “Murmanskaya” framework, the following regulatory and Refunds to the Members and the Secretary of the Revision recommendations of the Revision class-restoring repair process; document was updated: of Zarubezhneft JSC Revision Commission for 2019–2020 Commission, based on the results Commission1. corporate year; of the auditing.

1 The Regulation on Compensations and Refunds to Zarubezhneft JSC Revision Commission Members was approved by Order No. 499-р “On Resolutions of the Annual General Meeting of Shareholders of Zarubezhneft Joint Stock Company” of the Federal Agency for State Property Management, dated June 30, 2018. 156 157 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

MANAGEMENT OF ZARUBEZHNEFT JSC

SERGEY IVANOVICH KUDRYASHOV DENIS NIKOLAEVICH MAKSIMOV General Director (Sole Executive Body) Deputy General Director for Economics and Finance • Sergey Ivanovich Kudryashov has an extensive leadership and management experience in the fuel • In 2006, he obtained higher education with specialization in Accounting, Analysis and Auditing; and energy sector. in 2011, he obtained a second higher education with specialization in Law. He holds an international • In 1991, he graduated from the Kuibyshev Polytechnic Institute. In 2006, he received his Master accounting diploma (DipIFR) from ACCA (The Association of Chartered Certified Accountants). of Business Administration (Executive MBA) degree issued by the Stockholm School of Economics. • From 2004 to 2013, he worked in Orenburgneft PJSC, taking a range of positions in the Finance • He began his working career in 1991 at Nizhnevartovskneft, rising from the post of Production and Economics Department. Operator to Deputy General Director, Head of the Unitized Oil Field. • From 2013 to 2016, he worked as the Deputy General Director for Economics and Finance in JC • From 2002 to 2003, he worked as Deputy Manager of Tomskneft VNK, and Head RUSVIETPETRO LLC. of the Strezhevoyneft Oil and Gas Production Directorate. • In July 2016, he took the position of the Deputy General Director for Economics and Finance • From 2003 to 2004, he was Manager of Yuganskneftegaz JSC, and Vice President of YUKOS-EP of Zarubezhneft JSC. CJSC. • He was awarded the Certificate of Honor by the Ministry of Industry and Trade of the Socialist • From 2005 to 2008, he was First Vice President of OC Rosneft JSC being in charge Republic of Vietnam. of the company’s production sector. • Holds no shares of Zarubezhneft JSC. • From 2008 to July 11, 2012, he held the position of Deputy Minister of Energy of the Russian Federation and was in charge of the activity of the Russian oil and gas complex. • From July 12 to December 28, 2012 he held the position of First Deputy General Director of Zarubezhneft JSC. • Since December 28, 2012, he has been the General Director of Zarubezhneft JSC. In accordance with Order No. 920-р “On Resolutions of the Extraordinary General Meeting of Shareholders of Zarubezhneft Joint Stock Company” of the Federal Agency for State Property Management dated November 29, 2017, he was elected General Director of Zarubezhneft JSC for the period of 5 years. IGOR SEMENOVICH AFANASIEV • Mr. Kudryashov is also the Head of the Working Group of the Commission Deputy General Director for Geology and Development under the President of the Russian Federation for the issues of the Fuel and Energy Complex (FEC) and the development strategy for ecological safety. • In 1994, he graduated from Novosibirsk State University. • Holds no shares of Zarubezhneft JSC. • From 2002 to 2004, he worked in YuganskNIPIneft (Ufa). • From 2005 to 2006, he held the position of Head of the Department for the development of technologies for the Corporate Research Center at OC Rosneft JSC. • In 2006, he was promoted to the position of the Deputy Director of the Corporate Research Center, OC Rosneft JSC. • From2007 to 2014, he worked as the Director of the Field Development Department, OC Rosneft JSC. • Since August 2014, he has been the Deputy General Director for Geology and Development OLEG VALERIEVICH AKIMOV in Zarubezhneft JSC. Deputy General Director for Production • Holds no shares of Zarubezhneft JSC • In 1999, he graduated from the Gubkin Russian State University of Oil and Gas with a degree in Development and Operation of Oil and Gas Fields. In 2011, he earned an MBA degree from the Moscow State Institute of International Relations (MGIMO University) of the Russian Ministry of Foreign Affairs (Development and Operation of Oil and Gas Wells). In 2011, he earned his PhD degree in Technical Sciences. • In 1999, he started his career in Yuganskneftegaz JSC as an oil and gas well diagnostics operator, having worked his way up to the company’s Chief Engineer. • From 2006 to 2015, he worked in RN-Yuganskneftegaz LLC as the Head of Regional Engineering and Process Directorate, then the Chief Engineer of Production Department, then the Head EVGENIY ALEKSEEVICH MATVEYEV of Production Department, and then the First Deputy General Director for Production and Chief Deputy General Director for Corporate Security Engineer. • In 2015, he moved to the position of Advisor to the General Director of Zarubezhneft JSC. • He graduated from the Bauman Moscow Higher Technical School, and the Russian Academy of Public Administration under the President of the Russian Federation. • In 2016, he became the Chief Engineer of ZARUBEZHNEFT-Dobycha Kharyaga LLC. • From 1984 to 2015, he held a range of government and administrative positions. • In 2017, he took the position of the General Director of ZARUBEZHNEFT-Dobycha Kharyaga LLC. • From 2015 to 2016, he was a counselor to the Governor of the Tula Region in the executive office • Since May 2019, he has been the Deputy General Director for Production in Zarubezhneft JSC. of the Tula Region Government. • For more than 20 years of work in the oil and gas industry, he has been repeatedly awarded • In June 2016, he was appointed Head of Corporate Security Section of Zarubezhneft JSC. insignia, including a letter of appreciation and an honorary diploma from the Ministry of Energy of the Russian Federation, as well as an honorary diploma and a letter of acknowledgment • Since December 2017, he has been the Deputy General Director for Corporate Security from the Governor of the Nenets Autonomous Area. In 2017, by an order of the Ministry of Energy in Zarubezhneft JSC. of the Russian Federation, he was awarded the title of “Honored Oilman”. • He has departmental and governmental awards of the Russian Federation. • Holds no shares of Zarubezhneft JSC. • Holds no shares of Zarubezhneft JSC. 158 159 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

IGOR VIKTOROVICH SHCHELKUNOV ALEKSANDR YURIEVICH BELOV Deputy General Director for Refining and Sales Deputy General Director for Business Development Deputy General Director for General Administration and Human Resources • In 1989, he graduated from the V. V. Kuibyshev Polytechnic Institute (Oil Department), majoring • In 1992, he graduated from the Tyumen Industrial Institute, Oil and Gas Production Department, in Technology and Integrated Mechanization of Oil and Gas Fields Development. He holds with a degree in Technology and Integrated Mechanization of Oil and Gas Fields Development certificates of training of George Washington University School of Business and Public and qualification of Production Engineer. Management, and ESI INTERNATIONAL. He passed a project management course at the Moscow • From 2007 to 2009, he completed a joint program with Kingston University (London) School of Management Skolkovo. at the Academy of National Economy under the Government of the Russian Federation; he holds • From 1989 to 1996, he worked at the oil and gas fields operated by Kholmogorneft Oil and Gas a Master of Business Administration (MBA) degree. Production Directorate (Noyabrskneftegaz JSC). • From 1988 to 1997, he was an Oil and Gas Production Operator, Class 3 Process Engineer, Class • From 1996 to 2005, he rose from the Field Supervisor to the Head of Yuzhorenburgneft Oil and Gas 1 Geologist and Deputy Shop Supervisor, then Shop Supervisor of Research and Production Shop Production Directorate (Orenburgneft JSC). He headed the Production Unit “Orenburg-Yug” at the Oil and Gas Production Directorate of Yuganskneft, Yuganskneftegaz JSC. in TNK- BP. • From 1997 to 2005, he held the positions of the Deputy Head of the HR Policies Section, then • From 2005 to 2007, he worked as the Deputy General Director for Manufacturing in ROSSGAZ LLC. the Head of the HR Policies Section, and then the Director for HR Policies at Yuganskneftegaz JSC. • From 2007 to 2009, he worked as the President and the General Director of SNG GISSAR • From 2005 to 2007, he was the Head of the HR Policies Section in MCC EuroChem JSC. OPERATING LLC (foreign enterprise), a subsidiary of LUKOIL Overseas, in the city of Tashkent. • From 2007 to 2017, he held the position of the Director of Administration of MCC EuroChem JSC, • From 2009 to 2013, he held management positions at the following companies within Gazprom and was a member of the Management Board of MCC EuroChem JSC. Neft JSC: The General Director of Gazpromneft-Angara LLC, the Head of the Exploration • From 2017 to 2018, he was the Head of the Oil and Gas Division, the Member of the Management and Production Block in SIBIR ENERGY PLC, the General Director of Gazprom Neft Orenburg JSC. Board of EuroChem Group AG (Zug, Switzerland), the Member of the Board of Directors of MCC • From 2014 to 2015, he was the General Director of Preobrazhenskneft CJSC of OC RussNeft PJSC. EuroChem JSC (Moscow). • From 2015 to 2019, he worked as the Deputy General Director for Production at Gazprom Dobycha • In 2018, he took the position of the Deputy General Director for Refining and Sales, and General Shelf Yuzhno-Sakhalinsk LLC, headed the development of new assets in the Orenburg Region. Administration and Human Resources, in Zarubezhneft JSC. • Since 2019, he has been the Deputy General Director for Business Development in Zarubezhneft • He has governmental awards of the USSR and the Russian Federation. JSC. • Holds no shares of Zarubezhneft JSC. • He has corporate and departmental awards of the Ministry of Energy of the Russian Federation, as well as the title of “Honored Oilman”. • Holds no shares of Zarubezhneft JSC.

DENIS BORISOVICH ULITIN KIRILL ALEKSANDROVICH KOCHETKOV Deputy General Director for Organizational Development and Corporate Communications Deputy General Director for Legal and Corporate Issues • In 2000, he graduated from the Novosibirsk State Academy of Economics and Management • In 1994, he graduated with honors from the Sergo Ordzhonikidze Moscow Aviation Institute, with a degree in Finance and Credit. In 2009, he completed the Executive Education Program with a degree in Automated Information Processing and Control Systems. In 2003, he graduated for Russian oil and gas industry managers, “Oil and Gas Industry: Major Project Management” from the Moscow State Law Academy with a degree in Law. He is fluent in English. at the Moscow School SKOLKOVO. • Since 1994, he has worked in managerial positions atfuel and energy companies. • From 2001 to 2005, he worked at Yuganskneftegaz at various positions. • From 2010 to 2015, he was head of the legal department of Shtokman Development AG, • From 2005 to 2010, he worked d as the Assistant First Vice President of OC Rosneft JSC. a joint venture of Gazprom PJSC, Total S.A. (France), and Statoil ASA (Norway), established • From 2011 to 2012, he was the Deputy Director of the Oil and Gas Production and Transportation for construction and operation of the Shtokman gas condensate field development facilities. Department of the Ministry of Energy of the Russian Federation. • In 2015, he started his career in Zarubezhneft Group of Companies. • In January 2013, he was appointed Chief of the General Director’s Office of Zarubezhneft JSC. • From 2016 to 2018, he was the Deputy General Director for Legal and Corporate Issues • Since February 2015, he has been the Deputy General Director for Organizational Development in ZARUBEZHNEFT-Dobycha Kharyaga LLC. and Corporate Communications in Zarubezhneft JSC. • In June 2018, he was appointed Deputy General Director for Legal and Corporate Issues • He has departmental awards of the Ministry of Energy of the Russian Federation. of Zarubezhneft JSC. • Holds no shares of Zarubezhneft JSC. • He holds letters of acknowledgment from the Ministry of Energy of the Russian Federation, and Zarubezhneft JSC. In 2017, he was included into the list of top 100 lawyers made by Legal 500. • Holds no shares of Zarubezhneft JSC. 160 161 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

DIVIDEND POLICY AND INFORMATION ON PROFIT ALLOCATION OF ZARUBEZHNEFT JSC

Zarubezhneft JSC Regulation on Dividend combination of the shareholdersʼ interests • observance of the shareholders’ rights Pursuant to Order No. 409-р “On Share to be paid out in dividends vs. net profit in 2015-2019, % Policy was approved at the meeting with the demand for sufficient financing and interests; Resolutions of the Annual General of the Board of Directors on January of the Company, along with respect • commitment to high standards Meeting of Shareholders of Zarubezhneft 30, 2015 (Minutes No. 96). The revised to and strict observance of a shareholder of corporate governance; Joint Stock Company” of the Federal edition of the Dividend Policy was rights stipulated by the applicable • ensuring the interest Agency for State Property Management, 60 approved by the Board of Directors laws of the Russian Federation, as well of the management and shareholders dated June 30, 2019, the net profit 55.5

on February 16, 2017 (Minutes No. 134). as successful execution of investment in increasing the Company’s generated by Zarubezhneft JSC in 2018, 55 52.5 52.9

projects of Zarubezhneft JSC, profitability; in the amount of 10,668,603 thous RUB, 50 The Dividend Policy of Zarubezhneft to be implemented in accordance • raising the investment potential was distributed as follows: 50 48 JSC is aimed at ensuring the greatest with the Company Business Plan of the Company; • to pay dividends — transparency, for the Company’s as approved by the Board of Directors. • ensuring positive trend in terms 5,918,500 thous RUB, making up 45 shareholders, of the decision- The Company’s dividend growth rates of amounts of dividend payments, 55.476% of the net profit for the year making process with respect are dependent on the Company’s net subject to the Company’s net profit (performed by means of Payment 40 to dividend distribution, calculation profit growth rate, as well as on its increase; Order No. 3789 dated August 9, 2019); 2015 2016 2017 2018 2019 of the amount of dividends, financial standing and the investment • endeavor to provide the shareholders • to form a reserve fund — 1,066,860 and the procedure for payment thereof, projects being executed. with the most convenient way thous RUB, or 10% of the net profit; in line with the Russian Federation to receive dividends; • to make reimbursements legislation. In order to ensure the Dividend The fundamentals of the Dividend • endeavor to pay dividends as soon to the members of the Board Net profit for the previous year vs. accrued dividends in 2015-2019, bln RUB Policy transparency, the Company Policy adopted in Zarubezhneft JSC, as practicable; of Directors — 38,448 thous RUB, posts the Policy and any amendments are as follows: • ensuring maximum transparency or 0.36% of the net profit; thereto on the Company official website • compliance with the applicable of the mechanism for identifying • to make reimbursements

at https://www.nestro.ru/en/. laws of the Russian Federation, the dividend amount. to the members of the Revision 10.7 the Company’s Articles of Association Commission — 200 thous RUB, 9.1 8.5 8.4 Under the Dividend Policy, Zarubezhneft and bylaws, including compliance For a number of years, Zarubezhneft JSC or 0.002% of the net profit; 4.5 JSC strives to ensure annual growth of the Company’s dividend accrual has remained among the leading Russian • to finance Zarubezhneft 5.9 7.0 4.5 of dividends payable to the Russian and payment practices with the laws companies in terms of dividends paid JSC investment plan, 4.1 3.7 Federation, while providing an optimal of the Russian Federation; to the budget of the Russian Federation. approved by the resolution of the Board of Directors (Minutes

No. 162 dated December 20, 2018) — 2015 2016 2017 2018 2019

3,644,595 thous RUB, or 34.162% Dividends (payment) of the net profit. Net profit (previous year) 162 163 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Caring

for fragile PARTNER RELATIONS BETWEEN ececoossyystemss tems INTERNATIONAL AND RUSSIAN COMPANIES FOR THE PURPOSE OF GREEN ENERGY PROJECTS IMPLEMENTATION HAVE BEEN 05 ESTABLISHED APPENDICES 164 165 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

OFFICIAL INFORMATION ABOUT ZARUBEZHNEFT JSC

State registration number of the additional issue 1-01-65072-D dated April 19, 2005 Full name of the Company Zarubezhneft Joint Stock Company of ordinary (preferred) shares and the registration 1-01-65072-D dated July 10, 2007 Number and date of issue of the registration Certificate series 77 No. 003280973 dated October 22, 2004, OGRN (PSRN) date (if as of the date of preliminary approval, 1-01-65072-D dated September 25, 2007 certificate 1047708046870 by the Board of Directors (Supervisory Board), 1-01-65072-D-004D dated April 24, 2012 of the annual report of the company the registering Constituent entity of the Russian Federation Moscow body has not canceled the individual number (code) Location 101990, Moscow, Bld. 1, 9/1/1 Armyansky per. of the additional issue of ordinary (preferred) shares of the company) Telephone (fax) +7 (495) 748-65-00 Preferred shares None E-mail [email protected] Nominal value per preferred share, RUB None Included into the List of Strategic Joint Stock Yes Companies Shares owned by the Russian Federation 50,729,067 Full name and legal address of the Registrar Nezavisimaya Registratorskaya Kompaniya R.O.S.T. Joint Stock Company, 18/5B, Participating interest of the Russian Federation 100% Premise IX, Stromynka ul., Moscow, 107076 in the share capital Amount of the authorized capital stock, 50,729,067.000 Company shareholders with the participating interest The Russian Federation as represented by the Federal Agency for State Property as of December 31, 2019, RUB in the share capital being over 2% thereof Management Shares issued, total count 50,729,067 Availability of special rights for the Russian Federation None to take part in a joint stock company’s management Ordinary shares 50,729,067 (“golden share”) Share denomination, RUB 1,000 Full name and legal address of the Company’s auditor Nexia Pacioli LLC State registration number of the issue of ordinary 1-01-65072-D dated December 09, 2004 7/2 Bolshaya Tatarskaya ul., (preferred) shares, and the registration date Moscow, 115184 166 167 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

THE COMPANY HISTORY

Establishment of the All-Union JV Vietsovpetro establishment Zarubezhneft is the main Zarubezhneft was transformed The decree of the Russian Zarubezhneft is a part Zarubezhneft A PSA with CubaPetroleo Association Zarubezhneft foreing policy agent of the USSR into JSC. The Government Government on contribution of a project to process crude oil entered the project on four license blocks under the Ministry of Oil Industry in the oil industry abroad. transferred RMNTK of the Russian participant and market petroleum products for the development of 13 in the Republic of Cuba was of the USSR as the Main Main points of presence: Iraq, Nefteotdacha JSC, VNIIneft (JV Vietsovpetro) share in Republika Srpska (BH) Central Khoreyver Uplift fields signed Directirate (Decree of the USSR Angola, Algeria, Vietnam, India, JSC and Giprovostokneft JSC to the charter capital in the Nenets Autonomous Council of Ministers No. 2310r Iran, Yemen, Libya, Syria, Cuba to Zarubezhneft JSC of Zarubezhneft JSC was Okrug and established JC dated September 30, 1967) (presence in 33 countries was issued RUSVIETPETRO LLC ensured)

1967 1981 1967–1990 2004 2006 2007 2008 2009

2010 2011 2013 2014 2016 2017 2018 2019

Zarubezhneft JSC strated In July, a supplement A production sharing agreement a joint project with SPIMEX to the Agreement on oil for South East Ras Ul Ush JSC to launch exchange development and production and East Gebel El Zeit blocks In accordance, with the Decree traiding of crude oil at the Kharyaga field was signed in Ciaro between An agreement between of the Russian President, produced by the enterprises Zarubezhneft JSC received on production sharing terms Zarubezhneft JSC, the Ministry the Goverments of the Russian 100% minus one share of Zarubezhneft Group 20% share and operatorship was signed, according of Oil and Mineral Resources Federation and the Socialist of Arktikmorneftegazrazvedka of Companies in the domestic A new Company development from the French company Total to which the Agreement of Egypt, the Egyptian state Republic of Vietnam on futher JSC was transferred market of the Russian strategy was approved in the project of Kharyaga field Zarubezhneft JSC celebrated term was extended till oil holding company GANORE cooperation was signed to Zarubezhneft JSC Federation in the Company development its half-century anniversary December 31, 2031 and Pacific Oil Limited 168 169 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

INFORMATION ON PARTICIPATION OF ZARUBEZHNEFT JSC IN OTHER COMPANIES (AS OF DECEMBER 31, 2019)

Item Company name Zarubezhneft Zarubezhneft JSC Subsidiaries’ Region Item Company name Zarubezhneft Zarubezhneft JSC Subsidiaries’ Region No. JSC participating participating interest of the Company’s No. JSC participating participating interest of the Company’s interest presence interest presence 1 JV Vietsovpetro 49% - Vietnam 30 JV ANDIJANPETRO LLC - ZN LA LLC — 50% Uzbekistan 2 VRJ Petroleum Со 100% - Vietnam 31 Nestro LLC - ZARUBEZHNEFT-Dobycha LLC Russia — 100% 3 JC RUSVIETPETRO LLC 51% - Russia 32 ZN Energiya LLC - ZARUBEZHNEFT-Dobycha LLC Russia 4 AMNGR JSC 100% — 1 share - Russia — 100% 5 RMNTK Nefteotdacha JSC 100% — 1 share - Russia 33 ZN Razvitiye LLC 99.9% Zarubezhneftestroymontazh LLC Russia 6 Ulyanovskneftegaz LLC 99.9% RMNTK Nefteotdacha JSC — 0.1% Russia — 0.1% 7 Orenburgnefteotdacha JSC 100% — 1 share RMNTK Nefteotdacha JSC — 1 share Russia 34 SPK LLC - EXPLON LLC — 100% Russia 8 Neftegazincor JSC 95% - Russia 35 ZN Dobycha LLC 99.9% Zarubezhneftestroymontazh LLC Russia 9 Giprovostokneft JSC 22.09% RMNTK Nefteotdacha JSC — 38% Russia — 0.1% 10 VNIIneft JSC 32.27% RMNTK Nefteotdacha JSC — 38% Russia 36 ZN Asia Ltd. - ZN Razvitiye LLC — 100% Russia 11 VNIIneft-Zapadnaya Sibir CJSC - VNIIneft JSC — 51% Russia 12 Neftyanoe Khozyaystvo CJSC - RMNTK Nefteotdacha JSC — 15% Russia

13 ZARUBEZHNEFT-Dobycha LLC 99.9% Neftegazincor JSC — 0.1% Russia In 2019, the corporate structure • as part of a joint project 14 Zarnestservice LLC 80% Zarubezhneftestroymontazh LLC — 20% Russia of Zarubezhneft Group changed with Uzbekneftegaz JSC to enhance 15 Zarubezhneftestroymontazh LLC 80% Zarnestservice LLC — 20% Russia as follows: oil recovery at the fields of South • 16 Zarubezhneft Holding&Services АG 100% - Switzerland within the framework of optimization Alamyshyk, Khartoum and East of Zarubezhneft Group structure, Khartoum, located in the Fergana 17 EXPLON LLC 80% Zarubezhneftestroymontazh LLC — 20% Russia and implementation of the Non- Region of the Republic of Uzbekistan, 18 SPIMEX JSC 10% - Russia Core Assets Disposition Program JV ANDIJANPETRO LLC was 19 OPTIMA Group d.o.o. - Neftegazincor JSC — 100% Republic of Srpska of Zarubezhneft JSC, JV Arctic Drilling established; 20 Brod Refinery A.D. - Neftegazincor JSC — 79.99% Republic of Srpska Limited was liquidated; • Nestro LLC, ZN Energiya LLC, SPK 21 Modriča Motor Oil Plant A.D. – Neftegazincor JSC — 75.65% Republic of Srpska • the registration procedures related LLC, and ZN Asia Ltd. were established Nestro Petrol A.D. — 13.05% to increase of Zarubezhneft JSC in order to expand Zarubezhneft Group 22 Nestro Petrol A.D. - Neftegazincor JSC — 80% Republic of Srpska participating interest in VRJ Petroleum activities and execute new projects. 23 Jadran-Naftagas d.o.o. - Neftegazincor JSC — 34% Republic of Srpska Co to 100%, were completed; • for the purpose of execution 24 OPTIMA-Modriča d.o.o. - Modriča Motor Oil Plant A.D. — 100% Republic of Srpska of new projects of Zarubezhneft JSC 25 Zarubezhneft-Dobycha Samara LLC - ZARUBEZHNEFT- Russia in Russia and abroad in pursuance Dobycha LLC — 100% of directive No. 5051п-П13 (p-P13) 26 ZARUBEZHNEFT-Dobycha 99.9832% ZARUBEZHNEFT- Russia of the Government of the Russian Kharyaga LLC Dobycha LLC — 0.0168% Federation dated June 10, 2019 27 Severo-Karasevskoye Petroleum – Zarubezhneft-Dobycha Russia and the Resolution of the Board Enterprise LLC Samara LLC — 99.9% Ulyanovskneftegaz LLC — 0.1% of Directors of Zarubezhneft JSC 28 ZN LA Ltd. - ZARUBEZHNEFT- Russia (Minutes No. 170 dated June 27, 2019), Dobycha LLC —100% ZN Dobycha LLC and ZN Razvitiye LLC 29 ZN BV Ltd. - ZARUBEZHNEFT- Russia were established; Dobycha LLC — 100% 170 171 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

LIST OF THE LICENSES HELD REPORT ON THE EXECUTION BY ZARUBEZHNEFT GROUP OF THE INSTRUCTIONS OF THE PRESIDENT IN THE RUSSIAN FEDERATION OF THE RUSSIAN FEDERATION

In 2019, Zarubezhneft Group held • six NR licenses for geological A license auction took place on June AND THE DECREES OF THE GOVERNMENT the licenses efficient in the Russian survey, exploration and production 27th, 2019 for the purpose of geological Federation, as follows: of hydrocarbons; survey, exploration and production • nine NE licenses to produce • two licenses to prospect and appraise of hydrocarbons at the Zapadno- OF THE RUSSIAN FEDERATION hydrocarbons; hydrocarbon deposits. Yareyaginsky site. JC RUSVIETPETRO LLC was the successful bidder. Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Federation and Decrees of the Government of the Russian Federation No. License No. Project operator Blocks, sites, fields License validity period On the possibility of the JSC transition The resolutions provided for by the directives were adopted by the BD of Zarubezhneft JSC to tax control in the form of tax monitoring. (Minutes No. 176 dated December 30, 2019). 1 ORB 00896 NE Orenburgnefteotdacha JSC Kirsanovskoye 23.09.2009–31.05.2033 In pursuance of directive No. 11528п-П13 2 ORB 00898 NE Pashkinskoye 23.09.2009–31.05.2033 (p-P13) of the Government of the Russian Federation dated December 13, 2019 3 ORB 03072 NE Chernovskoye 14.09.2017–31.05.2033 On amendments to Zarubezhneft JSC The resolutions provided for by the directives were adopted by the BD of Zarubezhneft JSC 4 ULN 09132 NR Ulyanovskneftegaz LLC Radishchevsky 30.04.2008–03.08.2030 procurement documentation governing (Minutes No. 176 dated December 30, 2019). 5 ULN 09135 NE Slavkinskoye 30.04.2008–01.07.2038 competitive procedures. In pursuance of directive No. 10464п-П13 6 ULN 14582 NE Kondakovskoye 01.10.2008–01.07.2038 (p-P13) of the Government of the Russian 7 ULN 09133 NE Ruzhevskoye 30.04.2008–10.09.2026 Federation dated November 18, 2019 8 ULN 09134 NE Sulakskoye 30.04.2008–10.09.2026 On expediency of the Company integration The resolutions provided for by the directives were adopted by the BD of Zarubezhneft JSC into the activities covered by the national (Minutes No. 176 dated December 30, 2019). 9 ULN 09223 NP Zarubezhneft-Dobycha Samara LLC Yuzhno-Pcheliny 10.05.2017–10.05.2022 project (program) “International 10 NRM 00688 NR JC RUSVIETPETRO LLC Central Khoreyver Uplift-1, Severo- 08.09.2008–10.06.2033 Cooperation and Export”. Khosedayuskoye field n. a. A. A. Slivka In pursuance of directive No. 10357п-П13 (p-P13) of the Government of the Russian 11 NRM 00689 NR Central Khoreyver Uplift-2, Visovoye 08.09.2008–10.06.2033 Federation dated November 14, 2019 Central Khoreyver Uplift-2, On the purchase of Russian production • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft Verkhnekolvinskoye used to execute national projects JSC (Minutes No. 174 dated November 26, 2019). 12 NRM 16167 NP Central Khoreyver Uplift-2, Visovoye 13.10.2016–02.10.2023 and implement a comprehensive • On December 26, 2019, the BD considered the issue “On updating of Zarubezhneft plan of modernization and expansion JSC KPI system”, approved revised editions of passports and weight of corporate KPIs Central Khoreyver Uplift-2, of the trunk infrastructure. of Zarubezhneft JSC (Minutes No. 175 dated December 26, 2019). Verkhnekolvinskoye In pursuance of directive No. 9984п-П13 13 NRM 00690 NR Central Khoreyver Uplift-3, Zapadno- 08.09.2008–10.06.2033 (p-P13) of the Government of the Russian Khosedayuskoye field n. a. D. I. Sadetsky Federation dated November 1, 2019 Central Khoreyver Uplift-3, Sikhoreyskoye On implementation of methodological • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft guidelines on KPI application in state JSC (Minutes No. 174 dated November 26, 2019). Central Khoreyver Uplift-3, companies and development (updating) • On December 26, 2019, the BD considered the issue “On updating of Zarubezhneft Vostochno-Sikhoreyskoe of the Company bylaws governing JSC KPI system”, approved revised editions of passports and weight of corporate KPIs Central Khoreyver uplift-3, formation of key performance indicators of Zarubezhneft JSC (Minutes No. 175 dated December 26, 2019). Severo-Sikhoreyskoye and compensations to the Company 14 NRM 00691 NR Central Khoreyver Uplift-4, 08.09.2008–10.06.2033 management. Severo-Oshkotynskoye In pursuance of Decree No. 1388-p of the Government of the Russian Central Khoreyver Uplift-4, Federation dated June 27, 2019, Syurkharatinskoye and directive No. 9054п-П13 (p-P13) Central Khoreyver Uplift-4, Pyuseyskoye of the Government of the Russian Federation dated October 2, 2019 Central Khoreyver Uplift-4, Yuzhno-Syurkharatinskoye On establishing Zarubezhneft JSC • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft subsidiaries. JSC (Minutes No. 170 dated June 27, 2019). Central Khoreyver Uplift-4, Urernyrdskoye In pursuance of directive No. 5051п-П13 • ZN Razvitiye LLC was registered on July 22, 2019 (OGRN (PSRN) 1197746461516), Central Khoreyver Uplift-4, (p-P13) of the Government of the Russian and ZN Dobycha LLC was registered on August 1, 2019 (OGRN (PSRN) 1197746486343). Vostochno-Yanemdeyskoye Federation dated June 10, 2019 15 NRM 00841 NR Zapadno-Yareyaginskoye 19.07.2019–19.07.2044 On Zarubezhneft JSC year-end dividends • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft for 2018 JSC (Minutes No. 168 dated May 29, 2019). 16 NRM 16129 NE ZARUBEZHNEFT-Dobycha Kharyaga LLC Kharyaga 01.08.2016–31.12.2031 In pursuance of directive No. 4482п-П13 • The dividends were paid on August 9, 2019 (Payment Order No. 3789 dated August 9, 17 SLKh 15508 NE Severo-Karasevskoye Petroleum Lutseyakhskoye 01.03.2013–15.02.2033 (p-P13) of the Government of the Russian 2019). Enterprise LLC Federation dated May 23, 2019 172 173 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Federation and Decrees of the Government Federation and Decrees of the Government of the Russian Federation of the Russian Federation On expanding the practice of using • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft On annual reporting to the relevant federal • The resolutions provided for by the directives were adopted by the Company BD factoring in the performance of contracts JSC (Minutes No. 169 dated June 11, 2019). executive authorities and the Government (Minutes No. 160 dated November 20, 2018). The Company has an approved Action Plan for the supply of goods (performance • The amendments provided for by the directives were made to the documents governing of the Russian Federation on the scopes for fulfillment of the directives, and actions are being taken as per the Plan approved. of work, provision of services). procurement activities of Zarubezhneft Group, as follows: of the contracts for procurement • The report for 2018 on procurement by Zarubezhneft Group of the non-defense In pursuance of directive No. 4111п-П13 – the Regulation on Procurement of Zarubezhneft JSC (approved by Minutes No. 169 of non-defense production (not related production from MIS enterprises for the needs of FES, was sent to the Ministry (p-P13) of the Government of the Russian of the BD meeting dated June 11, 2019); to the State Defense Order) for the needs of Economic Development, the Ministry of Industry and Trade and the Ministry of Energy Federation dated May 8, 2019 – the Unified Regulation on Procurement for the Needs of Subsidiaries under List 1 of fuel and energy sector, concluded of the Russian Federation (Letters Ref. No. СК-25-1479 (SK) dated April 16, 2019). (approved by Order No. 178 dated June 11, 2019); with the enterprises of the military industrial – the Unified Regulation on Procurement for the Needs of Subsidiaries under List 2 sector (performance of work, provision (approved by Order No. 207 dated June 28, 2019). of services), (hereinafter, procurement – The existing edition of the Regulation on Procurement of Zarubezhneft JSC (approved of the non-defense production from MIS by Minutes No. 176 dated December 30, 2019) also meets the requirements set forth enterprises for the needs of FES). in the directives. In pursuance of directive No. 7923п-П13 (p-P13) of the Government of the Russian On finalizing corporate import phase- • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft Federation dated September 26, 2018 out plans for protection against radiation, JSC (Minutes No. 166 dated March 29, 2019). chemical and biological factors. • The activities provided for by the directives were included in the revised edition of Annex In pursuance of directive No. 584п-П13 No. 8 to the LTDP as approved by the BD of Zarubezhneft JSC (Minutes No. 168 dated On conducting an inventory of intellectual • The resolutions provided for by the directives were adopted by the Company BD (Minutes (p-P13) of the Government of the Russian June 11, 2019). property rights for the purpose of arranging No. 159 dated October 3, 2018). Federation dated January 26, 2019 • The standard defining personal protection equipment for employees of the Companies subsequent activities to ensure that • As part of the fulfillment of the directives in 2019, an inventory of the IP rights was belonging to Zarubezhneft Group was updated (Order No. 407 dated December 30, the IP identified, the rights whereto conducted (DZ No. 42/661 dated February 28, 2019), the results of the inventory were 2019). belong to the JSC, be legally protected, considered at the meeting of the Commission for Evaluation, Recognition, Useful Life and to recognize the rights thereto Determination, Impairment Evaluation and Determination of the Intangible Assets On development of programs to improve • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft in the balance sheet as intangible Utilization Expediency (Minutes No. 1 dated March 28, 2019). the quality of procurement management. JSC (Minutes No. 164 dated February 26, 2019). assets, for subsequent introduction into • An inventory of IP rights having not been previously identified was conducted (Letter In pursuance of directive No. 1519п-П13 • The General Director of Zarubezhneft JSC approved the Program on the Procurement the economic circulation, as well as, if to the Subsidiaries No. АД-42-586 (AD) dated February 18, 2019). Potentially protectable (p-P13) of the Government of the Russian Activities Management Quality Improvement (DZ No. 25/666 dated February 28, 2019), necessary, to evaluate such rights thereto. IP was considered at Zarubezhneft JSC Council for Science and Engineering (No. 9/2019 Federation dated February 20, 2019 which provides for extension of the Directives to Zarubezhneft JSC Subsidiaries. In pursuance of directive No. 7050п-П13 dated May 30, 2019) and approved for submission for registration with the Federal Service • Within the framework of the Program implementation, inter alia, standard forms (p-P13) of the Government of the Russian for Intellectual Property of the Russian Federation (Rospatent) (by December 31, 2019). of procurement documentation were approved (Order No. 185 dated June 18, 2019), Federation dated August 30, 2018 • The Report on Functioning of the Intellectual Property Rights Management System indicators for the procurement performed by the Subsidiaries were developed (Letter in Zarubezhneft JSC was considered by the Company Board of Directors (Minutes No. No. ДМ-25-2507 (DM) dated June 27, 2019), and test procurements through electronic 174 dated November 26, 2019). trading platforms of SberB2B, TEK-torg and GPB were carried out. • Copies of the approved Program on the Procurement Activities Management On amendments to the statutory • In pursuance of the instruction, the Company Board of Directors considered the issue Quality Improvement, along with excerpts from Minutes No. 164 of the meeting documents, providing for potential “On amendments to the statutory documents, providing for potential for establishing all- of the Board of Directors dated February 26, 2019 on adoption of resolutions for establishing all-Russian sectoral Russian sectoral physical culture and sports communities and corporate physical culture in pursuance of the Directives were posted in Zarubezhneft JSC Personal Account physical culture and sports communities and sports communities” (Minutes No. 150 dated February 22, 2018). on the Interdepartmental Portal of the Federal Agency for State Property Management. and corporate physical culture and sports • The revised edition of the Article of Association of Zarubezhneft JSC subject communities. to the above changes was approved by resolution of the General Meeting of Shareholders On updating the Long-Term Development • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft In pursuance of instruction No. ИШ-П13- of Zarubezhneft JSC (Order No. 499-р(r) of the Federal Agency for State Property Program of Zarubezhneft JSC (hereinafter, JSC (Minutes No. 164 dated February 26, 2019). 8690 (ISh-P) of the Government Management dated June 30, 2018). the LTDP) and submission of the LTDP • The Company developed, and the BD approved, Annex No. 14 to the LTDP “The Activities of the Russian Federation dated audit reports to the Ministry of Economic of the Long-Term Development Program to Accelerate the Growth Rates of Investments December 26, 2017 Development of the Russian Federation, in Fixed Capital of the Exploration and Production Segment” (Minutes No. 169 dated June the Federal Agency for State Property 11, 2019). On the implementation • The resolutions provided for by the directives were adopted at the BD meeting (Minutes Management, and federal executive • The auditor’s opinion based on the audit of the LTDP for 2018 was sent to the Ministry of the recommendations as to intellectual No. 149 dated February 8, 2018). authorities coordinating Zarubezhneft JSC of Economic Development, the Federal Agency for State Property Management, property rights management • By the resolution of the BD (Minutes No. 159 dated October 3, 2018), the Intellectual activities, in accordance with Decree No. and the Ministry of Energy (Ref. No. СК-46-1890 (SK) dated May 20, 2019) and was In pursuance of directive No. 9177п- Property Rights Management Policy of Zarubezhneft JSC, and the Action Plan 1870-р of the Government of the Russian posted on the Interdepartmental Portal of the Federal Agency for State Property П13 of the Government of the Russian for implementation thereof, were adopted (made available through Zarubezhneft JSC Federation dated August 30, 2017 Management on May 31, 2019. Federation dated December 12, 2017 Personal Account on the Interdepartmental Portal of the Federal Agency for State In pursuance of directive No. 276п-П13 On the expediency of applying Property Management, as from October 4, 2018). Activities have been carried out as per (p-P13) of the Government of the Russian the recommendations as to intellectual the Plan approved, including: Federation dated January 17, 2019 property rights management. – on June 10, 2019, the Regulation on the Innovative Development Section was In pursuance of instruction No. ИШ-P8-800 approved, having stipulated the functions related to the intellectual property rights On transition of Zarubezhneft JSC • The resolutions provided for by the directives were adopted by the Company BD (ISh-R) of the Government of the Russian management; to preferential use of domestic software. on January 28, 2019 (Minutes No. 163 dated January 28, 2019). Federation dated February 4, 2014 – The KPI sets for evaluation of the IP rights management system in Zarubezhneft JSC In pursuance of directive No. 10068п-П13 • Action Plan for 2019–2021, for Zarubezhneft JSC transition to preferential use (DZ No. 42/2040 dated June 28, 2019) were developed. (p-P13) of the Government of the Russian of domestic software (hereinafter, the “Action Plan”) was agreed upon with ANO Center – The BD considered the Report on Functioning of the Intellectual Property Rights Federation dated December 6, 2018 of Expertise on Import Phase-Out in the Information and Communication Technology Management System in Zarubezhneft JSC for 2019 (Minutes No. 174 dated (Rus: “Tsentr Kompetentsiy po Importozameshcheniyu v Sfere Informatsionno- November 26, 2019). Kommunikatsionnykh Tekhnologiy”) (Letter Ref. No. 03/130 dated March 13, 2019), and was approved by the BD of Zarubezhneft JSC (Minutes No. 166 dated March 29, 2019). • Activities on transition to preferential use of the domestic software were included in Annex No. 8 to the LTDP, the revised edition whereof was approved by the BD (Minutes No. 169 dated June 11, 2019). • The reports on the implementation of the Action Plan for Q1, Q2, Q3 and Q4 2019 were posted in Zarubezhneft JSC Personal Account on the Interdepartmental Portal of the Federal Agency for State Property Management, on April 10, 2019, July 10, 2019, October 10, 2019, and October 10, 2020 respectively, and sent to the Ministry of Communications of the Russian Federation. 174 175 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Federation and Decrees of the Government Federation and Decrees of the Government of the Russian Federation of the Russian Federation On amendments to the employment • The updated Register of Non-Core Assets of Zarubezhneft JSC and the Action Plan On the development progress, • The resolutions provided for by the directives were adopted at the BD meeting on March contract with the Head of the JSC for Sale of Non-Core Assets of Zarubezhneft JSC for 2019–2020 were approved and implementation, of the import phase- 17, 2017 (Minutes No. 135). and on expediency of amending the current by the BD (Minutes No. 166 dated March 29, 2019). out plans. • The Company has a working group on import phase-out (approved by Order No. program and register of non-core assets • Report on Sale of NCA for Q4 2018 was considered by the BD (Minutes No. 164 dated In pursuance of directive No. 830п-П13 144 dated May 30, 2017); by Order No. 125 dated May 17, 2017, a person responsible disposition. February 26, 2019). (p-P13) of the Government of the Russian for controlling the entry of information into AIS “Import Phase-Out Technology In pursuance of directive No. 6604п-П13 • Report on Sale of NCA for Q1 2019 was considered by the BD (Minutes No. 167 dated Federation dated February 6, 2017 and Projects”. (p-P13) of the Government of the Russian April 25, 2019). • The Company developed and approved governing document No. 426 dated December 19, Federation dated September 18, 2017 • Report on Sale of NCA for Q2 2019 was considered by the BD (Minutes No. 171 dated 2018 “Guidelines for Mandatory Analysis of the Potential for Foreign Production Phase- August 12, 2019). Out in Favor of the Domestic Production of Equivalent Specifications and Consumer • Report on Sale of NCA for Q3 2019 was considered by the BD (Minutes No. 174 dated Properties in the Russian Segment of Zarubezhneft Group Footprint”. November 26, 2019). • The Report on the Import Phase-Out Plan Implementation (Annex No. 8 to the LTDP) for 2018 was enclosed in the Report on the LTDP Implementation for 2018 (considered On submission by Zarubezhneft JSC • The resolutions provided for by the directives were adopted at the BD meeting on October by the BD of Zarubezhneft JSC (Minutes No. 168 dated May 29, 2019)). to the Ministry of Economic Development 27, 2017 (Minutes No. 144). • The BD approved the revised edition of Annex No. 8 to the Long-Term Development of the Russian Federation of information • To the Ministry of Economic Development of the Russian Federation, the information Program of Zarubezhneft JSC (Minutes No. 169 dated June 11, 2019). The document on possession of assets located to evidence that there were no assets located in the Russian Federation and possessed reflects measures to implement directives No. 10068п-П13 (p-P13) dated December 6, in the Russian Federation, through foreign by Zarubezhneft Group through any foreign legal entities in 2016 (Letter No. СК-46-4487 2018 “Transition to preferential use of domestic software”, and No. 584п-П13 (p-P13) legal entities. (SK) dated September 7, 2017), in 2017 (Letter No. СК-46-154 (SK) dated January 17, dated January 26, 2019 “On finalizing corporate import phase-out plans for protection In pursuance of directive No. 5945п-П13 2018), in 2018 (Letter No. СК-46-540 (SK) dated February 12, 2019), and in 2019 (Letter against radiation, chemical and biological factors”, of the Government of the Russian (p-P13) of the Government of the Russian No. СК-46-147 (SK) dated January 21, 2020). Federation. Federation dated August 25, 2017 • According to the instruction by the Ministry of Industry and Trade On approval of the Procedure • The resolutions provided for by the directives were adopted at the BD meeting on June of the Russian Federation in respect of compliance with Clause 1 of the Minutes for Coordination with the Ministry 23, 2017 (Minutes No. 140). of the Interdepartmental Working Group meeting, the system “Import Phase- for the Development of Russian Far East • The procedure for coordination with the Ministry for the Development of Russian Out Technology and Projects” was updated, as to imported production introduced and Arctic, of investment programs, Far East and Arctic, of investment programs (plans) for infrastructure development and operated in the Subsidiaries of Zarubezhneft Group, in Q1, Q2, Q3 and Q4 2019. and other plans, for infrastructure implementable in the Far Eastern Federal District, was approved by the Board of Directors • Zarubezhneft JSC developed a Digital Transformation Strategy aimed at setting development implementable by joint on June 23, 2017 (Minutes No. 140). The procedure is posted in the Personal Account objectives and goals for digitalization, as well as creating competitive advantages both stock companies with state participation of Zarubezhneft JSC on the Interdepartmental Portal of the Federal Agency for State in Russia and abroad through large-scale application of digital technology (approved in the Far Eastern Federal District. Property Management on June 26, 2017. by Order No. 345 dated November 25, 2019). In pursuance of directive No. 3538п-П13 • The Long-Term Development Program of Zarubezhneft JSC does not provide for any On expanding the practice of using • The resolutions provided for by the directives were adopted at the BD meeting (p-P13) of the Government of the Russian financing of social and economic development goals in the Far Eastern Federal District. factoring in the performance of contracts on November 11, 2016 (Minutes No. 129). Federation dated May 25, 2017 In 2017–2019, Zarubezhneft Group did not have any expenditures on activities aimed for the supply of goods (performance • In order to implement the practice of factoring, the methodology of financing against at priority development of the Far Eastern Federal District. of work, provision of services). a cash claim assignment by a counterparty (factoring) was approved by Order No. 501 On acquisition or rent of aircraft, including • The resolutions provided for by the directives were adopted at the BD meeting on May 23, In pursuance of directive No. 7704п-П13 dated November 29, 2016. those with high-comfort passenger 2017 (Minutes No. 138). (p-P13) of the Government of the Russian • The edition of Zarubezhneft JSC Regulation on Procurement subject to the requirements compartments. • Procurements of aircraft for the needs of Zarubezhneft JSC and its Subsidiaries, Federation dated October 11, 2016 of the directives was approved by the BD (Minutes No. 133 dated December 27, 2016). In pursuance of directive No. 2602п-П7 are monitored on an annual basis. In 2019, no such procurement took place. The existing updated edition of the Regulation on Procurement (approved by Minutes No. (p-P7) of the Government of the Russian 176 of the BD meeting dated December 30, 2019) also meets the requirements set forth Federation dated April 17, 2017 in the directives. • In 2019, small and medium business entities did not establish any requirements for factoring to be used in the performance of contracts for the supply of goods (performance of work, provision of services). 176 177 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Federation and Decrees of the Government Federation and Decrees of the Government of the Russian Federation of the Russian Federation On amendments to the Company’s • The resolutions provided for by the directives were adopted at the BD meeting on October On approval of the procedure for investment • The resolutions provided for by the directives were adopted at the BD meeting on March procurement policy in terms of innovative 14, 2016 (Minutes No. 128). projects accounting. 30, 2016 (Minutes No. 120). construction materials. • The edition of the Regulation on Procurement subject to the requirements In pursuance of directive No. 1659п-П13 • The procedure for accounting for high-priority investment projects of Zarubezhneft In pursuance of directive No. 6558п-П13 of the directives was approved by the BD (Minutes No. 133 dated December 27, 2016). (p-P13) of the Government of the Russian Group was approved by the Board of Directors on May 13, 2016 (Minutes No. 122). (p-P13) of the Government of the Russian The existing updated edition of the Regulation on Procurement (approved by Minutes No. Federation dated March 15, 2016 Federation dated September 5, 2016 176 of the BD meeting dated December 30, 2019) also meets the requirements set forth On innovation development. • The resolutions provided for by the directives were adopted at the BD meeting on March in the directives. In pursuance of directive No. 1471п-П13 15, 2016 (Minutes No. 119). • In 2019, no innovative construction materials were procured. (p-P13) of the Government of the Russian • The updated Innovation Development Program of Zarubezhneft JSC for 2016–2020 (with On conclusion of agreements on priority • The resolutions provided for by the directives were adopted at the BD meeting on August Federation dated March 3, 2016 potential prospects till 2030) was approved by the Board of Directors on September 14, engagement of vessels built at Russian 8, 2016 (Minutes No. 126). 2016 (Minutes No. 127). shipyards. • In order to implement the directives: • The Report on the Results of Zarubezhneft JSC Innovation Development Program In pursuance of directive No. 5059п-П13 – A Model Contractual Condition prescribing priority engagement of vessels built for 2018 was approved by the Board of Directors (Minutes No. 167 dated April 25, 2019). (p-P13) of the Government of the Russian at Russian shipyards, for export supplies of goods (cargoes) using water transport, On innovation development. • The resolutions provided for by the directives were adopted at the BD meeting on March Federation dated July 13, 2016 was developed; In pursuance of directive No. 1472п-П13 15, 2016 (Minutes No. 119), where: – by Order No. 354 dated August 19, 2016, the Model Contract Condition prescribing (p-P13) of the Government of the Russian – the passport and target values of an integrated KPI of innovative activities, priority engagement of vessels built at Russian shipyards, for export supplies Federation dated March 3, 2016 and the revised weights of corporate KPIs, for 2016–2018 were approved, of goods (cargoes) using water transport, was approved; – Annex No. 7 to the LTDP was updated subject to the inclusion of the above innovation – Zarubezhneft JSC and its Subsidiaries are monitored to ensure that the oil supply activity integrated KPI into the LTDP KPIs. contracts to be concluded contain the above model contract condition prescribing • The updated passport of the integrated KPI of innovative activity of Zarubezhneft JSC priority engagement of vessels built at Russian shipyards, for export supplies was approved by the resolution of the BD on August 21, 2017 (Minutes No. 141). of goods (cargoes) using water transport. • Information on achievement of the integrated KPI of innovative activity was included – In 2019, 15 contracts were concluded under the above model contractual condition in the Report on the Implementation of IDP of Zarubezhneft JSC for 2018 (approved prescribing priority engagement of vessels built at Russian shipyards, for export by the BD under Minutes No. 167 dated April 25, 2019). supplies of goods (cargoes) using water transport. On optimization and performance • The resolutions provided for by the directives were adopted at the BD meeting On implementation of professional • The resolutions provided for by the directives were adopted at the BD meeting on August enhancement of charity and sponsorship on September 4, 2015 (Minutes No. 109). standards across 8, 2016 (Minutes No. 126). expenditures. • At the meeting of the Board of Directors of Zarubezhneft JSC held on January 14, the Company’s activities. • In 2019, in pursuance of the directives, the Reports on Measures Taken to Implement In pursuance of directive No. 5024п-П13 2016 (Minutes No. 116), the Regulations on Charitable and Sponsorship Activities In pursuance of directive No. 5119п-П13 Professional Standards in Zarubezhneft JSC were considered by the Board of Directors (p-P13) of the Government of the Russian of Zarubezhneft JSC were approved. (p-P13) of the Government of the Russian in the 1st half of 2019 (Minutes No. 166 dated March 29, 2019) and in the 2nd half of 2019 Federation dated July 31, 2015 • At the meeting of the Board of Directors held on November 27, 2017 (Minutes No. Federation dated July 14, 2016 (Minutes No. 176 dated December 30, 2019). 145), the revised edition of the Regulations on Charitable and Sponsorship Activities On implementation of the non-core assets Refer to the Section “Information about the Non-Core Asset Disposition Program”. of Zarubezhneft Group was approved in pursuance of the recommendations based disposition programs. • The updated Register of Non-Core Assets of Zarubezhneft JSC and the Action Plan on the audit of the performance of procedures for organizing risks management In pursuance of directive No. 4863п-П13 for Sale of Non-Core Assets of Zarubezhneft JSC for 2019–2020 were approved and internal control system as to preventing and combating corruption. (p-P13) of the Government of the Russian by the BD (Minutes No. 166 dated March 29, 2019). • In 2019, as part of the implementation of recommendations based on a regular Federation dated July 7, 2016 • Report on Sale of NCA for Q4 2018 was considered by the BD (Minutes No. 164 dated evaluation of the corporate anti-corruption system, a revised edition of the Regulations On amendments to the employment February 26, 2019). on Charitable and Sponsorship Activities of Zarubezhneft Group was approved (Minutes contract with the Head of the JSC • Report on Sale of NCA for Q1 2019 was considered by the BD (Minutes No. 167 dated No. 176 dated December 30, 2019). and on expediency of amending the current April 25, 2019). • The budget for sponsorship and charitable activities of Zarubezhneft Group, for 2019, program and register of non-core assets • Report on Sale of NCA for Q2 2019 was considered by the BD (Minutes No. 171 dated was approved by the Board of Directors on December 20, 2018 (Minutes No 162) as part disposition. August 12, 2019). of the Business Plan 2019. In pursuance of directive No. 6604п-П13 • Report on Sale of NCA for Q3 2019 was considered by the BD (Minutes No. 174 dated • In 2019, Zarubezhneft JSC published information on its charitable and sponsorship (p-P13) of the Government of the Russian November 26, 2019). activities through its Personal Account, on a quarterly basis. Federation dated September 18, 2017 On the procedure of settlements • The resolutions provided for by the directives were adopted at the BD meeting On procurement of domestic commercially • The resolutions provided for by the directives were adopted by the Company BD (Minutes under export contracts. on September 4, 2015 (Minutes No. 109). viable software required for the JSC No. 126 dated August 8, 2016). In pursuance of directive No. 4807п-П13 • In order to implement the directives: activities. • The edition of the Regulation on Procurement subject to the requirements (p-P13) of the Government of the Russian – рa model contractual condition to export contracts, providing for the possibility In pursuance of directive No. 4972п-П13 of the directives was approved at the BD meeting (Minutes No. 128 dated October Federation dated July 23, 2015 of making settlements in Russian rubles, was developed; (p-P13) of the Government of the Russian 14, 2016). The existing updated edition of the Regulation on Procurement (approved – the minimum portion of export settlements to be made in Russian rubles was Federation dated July 11, 2016 by Minutes No. 176 of the BD meeting dated December 30, 2019) also meets determined; the requirements set forth in the directives. – by Order No. 497 dated October 12, 2015, a new model form of oil export contract, • In 2019, no foreign software procurement took place. containing a model contractual condition on the possibility of making settlements • At the same time, the Company takes proper measures to fulfill directive No. 10068п-П13 in RUB, was approved; (p-P13) dated December 6, 2018, “On transition of Zarubezhneft JSC to preferential use • In 2019, 15 crude oil supply contracts were concluded under the above model contractual of domestic software”. condition on the possibility of making settlements in RUB. On the normative acts of the Company • The resolutions provided for by the directives were adopted at the BD meeting on May 31, that govern limitations as to procurement 2016 (Minutes No. 124). of certain types of goods, work • The procurement limitations have been applied in the Company since 2016. and services. • In 2019, the analysis of procurement activities in terms of application of procurement In pursuance of directive No. 2793п-П13 limitations in 2018 was carried out, with information on the analysis results posted (p-P13) of the Government of the Russian on the Interdepartmental Portal and the respective report sent to the Federal Agency Federation dated April 19, 2016. for State Property Management (Letter Ref. No. ДМ-25-304 (DM) dated January 28, 2019). • In 2019, by Order No. 175 dated June 10, 2019, the procurement limitations as to the mandatory list of certain types of goods, work and services, were updated. The procurement limitations are available on the Company’s official website. 178 179 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Federation and Decrees of the Government Federation and Decrees of the Government of the Russian Federation of the Russian Federation On the introduction of a management • The resolutions provided for by the directives were adopted by the BD of Zarubezhneft JSC On approval by the JSC of long-term • The LTDP was approved by the resolution of Zarubezhneft JSC Board of Directors bonus system based on the manager KPI (Minutes No. 101 dated April 30, 2015). development programs and audit of such (No. 91 dated November 20, 2014). and subject to the need to reduce operating • The BD of Zarubezhneft JSC (Minutes No. 163 dated January 28, 2019) approved a revised programs. • The Regulations for the LTDP Implementation Audit were approved by Zarubezhneft JSC expenses (costs) by 2–3% annually. edition of the Guidelines for Calculating the Operating Expenses Reduction Indicator. In pursuance of directive No. 4955п-П13 Order (No. 507 dated November 11, 2014). In pursuance of directive No. 2303п-П13 • By the resolution of the BD (Minutes No. 164 dated February 26, 2019), the Report (p-P13) of the Government of the Russian • In 2019, in pursuance of the directives, the following activities were carried out: (p-P13) of the Government of the Russian on the Implementation of Operating Expenses Reduction Program for 2018 (in 2018, Federation dated July 17, 2014 • The audit engagement for auditing the LTDP implementation in 2018 was approved Federation dated April 16, 2015 the reduction in operating expenses amounted to 3.1%), and the Operating Expenses by the Board of Directors (Minutes No. 164 dated February 26, 2019). Reduction Program for 2019, were approved. • The LTDP implementation for 2018 was audited, the Report on the Audit of the LTDP • The Report on the Implementation of Operating Expenses Reduction Program for Q1 2019 Implementation for 2018 was considered by the Board of Directors (Minutes No. was considered by the BD of Zarubezhneft JSC (Minutes No. 169 dated June 11, 2019). 168 dated May 29, 2019) and prior considered by the Strategic Planning Committee • The Report on the Implementation of Operating Expenses Reduction Program for Q2 2019 under the BD of Zarubezhneft JSC on May 14, 2019 (Minutes No. 57). was considered by the BD of Zarubezhneft JSC (Minutes No. 172 dated September 20, • In order to update Zarubezhneft JSC LTDP and with account taken of the auditor’s 2019). recommendations based on the results of the LTDP audit and the received directives • The Report on the Implementation of Operating Expenses Reduction Program for Q3 2019 of the Government of the Russian Federation, the BD approved the updated: was considered by the BD of Zarubezhneft JSC (Minutes No. 174 dated November 26, – Annex No. 3 “Zarubezhneft Group Innovation-Related Activity” (Minutes No. 163 dated 2019). January 28, 2019, Minutes No. 176 dated December 30, 2019); – Annex No. 4 “Action Plan for Zarubezhneft JSC Long-Term Development Program On ensuring the establishment • The Unified Treasury of Zarubezhneft Group has been functioning since July 1, 2015. Risks Management up to 2030” (Minutes No. 163 dated January 28, 2019, Minutes of single treasuries of parent, subsidiary • For the establishment of the Unified Treasury, the following documents were approved: No. 176 dated December 30, 2019); and dependent companies. – Regulations on Payments in Zarubezhneft Group (Order No. 270 dated September 18, – Annex No. 5 “Demand for Labor Resources under Zarubezhneft JSC Long-Term In pursuance of directives No. 5110п-П13 2017); Development Program” (Minutes No. 163 dated January 28, 2019); (p-P13) dated August 8, 2014, and No. – Regulations on Fundraising and Investment in Zarubezhneft Group (Order No. 231 – Annex No. 6 “Labor Performance Enhancement Program” (Minutes No. 163 dated 1796п-П13 (p-P13) dated March 26, dated May 20, 2015); January 28, 2019); 2015, of the Government of the Russian – Unified Financial and Credit Policies in Zarubezhneft Group, the revised edition (Order – Annex No. 7 “Measures to Increase Performance and Transparency of Zarubezhneft Federation No. 58 dated March 31, 2017); JSC Activities (Minutes No. 163 dated January 28, 2019); – Regulations on Intra-Group Financing in Zarubezhneft Group (Order No. 315 dated – Annex No. 8 “Measures on Planned and Phased Replacement of the Foreign October 31, 2017). Production, Work and Services Purchased with Equivalent Domestic Products, Work • Following the review results, the report “Economic Effect of the Single Treasury and Services” (Minutes No. 169 dated June 11, 2019); Establishment in Zarubezhneft Group of Companies” was sent to the Ministry of Finance – Annex No. 9 “Operating Expenses Reduction Program” (Minutes No. 163 dated of the Russian Federation by the letter with Ref. No. СК-24-3584 (SK) dated September January 28, 2019); 10, 2019; and to the Federal Service for Financial Monitoring of the Russian Federation – Annex No. 10 “Program Measures to Ensure Achievement of the LTDP KPIs by the letter with Ref. No. СК-24-3583 (SK) dated September 10, 2019. and Compensation to Zarubezhneft JSC Management” (Minutes No. 163 dated On changes in the structure • The resolutions provided for by the directives were adopted at the BD meeting on April 15, January 28, 2019, Minutes No. 176 dated December 30, 2019). of the Company’s annual report. 2015 (Minutes No. 100). • Also, for the purpose of implementation of measures on Zarubezhneft JSC digital In pursuance of directive No. 2007п-П13 • The annual report prepared subject to the requirements stated in the directives transformation, Annex No. 13 to the Long-Term Development Program, “Zarubezhneft (p-P13) of the Government of the Russian was approved by the resolution of the annual General Meeting of Shareholders JSC Strategy in Digital Transformation”, was developed, and approved by the Board Federation dated April 6, 2015 of Zarubezhneft JSC (Decree No. 409-r of the Federal Agency for State Property of Directors (Minutes No. 163 dated January 28, 2019). Management dated June 30, 2019). • In pursuance of directive No. 276п-П13 (p-P13) dated January 17, 2019 • The report on the LTDP implementation and the KPI achievement, for 2018, was of the Government of the Russian Federation, in order to implement the sectoral section sent to the Federal Agency for State Property Management, the Ministry of Energy of the action plan for acceleration of the growth rates of investments in fixed capital and the Ministry of Economic Development, of the Russian Federation (letters No. СК-46- and increase their share in the gross domestic product up to 25%, the Board of Directors 2590 (SK) dated May 20, 2019). of Zarubezhneft JSC approved Annex No. 14 to the LTDP, “Long-Term Development Program Measures to Accelerate the Growth Rates of the Investments in Fixed Capital of the Exploration and Production segment” (Minutes No. 169 dated June 11, 2019). On the net currency assets limitation. • by Order No. 280 dated July 5, 2016, the Guidelines for Calculating and Monitoring Net In pursuance of directive No. 8495п-П13 Currency Assets possessed by Zarubezhneft Group, were approved. (p-P13) of the Government of the Russian • At the meeting of the Board of Directors on August 8, 2016 (Minutes No. 126) Federation dated December 17, 2014 the resolution on monthly submission of the report form to the Bank of Russia was adopted. • In 2019, the Department of Finance and Treasury Operations sent to the Bank of Russia information on the net currency assets of Zarubezhneft JSC, on a monthly basis. 180 181 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Federation and Decrees of the Government Federation and Decrees of the Government of the Russian Federation of the Russian Federation On increasing labor performance, • Annex No. 6 to the LTDP, “Labor Performance Enhancement Program for 2015–2018”, On implementation of measures aimed Refer to the Section “Report on Procurement Activities of the Zarubezhneft Group and creating and modernizing high- was developed and approved by the resolution of the Board of Directors of Zarubezhneft at ensuring information transparency of Companies”. performance jobs. JSC (Minutes No. 97 dated February 27, 2015), and the indicator “Labor Performance” of procurement activities and transition • By Order No. 544 of Zarubezhneft JSC dated December 1, 2014, the Small and Medium In pursuance of directive No. 7389п-П13 was included into the system of corporate KPIs of Zarubezhneft JSC (Minutes No. 103 to electronic procurement, including Business Entities Partnership Program of Zarubezhneft JSC was approved; both (p-P13) of the Government of the Russian dated May 28, 2015, Minutes No. 139 dated May 29, 2017). regulations governing the procedures the Partnership Program and the Register of Small and Medium Business Entities Federation dated October 31, 2014 • Amendments were made to the employment contract with the General Director, for procurement of goods, work Having Joined the Partnership Program were made available on the Company’s website as provided for by the directives (supplement to the employment contract dated and services. in the Section “Information Disclosure”. December 26, 2014). In pursuance of directive No. 6464п-П13 • In 2019, in pursuance of the directives of the Government of the Russian Federation, • In the Personal Account of Zarubezhneft JSC on the Interdepartmental Portal (p-P13) of the Government of the Russian revised editions of the Regulation on Procurement of Zarubezhneft JSC were prepared, of the Federal Agency for State Property Management, the information on labor Federation dated December 16, 2010, and approved by the BD (Minutes No. 169 dated June 11, 2019, and Minutes No. 176 performance enhancement is filled/updated annually. The information for 2018 was Instruction No. ИШ-P13-8685 (ISh- dated December 30, 2019). published on March 22, 2019. R) of the Government of the Russian • Quarterly reports on the results of procurement activities were considered Federation dated December 17, at the meetings of the Board of Directors of Zarubezhneft JSC as follows: the Report On ensuring the JSC adoption of key • In pursuance of the recommendations of the Revision Commission based on the results 2010, and letter No. ГН-13/1416 (GN) for Q4 2018 (Minutes No. 166 dated March 29, 2019), the Report for Q1 2019 (Minutes performance indicators. of the audit of financial and economic activities of the Company in 2015, the updated of the Federal Agency for State Property No. 169 dated June 11, 2019), the Report for Q2 2019 (Minutes No. 172 dated September In pursuance of directive No. 2579п-П13 Regulation on the KPI System, and the passports of the corporate KPI of Zarubezhneft Management dated January 25, 2011 20, 2019), and the Report for Q3 2019 (Minutes No. 174 dated November 26, 2019). (p-P13) of the Government of the Russian JSC were developed and agreed with the Federal Agency for State Property Management Federation dated April 25, 2014 (letter No. ДП-05/44755 (DP) dated October 28, 2016). On proposals and recommendations Refer to the Section “Environmental Protection”. • By the resolution of the Board of Directors of Zarubezhneft JSC dated November 25, aimed at stimulating the development • At the meeting of the Board of Directors held on April 20, 2012 (Minutes No. 59) 2016 (Minutes No. 131), the updated edition of the Regulation on Key Performance of environmental responsibility the Environmental Program of Zarubezhneft Group of Companies was approved. In order Indicators of Zarubezhneft JSC and the updated passports of the corporate mechanisms based on international to control the implementation of the Program, a specialized unit, the Occupational Health KPIs approved by the Federal Agency for State Property Management (letter No. standards, including, inter alia, and Safety and Environmental Protection Section, was established in Zarubezhneft JSC. ДП-05/44755 (DP) dated October 28, 2016) were approved. nonfinancial reporting and voluntary • In 2019, the Report on Sustainable Development of Zarubezhneft JSC for 2018 was • In 2019: certification and labelling systems subject prepared. The Report is available on the official website of Zarubezhneft JSC. – The Report on the Corporate KPI Achievement for 2018 was approved by the BD to independent verification and certification of Zarubezhneft JSC (Minutes No. 168 dated May 29, 2019). Based on achievement (Sub-clause “л” (l) of Clause 1 of the corporate KPIs target values, the BD adopted the resolution to pay of List No. Пр-1640 (Pr) of Instructions compensation to the Sole Executive Body of the Company (Minutes No. 168 dated of the President of the Russian Federation May 29, 2019). dated June 6, 2010, and Letter No. – The reports on the KPI achievement for 3 months, 6 months and 9 months 2019 were ГН-13/37524 (GN) of the Federal Agency considered by the BD of Zarubezhneft JSC (Minutes No. 169 dated June 11, 2019, for State Property Management dated Minutes No. 173 dated September 30, 2019, and Minutes No. 174 dated November 26, December 5, 2011) 2019). Resolution No. 1214 of the Government • At the meeting of the Company’s Board of Directors held on June 10, 2013 (Minutes – The KPI system of Zarubezhneft JSC was updated in accordance with Decree of the Russian Federation dated December No. 72), a revised edition of Zarubezhneft JSC Regulation on Organizing Information No. 1388-р(r) of the Government of the Russian Federation dated June 27, 2019, 31, 2010 “On Improvement of the Procedure Interaction through the Interdepartmental Portal for State Property Management and directive No. 9054п-П13 (p-P13) of the Government of the Russian Federation for Managing Open Joint Stock Companies in the Internet” was approved. In 2019, in accordance with the above Regulation, dated October 2, 2019. Whose Shares Are Owned by the Federal Zarubezhneft JSC regularly posted the relevant information in its Personal Account – The updated KPIs for 2020 were approved by the resolution of the BD of Zarubezhneft Government, and Federal State on the Interdepartmental Portal. JSC (Minutes No. 175 dated December 26, 2019). Enterprises” On conducting process audits and price • By the resolution of the Board of Directors of Zarubezhneft JSC (Minutes No. 110 dated On the implementation • The resolutions provided for by the directives were adopted by the BD (Minutes No. 149 audits of investment projects. September 30, 2015), the Standard of Process Audit and Price Audit of Investment of the recommendations as to intellectual dated February 8, 2018). In pursuance of directive No. 2988п-П13 Projects of Zarubezhneft Group was approved. The above Standard of Process property rights management. • By the resolution of the BD (Minutes No. 159 dated October 3, 2018), the Intellectual (p-P13) of the Government of the Russian Audit and Price Audit of Investment Projects of Zarubezhneft Group incorporates In pursuance of directive No. 9177п-П13 Property Rights Management Policy of Zarubezhneft JSC, and the Action Plan Federation dated May 30, 2013 the recommendations of the Expert Council under the Government of the Russian (p-P13) of the Government of the Russian for implementation thereof, were adopted (made available through Zarubezhneft JSC Federation, as well as the updated regulatory framework in terms of investment Federation dated December 12, 2017 Personal Account on the Interdepartmental Portal of the Federal Agency for State and project activities. Property Management, as from October 4, 2018). Activities have been carried out as per • In 2019, no investment projects were identified that fell under the criteria for being the Plan approved, including: included in the scope of process and price audits. – on June 10, 2019, the Regulation on the Innovation Development Section was On nonfinancial reporting. In pursuance • In 2019, the Report on Sustainable Development of Zarubezhneft JSC for 2018 was approved, having stipulated the functions related to the intellectual property rights of directive No. 1710п-П13 (p-P13) prepared and posted on the official website of the Company. management; of the Government of the Russian – The KPI sets for evaluation of the IP rights management system in Zarubezhneft JSC Federation dated March 30, 2012 (DZ No. 42/2040 dated June 28, 2019) were developed. – The BD considered the Report on Functioning of the Intellectual Property Rights On the implementation of investment • Information on the implementation progress of the investment programs Management System in Zarubezhneft JSC for 2019 (Minutes No. 174 dated programs (Instruction No. ИШ-P13-5361 • adopted in Zarubezhneft JSC was updated, on a quarterly basis, in the Personal Account November 26, 2019). (ISh-R) of the First Deputy Chairman of Zarubezhneft JSC on the Interdepartmental Portal of the Federal Agency for State of the Government of the Russian Property Management. Federation dated September 18, 2009, and fax message No. ГН-13/8809 (GN) of the Federal Agency for State Property Management dated April 1, 2011) 182 183 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Instructions of the President of the Russian Information on execution by the Company of the relevant Instructions and Decrees Federation and Decrees of the Government Federation and Decrees of the Government of the Russian Federation of the Russian Federation On development • Long-Term Development Program of Zarubezhneft JSC — subsequent to preliminary On inclusion of a list of measures into Refer to the Section “Procurement Activities”. and approval of the list of bylaws approval by the Strategic Planning Committee under the Board of Directors the Company’s long-term development • In pursuance of directive No. 1346p-P13 of the Government of the Russian Federation governing the Joint Stock Company’s (Minutes No. 1 dated September 19, 2014) was coordinated with the Expert Council program aimed at planned and phased dated March 5, 2015, by the resolution of the Board of Directors of Zarubezhneft JSC activity, as well as on ensuring submission under the Government of the Russian Federation (Letter No. ЭС-2909/02 (ES) dated replacement of procured foreign production (Minutes No. 101 dated April 30, 2015), Annex No. 8 to the Long-Term Development of reports on implementation of long-term September 29, 2014, and Letter No. ЭС-1211/02 (ES) dated November 12, 2014), (work, services) by the procurement Program of Zarubezhneft JSC, “Measures Aimed at Scheduled and Phased Replacement development programs, and on achieving and approved by the resolution of the Board of Directors of the Company (Minutes No. 91 of the Russian production (work, services) of Procured Foreign Production, Work and Services with Equivalent Russian Production, approved key performance indicators, dated November 20, 2014) equivalent in terms of specifications Work and Services” was approved. in accordance with Clauses 2 Refer to the Section “Long-Term Development Program”. and consumer properties, in accordance • The resolutions provided for by directive No. 830п-П13 (p-P13) dated February 6, 2017 and 3 of Instruction No. Пр-3013 (Pr) 1. The Regulation on Key Performance Indicators and the corporate KPIs passports were with Instruction No. АД-P9-9176 (AD-R) were adopted at the BD meeting on March 17,2017 (Minutes No. 135). of the President of the Russian Federation approved by the Board of Directors (Minutes No. 94 dated December 24, 2014). dated December 8, 2014 • The Company has a working group on import phase-out (approved by Order No. dated December 27, 2014 2. In 2016, subsequent to approval by the Federal Agency for State Property Management On the development progress, 144 dated May 30, 2017); by Order No. 125 dated May 17, 2017, a person responsible (Letter No. ДП-05/44755 (DP) dated October 28, 2016), the updated editions and implementation, of the import phase- for controlling the entry of information into AIS “Import Phase-Out Technology of the Regulations on Key Performance Indicators and the corporate KPIs passports out plans. and Projects” was assigned. were approved by the resolution of the Board of Directors of the Company. In 2017, In pursuance of directive No. 830п-П13 • The Report on the Import Phase-Out Plan Implementation (Annex No. 8 to the LTDP) at the meeting of the Board of Directors held on August 21, 2017 (Minutes No. 141) (p-P13) of the Government of the Russian for 2018 was enclosed in the Report on the LTDP Implementation for 2018 (considered the revised edition of the Passports of Zarubezhneft JSC Innovation Activity Integrated Federation dated February 6, 2017 by the BD on May 29, 2019 (Minutes No. 168)). Key Performance Indicator was approved • The BD approved the revised edition of Annex No. 8 to the Long-Term Development 3. Regulations on Increasing Investment and Operational Performance and Reducing Program of Zarubezhneft JSC (Minutes No. 169 dated June 11, 2019). The document Expenditures were approved by the resolution of the Board of Directors reflects measures to implement directives No. 10068п-П13 (p-P13) dated December 6, of Zarubezhneft JSC (Minutes No. 117 dated January 29, 2016, the previous edition was 2018 “Transition to preferential use of domestic software”, and No. 584п-П13 (p-P13) approved under Minutes No. 112 dated November 11, 2015). dated January 26, 2019 “On finalizing corporate import phase-out plans for protection 4. The Regulation on Internal Audit was approved by the resolution of the Board against radiation, chemical and biological factors”, of the Government of the Russian of Directors (Minutes No. 97 dated February 27, 2015). In accordance with the Guidelines Federation. for Preparing of the Regulation on Internal Audit, the Company developed a revised • According to the instruction by the Ministry of Industry and Trade edition of the Regulation on Internal Audit in Zarubezhneft JSC (approved of the Russian Federation in respect of compliance with Clause 1 of the Minutes by the resolution of the Board of Directors (Minutes No. 110 dated September 30, of the Interdepartmental Working Group meeting, the system “Import Phase- 2015)). In 2016, the Regulation on Internal Audit in Zarubezhneft JSC was updated Out Technology and Projects” was updated, as to imported production introduced subject to the Guidelines for Organizing Risks Management and Internal Control System and operated in the Subsidiaries of Zarubezhneft Group, in Q1, Q2, Q3 and Q4 2019. as to Preventing and Combating Corruption, and approved by the resolution of the Board • Zarubezhneft JSC developed a Digital Transformation Strategy aimed at setting of Directors of Zarubezhneft JSC on October 14, 2016 (Minutes No. 128 dated objectives and goals for digitalization, as well as creating competitive advantages both October 14, 2016). in Russia and abroad through large-scale application of digital technology (approved 5. The Regulation on Quality Management System of Zarubezhneft JSC was approved by Order No. 345 dated November 25, 2019). by the resolution of the Board of Directors of Zarubezhneft JSC (Minutes No 112 dated Participation in preparation of regulatory • At present, Zarubezhneft JSC is not an associated member of the WorldSkills Russia November 11, 2015). In 2016, the updated edition of the Regulation on the Quality documents for holding of professional Union, therefore the Company is not entitled to hold or participate in the industry-specific Management System of Zarubezhneft JSC was approved (Minutes No. 133 dated skill championships under the WorldSkills championships on professional skills. December 27, 2016). standards • Zarubezhneft JSC supports the idea of holding championships under the WorldSkills 6. The Risks Management Policy of Zarubezhneft JSC was approved by the resolution In pursuance of Clause 1 of instructions standards and, in case there is a championship in the fuel and energy sector of the Board of Directors of Zarubezhneft JSC (Minutes No 112 dated No. Пр-1921 (Pr) of the President in the expertise area “Oil and Gas Production”, will take part in the competition. November 11, 2015). In 2016, the Risks Management Policy of Zarubezhneft JSC was of the Russian Federation dated • In order to develop professional expertise and increase motivation of the Group updated subject to the Guidelines for Organizing Risks Management and Internal Control September 21, 2015 employees, Zarubezhneft JSC annually holds a corporate contest of professional System as to Preventing and Combating Corruption, and approved by the resolution skills, “Best in Profession”, among the employees of the subsidiaries performing of the Board of Directors of Zarubezhneft JSC (Minutes No. 125 dated June 27, 2016). business activities in such segments as hydrocarbon production, and oil refining 7. The Regulation on the Procedure for Developing and Implementing the Innovation and transportation. Development Program of Zarubezhneft JSC was approved by Order No. 262 • The information regarding Zarubezhneft JSC professional skills competition to be held of Zarubezhneft JSC dated September 6, 2017 (previous editions were approved by Order under the WorldSkills standards was sent to the Federal Agency for State Property No. 623 dated December 30, 2015, and Order No. 541 dated November 16, 2015) Management by Letter No. ИЩ-503683 (IShch) dated September 17, 2019. 184 185 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

INFORMATION ABOUT THE NON- CORE ASSET DISPOSITION PROGRAM OF ZARUBEZHNEFT JSC

In pursuance of the requirements set forth in Decree No. 596 of the President of the Russian Federation dated May 7, 2012, as well The measures on sale of the non-core assets were taken on the basis of the documents approved by the Board of Directors as Decree No. 894-р(r) of the Government of the Russian Federation dated May 11, 2017 “On Identification and Sale of Non-Core of Zarubezhneft JSC, as follows: Assets”, in 2019, Zarubezhneft JSC took measures on disposition of the non-core assets possessed by Zarubezhneft JSC. • Non-Core Asset Disposition Program (Minutes No. 145 of the BD meeting dated November 27, 2017); • Register of Non-Core Assets (Minutes No. 166 of the BD meeting dated March 29, 2019); • Plan for Sale of Non-Core Assets (Minutes No. 166 of the BD meeting dated March 29, 2019).

In total, as of the end of 2019, 49 non-core assets were sold for a total amount of over 28.5 MM RUB (48 assets were sold through competitive bidding at public auctions and 1 non-core asset was liquidated). Information about Sales of Non-Core Assets for 2019

Item Asset name Asset inventory number (if applicable) The balance sheet line the asset was recorded Balance value Actual sales value Deviation of actual cost of sales The reason for the deviation of actual No. under on the reporting date prior to the sale of the asset (thous RUB) from the asset balance value cost of sales from the asset balance of the asset (thous RUB) (thous RUB) value 1 Track-type snow/marsh vehicle ZVM 004075 1150 0 331 +331 Sold by auction 2411GP Uzola 2 Tank semi-trailer NEFAZ (AE020373) 00000236 1150 0 57 +57 Sold by auction 3 Tank semi-trailer NEFAZ (AE020273) 00-000319 1150 0 61 +61 Sold by auction 4 Special-purpose bus, GAZ VM-3284 769 1150 169.3 169.3 0 Sold by auction 5 Motor vehicle UAZ-390945-360 00-000394 1150 0 29 +29 Sold by auction 6 Motor vehicle UAZ-390995 E251MO73 000-00000-000427 1150 131.7 132 +0.3 Sold by auction 7 Cable winding machine (trailer unit 00-000318 1150 84.7 92 +7.3 Sold by auction 8341(4333US73)) 8 Hyundai IX 35 351 000-00000-000491 1150 0 750 +750 Sold by auction 9 Ford Cargo 901 00000271 1150 1,031.6 1,031.6 0 Sold by auction 10 Ural PPU 344 00000012 1150 0 255 +255 Sold by auction 11 Ural-ADPM 346 00000010 1150 0 185 +185 Sold by auction 12 FORD CARGO 709 00000229 1150 643.4 668 +24.6 Sold by auction 13 UAZ-120290 763 00-000394 1150 88.5 93.5 +5 Sold by auction 14 GAZ 2705-505 00000180 1150 0 42 +42 Sold by auction 15 Kamaz 65116-62-418 101264 1150 229.6 570 +340.4 Sold by auction 16 Bus Peugeot 591 101316 1150 0 585 +585 Sold by auction 17 UAZ-390945 695 101203 1150 0 80 +80 Sold by auction 18 Chevrolet Niva 697 101372 1150 0 260 +260 Sold by auction 19 Lowboy ChM ZAP 0201 00000088 1150 0 130 +130 Sold by auction 20 KAMAZ 53504-46 779 00-000309 1150 466.7 880 +413 Sold by auction 21 VAZ LADA 4х4 2131 A313TP73 00000273 1150 0 70 +70 Sold by auction 22 UAZ Patriot, with cargo box, 390 000-101389 1150 227.2 267.2 +40 Sold by auction 23 Honda СR-V (Amer.) 181 101326 1150 0 805 +805 Sold by auction 24 GAZ articulating crane 335 00000048 1150 0 305 +305 Sold by auction 25 Honda CR-V 877 101248 1150 0 315 +315 Sold by auction 26 Mitsubishi Pajero 817 101178 1150 0 605 +605 Sold by auction 27 Heavy-duty semi-trailer 0917 101329 1150 274 395 +121 Sold by auction 28 KAMAZ 65116 tractor 374 101251 1150 132 260 +128 Sold by auction 186 187 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

Item Asset name Asset inventory number (if applicable) The balance sheet line the asset was recorded Balance value Actual sales value Deviation of actual cost of sales The reason for the deviation of actual No. under on the reporting date prior to the sale of the asset (thous RUB) from the asset balance value cost of sales from the asset balance of the asset (thous RUB) (thous RUB) value 29 Vacuum truck AKN (OSR; Oil Spill 000-101427 1150 1,341 1,595 +254 Sold by auction Recovery), on undercarriage, KAMAZ 284 30 Steam generating unit, 101200 1150 0 935 +935 Sold by auction on undercarriage, KAMAZ 43118-15 31 Suzuki Grand Vitara 313 00000253 1150 0 465 +465 Sold by auction 32 Toyota Avensis 619 У(U) 619 УР (UR) 199 1150 0 670 +670 Sold by auction 33 Toyota Avensis 380 000у(u)380вн(vn) 199 1150 0 556 +556 Sold by auction 34 Toyota Avensis 156 Н(N)156КР(KR)197 1150 0 693 +693 Sold by auction 35 Opel Insignia 612 000-01409 1150 0 419 +419 Sold by auction 36 Skoda Octavia (A32-M-840) А(A)32-М(M)-840 143100 96 339.5 +243.5 Sold by auction 37 Skoda Octavia (A24-O-374) А(A)24-О(O)-374 143100 0 293.4 +293.4 Sold by auction 38 Toyota Avensis У(U) 620 УР(UR) 199 1150 0 616 +616 Sold by auction 39 Toyota Avensis У(U) 621 УР(UR) 199 1150 0 614 +614 Sold by auction 40 Bus Mercedes 2008 0041514 143100 551 1,372 +821 Sold by auction 41 Bolster-type haulage tractor MAZ, 000-00000-000442 1150 1,500 640 –860 Sold by open auction (the sale below E368MO73 the balance value was approved by the BD of Zarubezhneft JSC, Minutes No. 166 dated March 29, 2019) 42 Cementing truck TsA-320, with pump 000-00000-000508 1150 1 429 2,053 +624 Sold by auction TsN-26-32, on undercarriage, Е911MO73 43 Tractor with dozer blade attachment 101371 1150 562 805 +243 Sold by auction B10M. 44 Bolster-type haulage tractor MAZ 000-00000-000444 1150 1,500 700 –900 Sold by open auction (the sale below No. E367MO73 the balance value was approved by the BD of Zarubezhneft JSC, Minutes No. 166 dated March 29, 2019) 45 Health complex, bathhouse/sauna, 27 64420 1150 11,687 5,662 –6,025 Sold by open auction (the sale below km. the balance value was approved by the BD of Zarubezhneft JSC, Minutes No. 166 dated March 29, 2019) 46 Bolster-type haulage tractor 00-000351 1150 1,041.8 535 –506.8 Sold by open auction (the sale below MAZ-6430V9-1420-010 the balance value was approved by the BD of Zarubezhneft JSC, Minutes No. 166 dated March 29, 2019) 47 Semitrailer MAZ АЕ02-07 00000064 1150 0 48 +48 Sold by auction 48 URAL 4320 ATs10 01S389 AS 00000019 1150 0 181 +181 Sold by auction 49 Arktik Drilling Limited Inc. - 1170 Not applicable Not applicable Not applicable Non-core asset was liquidated (18% of the authorized capital owned by AMNGR LLC)

In order to structure the sale way of sale of the non-core assets • Stage 4: Preparation of further Reports on sale of non-core assets across Zarubezhneft Group were considered quarterly at the meetings of the Board of Directors of non-core assets, Zarubezhneft through competitive procedures subject proposals for sale of non-core assets of Zarubezhneft JSC. JSC approved the Regulations to the requirements of the legislation (in the event if the above 3 stages on the Organization of Sale of Non-Core of the Russian Federation, as follows: have not identified a purchaser, Assets of Zarubezhneft Group (Order • Stage 1: Holding auctions/tenders; a range of proposals will be prepared No. 127 dated May 17, 2017), which • Stage 2: Sale by public offering; for possible transfer of the non-core provides for a detailed and phased • Stage 3: Sale with no price declared; asset for rent or pledge, gratuitous transfer thereof, etc.). 188 189 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

INFORMATION ON CLAIM INFORMATION ON MAJOR TRANSACTIONS ADMINISTRATION OF ZARUBEZHNEFT JSC CONCLUDED BY ZARUBEZHNEFT JSC IN THE FINANCIAL YEAR In 2019, Zarubezhneft JSC took • By the decision of the Arbitration in full, while in one case amounting part, as a defendant, in two court Court of the Murmansk Region, dated to 45,878 KM the claims of the minority In accordance with the Articles of Association of Zarubezhneft JSC and with account taken of the details of the Company’s cases on claims associated December 18, 2019, AMNGR JSC shareholder were satisfied. The remaining accounting (financial) statements, the major transactions in 2019 were those worth over 43.5 bln RUB. with labor relations (on recovery of wages claims as to invalidate Decision No. 2 cases are pending and no decision has and on compensation for moral damage) dated May 25, 2018 of the Murmansk been taken on them. In 2019, Zarubezhneft JSC concluded no major transactions. for the total amount of 3,240,223 RUB. Region Federal Tax Service The plaintiffs’ claims were denied in full. Interdistrict Inspectorate, adopted The reason for such lawsuits was the fact based on the field tax audit for 2014– that at the time of their filing, Nestro Petrol In addition, the Moscow Arbitration Court 2015, were partially satisfied. Against A.D. and Neftegazincor LLC (as affiliates) is considering four court cases raised the total amount of 35,366,594.41 RUB jointly owned more than 90% of the shares by applications of Zarubezhneft JSC of additionally assessed taxes of Modriča Motor Oil Plant A.D. INFORMATION ON RELATED-PARTY to challenge the decisions of the Federal plus fines and penalties, contested Tax Service Inspectorate No. 1 by AMNGR JSC, AMNGR JSC Legal subdivisions of the Subsidiaries for Moscow dated November 14, 2018 claims were satisfied in the amount defend the interests of Zarubezhneft JSC TRANSACTIONS CONCLUDED on the additional assessment of 24,865,656.23 RUB. through both judicial and extrajudicial of property tax for the period from Q1 procedures. The arising court BY ZARUBEZHNEFT JSC through Q4 2016, for the total amount The legal disputes regarding cases with their participation of 17,401,016 RUB, filed in connection the corporate relations involving BH are mainly related to the ordinary course with changes in the cadastral value Group Subsidiaries should be noted of business and pose no significant risk IN THE FINANCIAL YEAR of immovable property. These cases have as ongoing since 2013. to the financial and economic activities not been considered or decided upon yet. of Zarubezhneft Group of Companies. In 2019, the Company concluded no contracts/agreements whereto the regulations on related-party transactions would apply. In 2019, in particular, the District The results of certain large-scale court Commercial Court and the Main cases involving Zarubezhneft Group Court of Banja Luka considered court subsidiaries in 2019 should also be noted, cases on eight lawsuits filed as follows: by minority shareholders (legal • The Moscow Arbitration Court denied entities and individuals) against Nestro the claims of Gazstroymekhanisatsiya Petrol A.D. and Neftegazincor LLC LLC to Zarubezhneftestroymontazh for forced redemption of shares, as well LLC (defendant) for recovery of losses as on setting the redemption price in the amount of 31,734,017.74 RUB of shares of Modriča Motor Oil Plant A.D. under a construction contract (claims totaling 2,592,722.08 KM). (case No. A40-45179/2019 (A40)), by the decision dated June 7, 2019 Four court cases have been as left unchanged by Resolution 9 considered as of the date. In three of the Arbitration Appeal Court dated of the above cases, in the total amount September 6, 2019. The decision has of 1,925,371.46 KM, the court denied come into force. the claims of the minority shareholders 190 191 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

LIST OF PROGRAMS IMPLEMENTED INFORMATION ON THE AUDITOR BY ZARUBEZHNEFT JSC AS PART OF ITS OF ZARUBEZHNEFT JSC DEVELOPMENT STRATEGY AND LONG- ACCOUNTING STATEMENTS TERM DEVELOPMENT PROGRAM FOR THE FINANCIAL YEAR

• The updated Program of Innovative • The Labor Performance Enhancement • The activities of the Long-Term Zarubezhneft JSC annually engages In 2018, Nexia Pacioli LLC won The Federal Treasury, and the Self- Development of Zarubezhneft JSC Program was formed and included Development Program to accelerate external auditors for auditing the accounting the competition and became the RAS Regulatory Organization of Auditors for 2016–2020 (with potential prospects into the Long-Term Development the growth rates of investments (financial) statements prepared statements auditor. The cost of services (SRO) the auditor belongs to, regularly till 2030) was approved by the Board Program of Zarubezhneft JSC based in fixed capital of the Exploration under the Russian Accounting Standards. of Nexia Pacioli LLC on the audit exercise control over the auditor’s of Directors of Zarubezhneft JSC on Directive No. 7389п-П13 (p-P13) and Production segment were of the accounting (financial) statements activities. (Minutes No. 127 dated September 14, dated October 31, 2014 and approved approved within the scope of Annex Selection of the audit company for 2019 amounted to 708.0 thous RUB. 2016). by the Board of Directors (Minutes No. No. 14 to the Long-Term Development for the statutory audit of Zarubezhneft Besides, Nexia Pacioli LLC provided • Occupational Health, Safety, 97 dated February 27, 2015, No. 150 Program by the resolution of the Board JSC accounting (financial) statements audit services as to special purpose Environment Protection, Security dated February 22, 2018, and No. 163 of Directors of Zarubezhneft JSC for 2018–2019, prepared under the RAS, financial statements of Zarubezhneft and Social Responsibility Policy dated January 28, 2019). (Minutes No. 169 dated was carried out through an open tender JSC for 2018, in the amount of 180.0 of Zarubezhneft JSC (Minutes No. • A set of measures aimed at scheduled June 11, 2019). as per Federal Law No. 44-ФЗ (FZ) “On thous RUB, and services on auditing 133 of the meeting of the Board and phased replacement of procured Contract System in the Procurement the implementation of Zarubezhneft of Directors of Zarubezhneft JSC dated foreign production, work and services of Goods, Work and Services to Cover JSC Long-Term Development December 27, 2016). with equivalent Russian production, State and Municipal Demand” dated Program for 2018, in the amount • Performance Enhancement work and services was approved April 5, 2013. of 852.0 thous RUB. and Costs Optimization Program within the scope of Annex No. 8 of Zarubezhneft Group was approved to the Long-Term Development by the resolutions of the Board Program by the resolution of the Board of Directors of Zarubezhneft JSC of Directors of Zarubezhneft JSC (Minutes No. 127 dated September 14, (Minutes No. 147 dated December 19, EXTRACT FROM THE CONSOLIDATED 2016, No. 134 dated February 16, 2017, 2017, No. 150 dated February 22, 2018, and No. 150 dated February 22, 2018). and No. 169 dated June 11, 2019). FINANCIAL STATEMENTS OF ZARUBEZHNEFT GROUP LIST OF THE BYLAWS GOVERNING AND INFORMATION ON THE AUDITOR, THE ANNUAL REPORT PREPARATION FOR THE FINANCIAL YEAR

• Regulation on Internal Audit • Internal Control Policy • Regulations for Auditing Subsidiaries in Zarubezhneft JSC (approved in Zarubezhneft JSC (approved (approved by Order No. 409 Zarubezhneft JSC annually engages The winner of the tender and the auditor provided by Deloitte & Touche CIS JSC by the Resolution of the BD dated by the resolution of the BD dated June dated December 21, 2017). external auditors for auditing of the consolidated financial statements as to the audit of the consolidated November 20, 2018, Minutes No. 160). 26, 2016, Minutes No. 125). the consolidated financial statements of Zarubezhneft Group for 2019–2020 financial statements for 2019, amounted • Policy of Interaction between • Methodology for Planning prepared under the IFRS. Selection was Deloitte & Touche CIS CJSC. to 11,159 thous RUB. the Audit Committee under the Board and Conducting Internal Audits of the audit company for audit Deloitte & Touche CIS JSC performs of Directors of Zarubezhneft JSC (approved by Order No. 14 dated of Zarubezhneft Group consolidated quality control of audit engagements The independence of the auditor and an External Auditor (approved January 21, 2019). financial statements for 2019–2020 was as of and before the date of issue is confirmed by regular inspections by the Resolution of the BD dated carried out through an open request of the audit opinion, as well as inspection of the Federal Treasury and the SRO November 24, 2016, Minutes No. 131). for proposals as per the requirements and monitoring of quality of auditor’s the listed auditors belong to. stated in Federal Law No. 223-ФЗ documentation for the audits prior (FZ) “On Procurement of Goods, Work completed. The cost of the services and Services by Certain Types of Legal Entities” dated July 18, 2011. 192 193 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

EXTRACT FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ZARUBEZHNEFT GROUP PREPARED UNDER THE IFRS, FOR THE YEAR Consolidated statement of financial position as of December 31, 2019 ENDED ON DECEMBER 31, 2019, MM RUB Million, Russian RUB December 31, 2019 December 31, 2018 ASSETS Non-Current Assets Consolidated statement of profit and loss and other comprehensive income for the year ended on December 31, 2019 Property, plant and equipment 40,924 38,583

Million, Russian RUB 2019 2018 Investment in Joint Ventures 74,822 87,653 Revenue From Sales and Joint Operations Income Debt securities 4,230 - Sales of oil, gas and petroleum products 65,300 58,521 Deferred tax assets 1,104 1,629 Support services and other sales 9,521 10,996 Other non-current assets 3,028 2,296 Joint venture income 18,068 22,526 124,108 130,161 Total Revenue From Sales and Joint Operations Income 92,889 92,043 Current Assets Costs and Expenditures Inventories 4,427 8,943 Cost of purchased oil, gas and petroleum products (40,637) (35,953) Trade and other receivables 5,447 4,773 Business and operating expenses (15,512) (15,715) Dividends debt 5,111 9,383 Selling and marketing, general running, and administrative expenditures (6,236) (6,188) Taxes recoverable and tax prepayments 1,676 1,139 Taxes other than the profit tax (5,543) (5,336) Borrowings issued 4,160 4,458 Depreciation, depletion and amortization (4,606) (3,525) Debt securities 6,861 1,062 Transportation expenditures (2,600) (2,244) Deposits, cash and cash equivalents 35,387 32,836 Geological exploration costs (211) (118) Other current assets 1,146 1,086 Export duty (342) (655) 64,215 63,680 Other income/(expenses), net 2,209 (544) TOTAL ASSETS 188,323 193,841 Profit from operating activities 19,411 21,765 EQUITY CAPITAL AND LIABILITIES Expenditures on assets impairment, net (413) (6,977) Capital and Provisions Financial income 999 595 Authorized capital 50,729 50,729 Financial expenditures (806) (1,862) Other provisions 14,310 13,243 Currency differences, net (2,918) 4,042 Provision for translation to presentation currency 22,284 30,168 Profit before profit tax 16,273 17,563 Undistributed profit 57,624 51,873 Current profit tax (1,888) (4,030) Parent company shareholders’ equity 145,007 146,013 Deferred profit tax (932) (1,943) Minority shares (8,207) (9,485) NET PROFIT FOR THE YEAR 13,453 11,590 TOTAL CAPITAL AND PROVISIONS 136,800 136,528 Net profit/(loss) for the year, attributable to: Long-Term Liabilities • Parent company shareholder 13,310 11,837 Long-term loan liabilities 14,743 15,231 • Minority shares 143 (247) Long-term estimated liabilities 10,988 10,195 13,453 11,590 Deferred tax liabilities 5,716 5,320 OTHER COMPREHENSIVE INCOME/(EXPENSES) 31,447 30,746 Items Subject to Reclassification to Profits and Losses Short-Term Liabilities Effect of translation to presentation currency (7,257) 12,246 Short-term loan liabilities 6,441 10,975 Cash flow hedge result - 323 Trade and other payables 8,291 8,555 Other Comprehensive Income/(Expenses) for the Year less Profit Tax (7,257) 12,569 Short-term estimated liabilities 1,424 1,448 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 6,196 24,159 Tax liabilities 1,623 2,871 Other comprehensive income/(expenses) for the year, attributable to: Derivative financial instruments 186 1,327 • Parent company shareholder 5,426 24,960 Other short-term liabilities 2,111 1,391 • Minority shares 770 (801) 20,076 26,567 6,196 24,159 TOTAL LIABILITIES 51,523 57,313 TOTAL CAPITAL AND LIABILITIES 188,323 193,841 194 195 ANNUAL REPORT 2019 ABOUT STRATEGY COMPANY PERFORMANCE CORPORATE APPENDICES THE COMPANY REPORT IN 2019 GOVERNANCE

GLOSSARY CONTACT DETAILS

AG – additional goods IFRS – international financial reporting R&D – research and development Zarubezhneft JSC 101990, Moscow, Bldg. 1, 9/1/1 Armyansky per., Russian Federation Tel.: +7 (495) 748-65-00 standards Fax: +7 (495) 748-65-05 AIS – analytical information system RAS – Russian Accounting Standards E-mail: [email protected] IRD – internal regulatory documents Telex 113303 STEK RU APG – associated petroleum gas RMNTK – Russian Interdisciplinary https://www.zarubezhneft.ru/en/ IT – Information Tecnology Scientific and Technical Center Zarubezhneft JSC Branches in the Republic of Cuba ARPD – asphaltene-resin-paraffin Havana Regional Office Villa 4021, 5th Avenida St. Y 248, Marina Hemingway, Santa Fe, Havana, Cuba deposits JSC – joint-stock company ROE – return on equity Havana Branch Avenida 3rd between Streets 78 and 80, Miramar Trade Center, Havana Building, Floor 5, Miramar, Playa Municipal District, Havana, Cuba BP – business process JV – joint venture Jack-up – self-elevating drilling rig Tel.: (537) 204-01-33/36/38 E-mail: [email protected]

CPF – central production facility KFU – Kazan federal university SRO – self-regulatory organization Zarubezhneft JSC Representative Offices in the Socialist Republic of Vietnam (of auditors) Vung Tau Representative Office 3 Le Quy Don Street, Vung Tau, Vietnam CIS – commonwealth of independent KPI – Key Performance Indicators Tel.: (84-64-3) 85-2920 Fax: (84-64-3) 85-2387 states TOE – tons of oil equivalent E-mail: [email protected] KPSA – Kharyaga production sharing Hanoi Representative Office 360 Kim Ma Street, DAEHA Business Center, Hanoi DAEWOO Hotel, Office 302, Hanoi, Vietnam ERP – emergency response plan agreement UoM – unit of measure(ment) Tel.: (84-43) 771-9990 Fax: (84-43) 771-9993 ESP – electrical submersible pump LLC – limited liability company Upstream (segment) – production, E-mail: [email protected] intra-field transportation and primary FPM – formation pressure maintenance LTDP – long-term development program processing of hydrocarbons

Freight – the carriage charge payable MET – Mineral Extraction Tax VAT – value added tax for cargo transportation or using a vessel MPC – maximum permissible WHP – wellhead platform PWDU – preliminary water discharge unit concentration

HFF – hydraulic formation fracturing NTS – new technologies

HPF – hazardous production facility ORF – oil recovery factor

HSE – Health, Safety and Environment OSCP – oil spill contingency plan

IDP – innovative development program PSA – production sharing agreement 196 ANNUAL REPORT 2019

THANK YOU FOR YOUR ATTENTION!

Russian Federation 9/1/1 Armyansky Lane, Bldg. 1, Moscow, 101990, Tel.: +7 (495) 748-65-00 Fax: +7 (495) 748-65-05 [email protected] www.zarubezhneft.ru