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Annual Report 2020 ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

“Rosneft” and the “Company” mean Rosneft Oil Company PJSC either separately or together with its subsidiaries and affiliates, as the context may require. This Annual Report contains for- ward-looking statements that are subject to risks and uncer- tainties. The actual Rosneft results may differ materially from the information contained in the forward-looking state- ments due to a number of factors. To convert tonnes to barrels, a factor of 7.404 is used. To convert 1,000 cubic metres of gas to barrels of oil equivalent, an average factor of 6.09 is used. To convert Rospan’s gas condensate to barrels of oil equivalent, a factor of 8.3 is used.

ANNUAL REPORT CONTAINING INTEGRATED REPORTING ELEMENTS

Rosneft's 2020 Annual Report contains elements of integrated reporting as defined in the International Integrated Reporting Framework published by the International Integrated Reporting Council (IIRC). It aims to present the Company’s financial and non-financial results and sustainable development achieve- ments, highlighting the existing links between the competitive environment and Rosneft’s strategy, business model, risk man- agement and a clearly defined corporate governance structure. Since 2017, Rosneft has been involved in the activities of the IIRC business network, which seeks to develop fundamental principles of integrated reporting, while also contributing to and promoting the International Integrated Reporting Framework.

The Annual Report was approved by the General Shareholders Meeting on June 01, 2021 (unnumbered Minutes).

1 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

CONTENTS 4 SUSTAINABLE DEVELOPMENT Health, safety, environment. Climate change...... 176 Personnel and social programmes...... 185 Social and economic development of regions and charity in 2020...... 200 Company sponsorship activities...... 202 Energy efficiency and energy vingsa ...... 204 Message from the Chairman of Rosneft’s Board of Directors ...... 4 Localisation and development of industrial clusters...... 207 Message from the Chief Executive Officer and Chairman Supplier and contractor relationships...... 212 of the Management Board...... 6 Research, design, and innovations...... 216 COVID-19 measures: caring for our people is our top priority...... 8 Digital transformation...... 223 Assets and regions of operation...... 10 Mission and values...... 12 Investment case...... 13 5 CORPORATE GOVERNANCE Business model...... 14 Message from the Chairman of the Board of Directors...... 230 Company structure...... 16 Corporate governance...... 232 General shareholders meeting...... 236 STRATEGY Members of the Board of Directors...... 238 1 Executive bodies...... 252 Rosneft–2022 Strategy...... 20 Remuneration of members of the Board of Directors...... 264 Focus on sustainable development...... 22 Remuneration of the management...... 265 Committed to our consumers and environment...... 24 Civil liability for the members of the Board of Directors Carbon management plan for the period until 2035...... 25 and the management...... 266 Focus on digital transformation and technology...... 26 Managing possible conflicts of interest...... 266 Progress against strategic objectives...... 28 Audit commission...... 272 Long-term development programme and progress report...... 31 Risk management and internal control system...... 273 KPI structure...... 32 Investment program in 2020...... 34 6 INFORMATION FOR SHAREHOLDERS AND INVESTORS OPERATING RESULTS Share capital...... 286 2 Dividend policy...... 288 Key operating and financial results...... 40 Shareholder relations, key events in 2020...... 289 Rosneft’s exploration and reserve replacement...... 42 Institutional investor relations...... 292 Production of liquid ...... 50 Rosneft bonds and credit ratings...... 298 Overview of production in regions of operation...... 60 Information disclosure...... 300 Greenfield development projects...... 71 In-house oilfield services...... 80 projects...... 82 Gas business...... 86 Development of international projects in promising oil and gas regions.....98 Downstream (refining and marketing)...... 104 Appendix 1. (Consolidated financial statements Rosneft Oil Company for the year ended December 31, 2020 with independent auditor’s report Rosneft Oil Company)...... 301 Appendix 2. (Key risk factors)...... 310 3 MARKET OVERVIEW AND COMPETITIVE ENVIRONMENT Appendix 3.(Report on compliance with the principles and recommendations of the Corporate Governance Code)...... 314 Macroeconomic environment in 2020...... 138 Appendix 4. (Information on compliance with instructions issued by the President of the Russian Oil and gas industry overview...... 146 Federation and the Government of the Russian Federation)...... 335 Competitive analysis...... 158 Appendix 5. (Information on core internal regulations that serve as a basis for the preparation Overview of key taxation changes in the Russian Federation of this annual report, including key internal documents regulating the internal audit function with the largest impact on the Company’s financial and business and the functioning of the IC&RMS)...... 359 operations...... 169 Appendix 6. (Financial statements and auditor’s report)...... 361

2 3 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

of Directors approved the docu- The expansion of this programme Summing up the 2020 results, MESSAGE FROM THE CHAIRMAN ment in December 2020. Its key along with the use of innovative I would like to emphasise goals include preventing GHG technologies, including drones, Rosneft’s unique potential emissions of up to 20 mmt of CO laser and thermal imaging devices, and ability to stay the course OF ROSNEFT’S BOARD OF DIRECTORS 2 equivalent, reducing upstream and ultrasonic detectors, will help in today’s turbulent market envi- emissions intensity by 30%, cut- reduce the intensity of ronment. In these challenging ting methane emissions inten- emissions to below 0.25%. conditions, the Company effec- sity to below 0.25%, and achieving tively reinforced its financial posi- zero routine flaring of associated Rosneft accomplishments tion and laid a strong foundation gas. in reducing GHG emissions have for future projects. been recognized by interna- Rosneft is continuing its energy tional partners. We have signed saving and associated petroleum a cooperation agreement in car- gas (APG) utilization programme bon management and sustainable seeking to achieve zero routine development with our long- flaring of APG. Simultaneously, term partner and shareholder, the Company is planning BP. While signed in early 2021, to increase to 25% the share of gas the agreement was largely based in its production portfolio. on the decisions and initiatives that the Company was consist- We are working to optimize ently implementing in 2020. emissions from power genera- tion and further exploring ways As Rosneft Board Chairman to replace electricity produced I believe it is very important that by traditional combined heat the Company looks beyond 2035 and power units with power gener- to explore ways of achieving car- ated from low-carbon and renew- bon neutrality by 2050. able energy sources. A company’s ESG performance With capacity to use underground has become a key factor con- storage facilities and Rosneft sidered by investors. Rosneft’s own depleted fields for Carbon strong results across key ESG Capture, Utilisation and Storage metrics allowed the Company (CCUS) the Company is well posi- to continue developing interna- tioned to leverage its existing tional partnerships and cooperat- infrastructure for gas capture ing on promising projects. In 2020, Gerhard SCHROEDER and other CCUS purposes, includ- the Company scored a major suc- Chairman of the Board of Directors ing chemical neutralisation, trans- cess by attracting the world’s portation and storage of carbon. leading oil and gas companies and to joint DEAR SHAREHOLDERS In 2020, we significantly improved In 2020, Rosneft released Natural carbon capture has also projects. AND INVESTORS, our position on FTSE Russell’s an updated public statement been an important element ESG Index, which includes per- regarding the Company’s con- of the Company's effort to reduce Rosneft and Equinor closed In 2020, Rosneft worked con- formance in human rights, indig- tribution towards the UN its carbon footprint. The Company a deal in December, by which sistently to achieve its sustaina- enous support, workplace Sustainable Development Goals, has set an ambitious goal the Norwegian company acquired ble development goals. I am very conditions, and industrial safety its stance on human rights, to unlock the carbon capture 49% of the Krasnoyarsk Geological pleased that despite the global and health. FTSE Russel, a division and the Declaration on Respecting potential of ’s forests Research and Analytical Centre economic turmoil the Company of the Stock Exchange, Human Rights to be used by 2035 with a massive refores­ (KrasGeoNats). The latter owns 12 fully achieved its plans in this area. confirmed that Rosneft remains when interacting with suppliers tation and ecosystem preservation licenses for exploration and pro- a member of the FTSE4Good of goods, works and services. programme to fight emissions. duction of conventional reserves Therefore the Company's perfor- Index Series group of international in onshore areas of Eastern mance has been praised by major stock indices. It is encouraging Rosneft was first in Russia to pre- Rosneft is implementing a com- . international agencies. Rosneft to see and a great achievement pare a comprehensive Carbon prehensive programme to improve has been named Russia’s best by Rosneft and its employees that Management Plan for the period production processes and reduce Trafigura purchased oil and gas company in promi- we are ahead of 84% of partici- until 2035 with clear tar- methane emissions, which a 10% stake in LLC Vostok-Oil, nent ESG ratings from Refinitiv, pants in the ICB's international oil gets to reduce greenhouse gas are significantly even more harm- a promising project in the north

Bloomberg, as well as the CHRB. and gas supersector. (GHG) emissions. Rosneft Board ful for the environment than CO2. of the Krasnoyarsk Region.

4 5 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

invested more than RUB 164 bln and the Severo-Danilovskoye field, in the production segment were MESSAGE FROM THE CHIEF in APG utilisation at our produc- boasting the production potential introduced for the ongoing pro- tion assets. of over 45 mmb of liquid hydrocar- jects most affected by the OPEC+ EXECUTIVE OFFICER AND CHAIRMAN bons per year. production cuts. In the reporting year, Rosneft continued working consist- During 2020, Rosneft contin- Despite all the challenges, OF THE MANAGEMENT BOARD ently towards our 2022 strate- ued with its large-scale explo- Rosneft delivered solid net profit gic goals approved by the Board ration programme discovering in 2020, which reached record of Directors. Launching the Vostok three of the world’s largest oil RUB 324 bln in the fourth quar- Oil project marked a major mile- and gas fields: Zapadno-Irkinskoye ter and RUB 147 bln for the year stone both for the Company on the Taimyr Peninsula as a whole. The Company's free and the country’s economy, pav- and Marshal Zhukov and Marshal cash flow remained positive ing the way for the develop- Rokossovsky in the . in 2020 at RUB 425 bln, allowing ment of the world's largest oil The fields’ average resource poten- for consistent shareholder pay- and gas province in Russia’s north. tial is over 4 bboe. ments and servicing of debt. Vostok Oil’s potential is confirmed by thorough feasibility studies In the forth quarter of 2020, In the reporting year’s complex and analysis of geological data the Company increased daily market environment, Rosneft was and development technologies production of liquid hydrocar- able to promptly react to and suc- conducted by Rosneft special- bons and gas by 1.9% and 7.5% cessfully tackle the external chal- ists. Our findings are corroborated quarter-on-quarter respectively, lenges. This helped maintain by leading international experts. responding to positive changes and reinforce our leading positions Going forward, we plan to create in the market. With its state-of- in the energy market. I am confi- a new world-class cluster, the only the-art technologies, Rosneft dent that the decisions and strat- one of its kind today. can effectively manage the pro- egies implemented in 2020 will duction process. We can rapidly enable the Company to deliver The project’s key advantage is its boost production strong results across its business close proximity to the unique as the demand for oil recovers. sectors both in Russia and abroad. Northern Sea Route, enabling feedstock supplies to both Europe Unit OPEX in hydrocarbon pro- and Asia. Additionally, Vostok duction went down by 7.1% year- Oil will help increase cargo flow on-year in the fourth quarter along the route as prescribed of 2020 to USD 2.6 per boe, while by the Russian President. the annual rate was at USD 2.8 per boe, down by 9.7% year-on-year In 2020, Rosneft transformed (USD 3.1 per boe in 2019). and improved the quality Chief Executive Officer and Chairman of the Management Board of its production assets portfo- In 2020, Rosneft continued devel- lio. In particular, we sold some oping its gas assets, with gas of the depleted and high water- exceeding 20% in the Company’s DEAR SHAREHOLDERS the spread of COVID-19 that meet economy. Successful implemen- cut tail assets that were expen- total hydrocarbon production. AND INVESTORS, the world's best practices. We tation of the plan will cement sive to operate and had a low rate This is in line with the strat- monitor the situation on a daily our position as a leading player of return on invested capital. We egy to increase the share of gas In 2020, Rosneft significantly basis at all Rosneft facilities, in the global energy market also focused on large high-mar- in our production portfolio. strengthened its financial posi- with as many of our person- in the context of energy transition gin projects with quality reserves tion despite the pandemic-related nel as possible working remotely. and help maximise monetisation and low carbon footprint. In late In 2020, Rosneft spent restrictions and temporary cuts Strict observance by all employ- of the Company's proved reserves. 2020, Trafigura Group Pte. Ltd, RUB 785 bln in capital expendi- in oil production under the OPEC+ ees of anti-pandemic rules one of the world’s leading trad- tures, meeting the optimisation agreement we have committed and requirements helped pre- Rosneft is actively introducing ing companies, joined the ranks target for its CAPEX programme to in compliance with the govern- vent the spread of COVID-19 its own innovative technologies. of Vostok Oil’s shareholders – originally approved at RUB1 trln. ment directives. at our production facilities. One example of this is the pro- an important step towards the for- When deciding to opti- gress in Associated Petroleum mation of the project shareholder mise the CAPEX programme, The health and well-being We have developed a Carbon Gas (APG) utilization enabling structure. the Company's management of Rosneft employees is and has Management Plan for the period us to not only inject it into the res- remained conscious of the need always been our top priority. until 2035 that outlines a frame- ervoir, thus maintaining forma- In 2020, Rosneft launched to continue investing in new pro- We acted promptly to develop work for the Company's tran- tion pressure, but also to generate two new major projects – duction projects. It is worth not- and roll out measures to prevent sition to a low-carbon electricity. In recent years, we have the Erginsky licence area ing that the CAPEX reductions

6 7 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Well aware of the life and health Group and units Health, life risks posed by COVID-19 with a large number of people. COVID-19 MEASURES: CARING and workplace safety and the production risks that The Company has hired a dedi- of our employees come with anti-epidemic cated medical organisation that FOR OUR PEOPLE IS OUR TOP measures and restrictions, provides logistics and vaccination have always been we took active steps to pro- in accordance with the Ministry our highest priority tect our staff and contractors of Health’s requirements, includ- PRIORITY and ensured continuous operation ing preliminary medical check-ups of our production facilities. Our and follow-up observation. work organisation and planning efforts included, but were not lim- Given that the infection rate ited to, shift arrangements, strict across the Company is on a down- health and sanitary compliance, ward trend, the epidemiologi- quarantine and control meas- cal situation stabilised and mass ures, work zoning and oversight. vaccination began, in March 2021 We introduced compulsory med- Rosneft started a phased return ical examinations and provided of staff to offices. our staff with necessary personal protective equipment. The control measures were in line with statu- tory and corporate requirements and standards.

In early March 2021, Rosneft launched COVID-19 vac- cination for its employees. The Company received the first batch (50,000 doses) of Russian- made vaccine approved by the Russian Ministry of Health. To minimise the risk of infec- tion, we will first vaccinate staff at our major remote facilities such as , Vankorneft,

We care for our people We care for our business We care for our customers

Remote working introduced All Group Subsidiaries Length of breaks Production of two sanitiser and disinfectant for staff not involved 39 mln units 6.8 mln litres developed Plans between shifts components: ethanol and acetone in ensuring continuous of personal protective of disinfectants for offices of Priority Response increased to production equipment (PPE) and over and workplaces Measures to Ensure Business Continuity litres 60 and 90 days 680,000 and implemented kt of hand sanitisers 41.8 a set of initiatives of acetone and COVID-19 vaccination Regular testing: over to ensure production for employees We rolled out more than stability Strict compliance with sanitary 3.2 kt and to prevent of ethanol were sold domestically 780,000 tests and hygienic requirements the spread of COVID-19 250 observation units with over 21,500 beds Contactless payment solutions at filling and more than stations Support for medical institutions: funding 322 isolation and PPE supply units with 2,800 beds

8 9 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

ASSETS AND REGIONS OF OPERATION

Russia Norway

Belarus Germany Kazakhstan Italy Kyrgyzstan 23 countries of operation

Egypt Qatar 78 regions of operation Myanmar in Russia

Vietnam 6% share in global oil production Indonesia 13 refineries in Russia Brazil

Mozambique

Average hydrocarbon production growth in 2010– Hydrocarbon production in 2020, mmboe per day Hydrocarbon production costs in 2020, USD per boe Hydrocarbon reserves, bboe as at 1 January 20211 2020, % 5.2 152 7. 5 4.4 1.0 11.1 11.6 3.8 3.5 3.4 10.1 53 3.0 1.9 2.8 8.5 1.4 1.4 2.1 6.4 6.8 1.6 1.1 0.5 59 54 2.8 54 45 4.1 0.5 3.7 99 45 32 2.8 23 27 1.1 0.9 2.5 2.3 1.8 2.3 26 27 2.1 1.9 1.7 26 24 8 3 0.2 0.1 36 28 27 19 21 24 23

-0.7 -1.0 -1.7 Hydrocarbon liquids Hydrocarbon liquids Gas Gas

Sources: company reports; Wood Mackenzie (). Source: company reports for 2020. Source: company reports for 2020. 1 Data on Rosneft is provided according to the Russian resource classification system (АВ1С1+В2С2) as at 1 January 2021, data on other companies is based on Wood Mackenzie’s appraisal and includes commercial and sub-commercial reserves.

10 11 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

MISSION AND VALUES INVESTMENT CASE

Rosneft is a national oil industry leader and the largest publicly-traded company in the world.1

Our mission is to unlock energy potential through the development of projects in Russia and abroad, ensure energy , and promote the sustainable use of natural resources Efficient capital Sustainable management shareholder returns and strong potential USD 9.7 bln decrease in net debt % BUSINESS PRINCIPLES 50 of net income: dividend payout ratio >35% reduction in general and administrative 70% expenses of investments banks have a Buy recommendation for Rosneft shares3 % 2 • 24 • Focus on the ESG agenda Strong project management Vostok Oil interest expense savings • Commitment to the UN Sustainable • Maintaining operational leadership large-scale project, strong upside potential for the Company Development Goals • Ensuring high shareholder returns

Positive Total shareholder return financial result (TSR)

in 2020 despite the decline in oil prices MOEX • Commitment to strong business ethics Brent • Digitalising the entire business 0.8 Oil and Gas and production restrictions Сompetitors Index • Growing a talent pipeline and creating a sustainable and organisational capabilities technological advantage Rosneft • Fostering in-house research and development RUB 425 bln free cash flow -9.6 -11.8

RUB 147 bln net income -25.3

1 In terms of production volumes among publicly-traded companies listed on western stock exchanges. 2 ESG (environmental, social, and corporate governance). 3 Share of investment banks that recommended to buy or hold Rosneft shares/GDRs as at the end of 2020

12 13 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors BUSINESS MODEL

CAPITAL1 CAPITAL resources OIL AND GAS OIL REFINING COMMERCE FINANCIAL results PRODUCTION AND AND LOGISTICS PERFORMANCE Major resource base Modern and environmentally Effective trading Strong performance FINANCIAL and modern production friendly refineries and wide retail and stable profits FINANCIAL assets network RUB 785 bln RUB 1,209 bln investments EBITDA

SOCIAL Crude oil, mmt Oil refining, mmt Oil sales, mmt Revenue, RUB bln 21% AND REPUTATIONAL EBITDA margin 23 RUB 147 bln countries of operation net income

SOCIAL HUMAN 226 104 121 2,249 AND REPUTATIONAL 356,000 oil RUB 2.4 trln. qualified employees2 fiscal payments

Hydrocarbon liquids 193 In Russia 93 In Russia 5 RUB 5.6 bln Abroad production⁴ 11 Abroad 115 charity INTELLECTUAL Crude oil purchases in Russia 14 Crude oil purchases abroad 19 31 Petroleum products, mmt Petroleum products sales, mmt R&D and design institutes HUMAN #1 employer in Russia’s oil industry NATURAL Crude oil 105 104 RUB 28 bln RUB 42 bln Exploration allocated for social projects green investments 3,066 petroleum PRODUCTIVE Gas products INTELLECTUAL In Russia 38 Production in Russia 90 technologies Abroad 64 64 72 #1 Production abroad 11 patents implemented Petrochemicals 2 worldwide Purchase 3 issued and rolled out by production volume3 Stakes in 13 Gas, bcm Gas sales, bcm NATURAL refineries 6 refineries in Russia Abroad 73 767 kt of СО eq. 2 petrochemicals reduction of GHG emissions5

1.3 mmt 68 68 Euro-6 production 240 gas PRODUCTIVE

1 138% 38 mmt Definition and list of capitals Gas production⁴ 58 as per the International Integrated In Russia 52 reserve motor Reporting Framework published Gas purchases 10 Abroad 4 replacement output 4 129 by the International Integrated Production by subsidiaries Internal consumption, etc. 12 ratio (SEC) Reporting Council (IRCC) and proportionately consolidated other 2 Headcount as at 31 December 2020 companies 5 Effect from the Energy Saving 3 Listed on Western stock exchanges Programme

15 14 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

COMPANY STRUCTURE

Upstream Downstream

EXPLORATION Russia Norway Myanmar REFINING Russia Oil plants JSC Neftegorsky Gas Processing Plant LLC RN-Exploration RN Nordic Oil AS Bashneft International B.V. JSC Angarsk LLC Novokuibyshevsk Oils LLC Tuimazinskoye Gas LLC RN-Shelf Arktika Company and Additives Plant Iraq Mozambique Processing Plant LLC NK Priazovneft JSC Achinsk Refinery VNK PJSC LLC Shkapovskoe Gas LLC Bashneft-Petrotest LLC RN-Komsomolsk Refinery Rosneft – MP Nefteprodukt Bashneft International B.V. RN Angoche Pte. Ltd. Processing Plant LLC Vostok Oil RN Zambezi North Pte. Ltd. JSC Novokuibyshevsk Refinery Iraqi Kurdistan Petrochemicals LLC RN-Buzulukskoye Gas RN Zambezi South Pte. Ltd. JSC Kuibyshev Refinery USA and catalysts Processing Plant LLC RN-BVK JSC Syzran Refinery Neftegaz Holding America Limited RN-Batil Pte. Ltd. LLC RN- Refinery JSC Angarsk Polymer Plant Germany RN-Zawita Pte. Ltd. PJSC Saratov Refinery JSC Angarsk Plant of Catalysts Brazil Rosneft Deutschland GmbH JSC Oil Refining and Organic Synthesis RN-Qasrok Pte. Ltd. PCK Raffinerie GmbH Rosneft Brasil E&P LTDA RN-Harir-Bejil Pte. Ltd. Company JSC Novokuibyshevsk RN-Darato Pte. Ltd. LLC Nizhnevartovsk Oil Refining Petrochemical Company Association LLC Novokuibyshevsk Catalyst OJSC Mozyr Refinery PJSC Slavneft-YANOS Plant SERVICES Integrated Refinery PJSC Ufaorgsintez Ukraine Russia (Bashneft-Ufaneftekhim, Bashneft-Novoil Gas processing PRJSC LINIK LLC RN-Service and Bashneft-UNPZ) JSC Otradnensky Gas LLC RN-Bureniye Processing Plant LLC RN-GRP LLC Intellectualnye Sistemy

SALES Russia PJSC Rosneft-Karachaevo- Kyrgyzstan Cherkessknefteprodukt CJSC RN-Kyrgyznefteprodukt LLC RN-Morskoi Terminal Nakhodka LLC RN-Ingushnefteprodukt LLC RN-Vostoknefteprodukt PJSC Armenia PRODUCTION Timan- Eastern Siberia LLC RN-Morskoi Terminal Rosneft-Yamalnefteprodukt LLC Petrol Market LLC Bashneft- JSC Verkhnechonskneftegaz Rosneft Vietnam B.V. LLC RN-Severo-Zapad CJSC Rosneft-Armenia JSC Vankorneft LLC RN-Morskoi Terminal Tuapse JSC Belgorodnefteprodukt Far East Canada JSC Vostsibneftegaz LLC RN-Krasnoyarsknefteprodukt JSC Irkutsknefteprodukt Georgia JSC Orelnefteprodukt -1 LLC RN-Vankor RN Cardium Oil Inc. LLC RN-Novosibirsknefteprodukt JSC Penzanefteprodukt Petrocas Energy JSC RN-Shelf-Far East LLC Taas-Yuryakh LLC RN-Chechennefteprodukt International Neftegazodobycha Egypt PJSC Rosneft-Altainefteprodukt JSC Tomsknefteprodukt VNK JSC Rosneft-Kubannefteprodukt LLC RN- Limited Western Siberia JSC Suzun Upstream Projeсts Pte. Ltd. LLC RN-Aero LLC RN-Yuganskneftegaz LLC Tagulskoye PJSC Tulanefteprodukt LLC RN-Purneftegaz JSC Bratskekogaz PJSC Rosneft-Kurgannefteprodukt JSC RN-Rostovnefteprodukt JSC Tomskneft VNK PJSC Rosneft-Smolensknefteprodukt Volga-Urals LLC RN-Bunker LLC RN-Uvatneftegaz PJSC Rosneft-Kabardino-Balkaria JSC Kaluganefteprodukt JSC Samotlorneftegaz JSC Samaraneftegaz Company JSC Ryazannefteprodukt JSC Rospan International OJSC Udmurtneft OJSC Rosneft-Artag JSC Karelianefteprodukt JSC RN-Nyaganneftegaz JSC Orenburgneft LLC Bashneft-Roznitsa PJSC Saratovnefteprodukt JSC Sibneftegaz LLC Bashneft-Dobycha JSC Rosneft-Murmansknefteprodukt JSC RN-Yaroslavl LLC Kynsko-Chaselskoye JSC RN- LLC RN-Chernozemye Neftegaz JSC Bryansknefteprodukt JSC Voronezhnefteprodukt JSC Uralsevergaz JSC Tyumenneftegaz LLC RN-Krasnodarneftegaz JSC Lipetsknefteprodukt JSC Messoyakhaneftegaz OJSC Grozneftegaz Belarus JSC Ulyanovsknefteprodukt PJSC NGK Slavneft LLC RN-Stavropolneftegaz JSC Samaranefteprodukt FLLC RN-Zapad LLC Sorovskneft JSC Rosneft-Dagneft JSC Buryatnefteprodukt JSC Yugraneft Corporation JSC Dagneftegaz Mongolia LLC Kharampurneftegaz JSC Tambovnefteprodukt JSC Kondaneft JSC Khakasnefteprodukt VNK LLC Rosneft-Mongolia LLC SKN JSC RN- LLC Mergevan JSC Rosneft-Stavropolye

16 17 1 STRATEGY ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Igor SECHIN, Chief Executive Officer and Chairman of the Management Board ROSNEFT–2022 at Rosneft:

In spite of the challenges of 2020, we kept our principles unchanged and achieved success across the key metrics of the Rosneft–2022 STRATEGY Strategy. The Company reaffirms its commitment to the reasonable use of resources by combining robust production efficiency and adherence to the sustainability principles.

CORE STRATEGIC PRIORITIES ACHIEVEMENTS IN 2020 A NUMBER OF STRATEGIC GOALS DELIVERED AHEAD OF THE SCHEDULE USD 2.8 per boe leadership in upstream unit OPEX Share of horizontal wells Lower well costs3 ENHANCING YIELD RUB 22.6 bln effect from operational efficiency and efficiency of existing Rosneft programmes in oil refining

assets and petrochemicals 68% 15% 2020 actual 2020 actual

2 40% 10% greenfields came on stream1 2022 target 2022 target ENSURING DELIVERY 23.7 mmt production at key projects high quality project management Faster horizontal drilling4 Longer well operation times between repairs5

>RUB 40 bln % % 2 16 13 innovations impact 2020 actual 2020 actual TRANSFORMING CULTURE 72 AND TECHNOLOGICAL new technologies

CAPABILITIES implemented and rolled out 5% 10% to further sharpen 2022 target 2022 target the competitive edge

3 Оn a comparable basis since the strategy launch. 1 The Erginsky licence area and the Severo-Danilovskoye field. 4 Faster horizontal drilling using the in-house service in comparable conditions. 2 The 2020 combined proven economic effect from the Target Innovative Projects implemented over the last three years. 5 Since the strategy launch.

20 21 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

FOCUS ON SUSTAINABLE DEVELOPMENT

Target 2020 result

Ensuring global leadership in accident-free operations, safe workplace conditions, protecting health of local residents in the regions where the Company operates, and minimising the environmental footprint.

RUB 42 bln 767 kt of СО2 eq green investments reduction in GHG emissions

14% reduction in gross air pollutant emissions

Strengthening environmental and social responsibility positions

Integrated approach 1.5 mln trees to sustainable development planted as part of forest conservation Gas investment programme Energy saving programme >70 mln fingerlings 21 0.4 mmtoe THE ROSNEFT–2022 STRATEGY FOCUSES ON ENSURING THE COMPANY'S LEADERSHIP released into Russian rivers new APG utilisation facilities energy savings within IN MINIMISING THE ENVIRONMENTAL FOOTPRINT AND PROMOTING ECO-FRIENDLY to support reproduction the programme PRODUCTION of aquatic biological resources PRESERVING THE ENVIRONMENT FOR FUTURE GENERATIONS IS AN INTEGRAL PART OF OUR CORPORATE CULTURE Environmental efficiency Marine biodiversity improvement programme conservation programme

94% RUB 119 mln share of recycled and reused investments within water the programme

22 23 ROSNEFT / ANNUAL REPORT 2020

CARBON MANAGEMENT PLAN COMMITTED TO OUR CONSUMERS FOR THE PERIOD UNTIL 2035 AND ENVIRONMENT In pursuing its climate agenda, Rosneft focuses on protecting the environment in line with Russia’s Energy Strategy to 2035 and the Agreement goals.

In 2020, we approved the Carbon Management Plan for the period until 2035 underlying Our eco-friendly solutions our environmental agenda to contribute to low-carbon economy. It covers climate risk management and seeks to unlock opportunities associated with future demand for energy. PULSAR branded gasoline Compressed The Carbon Management Plan also seeks to find potential ways of achieving carbon neutrality eco-friendly fuel with minimum exhaust gases ensures clean fuel system by 2050.

4 regions 19% 33 regions >1,100 filling sales sales growth sales stations 2035 targets Planned emission reduction initiatives

Greener motor oils RMLS (low-sulphur marine fuel) Reducing emissions • Analysis, development and piloting of technology solutions complies with the latest MARPOL standards for , production and use of blue hydrogen reduce fuel consumption and make exhaust at our refineries mmt gases less toxic -20 0.6 mmt of СО eq. • Further progress of our Energy Saving Programme ('continuous production 2 improvement’)

Cutting the methane • Cutting-edge technologies for APG injection and utilisation Efficiency and eco-friendliness emissions intensity • Potential offered by underground storage facilities, depleted fields Use of renewable energy sources and their infrastructure <0.25% • Rosneft is considering the use of renewable energy sources in greenfield projects

• We intend to cut the methane emissions intensity by implementing СО2 upstream unit emissions innovative technologies, including: – drones % – laser and thermal imaging devices -30 – scanning technologies – ultrasonic detectors

EVs Euro-6 – greener fuel Routine flaring Zero routine flaring of associated petroleum gas will be achieved Charging points 1.3 mmt produced of associated petroleum gas through further implementation and augmentation of the gas at filling stations in6 regions Sold at 750 filling stations 0 investment programme CNG advantages Euro-6 fuel advantages

Natural absorption additionally lowering emissions S NOx CO S

Biosequestration Unlocking the biosequestration potential of Russia’s forests no sulphur no benzene -52% -53% less sulphur less benzene -24% less engine less engine less impurities and a massive reforestation and ecosystem preservation pro- hydrocarbon and catalytic deposits emissions converter wear gramme will open up additional opportunities to offset green- house gas emissions.

24 25 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors >RUB 40 127 72 FOCUS ON DIGITAL TRANSFORMATION bln technologies technologies of effect from target innovative tested in 2020 implemented and rolled out AND TECHNOLOGY projects implemented in 2020 over the last three years

Target 2020 result

Advanced technology powering Upstream Oil Refining and Petrochemicals Downstream sustainability initiatives

Digital Field, remote drilling and production Digital Plant Digital and Digital Supply Chain • We developed a technology for producing eco- control centres, IIoT, Big Data programmes friendly drilling fluids from vegetable oils using Rolling out biodegradable components 6 refineries the standard solution • Digital field management1 rolled out advanced for optimised blending ~1,500 filling stations • We successfully pilot tested a set of innovative process management of heavy petroleum connected to the remote fuel payment service technologies and tools to identify and quantify systems >17,000 products at methane leaks surface infrastructure facilities digitalised refineries Automation and robotisation as part of digital field management 5 • The trials of a unique microbial agent based on indigenous psychrophilic microorgan- 24 digital twins +38 oil depots isms for eliminating hydrocarbon pollution 15% 40% of process units designed and upgraded automated measurements in the marine environment and cold climate reduction in in-shift oil reduction in costs at refineries began losses related to on-site • of material flows at filling stations response interventions ~100% into reservoir pressure • Production process engineering models and ca. 90% oil depots covered with measuring • To enhance industrial safety, we are imple- 36% maintenance system are being introduced, a system for optimised instruments menting a pilot computer vision platform, Reduction in logistics mixing of heavy petroleum products put into which automatically detects people in haz- costs operation • We implemented a dedicated automation sys- ardous areas, checks whether they use per- tem for retail filling stations sonal protective equipment, and notifies of any emergencies Enhancement of in-house technology capabilities Global asset performance management system to extend functional operation times between • We tested software robots designed to manage repairs inventories and procurement procedures • Pilot testing of an APG desulphurisation plant 55 t per day using a microporous membrane technology in a flow mode (or 6.8 t per day per The Meridium-based system to improve the effi- began stage) of the average ciency of process equipment performance man- initial flow rate for MSHF horizontal wells agement for comprehensive monitoring of critical • The Company developed a commercial tech- in the RN-Yuganskneftegaz's Bazhenov suite equipment began pilot operation nology to manufacture dispersant compo- sitions to be used in emergency oil clean-up >21,000 operations at sea hydraulic fracturing operations carried out using the RN-GRID hydraulic fracturing simulator during strategy implementation • A low-permeability reservoir development tech- nology involving the use of horizontal production and injection wells and multi-stage hydraulic fracturing was deployed

• A new software module, Decision Support in Development of New Areas of Low-Permeable Reservoirs, was added to the RN-KIN corporate software package.

1 Based on the results of implementation at a pilot Bashneft site

26 27 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PROGRESS AGAINST STRATEGIC OBJECTIVES Improved performance

Target EXPLORATION AND PRODUCTION 2020 result Optimise capex (by 10% for similar well design, by 10% for linear Optimise opex (by -2–3% per objects) year on a comparable basis)

14.8% 2.8 USD/ 100% liquid hydrocarbon reserve replacement ratio and organic growth reduction of production well construction costs on a comparable basis Maintaining leadership since the strategy launch in upstream unit OPEX Increase the success rate Optimise Russian onshore field of onshore exploration drilling development (increase the share Commission large-scale Engage in partnerships for capital intensive and high risk projects in Russia of new horizontal wells) projects on time and on budget

Exploration leadership • Equinor: a deal to jointly develop East Siberian fields 15.2 mmt 2 production increase due to new greenfields came on stream – 19 well start-ups the Erginsky licence area 1 new fields and the Severo-Danilovskoye field 208 68% GAS new deposits share of horizontal wells A stronger impact of base production recovery measures 2 btoe 1.1 thousand hydrocarbon reserves new horizontal wells drilled using Commissioning projects on time and on budget discovered in 2020 multi-stage hydraulic fracturing In the future techniques Implement major gas production projects, including Rospan 10.8 mmt and Kharampur Monetise gas reserves within recovered base production Eastern Siberia and the Far Fast-track the development of new reserves based on viability volume • Rospan: construction of the first • Kharampur: East start-up complex completed – Construction (launch in Q1 2021) and installation over 40% Efforts are ongoing 23.7 mmt 5% 6.5% complete to provide access to local gas production at key projects an increase in production increase in base production – Fist stage of connecting transportation infrastructure at key projects per well to Gazprom pipelines and find sales markets completed

More efficient service Increasing technological edge Reduce time by 5% Ensure a high share of in-house Decrease non-productive time on a comparable basis services Increase APG utilisation, including through the development Develop liquid petroleum gas of captive power generation and petrochemicals (LPG) and natural gas liquids (NGL) production <5% 13% 59% maintaining a low proportion reduction of share of in-house services >98% 21 A positive opinion of the Main of the non-productive drilling time in the Company’s total drilling APG utilisation new APG utilisation facilities Department of State Expert time metreage at Samotlorneftegaz Evaluation for all construction and Vankorneftegaz stages of the Maisky gas Hydraulic fracturing fleets 15.6% processing complex obtained expanded to 19 units reduction of horizontal drilling Procurement documents time Develop Turonian deposits drafted 21 Design and survey commenced to ensure the full-scale development hydraulic fracturing fleets of the Turonian deposit

Due to production restrictions set by the OPEC+ deal and the sale of production assets, some quantitative strategic production targets became outdated.

1 Including 17 onshore and 2 offshore fields

28 29 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

OIL REFINING AND PETROCHEMICALS LONG-TERM DEVELOPMENT Substantial profitability growth PROGRAMME AND PROGRESS REPORT Complete ongoing refinery development projects in Russia Originally developed in 20143, Performance indicators include The Programme envisages to substantially increase Increase efficiency and optimise opex (by 2–3% per year profitability on a comparable basis) the Long-Term Development an integrated KPI for innovations. a reserve replacement ratio Programme (the Programme) of at least 100%, efficient brown- 4 Refinery development projects RUB 22.6 bln is subject to annual updates . Rosneft’s Investment Programme field operation and production in Russia continued 2.2% aims to help the Company ramp-up driven by new projects effect from operational efficiency decrease in opex In 2020, we revised achieve its strategic objec- in Eastern Russia, development Most projects are in the active programmes in oil refining stage: the bulk of equipment has and petrochemicals the Programme, taking into tives stipulated in the Strategy of hard-to-recover reserves, gas been purchased, construction account the Company’s perfor- and the Programme (Investment output growth secured by a long- and installation are in progress mance results and action plans Programme in 2020 section) in key term high-performing sales port- to achieve certain long-term business areas. folio, and stronger margins across goals and updated initiatives the entire value chain. drafted pursuant to the Russian We completed the Programme's COMMERCE, LOGISTICS AND RETAIL Government directives5. key initiatives planned for core In implementing the Programme, The updated Programme was businesses and functional units we focus on cost effective- approved by the Company’s Board for 2020. For the Programme out- ness and KPI targets for all key Commerce and logistics of Directors (Minutes No. 14 dated comes in 2020, see the Operating initiatives. 21 December 2020). results section. Improve the cost efficiency Adjust the product mix of sales and access to end Expand and diversify distribution to market trends by marketing The Programme details Ernst & Young LLC, an independ- consumers (domestic/export channels (jet fuel, marine fuels, new products (bitumen, marine the Company’s strategic focus ent auditor, has completed its sales) and lubricants) fuels) areas, targets and goals for all engagement and provided assur- business areas and corporate ance about Rosneft's Long- • Aircraft fuelling with jet fuel • 110% – Polymer modified functions. It also includes Term Development Programme 14% started at 5 airports of Russia, bitumen sales growth1 a list of key initiatives to achieve Progress Report and achievement increase in the sales of motor Europe and Asia • 0.6 mmt of the new residual the strategic goals and implement of the key performance indicators oils for passenger cars thanks • Marine fuel sales started marine low sulphur (RMLS 40) the strategy in the medium term. in 2020. The opinion was received to stronger retail sales at the St Petersburg fuel used in bunkering on April 20, 2021. International Mercantile The main priorities, key per- Exchange formance indicators (KPIs) and actions plans under the cur- Retail rent Innovation Development Programme, Import Substitution and Equipment Localisation Promote strong brands and service Expand non-fuel business excellence at filling stations (introduce new categories of goods) Programme, and Energy Saving Programme take into account Expansion of non-fuel • the Programme provisions services at filling stations 9% 600+ and are integrated into the cur- growth in sales of petroleum filling stations fitted with equipment through the installation rent version of the document. products through the retail channel for making hot dogs, sandwiches, of post lockers and carwash since 2017 and hot beverages robotics Develop customer proposition at filling stations Rosneft is the No. 1 (programme and use of fuel cards) most recognised brand2

Improve performance

and optimise costs 15.5 mln people 1.7 mln holders engaged through loyalty programme of virtual loyalty cards

% 2.5 1 mln 3 optimisation of expenses In accordance with Instruction of the President of the Russian Federation No. Pr-3086 dated 27 December 2013; approved people hold fuel cards. Virtual fuel card by Rosneft's Board of Directors on 9 December 2014 (Minutes No. 12). on a comparable basis 4 service up and running In accordance with the Russian Government Directive No. 4955p-P13 dated 17 July 2014 and the Long-Term Development Programme. 5 1 No. 4955p-P13 dated 17 July 2014, No. 7558p-P13 dated 12 November 2014, No. 1346p-P13 dated 5 March 2015, No. 2303p-P13 dated 16 April Polymer modified PMB and PG. 2015, No. 7389p-P13 dated 31 October 2014, No. 1472p-P13 dated 3 April 2016, No. 4531p-P13 dated 28 June 2016, No. 4750p-P13 dated 2 Based on 2020 marketing research. 4 July 2016, No. 830p-P13 dated 6 February 2017, No. 276p-P13 dated 17 January 2019, No. 6739p-P13 dated 30 July 2020.

30 31 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

KPI STRUCTURE KPI PROGRESS To calculate annual bonuses resolutions regarding annual with the Regulations on the KPI for managers and employees, bonus payments and their size Normalisation Procedure Related The Company’s KPI system seeks to decompose the Company’ Development Strategy and its the Company analyses progress depending on the management's to Management Performance Long-Term Development Programme into specific KPIs, cascade them to all management levels, against KPIs following the review progress against KPIs. Review and Assessment evaluate progress against targets, and create incentives for efficient management decision- of the annual performance based in the Reporting Period making. A strong motivation tool for employees, KPIs ensure a step-by-step achievement on the management accounts Target KPIs are normalised to Calculate Annual of the Company’s strategic goals. and audited public financial to reflect the factors beyond Bonuses1 and the Guidelines statements. the management’s control, for KPI Normalisation Related such as FX volatility and global to Performance Review against 2 Development Strategy Long-Term Development Programme The Company’s Internal Audit market prices in accordance Business Plan . Service annually assesses the performance against cor- Actual KPI progress for the Company and Chief Executive Officer porate and individual KPI in 2019–2020 set for calculating annual Business plans Business plans Consolidated business KPI 2020 Progress in 2020 Progress in 2019 of Group Subsidiaries of business units plan bonuses for the management (actual) of the Company and Group Return on average capital • Collective KPIs of the Group • Collective KPIs of businesses • Corporate KPIs Subsidiaries. The audit results 6.9 Above target Above target Subsidiaries • Individual KPIs of the Company's • Individual KPIs of the Chief employed (ROACE), % for top managers are subject • Individual KPIs of Group top managers responsible Executive Officer Subsidiaries’ senior management for the performance of businesses to review by the Board of Directors’ Financial leverage (net debt / 2.4 Above target Above target HR and Remuneration Committee. EBITDA)3

Top manager assessment Injury rate, % 93 Above target Above target results are discussed by the HR and Remuneration Committee Assessment of progress against KPIs 4 of the Board of Directors. Integrated KPI for innovations ХХ On target On target The Board of Directors makes

The KPI system ensures: • corporate KPIs based • hydrocarbon production rate; • focus on implementing the strat- on the key financial, economic, • accident rate; egy and meeting the targets set and industry-specific indicators • workforce productivity; in the Long-Term Development from the Company’s consoli- • TSR equal to or above Programme; dated business plan and busi- the Russian industry's average; • focus on consistently improv- ness plans of its business units; • cost reduction vs the previous ing the Company’s financial • individual KPIs based on individ- reporting period on a compara- and operating (industry-specific) ual strategic goals for each top ble basis; results; executive. • financial leverage (net debt / • compliance with directives EBITDA); and instructions of federal exec- KPIs and targets for the senior • integrated KPI for innovations; utive bodies, including annual management are set by Rosneft’s • compliance ratio cost-cutting targets; Board of Directors on an annual as regards instructions • well-balanced integrated indi- basis subject to preliminary dis- from the Board of Directors cators motivating employees cussion by the relevant committee. and the Management Board. to achieve the Company’s main goals; Based on the current business • transparency, measurability, min- plan, the 2020 KPIs for Rosneft’s imum sufficiency, and consist- top managers were adopted ency of KPIs; by the Board of Directors • a top-down approach to cascad- on 16 March 2020 (Minutes No. 16). ing and breaking down KPIs. Corporate KPIs and the individual With both financial and indus- KPIs of the CEO for 2020 include: try-specific KPIs in place, the sys- • return on average capital 1 tem includes: employed (ROACE); Approved by the Board of Directors (Minutes No. 27 dated 6 April 2015). 2 Approved by No. 730 dated 12 December 2019. 3 In RUB. 4 Based on the management accounts.

32 33 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

INVESTMENT PROGRAM IN 2020 UPSTREAM In 2020, Upstream capex totalled and offshore fields amounted We use the industry best man- RUB 706 bln. These investments to ca. RUB 390 bln, or 50% agement practices to implement Rosneft 2020 investment program was approved as part of the 2020–2021 Business Plan help us maintain and develop of the Company capex. our projects. by the Board of Directors meeting held on the 19th of December, 2019 (Minutes No. 11 dated mature and new oil and gas December 23, 2019). The Board of Directors approved the updated 2020 investment program assets to meet the strategic goals Capital investments in major June 29, 2019 (Minutes No. 2 dated June 29, 2020). related to production and reserve and new projects exceeded replacement. In 2020, capital RUB 275 bln, or 35% of the capex. investments in mature onshore Actual CAPEX 2020 totalled Investment programme split RUB 785 bln. Launch of major and new E&P projects in 2009–2022 Given the current macroeconomic % >20 environment, the Company took investment ~35% percentage a number of steps over the year optimisation in 2020 ~ RUB of investments in new to optimise its investment port- 0.8 trln >22 ~6 >23 ~7 ~5 and major oil and gas folio, maintain financial stability Vostochno- Russkoye Erginskoye projects in Russia and lay a strong foundation for its Vankorskoye Messoyakhskoye Zohr Rospan in 2020 strategic initiatives. us to postpone the least profitable (Egypt) >2 and long-term projects while car- >5 >5 >5 ~5 % This resulted in a more than 20% rying on with the pre-investment Upstream 90 % Sakhalin-1 Chupalsky Yurubcheno- Taas-Yuryakh Severo- Kharampur ~16 (Arkutun-Dagi) Lisence Area Tokhomskoye (Phase 2) Danilovskoye production reduction of investments vs study. With portfolio manage- Downstream 7 % (Refining and marketing) at new and major the initial plan (ca. 8% year-on- ment tools at our disposal, we can >3 >4 ~3 >4 Other 3 % Severo- fields in 2020 year), with investment efficiency promptly respond to market Sakhalin-1 Suzunskoye Kondinskoye Tagulskoye Komsomolskoye (Odoptu) targets achieved. changes and restore our invest- >2 ment activities in case the macro- >3 2 Severnoye Kuyumbinskoye projects We ranked our invest- economic environment improves. Chaivo Lodochnoye Erginsky license ment projects by return given >3 area and Severo- the Company strategic objectives. Our investment program seeks Vostochno-Salymsky License Area Danilovskoye field The portfolio optimisation allowed to achieve key strategic goals, launched in 2020 including increase in profitability, enhancing operational and invest- Capex, RUB trln ment efficiency, launching pro- 2009–2015 2016–2019 2020 2021–2022 jects on time and on budget, 0.9 0.9 Area of circle corresponds to plateau production, the figures inside circle are shown: for oil projects – in million tonnes per annum; for gas projects – and minimising the environmental in million tonnes of oil equivalent per annum. 100% of production 0.8 footprint.

Over 96% of our investments are concentrated in Russia, We retain leadership in terms CAPEX in exploration and production per unit, USD/boe1 with ca. 20% attributable of exploration and produc- 16.8 to projects in Eastern Siberia tion unit capex, which amounted and the Far East. In 2020, to USD 5.5 per boe in 2020, while 11.9 9.6 9.9 Upstream accounted for ca. 90% also delivering on our hydrocarbon 9.3 7. 3 7.4 7.6 of our investments, including 4% production targets. 5.5 6.3 spent on gas projects, and 7% 2018 2019 2020 for Downstream.

1 Compared to oil majors listed on Western stock exchanges.

34 35 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

DOWNSTREAM Delegating: Investment Bodies and Limits of Authority

In 2020 Downstream capex construction and reconstruction We expect these projects to give Limits of authority Investment Bodies totalled RUB 53 bln. of oil depots and airport refueling a boost to our refining margins, complexes, continued development light product yield and the out- >USD 1,500 mln Board of Directors Investments focused on complet- of catalysts and additives busi- put of high-quality petroleum ing highly cost-efficient projects ness, and further implementation products. USD 500–1,500 mln to construct and upgrade produc- of existing capacities maintenance Management Board tion units and facilities at refineries, program.

USD 200–500 mln Investment Committee

INVESTMENT PROCESS USD 0–200 mln Segment Subcommittees

Our investment process hinges on the following key principles: Upstream Downstream Functional

1 2 3 4 5 Investment decision-mak- when assuming financial obli- IT tools: automating investment ing: sound investment deci- gations (the two-key principle) project management, including sions, shorter periods of approval at all stages of project planning the support of investment deci- Availability of all Performance above Financing only in case Standardising Authority delegation and review of investment memo- and implementation. sion making, economic analysis required investment the minimum of an investment approaches decisions threshold for each decision to project assessment randa, responsibility of investment and portfolio management. project and funds allocated and documentation project owners and supervisors Portfolio analysis: com- in the business plan for compliance with timelines, posing a balanced portfolio budget, efficiency and perfor- of the Company's projects and flex- Portfolio optimisation mance criteria; ible management, relying on prin- criteria: 6 7 8 9 10 ciples of comprehensive project Monitoring and control: regular ranking and optimisation based • economic efficiency; and thorough project monitoring on a list of criteria depending Comprehensive due Project responsibility Monitoring Compatibility Alignment • materiality; diligence and control with project stages with related at all levels, change manage- on the Company’s development • readiness for implementation; at all project stages, processes ment process; IT-based control strategy and priorities, use of tools • compliance with the strategy. including follow-up of investment decision availability for portfolio scenario analysis. monitoring

Our investment activities help project identification, classifi- Rosneft investment govern- Portfolio Management us ensure commitment to the fol- cation, thorough project analy- ance process is integrated with all Macroeconomics lowing strategic priorities: sis and efficient decision-making related processes, including strate- Strategic objectives and priorities O and external environment pt ct a im • sustainable business growth process reliant on delegation gic and business planning, budget- e n j n d is o io r a Resource and financing driven by investments in com- of authority; ing, reporting and financial control, r t a t P c n i Ongoing projects le k o constraints e in n petitive and high value-added honouring social responsibil- project management and corporate s • g projects and portfolio ity principles regarding occupa- governance. It covers the following Target efficiency optimisation; tional safety and environmental areas: Investment initiatives and profitability • increasing efficiency across protection;

M

all business streams through • focus on the UN Sustainable Discipline and responsibility: busi- o

Individual project results n g Investment distribution

i n an in-depth analysis of invest- Development Goals (SDGs) ness projects are approved through t PROJECT i o k r a i ment needs, efficient deci- to help achieve progress decision-making delegation n PORTFOLIO Project approval, cancellation, m n g - a o Overall portfolio results a n i completion sion-making and project in addressing global eco- within the permitted limits as per s t s n io e d s a s p i t implementation, monitoring nomic, social and environmen- the investment mandate following s e c n m r de e e fo t m and control throughout the pro- tal challenges, including those a regulated comprehensive project n rm en le Improvement recommendations t ance stm p Value creation (NPV) Inve im ject life cycle; related to carbon management analysis process. and • strengthening investment dis- (see carbon management plan cipline by ensuring better on page 25).

36 37 2 OPERATING RESULTS 2 40 OPERATING results Key Operating Results 2 1 Key FinancialResults AND FINANCIAL RESULTS KEY OPERATING

Total accrued dividends,RUB bln Dividend pershare,RUB mmt Petroleum productandpetrochemicals export, Free cashflow, RUB bln mmt Petroleum productandpetrochemicals output, Unit opexinproduction,USD/boe Oil refining,mmt boe Unit capexinexplorationandproduction,USD/ Oil exports, mmt Oil exports, Capex, RUB bln Natural gasproduction,bcm ROAE Production ofliquidhydrocarbons, mmt ROACE years ratio,PRMS hydrocarbon reserves-to-production Net income margin rvdPM eevso aktbegs c ,2 ,5 1 2,420 –1% 2,452 2,423 Proved ofmarketable PRMSreserves gas,bcm Net income, RUB bln rvdSCrsre fmreal a,bm216219–%2,065 –1% 2,119 2,106 Proved ofmarketable SEC reserves gas,bcm mmt Proved ofliquidhydrocarbons, PRMSreserves EBITDA EBITDA margin Taxes andcustoms duties,RUB trln mmt Proved ofliquidhydrocarbons, SEC reserves ates andjointventures, RUB bln Revenues andequityshareinprofitsofassoci- Metric Metric Adjusted to theeffect ofoffsetting overpayments. Adjusted to pandemic-related expenses. 1 , RUB bln 2 20.4% 0. 3. 1%230.2 –11% 230.2 204.5 ,8 ,3 1%3,899 –11% 3,935 3,489 785.0 0. 1. 6 115.0 –6% 110.2 104.0 0021 2018 Δ 2019 2020 0021 2018 Δ 2019 2020 ,0 ,0 4%2,081 –43% 2,105 1,209 ,5 ,7 3%8,238 –34% 8,676 5,757 ,9 ,8 1%4,377 –11% 4,383 3,891 6.9% 3.0% 0. 0. 6 111.7 –6% 107.5 101.4 1. 4. 2%123.7 –23% 149.4 115.4 .4 34 7% 25.91 –79% 33.41 6.94 62.8 64.2 73.6 3.1% 2 4 5%1,133 –55% 941 425 2.8 5.5 2.4 8 0 7%649 –77% 802 181 3 30 23 0% 23 23 ROSNEFT /ANNUAL REPORT 2020 24.0% 5. 8 936.0 –8% 854.0 43 1. ..12.3% –11.3 p.p. 14.3% 57 88pp 17.4% –8.8 p.p. 15.7% 354.1 .%–6.1 p.p. 9.2% 7.0 6 3.7 6.1 3.1 71 –3.6 p.p. –9.6% –34% –79% –10% –10% 6 67.3 –6% 24.8% 274.6 . % 7.9 73.7 4.0 6.8 3.1 Strategy 4 3 for petroleum products. volumes to fitthecurrentdemand to theneedto optimise processing unit opexwent upby10.0% due year. Alongsidethismarginalgrowth, for 12M 2020were up1.9% year-on- Opex atourRussianrefineries Tonne ofRefined Oil OPEX ofRussianRefineries per effect on1 May2020. year dueto theOPEC+ dealthattook day (204.5 mmt), down 11.4% year-on- 4.14 mmb ofliquidhydrocarbons per In 2020, theCompanyproduced Hydrocarbons, mmt Production ofLiquid Hydrocarbons, mmb Proved ReservesofLiquid

28,853 Including petrochemistry expenses. Including petrochemistry Across therelevant assets (after divestments) Proved PRMSreserves Proved SEC reserves 230.2 1,364 2018 082019 2018 082019 2018 23432,354 32,304 29,114 230.2 1,459 2019 prtn eut Market Overview Operating results 4 , RUB 25,816 204.5 1,596 2020 2020 2020 28,726 Environment and Competitive bcm Proved ReservesofNatural Gas, and exchange rate fluctuations is related to EBITDA dynamics A year-on-year drop innet income eral andadministrative expenses. offset bya partly 9.3% declineingen- of thereverse excise tax. The latter was mechanism, whichisusedaspart by anegative effect ofthedamper year decreaseinEBITDA wasdriven fromlower revenue,Apart ayear-on- EBITDA andNetIncome, RUB bln the COVID-19 pandemic. deal andadropingasdemandamid tion cutsinlinewiththenewOPEC+ production asaresultofoilproduc- to lower associated petroleum gas The decreaseisprimarilyattributed to 62.83 bcm, down 6.2% year-on-year. In 2020, gasproductionamounted Natural gasproduction,bcm 2,065 ,8 2,105 2,081 Proved PRMSreserves Proved SEC reserves Net profit Net EBITDA 2018 2018 082019 2018 67.3 ,2 2,452 2,420 649 2,119 2019 2019 7.0 6 802 Development Sustainable 1,209 2,106 62.8 2020 2020 2020 2,423 181 Ratio, % SEC, Hydrocarbon Reserve Replacement oil demand. and COVID-19-related declineinglobal tion andsalesundertheOPEC+ deal in globaloilprices, cutsinoilproduc- to RUB 5,575 bln on thebackofadrop by 33.6% year-on-year In 2020, ourrevenue decreased Revenue, RUB bln year-on-year. The indicator remainedflat production, RUB/boe Unit OPEXinhydrocarbon 3,979 Governance Corporate Other and aliates and Other chemicals petro and products Petroleum gas and Oil 194 2018 082019 2018 173% 4,097 162 0821 2020 2019 2018 4,493 199 129% 2019 3,997 186 and Investors for Shareholders Information 2,489 200 2020 138% 2020 3,139 - 129 3 41 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

1 ROSNEFT’S EXPLORATION 152 bboe 556 mmtoe1 214 % (20.5 btoe) AB1C1+В2C2 replacement of AB1C1 hydrocarbon reserve replacement hydrocarbon reserves hydrocarbon reserves ratio according to the Russian AND RESERVE REPLACEMENT resource classification system

In 2020, the Company fields confirmed its leading 13.3 bt 24.9 bln 4.3 bln tonnes 19 1,133 licences in Russia (including positions in resource base total oil and gas tonnes onshore oil and gas and 208 new deposits 55 offshore licences) and exploration efficiency. condensate reserves offshore oil and gas condensate resources with total reserves over 2 btoe in Russia condensate resources discovered through successful exploration

8.7 tcm 19.6 tcm total gas reserves offshore gas Eastern Arctic shelf in Russia resources Oil assets, crude oil, gas con- densate and liquid hydrocarbons production

Gas assets, gas production 1.8 tcm Exploration assets onshore gas Western Arctic shelf Russia’s shelf resources Shelf 0.4 / 2.0 Oil and gas provinces 0.0 AB1C1+B2C2 oil and gas con- Timan-Pechora densate reserves by region, 0.2 / 0.0 bln tonnes 0.0 AB1C1+B2C2 gas reserves Kara Sea Licence areas by region, tcm in Taimyr

Licence areas around the

Bashneft-Polyus Payakh cluster

Suzunskoye Messoyakha Vankor Volga-Urals Region Tagulskoye Far Eastern shelf Eastern Siberia and Far East 1.6 / 0.2 Russkoye Rospan 3.9 / 2.1 Sibneftegaz Kynsko-Chaselskaya group

Sakhalin-1

Kharampur Licence areas Sakhalin shelf Udmurtneft Licence areas in the in Yakutia Sorovskneft Irkutsk Region Southern Russia Nyaganneftegaz Purneftegaz Srednebotuobinskoye Megionneftegaz 0.1 / 0.1 Yuganskneftegaz Verkhnechonskoye RN-Shelf Dalny Vostok Samotlor Licence areas in the Samaraneftegaz Uvat Krasnoyarsk Territory Obneftegazgeologia Bashneft-Dobycha Priazovneft Kuyumba Tomskneft Krasnodarneftegaz Yurubcheno-Tokhomskoye Orenburgneft Bratskekogaz

Stavropolneftegaz

Dagneftegaz

Grozneftegaz Caspian OC Dagneft

Western Siberia

1 7. 2 / 4.2 Within the Company (excluding acquisitions/divestments).

42 43 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Oil and Gas Condensate Reserve Replacement Ratio, SEC

200 173% 4 150 129% 138%

2018 2019 2020

Breakdown of Proved Liquid Hydrocarbon Reserves, mmt

ONSHORE EXPLORATION IN RUSSIA INDEPENDENT INTERNATIONAL AUDIT OF RESERVES KEY ONSHORE 3,891 The Company’s top priorities are simulations are used to identify ACHIEVEMENTS unlocking the resource potential optimum parameters for seismic IN RUSSIA: Under the SEC (U.S. Securities and the 1P category, 83,761 mmboe and sustainable use of mineral surveys during the design stage. Exchange Commission) classifica- (11,308 mmtoe) in the 2P cat- resources, exercising strict com- The Company completed projects tion, Rosneft’s proved hydrocarbon egory, and 126,216 mmboe 1 pliance with environmental safety to model surveillance systems 477 mmtoe reserves totalled 38,644 mmboe (17,028 mmtoe) in the 3P category. Western Siberia 2,828 increase in АВ1С1 standards, and an extensive appli- in Eastern and Western Siberia, (5,678 mmtoe) as at 31 December reserves through Volga-Urals 606 cation of advanced technologies. the Republic of 2020. (5,221 mmtoe)2. The audit 2020 saw an increase of over exploration Eastern Siberia 381 and the North . The to assess life-of-field reserves 700 mmtoe in Rosneft’s PRMS 3P Timan-Pechora 29 The Rosneft–2022 Strategy, Company has deployed advanced was performed by DeGolyer & reserves at existing assets (before Southern Russia 23 approved by the Company’s seismic data processing and 194% MacNaughton. acquisitions/divestments) as a Oshore 18 Board of Directors, sets out the interpretation technologies and ratio of oil and gas result of successful exploration condensate reserve Foreign countries 6 key exploration targets: to ensure detailed velocity-depth modelling In 2020, Rosneft’s SEC-proved and production drilling and the use replacement through 100% reserve replacement of liq- in order to improve the exploration reserve life amounted to more of advanced recovery enhance- exploration uid hydrocarbons and to increase drilling success rate. It also contin- than 20 years. The SEC-proved ment techniques to extract the exploration drilling success ued R&D in the integration of seis- organic reserve replacement ratio hard-to-recover reserves, among Breakdown of Proved Reserves rate to 95% by 2022 through the mic and non-seismic methods. 110 stood at 151%, while the replace- others. The highest increase in of Marketable Gas, bcm use of advanced technologies and exploration wells ment ratio for existing assets was reserves was registered at the completed and tested innovative solutions. 138%3. fields of RN-Yuganskneftegaz, RN-Nyaganneftegaz, The Company has developed and 84.5% As at 31 December 2020, Rospan International, is implementing a set of R&D pro- success rate the Company’s reserves Verkhnechonskneftegaz, and jects. Finite difference wave field of exploration drilling under the PRMS (Petroleum RN-Purneftegaz. The reserves 2,423 Resources Management at Vostok Oil assets, includ- 17 System) standards, according to ing Tagulskoye and Zapadno- new fields DeGolyer & MacNaughton, totalled Erginskoye fields, also went up 43,484 mmboe (5,884 mmtoe) in significantly. Unique wireless seismic technology and 208 new Western Siberia 2,112 deposits Eastern Siberia 170 In 2019–2020, we completed the development of the innovative seismic with AB1C1+B2C2 Foreign countries 54 acquisition system "Cheetah" and confirmed through test its geologic accu- reserves of racy and productivity as well as the capability of working in hard-to-reach Volga-Urals 33 areas. We assessed and ranked the Company’s assets for priority implemen- O shore 30 tation of new technologies. The work is also underway to optimise seismic mmtoe Southern Russia 22 surveying to address geological issues and reduce environmental impact. 906 Timan-Pechora 2

1 Within the Company (excluding acquisitions/divestments). 2 With acquisitions/divestments, including fuel gas. 3 Calculated in metric units across the relevant assets (including divestments). 4 Including divestments across the relevant assets.

44 45 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

RESERVE REPLACEMENT BY REGION

WESTERN SIBERIA

growth rate target for recov- At RN-Vankor, a success- method of localising hydrocarbon including five that have not been erable reserves. In the report- ful exploration programme reserves in siliceous upper cre- previously recorded on the bal- ing period, significantly more oil aimed at growing Vostok Oil’s taceous deposits. The invention ance of Russia’s hydrocarbon Increase in reserves – reserves were discovered than resource base led to the dis- helps assess hydrocarbon reserves raw materials. The testing of well extracted. In 2020, the increase in covery of Novoognennoye field in the sedimentary rocks’ siliceous No. 70 included the first use of 270 mmt RN-Uvatneftegaz’s АВ1С1 reserves containing more than 20 mmt deposits through exploration. Jet Pump technology on a gas of oil and gas (12.5 mmt) exceeded produc- of oil and about 1 bcm of gas. The proposed method consists of field – previously it had been used condensate tion (9.2 mmt) by 136%. The drill- Oil was discovered in the Lower determining the zonation of silica only for oil fields. The use of jet ing of Linveskaya well No. 324P Cretaceous deposits north of the distribution in the Berezovskaya pumps accelerates the develop- and 65 bcm Rosneft’s reserve growth in revealed three new deposits of the Messoyakhsky ridge, changing the suite and similar structures. ment of deposits with low per- of gas Western Siberia amounted to Pikhtovoye field with 9,5 mmt of Company’s view of the possible meability and through 269.9 mmt of oil and gas conden- potentially recoverable reserves. nature of the prospective targets’ In 2020, Rosneft studied the per- creating a stronger drawdown 33 sate and 65 bcm of gas. 33 explo- The drilling of Vostochno- saturation. meability and porosity prop- within a shorter timeframe, clears exploration wells ration wells were completed and Pikhtovaya well No. 324P revealed erties of reservoir rocks of the the bottom-hole zone from killing completed and tested tested with a success rate of a prospective field with two new At its Western Siberian gas assets, Kharampurskoye field's Turonian fluid and drilling mud, as well as with a success rate of 88%. 3D seismic surveys totalled deposits and 3,5 mmt of poten- Rosneft’s reserve increases deposit using the new Digital closes the well at the bottom for a 2.1 thousand sq km. One field and tially recoverable reserves. in 2020 amounted to 7,2 mmt of Core technology. The studies were faster transition to radial pressure % 62 new deposits were discov- oil and condensate and 27.6 bcm carried out by ’s build-up unaffected by the well- 88 ered with a total of 71 mmtoe in In 2020, RN-Purneftegaz of gas. Moscow-based laboratory and bore. The Company is looking into АВ1С1+В2С2 reserves. discovered ten new involved experts from BP Plc. ways to cascade the experience to 1 deposits at the Yuzhno- The Company continued to study Comparative analysis of the its other projects. new field RN-Uvatneftegaz is consist- Tarasovskoye, Barsukovskoye, the unconventional gas-saturated results is underway. ently implementing the strat- Verkhnepurpeyskoye, and reservoir of the Berezovskaya A new gas cluster will be created and 62 egy to develop the Uvat project, Novopurpeyskoye fields with total suite in Western Siberia. In 2020, As part of the Gydan Peninsula based on the Minkhovskoye field. new deposits including by ensuring the annual reserves of 5.7 mmtoe. Rosneft filed for a patent for its study in 2020, the interpreta- with AB1C1+B2C2 tion of 3D seismic surveys of the reserves of Minkhovskiy licence area con- firmed the field potential and ver- 71 mmtoe ified the location of exploration wells. In 2020, Rosneft drilled and Performed completed well No. 70, the first 3D seismic surveys of exploration well of the Minkhovsky licence area. Following extensive 2.1 thousand Geological Information System sq. km and MDT drilling, ten prospec- tive fields are ready for testing,

46 47 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

EASTERN SIBERIA AND FAR EAST VOLGA-URALS, TIMAN-PECHORA, AND SOUTHERN RUSSIA

In the Orenburg and The first well within the regions, the Company continued Predpatomsk foredeep led to a exploration of Domanic depos- major discovery – the testing of Increase in reserves – its for siliceous limestones. The Increase in reserves – the Vendian terrigenous depos- Company is now planning a pilot mmt its in Nizhnedzherbinskaya well mmt development programme to 62 56 of oil and gas No. 1 identified a new large gas of oil and gas develop a conclusion on the com- condensate condensate field named after Ivan condensate mercial potential of these deposits Kulbertinov with reserves of more In 2020, reserves in the Volga- in the licence areas in the Samara and 5 bcm In 2020, total reserves growth than 75 bcm of gas and 1.4 mmt of and 38 bcm Urals Region, Timan-Pechora, Region. In 2020, Orenburgneft of gas of gas in Eastern Siberia and the Far gas condensate. and Southern Russia increased began appraisal drilling in the East was 56 mmt of oil and gas by a total of 61.9 mmt of oil and Kutuluk subsoil area in order to condensate and 38 bcm of gas. Drilling of Danilovskaya well 12 gas condensate and 5 bcm of assess the commercial pros- 65 12 exploration wells were com- No. 85 confirmed the industrial oil exploration wells gas. 65 wells were completed pects of domanikoid strata within exploration wells pleted and tested with a success and gas bearing potential of the completed and tested and tested, with a success rate of the Orenburg Region. In 2020, completed and tested rate of 92%. 2D seismic surveys of Ust-Kutsky horizon outside the with a success rate of 82%. 3D seismic surveys totalled Samaraneftegaz's geologists per- with a success rate of 42 linear km and 3D seismic sur- zone of the basement protrusions 1.8 thousand sq. km, while 2D seis- formed the search for missed % veys of 634 thousand sq km. Four for the first time, which will drive 92% mic surveys totalled 0.9 thou- deposits and exploratory drilling, 82 fields and 16 new deposits discov- further exploration in the Irkutsk sand linear km. Twelve fields and discovering 29 new deposits and ered with a total of 811 mmtoe of Region. The oil flow rate exceeded 130 new deposits were discov- two new fields with a 6.7 mmtoe АВ1С1+В2С2 reserves. 500 cub m per day. 4 ered with a total of 24 mmtoe in increase in recoverable AB1C1 + 12 new fields АВ1С1+В2С2 reserves. B2C2 reserves. new fields As part of the Vostok Oil pro- The drilling of Preobrazhenskaya and ject, a unique Zapadno-Irkinskoye appraisal well No. 14 to the south- 16 and 130 new deposits new deposits field was discovered on the east of the Lisovsky field within with AB1C1+B2C2 with AB1C1+B2C2 Taimyr Peninsula, with more than the reefal buildups confirmed reserves of reserves of 600 mmtoe of C1+C2 reserves. the industrial oil and gas bearing potential of the Early Cambrian 811 mmtoe 24 mmtoe The Srednebotuobinskoye field intersalt formation. The well once had a successful exploration year: again confirmed the extremely Performed Performed 2D seismic a highly promising block identi- high productivity of the Early 2D seismic surveys of surveys of fied with a new integrated seismic Cambrian reefal buildup of the and geological model was not only Osinsky horizon: the tests recorded 42 linear km linear km confirmed by the drilling of explo- an oil flow of 362 cub m per day. 900 and 3D seismic ration well No. 117 but also turned and 3D seismic surveys of out to have a record oil-saturated We continued to drill additional surveys of thickness of the Botuobinskoye sidetracks to increase the explo- sq. km sq km formation (16.6 m). Rosneft ration drilling success rate, further 634 1.8 plans to drill another explora- study the target reservoirs, and tion well No. 118 and 38 produc- search for new prospects. tion wells at the new block. The drilling of well No. 117Р helped to identify new drilling prospects at the field. Production drilling has already confirmed oil depos- its in other eastern blocks of the Srednebotuobinskoye field. The drilling revealed gas in the car- bonate deposits of the Yuryakhsky horizon, the prospects of which were previously associated only with deposits above the basement protrusions.

48 49 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PRODUCTION OF LIQUID HYDROCARBONS

INNOVATIVE TECHNOLOGIES FOR STABLE PRODUCTION 2020 PERFORMANCE HIGHLIGHTS Key achievements in field development in 2020 The key factor affecting the our strategic priorities, we con- continues comprehensive devel- The average flow rate per produc- Horizontal wells accounted for 68% The production per well attrib- Company's crude oil production tinue to focus on accelerating the opment of the new oil and gas tion well increased to 12.0 t per day of new wells commissioned in 2020 utable to base production recov- in 2020 was the government-or- construction of the most effi- province in the Krasnoyarsk (up 1.3% year-on-year), with a 1.7% (up 11 p.p. year-on-year), while ery was up 6.5% year-on-year, dered production cut as part of cient high-tech wells. 68% of the Territory’s north as part of the increase in the well stock. the share of horizontal wells drilled from 1.16 kt to 1.23 kt per well. the OPEC+ deal taking effect 2.6 thousand wells commissioned Vostok Oil project. Investment using multi-stage hydraulic fractur- The annual average flow rate ing techniques (MSHF HW ) increased In October 2020, in May 2020. As a result, the in 2020 were horizontal, compared incentives for infrastructure facil- of new wells stood at 44.7 t per day from 34% to 44%. RN-Yuganskneftegaz set a new 2020 production of liquid hydro- to 57% a year earlier. The share itated the economic model’s effi- (flat year-on-year). Accordingly, record, performing 600 hydraulic carbons amounted to 4.14 mmb of horizontal wells drilled using ciency and allowed Rosneft to the Company retained its leader- The Company completed 1.4 thou- fracturing operations in one month. ship in the production drilling effi- sand sidetracking operations (up 13% The annual number of such opera- per day (204.5 mmt), down 11.4% multi-stage hydraulic fracturing begin project implementation. ciency among its Russian peers. year-on-year), thus increasing crude tions is about five thousand. year-on-year. In August, the techniques increased to 44% (up oil production by 4 mmt (up 19% restrictions eased, allowing the 10 p.p. year-on-year). The pro- year-on-year). Company to quickly increase pro- duction per horizontal well was duction and demonstrate a 1.9% 2.6 times higher than per direc- quarter-on-quarter growth, to tional well. 3.98 mmb per day (49.46 mmt). Despite external constraints, the Previous production cuts provided Company continues to develop Rosneft with invaluable techno- brownfields and maintain leader- logical expertise that allows it to ship in the Russian oil industry in manage production quickly and terms of launching new high-mar- efficiently. The Company relies on gin projects. In 2020, Rosneft the following instruments: limiting launched two new major pro- flow rates without well suspen- jects – the Erginsky licence area sion, intermittent well operation, and the Severo-Danilovskoye field. and optimisation of well inter- In 2020, the Company's share in ventions at the existing wells. the total production of hydro- The strategy facilitates flexi- carbon liquids as part of new ble production management and major projects1 totalled 19.9 mmt prompt increase in production, if (403 kbpd), up 4.8% year-on-year. necessary. In compliance with the Russian Production drilling in 2020 President's instruction to amounted to 10.9 mm m, up increase the cargo flow along the 9.1% year-on-year. In line with Northern Sea Route, the Company

1 Launched since 2016 (including the Erginsky licence area and Severo-Danilovskoye field).

50 51 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

COMMISSIONING OF NEW completion technologies, commis- commissioned. The average ini- a 5% increase in incremental oil of horizontal wells in 2020 was a WELLS sioned 59 wells with MSHF and a tial oil flow rate for the field’s new production from wells commis- quarter higher than the average horizontal section of over 1,200 m. wells stood at 39 t per day. sioned in 2019. for all of the facility’s new produc- In 2020, Rosneft Rosneft is focused on high-tech The successfully tion wells (67 t and 49,5 t per day, commissioned wells: 68% out of the 2.6 thou- tested the Perf & Plug technology In 2020, Verkhnechonskneftegaz, In 2020, Orenburgneft expanded respectively; up 26%). sand wells commissioned in 2020 using Russian-made equipment. operator of Severo-Danilovskoye its horizontal drilling programme 2.6 thousand were horizontal vs 57% in 2019. Rolling out this technology will oil and gas condensate field, and commissioned 15 horizon- In 2020, Bashneft-Dobycha set new wells, 1.1 thousand new MSHF HWs increase the number of hydrau- started its drilling, which will con- tal wells (up +36% year-on-year), a new production drilling record were commissioned, with their lic fracturing stages in horizon- sist solely of horizontal wells. The including six wells with mul- and commissioned 153 new wells 68% share reaching 44%. Advanced tal wells, ensure the possibility of optimisation of well construction ti-stage acid and proppant frac- (up 34% year-on-year) with plans of which were planning, drilling, and develop- refracturing, and reduce the well cycle in 2020 allowed the Group turing. The share of new horizontal underway to increase the annual horizontal ment technologies facilitated development costs in case of mass Subsidiary to commission 14 new wells reached 19 %. These tech- commissioning rate going for- new wells’ average annual flow implementation. wells with an incremental oil pro- nologies make such wells highly ward. Maintaining the focus on rate of 44.7t per day, flat year-on- duction of 191 kt. productive, with horizontal wells high-tech, the Group Subsidiary year, and 15.2 mmt of incremental In 2020, Samotlorneftegaz com- having an initial flow rate of 69.8 t increased the share of horizontal production. missioned 406 new wells, the RN-Uvatneftegaz continued per day, which is almost 1.5 times wells by 12% year-on-year, to 86%. highest number over the past five extensive drilling across the Uvat higher than the average for the One of the key contributors to the In 2020, RN-Yuganskneftegaz years, (up 10% year on year), which group of fields. To streamline the Group Subsidiary’s new produc- production drilling programme and commissioned 854 new wells pro- resulted in 1.2 mmt of incremen- development of hard-to-recover tion wells drilled in 2020 (47.7 t per the share of horizontal wells in ducing over 4.7 mmt and reached tal production (up 5.5% year-on- reserves, the Group Subsidiary day). particular is the implementation of the eight-years maximum aver- year). The Group Subsidiary makes increased the percentage of mul- high-tech acid-proppant MSHF in age annual flow rate of new wells consistent efforts to pinpoint hid- ti-stage hydraulic fracturing hori- Samaraneftegaz also increased carbonate Kashira-Podolsk depos- (48.9 t per day, up 25% year-on- den deposits at the Samotlor field, zontal wells in the total number its horizontal drilling operations its. MSHF HWs account for more year). These results were attrib- including through the implemen- of new horizontal wells from 51% in 2020. The Group Subsidiary than 70% of the new wells com- utable to innovative technologies tation of its appraisal sidetracking in 2019 to 73% in 2020. The use commissioned eleven horizon- missioning programme (up +22% and streamlined development sys- and well deepening programme. of advanced technologies cou- tal wells (up 83% year-on-year), year-on-year). The MSHF burst tems. For example, the percentage Due to these efforts, 16 wells in pled with the accelerated commis- including six with multi-stage port system with cup packers of horizontal wells in produc- YuV1 formation with an average sioning of new wells on the back acid fracturing and one with mul- allowed for expanding the range tion drilling increased from 38% initial oil flow rate of 81.3 t per day of the migration of operations ti-stage proppant fracturing. The of initiatives aimed at minimising in 2019 to 48% in 2020. In 2020, and eight wells in BV8(1–3) for- to the structurally complicated share of horizontal wells more the post-commissioning flow rate the Group Subsidiary continued mation with an average initial oil fields of the Uvat group Central than doubled year-on-year, reach- decline. to pilot horizontal drilling and flow rate of 145 t per day were Development Centre, facilitated ing 14%, while the initial flow rate

52 53 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

MULTILATERAL WELLS At the Srednebotuobinskoye field, per day, several times higher than Taas-Yuryakh Neftegazodobycha the rate of the Group Subsidiary’s Multilateral wells are applied to commissioned the longest mul- traditional directional wells. improve the recovery and reservoir tilateral well having 15 horizon- penetration quality for projects tal sidetracks with a total drilling To increase exposure to depos- with high geological complexity. length exceeding 10,000 m across its within the pay zone and This method of pay zone penetra- a pay zone. The well’s initial flow enhance the oil recovery rate, East tion was successfully piloted and rate stood at 402 t per day, 220% Siberian Oil and Gas Company implemented at the Company’s above the average rate of the (Vostsibneftegaz) commissioned fields with 116 multilateral wells Subsidiary's multilateral and hori- another high-tech multilateral commissioned in 2020. zontal wells in 2020. Incremental fishbone well, with an initial flow oil production amounted to rate of 281.5 t per day or more At the Vankor cluster’s 122.7 kt, accounting for 15% of the than double the target average Tagulskoye field, 27 fishbone mul- total for all of the facility’s new rate of new wells commissioned tilateral wells were commissioned wells in 2020. The technology is in 2020 (126.5 t per day). The well in 2020, marking a new high for being successfully rolled out, with consisting of main wellbore and the field and a 12-well increase 36 multilateral wells commis- three sidetracks is 2,200 m long. from the previous record set in sioned at the field in 2020, which 2018–2019. is a record high and nine wells SevKomNeftegaz, a joint pro- above the level of 2019. ject with Norway's Equinor, Tyumenneftegaz continued suc- launched pilot drilling of multi- cessful use of multilateral wells Orenburgneft drilled and com- lateral wells. The first fishbone at the Russkoye field to increase missioned its first-ever horizon- multilateral well (main bore and well productivity and scope of tal multilateral fishbone well (in three additional sidetracks) was reserves. The Group Subsidiary the carbonate formation of the successfully drilled and commis- commissioned 14 wells with one Pronkinskoye field), with a main sioned in the PK1 formation at the and two sidetracks. The aver- wellbore of 811 m and the total Severo-Komsomolskoye field. The INFILL DRILLING (64% of all wells commissioned at Modern approaches and side- age increase in the initial flow rate length of four sidetracks reaching Company plans to use such wells the field). In addition, horizontal tracking technologies allow not was +56% compared to horizontal 1,198 m. The initial flow rate of the to improve the efficiency of devel- Along with drilling in new areas, wells with MSHF are constructed. only recommissioning of wells wells drilled in similar conditions. new high-tech well stood at 66 t oping thin under-gas-cap zones. the Company conducts infill drill- that used to be in critical condi- ing to augment production by The Vankor field has been suc- tion but also improved production transforming and expanding the cessfully implementing its infill at mature fields, including those development system. drilling programme. As at the end with a long development his- of 2020, the incremental pro- tory. Horizontal sidetracks enable In 2020, RN-Yuganskneftegaz duction attributable to the com- extraction from formation inter- expanded its infill drill- missioning of 52 new infill wells vals that have not been reached ing programme at the totalled 798 kt. In harsh geological by previously drilled directional Priobskoye, Prirazlomnoye and conditions, advanced drilling and wells. Malobalykskoye fields. The pro- horizontal well completion tech- gramme included commissioning nologies ensured an average flow Improving the design of sidetracks of 137 new wells (up 78% year- rate of 99 t per day, which is almost by increasing the share of horizon- on-year), including 48 MSHF HWs three times higher than the average tal drilling to 74% vs 71% in 2019 (five ports per well on average). well flow rate across the Company. helped to bring the average well Going forward, the company flow rate after well by intends to roll out the programme SIDETRACKING sidetracking up from 18.4 t per day to its other fields, with the infill in 2019 to 19.5 t per day in 2020. drilling growing at 27% above the In order to increase production and approved targets over five years. achieve target recovery factor the At RN-Yuganskneftegaz’s fields Company carries out sidetrack- 398 sidetracking operations To maintain production and ing operations in existing wells. were carried out in 2020, includ- improve the quality of reserves In 2020, such operations covered ing 337 sidetracks with horizontal recovery at the Samotlor field, 1.4 thousand wells, up 13% year- completion (up +13% year-on- Samotlorneftegaz continues its on-year, resulting in an incremen- year). The active application of infill drilling programme. 261 infill tal production of around 4 mmt of horizontal sidetracks at mature wells were commissioned in 2020 crude oil (up 19% year-on-year). fields, for example in Cretaceous

54 55 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

formations of the Mamontovskoye from three in 2019), with the aver- such equipment was used in more WELL INTERVENTIONS FOR well interventions increased pri- In 2019, Taas-Yuryakh and Ust-Balykskoye fields, results age initial flow rate reaching 129 t than 75% of cases, ensuring the INCREMENTAL AND RECOVERED marily due to higher efficiency of Neftegazodobycha successfully in high initial oil flow rates of up to per day (up 14% year-on-year). maximum average increase over PRODUCTION bottom-hole zone treatment and piloted inflow control devices in 450 t per day, though these fields the past five years at 28.1 t per well optimisation. In 2020, Rosneft horizontal and multilateral wells have a more than fifty-year his- In 2020, Taas-Yuryakh day. In line with its approved Strategy, performed 3,743 bottom-hole zone at the Srednebotuobinskoye field. tory of development. Due to the Neftegazodobycha launched its the Company keeps improving the treatment operations with a total 2020 saw gas-oil ratio stabilisation use of new technologies, the aver- sidetracking programme partially In 2020, Bashneft-Dobycha efficiency of its well interventions. production recovery of 3.3 mmt without restricting well operations, age annual well flow rate totalled aimed at resuming operations performed a record number of In 2020, the Company performed (up 3% year-on-year), and 3,212 well and higher crude oil production. For 22.8 t per day, compared to the at previously drilled and aban- sidetracking operations, com- 4,473 well interventions for incre- optimisations with a total produc- horizontal wells, GOR decreased Company’s average of 19.5 t per doned horizontal wells by turn- missioning 126 wells and achiev- mental oil production (excluding tion recovery of 5.5 mmt. four times and the flow rate dou- day. The appraisal sidetracking ing them into multilateral. At the ing an incremental oil production production drilling and sidetrack- bled, while for multilateral wells, programme included the drill- Srednebotuobinskoye field, the of 223.5 kt, more than double ing). The well interventions trans- MONITORING AND MANAGING GOR reduced six times. Following ing of 33 wells reaching new, cur- first two wells were commissioned the 2019 level (53 operations, lated into 5.1 mmt of incremental WELL OPERATIONS IN HARSH the pilot operations, the company rently undeveloped Achimov and following the drilling of several 112.5 kt). oil and gas condensate production. GEOLOGICAL CONDITIONS intends to roll out the technology Jurassic deposits. The highest ini- sidetracks. to 41 wells of the field. tial oil flow rates (up to 244 t per In order to increase production Over 8.8 thousand well interven- To minimise the risks of early day) were recorded in the Achimov To increase well productiv- and achieve the target oil recov- tions were performed in 2020, gas from the gas cap or In 2020, the Group Subsidiary formation of the Kudrinskoye field. ity and better develop pre- ery factor, RN-Uvatneftegaz resulting in a recovered production underlying water and to be able to continued to use autonomous viously undrained reserves, more than doubled the number of of 10.8 mmt. The production per restrict and control the flow of gas inflow control devices and com- In 2020, Samotlorneftegaz com- Samaraneftegaz has been sidetracking operations, resulting well attributable to base produc- with a coupling, the Company uses pletion systems with shifta- missioned 513 wells following a actively engaging small-scale in 131.5 kt of incremental oil pro- tion recovery was up 6.5% year-on- inflow control devices to restrict ble sleeves in horizontal wells workover by sidetracking, a record downhole pumping equipment in duction, three times higher than year, from 1.16 kt to 1.23 kt per well. fluid inflow into certain horizontal of SevKomNeftegaz as part of number for the whole Company. sidetracking since 2016. In 2020, in 2019. Production per well following well sections. pilot development of It is also a five-year high for the subsidiary, up 21% year-on-year. The drilling was focused on tight AV4–5 and BV8(1–3) formations with a short construction time and high initial flow rates (44.9 t per day, compared to the Subsidiary’s average of 34.4 t per day). These measures resulted in an additional crude oil production of 844.9 kt, up 9.4% year-on-year.

In 2020, RN-Vankor reached an all-time high of incremental production from sidetracking – 0.55 mmt of oil (up 71% to the previous record set in 2018). The result was solely due to the use of combination string drilling tech- nology, which widens the range of permissible bottom-hole pres- sure, providing greater flexibility in managing the well operations and extending its life. In 2020, the technology was used to complete the construction of eight wells (out of 50 wells in operation), which accounted for 28% of all incremental production from the annual sidetracking programme. The company also continues well reconstruction by multilateral sidetracking. Six wells of the kind were commissioned in 2020 (up

56 57 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PK1 formation at the Severo- number since the centre was Komsomolskoye field. The pilot launched in 2008. Over the past development also involved the five years, the centre’s operations commissioning of 50 wells, includ- have tripled. The high perfor- ing 42 with inflow control devices. mance was achieved due to new technologies and improved meth- In 2020, Tyumenneftegaz also odology, better corporate IT solu- piloted the technology at five wells. tions, and training initiatives for According to preliminary modelling, the centre’s employees (corporate levelling inflow profile will increase geo-steering school, annual work- cumulative oil production by up to shop on geological support and 25%. The company plans to start geomechanics). full-scale implementation of this technology in 2022–2024. The centre’s staff demonstrated their qualifications at the Russian In 2020, the Group Subsidiary and international introduced marker diagnostics to championships, requiring the par- monitor inflow profiles at three ticipants to simulate a drill of hori- wells of the Vankor field. This zontal wells with different difficulty technology allows monitoring of levels and penetrate an oil res- the flow profiles in horizontal and ervoir as far as possible. Rosneft multilateral wells without sus- won the team classification of the pending production and downhole Russian championship, beating the operations. If successful, the tests teams of four other major compa- will provide information on the nies. At the World Championship, underground well operations for a Rosneft employee took the first a timely and targeted response to place from among more than any complications. 250 participants from 60 compa- nies and 20 countries. At Vostsibneftegaz’s Yurubcheno-Tokhomskoye field, In 2020, the Company contin- seismic and geological analy- ued to develop geological support for Bashneft-Petrotest – petro- and field development. In 2020, further upgraded. At the end of out across the Group. In 2020, sis and detailed interpretation of activities. Geosteering, log data physical support of drilling Rosneft finalised and success- 2020, 85% of models were created over 400 efficiency improvement geotechnical survey at the design interpretation, and geomechanical at RN-Yuganskneftegaz and fully tested the first version of its using the corporate hydrodynamic projects were approved, with more stages, geological support of drill- modelling are now combined with Rospan International sites. RN-Geosim simulator designed for simulator. than 650 projects green-lighted ing and well completion helped to seismic and geological support for geological modelling and analy- since the OEIS launch in 2018. The identify potential gas and bottom drilling complex wells. In 2020, Rosneft and Rosatom sis of hydrocarbon deposits using OPERATIONAL EFFICIENCY economic effect from the imple- water inflow intervals. Following signed an agreement to cooper- three-dimensional geological IMPROVEMENT SYSTEM mentation and roll-out of these the tests, the company piloted DEVELOPMENT OF IN-HOUSE ate in improving the processing models. The Company continues projects stood at about RUB 20 the use of segmented liners to SERVICE and interpretation of data from the development of RN-PetroLog The Company has put in place bln in 2020 and approximates preventively seal the intervals of AINK-PL equipment. The agree- well logging interpretation soft- a comprehensive Operational RUB 35 bln since launching the potential inflow of unwanted fluids In 2020, Bashneft-Petrotest ment will perfect the method- ware suite with modules which Efficiency Improvement System system. with swellable packers. Rosneft engaged its specialists in high- ology for open and closed wells can be used to upload, store and (OEIS) intended to identify and intends to apply this experience at tech well logging at Bashneft- and to test the AINK-PL equip- visualise logging data in the pro- implement the most promising Slavneft-Krasnoyarskneftegaz's Dobycha sites, continued to ment to check its performance in ject tree, harmonise petrophysical efficiency initiatives at Rosneft Kuyumbinskoye field. perform downhole logging and various geological and technical project data for further multi-well subsidiaries with potential to sig- blasting and perforating opera- conditions. processing, edit data interactively nificantly improve production pro- DRILLING GEOLOGICAL SUP- tions in Bashkortostan and the in graphical mode, and see statis- cesses across the Group while also PORT CENTRE Territory, and supported ENHANCING CORPORATE tics of a petrophysical project. cutting the budgeted costs. Each the piloting of new logging tech- SOFTWARE efficiency improvement project In 2020, Rosneft's drilling geolog- nologies at Varyeganneftegaz, RN-KIM hydrodynamic simula- goes through a rigorous selection ical support centre supervised the Samotlorneftegaz, Orenburgneft, The Company is expanding the tor and RN-KIN information sys- process that includes technical drilling of 3,018 horizontal wells Bashneft-Dobycha, etc. It also ini- range of its proprietary application tem for mining data analysis and and economic studies. If success- and sidetracks, the highest tiated a new line of business software related to development monitoring were fully implemented, it is then rolled

58 59 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

RUB 460 bln starting 1 January SAMOTLORNEFTEGAZ (excluding drilling) increased to OVERVIEW OF PRODUCTION 2021 will serve as a source of addi- 0.67 kt per well (up 7.1% year-on- tional investments in developing Over 98% of Samotlorneftegaz’s year), mainly due to more efficient IN REGIONS OF OPERATION oil production in the area and will proved reserves are concen- transitions and reaching other ensure incremental production of trated within the Samotlor field, formations. more than 70 mmt in 2021–2030. one of the largest in the world. Commercial production at the WESTERN SIBERIA Samotlor field began in 1969 and Samotlorneftegaz RN-Yuganskneftegaz peaked at over 150 mmtpa in the 1980s. RN-YUGANSKNEFTEGAZ the average flow rate increased 23 mmtoe by 25.5% year-on-year, reaching In 2020, the company produced of hydrocarbons RN-Yuganskneftegaz is the 48.9 t per day. 69 mmtoe 23 mmtoe of hydrocarbons, produced in 2020 Company’s largest asset. The of hydrocarbons including over 18 mmt of liquid bulk of proved reserves (80%) are In October 2020, produced in 2020 hydrocarbons. concentrated in the Priobskoye, RN-Yuganskneftegaz performed Prirazlomnoye, Mamontovskoye a record 600 hydraulic fractur- In 2021–2030, The Samotlor field relies on gov- RN-UVATNEFTEGAZ and Malobalykskoye fields. ing operations. The annual num- the tax deduction ernment support to continue drill- Western Siberia is Rosneft’s key ber of such operations is about for the Priobsky ing new wells and performing well The bulk of proved reserves hydrocarbon-producing region Taking into consideration the five thousand. To expand the pay license area interventions. Incremental pro- (ca. 70%) at RN-Uvatneftegaz accounting for 161 mmtoe of production restrictions set by zone coverage, the company uses is expected to help duction of oil and gas condensate are concentrated in the Ust- hydrocarbons or 63% of the the new OPEC+ agreement, up to 20 stages of MSHF, includ- achieve an incremental at Samotlorneftegaz achieved Tegusskoye, Zapadno-Epasskoye, Company's production. In 2020, RN-Yuganskneftegaz pro- ing in the horizontal sections of production of through the drilling of new wells Urnenskoye, Severo-Tyamkinskoye, the liquid hydrocarbon pro- duced 69 mmtoe, including wells. Hydraulic fracturing allows grew to 1.2 mmt (up 5.5% year-on- Severo-Tamarginskoye and duction exceeded 125 mmt. 65 mmt of liquid hydrocarbons. the company to reach and effec- 70+ mmt year), while the number of com- Protozanovskoye fields, which are The Company’s key producing RN-Yuganskneftegaz ensures sta- tively produce the reserves from missioned wells reached 406. being developed as part of the assets in Western Siberia include ble production both by drilling new ultralow-permeability reservoirs. Production from well interventions Eastern Development Centre. RN-Yuganskneftegaz (27% of wells and performing well inter- The operations are fully designed Rosneft's total hydrocarbon pro- ventions for incremental oil pro- in RN-GRID, the first Russian duction), Samotlorneftegaz (9%), duction and by maintaining and hydraulic fracturing simulator. and RN-Uvatneftegaz (4%). recovering its basic production. The use of proprietary simulator put an end to Rosneft’s reliance To enhance oil recovery at its In August 2020, on foreign software for for hydrau- fields in Western Siberia, the RN-Yuganskneftegaz set a new lic fracturing modelling. Company monitors and stream- record in commercial drilling of lines its existing development two-string horizontal wells – The efficiency of well interven- systems by switching from con- 15,700 m per rig, up by 47% com- tions for recovered production ventional directional wells to pared to 2015. increased by 20%, from 1.23 kt MSHF HWs. This technology sig- to 1.48 kt per well, mainly due to nificantly boosts the well pro- In October 2020, the company optimised production and clearing ductivity rate and the scope of set a new industry record in daily of the bottom-hole zone. reserves under development, while drilling – 27,542 m, which is 414 m also reducing the well stock and per day higher than the previ- In accordance with Federal enhancing the project economics. ous record dated July 2017. The Law No. 340-FZ on Introducing The Company massively leverages new milestone was achieved with Incentives for the Priobsky licence MSHF HWs at its mature assets in fewer rigs and a 6% increase in area dated 15 October 2020, on Western Siberia. efficiency. The company is com- 28 January 2021 the Company mitted to minimising downtime – entered into an investment agree- New projects are also underway, 24/7 monitoring and control of the ment with the Ministry of Finance with the Erginsky cluster and the construction of each well reduce of the Russian Federation and Russkoye field standing out as the downtime to zero and ensure a the Ministry of Natural Resources largest plays. high level of safety. and Environment of the Russian Federation to stimulate oil produc- Western Siberia is the larg- The initial flow rate of newly com- tion in the Priobsky licence area. est gas-producing region, with missioned wells reached 89.6 t per MET tax deduction for the Priobsky 44 bcm extracted in 2020. day (up 18.8% year-on-year), while licence area in the amount of

60 61 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

In 2020, RN-Uvatneftegaz pro- RN-NYAGANNEFTEGAZ 42 new production wells were EASTERN SIBERIA AND THE FAR EAST (ONSHORE) duced 9.4 mmtoe of hydrocarbons, drilled (up 66% vs 2019), with including 9.2 mmt of liquid hydro- The bulk of proved reserves (over incremental production expand- RN-Vankor leverages horizontal In order to develop under-gas-cap carbons. It commissioned 83 new 99%) at RN-Nyaganneftegaz ing to 165 kt (up 60% vs 2019). The wells to develop the Vankor field. zones at the Verkhnechonskoye wells (up 5% year-on-year), result- are concentrated in the share of horizontal wells drilled In 2020, it commissioned 54 new field, the company has been work- ing in 1.04 mmt of incremental pro- Krasnoleninskoye field, includ- using multi-stage hydraulic frac- wells there (up 32% year-on-year) ing to improve the drilling of mul- duction (up 48 kt vs 2019). It also ing the Kamenny (western part), turing techniques (MSHF HWs) which produced 0.8 mmt of oil tilateral wells that help maintain launched 2.6 times as many wells Em-Egovsky and Palyanovsky rose from 53% in 2019 to 69%. and gas condensate. At this field, the pressure drawdown at a mini- after sidetracking operations, with areas. RN-Vankor increasingly relies on mal level to prevent gas blowouts. incremental production rising to The efficiency of well interventions sidetracking, having drilled a total In 2020, Verkhnechonskneftegaz 4,240 t per well, or 3.5x vs 2019. In 2020, RN-Nyaganneftegaz pro- (excluding drilling) was up 60% of 61 sidetracks in 2020 (up 49% commissioned seven wells with an duced over 7 mmtoe of hydrocar- at 1.4 kt per well, mainly thanks to The Company continues to vs 2019). This resulted in 552 kt of average initial flow rate of 76.7 t RN-Uvatneftegaz is introducing bons, including 5.9 mmt of liquid recompletions, commingling and expand its operations in Eastern incremental oil and gas conden- per day, a slight improvement vs new technology aimed at boost- hydrocarbons. The average daily recommissioning. Siberia and the Far East. In 2020, sate production (up 2.7x). the 72.6 t per day in the previous ing production, gaining access to flow rate of existing wells grew these regions produced 38 mmtoe year. Thanks to this method of pay commercially recoverable reserves by 6.7 t per well, or 13%, vs 2019. The average daily flow rate of of hydrocarbons, including 32 mmt RN-Vankor continues to drill pro- zone penetration and the acceler- and cutting unit costs. In terms A total of 207 well interventions existing wells increased by 3.2% of liquid hydrocarbons. duction wells and build top-prior- ated commissioning of new wells, of reducing operating costs, the (in addition to drilling) were per- vs 2019 to 7.9 t per well as void- ity facilities and infrastructure at the incremental production tar- company successfully completed formed at RN-Nyaganneftegaz's age replacement grew by 3–4% The bulk of production comes new fields of the Vankor cluster. get for new wells was exceeded hydraulic fracturing tests in injec- fields, leading to a 2% increase in year-on-year. from the Vankor cluster fields (52% by 19%. tion wells using the silica sand-en- incremental production to 0.7 kt of total production in the region) Vankor cluster abled Salik service based on the per well. and Verkhnechonskoye field (20%). HiWAY technique, which pro- RN-Purneftegaz Verkhnechonskneftegaz vides cost savings of 5–10%, or VANKOR CLUSTER RUB 0.5 mln (net of VAT) per injec- RN-Nyaganneftegaz 20+ mmtoe tion well on average, by reducing RN-Vankor operates the develop- of hydrocarbons 6+ mmtoe produced in 2020 8.8 mmtoe proppant, logistics and chemicals of hydrocarbons ment project for the Vankor clus- of hydrocarbons expenses. It also reduces the time 7+ mmtoe produced in 2020 ter fields, including the Vankor produced in 2020 needed to complete the job by of hydrocarbons (the largest discovery in the last accelerating the water and prop- produced in 2020 20 years), Suzunskoye, Tagulskoye VERKHNECHONSKNEFTEGAZ pant filling. Such treatment does and Lodochnoye fields located in not impair well injectivity com- the Turukhansky and Taimyrsky Verkhnechonskneftegaz TAAS-YURYAKH pared to the conventional hydrau- RN-PURNEFTEGAZ municipal districts in the explores and develops the NEFTEGAZODOBYCHA lic fracturing. Krasnoyarsk Territory’s north. Verkhnechonskoye field in the The bulk of proved reserves (over Irkutsk Region, which is one of the Taas-Yuryakh Neftegazodobycha is 90%) at RN-Purneftegaz are con- In 2020, the Vankor cluster pro- largest fields in Eastern Siberia. developing the Central Block and RN-Uvatneftegaz centrated in the Tarasovskoye and duced over 20 mmtoe of hydrocar- the Kurungsky licence area of the Komsomolskoye fields. bons, including more than 15 mmt In 2020, the company produced Srednebotuobinskoye field, which of liquid hydrocarbons. 8.8 mmtoe of hydrocarbons, is one of Rosneft’s Top 3 assets in 9+ mmtoe In 2020, RN-Purneftegaz pro- including 7.7 mmt of liquid hydro- the Eastern Siberian oil cluster. of hydrocarbons duced over 6 mmtoe of hydrocar- Since the commencement of carbons. The Verkhnechonskoye produced in 2020 bons, including more than 3 mmt commercial production at the field is being developed using In 2020, the company pro- of liquid hydrocarbons. Vankor field in August 2009, advanced technologies. There are duced 5.5 mmtoe of hydrocar- cumulative oil and gas conden- also ongoing initiatives to stream- bons, including 4.8 mmt of liquid sate production has exceeded line well construction and comple- hydrocarbons (a 21% year-on-year 194 mmt on the back of a well tion practices, monitor pay zone increase). intervention programme covering performance, and optimise opera- the existing wells and the com- tion of infrastructure facilities. mitment to drill new wells.

62 63 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

55 new wells were drilled, all hori- VOLGA-URALS REGION 67 new production wells were SAMARANEFTEGAZ zontal. The average flow rate of drilled, resulting in an incremental Samaraneftegaz new wells increased by 39% year- production of 423 kt. The average More than 50% of on-year to 105 t per day (from 76 t of new wells increased by 7% year- daily flow rate per new well rose by Samaraneftegaz's proved reserves per day in 2019). on-year to 47.6 t per day as void- 7% year-on-year to 47.6 t. are concentrated in eight major 12.8 mmtoe age replacement added 6 p.p. fields, including the Barinovsko- of hydrocarbons Also, a total of 42 sidetracks were Lebyazhinskoye, Kuleshovskoye, produced in 2020 Taas-Yuryakh The biggest drilling growth was drilled (up 7.7% vs 2019), with the Mukhanovskoye and Mikhailovsko- Neftegazodobycha seen at the Arlanskoye field, where incremental production at 84 kt. Kokhanskoye fields. 88 out of the region's 148 new 5 mmtoe wells were built. Given its com- The average daily flow rate of In 2020, the company pro- of hydrocarbons In 2020, this region produced plex geology, horizontal drilling existing production wells reached duced 12.8 mmtoe of hydrocar- produced in 2020 around 41 mmtoe of hydrocar- with multi-stage hydraulic frac- 16.2 t per well (up 5% vs 2019) bons, including 12.4 mmt of liquid bons (including 39 mmt of liquid turing techniques has been used as voidage replacement added hydrocarbons. hydrocarbons), or 16% of Rosneft’s widely. Over 180 horizontal wells 3.5 p.p.and production recov- total output. The Company’s key were commissioned at the field ery increased from 1.32 to 1.45 kt The number of hydraulic frac- VOSTSIBNEFTEGAZ producing assets there include between 2016 and 2020. The use per well. turing works increased by 11% to Bashneft-Dobycha, Orenburgneft, of advanced technology con- 103, a record high since 2012, with Vostsibneftegaz is running a pro- Samaraneftegaz and Udmurtneft. tributed to gains in productivity, incremental production at 173 kt. ject to develop an expanded with the average oil flow rate per Orenburgneft Besides drilling, 377 well interven- high-priority area at the BASHNEFT-DOBYCHA well rising by 73% at Bashneft- tions were performed, up 6% vs Yurubcheno-Tokhomskoye field, Dobycha between 2009 and 2019. 2019, resulting in 690 kt of incre- located in the Evenki District of Bashneft-Dobycha operates Oil production increased from 3.1 14 mmtoe mental hydrocarbon production. the Krasnoyarsk Territory. licence areas in the Republics of to 4.5 mmt at the Arlanskoye field of hydrocarbons Bashkortostan and , over the same period. produced in 2020 Production recovery stood at In 2020, Bashneft-Dobycha pro- the Orenburg Region, and the 1.42 kt per well, a 5.3% increase vs duced 3.3 mmtoe of hydrocar- Khanty-Mansi Autonomous Area – a year before. bons, including 3 mmt of liquid Yugra. More than 50% of its Bashneft-Dobycha hydrocarbons. proved reserves are concentrated in six major fields, including the It performed 46 well interventions, Arlanskoye, Yugomashevskoye and 11.5 mmtoe up 5% year-on-year, including Tuimazinskoye fields. of hydrocarbons new well drilling and sidetracking, produced in 2020 which resulted in an incremental In 2020, Bashneft-Dobycha pro- production of 535 kt. duced 11.5 mmtoe of hydrocar- bons, including 11.2 mmt of liquid hydrocarbons. ORENBURGNEFT Vostsibneftegaz The company performs high-im- More than 50% of Orenburgneft's pact well interventions and drills proved reserves are concen- 3.3 mmtoe new wells to maintain robust oil trated in 10 major fields, includ- of hydrocarbons production at its mature fields. ing the Sorochinsko-Nikolskoye, produced in 2020 In 2020, it performed 968 well Pokrovskoye, Olkhovskoye and interventions (in addition to drill- Pronkinskoye fields. ing), with incremental production increasing by 4% vs 2019. In 2020, the company produced 14 mmtoe of hydrocarbons, Bashneft-Dobycha stepped up including over 13 mmt of liquid production drilling, commission- hydrocarbons. ing 153 new wells in 2020 (vs 114 a year before). The average flow rate

64 65 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

SOUTHERN RUSSIA TIMAN-PECHORA PROVINCE

RN-STAVROPOLNEFTEGAZ Bashneft-Polyus

The bulk of proved reserves (70%) at RN-Stavropolneftegaz are concentrated in the 1.1 mmtoe Velichaevsko-Kolodeznoye, Zimne- of hydrocarbons produced in 2020 Stavkinsko-Pravoberezhnoye, Achikulakskoye and RN-KRASNODARNEFTEGAZ Urozhaynenskoye fields. BASHNEFT-POLYUS The Trebs and Titov fields: The bulk of proved reserves In 2020, the company pro- Bashneft-Polyus operates a devel- (76%) at RN-Krasnodarneftegaz duced 0.71 mmtoe of hydro- opment project covering the Trebs 10-millionth are concentrated in the carbons, including 0.68 mmt of and Titov fields located in the tonne of oil extracted Anastasievsko-Troitskoye and liquid hydrocarbons. Since 2012, Nenets Autonomous Area. Mechetsko-Chernoyerkovskoye RN-Stavropolneftegaz has fields. been developing weakly drained In 2020, it produced 1.1 mmtoe of reserves in the Jurassic formations hydrocarbons, including 1 mmt of In 2020, RN-Krasnodarneftegaz by drilling new wells while also liquid hydrocarbons. The 10-mil- produced 1.8 mmtoe of hydrocar- proceeding with its prospecting lionth tonne of oil was extracted bons, including 0.5 mmt of liquid and appraisal efforts. at the Trebs and Titov fields. hydrocarbons. To ensure stable production, the company drilled It commissioned 18 new wells vs Bashneft-Polyus brought on twice as many wells as in 2019, nine in the previous year, resulting stream 24 new wells, up 9%, with with incremental production from in 41 kt of incremental production, the average flow rate rising by 15% new wells more than quintupling. up 38 kt vs 2019. from 147 to 170 t per day. The com- The average flow rate of new wells pany drilled a horizontal well at reached 8.4 t per day, up 12%. Thanks to well interventions, the the Trebs field. The well is a nat- average flow rate of production urally flowing well delivering a RN-Krasnodarneftegaz has also wells grew by 7% to 6.6 t per day. record flow rate of 438 t per day. been performing hydraulic fractur- ing, well recommissioning and pro- The efficiency of well interven- duction recovery. The latter's effect RN-Stavropolneftegaz tions to recover production grew increased by 26% year-on-year to by 150% to 5.4 kt per well (2.2 kt 0.4 kt per well. per well in 2019). The number of 0.7 mmtoe operations boosting production of hydrocarbons increased to 28 (up +6 % vs 2019). RN-Krasnodarneftegaz produced in 2020

1.8 mmtoe of hydrocarbons produced in 2020

66 67 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

DEVELOPMENT OF HARD-TO-RECOVER RESERVES

The Company’s portfolio of classified as hard-to-recover fracturing stages. In recent years, • more than 100 wells were drilled high-viscosity oil reserves of the assets with hard-to-recover reserves under the applicable laws Rosneft has commissioned yearly using infill drilling under the Pokurskaya suite formations in reserves currently consists of amounted to 19.7 mmt amid the an average of ~100 wells with standard development scheme; Western Siberia. more than 120 fields with over restrictions under the new OPEC+ 19.7 mmt horizontal sections of over 1 km, • a development technique for 4 bt of oil in recoverable reserves. deal. The share of hard-to-recover of hydrocarbon using multi-stage hydraulic frac- low-permeability reservoirs was In 2020, the Company completed Rosneft’s key assets of this reserves rose from 9.7% of the production from hard- turing, to tap into formations created with the use of hori- the following key initiatives as type are RN-Yuganskneftegaz Company’s output in 2019 to 10.2% to-recover reserves with hard-to-recover reserves. zontal wells drilled along the part of the Bazhen pilot develop- in 2020 and Vostok Oil, with aggre- in 2020. In 2020, Rosneft increased The use of longer horizontal wells regional stress with cross frac- ment programme: gate hard-to-recover reserves the number of production wells and a higher number of hydrau- tures from hydraulic fracturing • drilled ten horizontal wells with of over 2 bt of oil. They are fol- at fields with hard-to-recover 4+ bt lic fracturing stages enables the enabling to boost well pro- ball-n-drop completion systems lowed by RN-Nyaganneftegaz, reserves by 20% year-on-year to of total Company to effectively develop ductivity rate compared to the in the Salymsky and Priobsky RN-Uvatneftegaz and over 4.8 thousand wells. hard-to-recover previously unprofitable depos- standard development scheme licence areas; Samaraneftegaz currently reserves its. On top of that, in 2020, the and mitigate risks of breaking • minimised problems in the pro- accounting for about 90% of the In improving its development following activities were carried waterflood-induced fractures; cess of drilling horizontal wells Company’s resource base in terms technologies, the Company 2+ bt of oil out as part of projects to develop • a technology of simultaneous under abnormally high pressure of hard-to-recover assets. focuses on at in total low-permeable reservoirs: isolated production and injec- and temperature conditions. low-permeability formations, in RN-Yuganskneftegaz • more than 50 elements of tion into horizontal wells drilled All wells were drilled and com- The Company consistently devel- particular using more sophisti- and development systems with using multi-stage hydraulic frac- pleted without any problems; ops its hard-to-recover oil reserves. cated and longer horizontal wells Vostok Oil reserves horizontal injection wells were turing techniques (MSHF HW) • the horizontal sections of the Oil production from deposits with a higher number of hydraulic drilled; was developed; drilled wells averaged 970 m long, with a horizontal section In the coming years, the bulk of of about 1,400 m long drilled for production from hard-to-recover the first time in the Bazhenov reserves will be concentrated in suite; the Western Siberian fields with • carried out multi-stage hydrau- low-permeability formations of lic fracturing and launched eight the suite and the Achimov wells. The proppant weight was deposits. Beyond 2020, though, on average 72 tonnes per stage; oil production from hard-to-re- • the average initial oil flow rate cover reserves will largely depend per stage for launched hori- on elimination of geological and zontal wells was 6.8 t per day engineering uncertainties related against the planned rate of 6 t to appraisal and the choice of per day. best development solutions. To this end, the Company imple- Multi-stage hydraulic fracturing ments an exploration programme and the exploration programme in coupled with pilot projects set to the Bazhenov suite will continue develop low-permeability for- in 2021. mations, the Bazhenov suite and high-viscosity oil deposits as part of the Target Innovative Projects. Target Innovative Projects seek to develop technologies to tackle silty sand deposits (structur- ally complicated undersaturated ultralow-permeability reservoirs), to bring Bazhenov and Domanic plays into production, to introduce thermal recovery methods fit for ultrahigh-viscosity oil fields in the Samara Region, and to develop

68 69 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PROGRESS ON THE PROGRAMME TO INCREASE APG UTILISATION GREENFIELD DEVELOPMENT RATES PROJECTS

In 2020, the APG utilisa- • A compressor station with Other facilities are part of the APG tion rate for mature assets a gas treatment unit at gathering, treatment, and trans- ERGINSKY CLUSTER reached 94.3%, excluding green- Messoyakhaneftegaz’s port systems. field projects and fields under Vostochno-Messoyakhskoye development (Suzunskoye, field1. The pumping of gas into The Company continues making progress Srednebotuobinskoye, Tagulskoye, underground storage facilities on its strategic project in the Khanty-Mansi Lodochnoye, Vostochno- started in July 2020, with a total Autonomous Area – Yugra in a bid to develop Messoyakhskoye, Yurubcheno- of 500 mmcm of gas pumped the Erginsky cluster which consists of five licence Tokhomskoye, Kondinskoye, during the year. areas: Kondinsky, Zapadno-Erginsky, Erginsky, Russkoye, Kuyumbinskoye, Severo- Chaprovsky and Novoyendyrsky. Komsomolskoye, Trebs and Titov fields) where gas infrastructure is APG production in 2020 yet to be created. If fields under As part of the project to develop Since the start of the project, development and greenfield pro- the Erginsky cluster, the Company the Kondinskoye field has seen jects at early stages of devel- Vankor Yuganskneftegaz 3 mmt embarked on the full-scale devel- 7.2 mmt of oil produced (includ- opment are included, the APG Cluster +7% of hydrocarbon opment of its key asset – the ing 2.6 mmt in 2020), 478 wells utilisation rate amounts to 74.8%. bcm liquids produced (YoY) Erginsky licence area. A high-pres- from across 23 well pads com- 4.8 sure pipeline was launched there missioned, and key infrastructure 3.7 bcm APG supplies to process- In 2020, the Company completed Maintaining APG utilisa- ing facilities grew due to transport oil to the Priobskoye facilities launched. Drilling started the construction of 21 APG utili- tion rate at the Vankor field to the prompt replace- field, with marketable oil start- at three new well pads in 2020 as sation facilities. Some of the most at 98.4%. Since 2014, 34.5 ment of the compres- ing to flow into ’s pipe- part of the project’s third phase. important ones include: bcm of gas was supplied sor unit at the Priobskoye line system. The area also saw Marketable oil is transported to • A complex of facilities for inject- to Gazprom. field’s Compressor Station 2 continued production drilling at trunk pipelines via a 68 km long ing APG into the reservoir at and launch of pipeline nine well pads along with the con- feeder pipeline. Vostsibneftegaz’s Yurubcheno- Samotlorneftegaz from the Moskovtsev field. struction of infrastructure facili- Tokhomskoye field (four gas ties, oilfield pipelines, and power In 2020, the Company drilled pumping units in phase I). The Verkhnechonsk- transmission lines. Equipment 272 wells in the field and produced gradual injection of gas into 6.1 bcm neftegaz for the first start-up complex of 3 mmt of liquid hydrocarbons (up Production rose by 2.2% the system of reservoir pressure the oil treatment and transpor- 7% year-on-year). year-on-year on the back maintenance started in August tation facility was delivered and of higher APG supplies 1.3 bcm 2020, with a total of about to processing facilities. Gas production rose is being installed, with the facil- 190 mmcm of gas injected in Maintaining APG utilisation by 5.9% year-on-year due ity scheduled to go on stream 2020. rate at the Samotlor field to the increase in the amount in 2021. As part of its efforts • The Troitskaya compressor sta- at 98.6%. of gas pumped into under- to develop the cluster, earlier tion at RN-Krasnodarneftegaz ground storage facilities. Rosneft had brought on stream with a capacity of 250 mmcm. Purneftegaz the Kondinskoye and Zapadno- • A 50.5 MW gas tur- Erginskoye fields. bine power plant at the Srednebotuobinskoye 2.5 bcm field of Taas-Yuryakh Maintaining APG utilisa- tion rate at RN-Purneftegaz Neftegazodobycha. at 99.2%.

1 The asset is jointly managed with .

70 71 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

VANKOR CLUSTER LODOCHNOYE FIELD

Pilot production continues at the The Company continues to establish the Vankor cluster (based on the Vankor field) where field in the run-up to commercial Suzunskoye and Tagulskoye fields have come on stream and are being actively developed. development. Rosneft is also getting ready to launch the Lodochnoye field, thus completing formation of the cluster. Production drilling is under- way at the most prolific sec- tions by reserves (reservoirs of SUZUNSKOYE FIELD the Yakovlev suite). Construction and installation work is ongoing Phase 2 of the Suzunskoye field In 2020, a total of 20 wells were at infrastructure and oil and gas development is underway envis- drilled at the field, including seven treatment facilities to start up key aging the construction of gas multilateral ones. Production 0.8 mmt field facilities. facilities (gas treatment unit with of liquid hydrocarbons totalled of liquid hydrocarbons a compressor station, the Suzun– 2.1 mmt. produced in 2020 In 2020, the Company drilled Vankor interfield gas pipeline, gas 11 wells, including five multilateral well pads). The Company com- ones. Production of liquid hydro- pleted three underwater cross- carbons totalled 0.8 mmt. ings (2,200 m long in total) by directional drilling and is building the Suzun–Vankor interfield gas pipeline. 2.1 mmt DANILOVSKY CLUSTER of liquid hydrocarbons Follow-up exploration is ongo- produced in 2020 ing on a new prospective target The Company continues its project to develop the Severo-Danilovskoye (Nkh-3 formation). Drilling contin- field. The dense arrangement of the licence areas and the proximity ues in the field’s southern part. of the Verkhnechonskoye field will bring meaningful synergies from shared use of the ground infrastructure.

TAGULSKOYE FIELD The Severo-Danilovskoye field was The Company is actively building launched in the fourth quarter of well pads, infield roads, and engi- Rosneft continues to build field 2020. Upon completion of hydrau- neering facilities. The field con- mmt facilities, well pads, and other lic testing, oil transportation from struction includes drilling over 0.3 of hydrocarbon liquids infrastructure. the field started via a 93 km-long 90 wells on well pads, a reservoir produced in 2020 pipeline to the Verkhnechonskoye pressure maintenance system, and A drilling programme is underway field. A 4 MW mobile power unit other top-priority infrastructure aiming to bring additional reserves was commissioned at the field to facilities. into production. ensure efficient use of APG. It will serve as the main power source In December 2020, Rosneft and In 2020, we drilled 61 wells, until a 31 MW gas turbine power Equinor closed the transaction including 33 multilateral ones. plant is completed. The Company whereby the Norwegian company Production of liquid hydrocarbons continues production drilling and acquired 49% of the Krasnoyarsk 1.4 mmt totalled 1.4 mmt. construction of well pads, infra- Geological Research and of liquid hydrocarbons structure facilities and roads. Analytical Centre (KrasGeoNats)1 produced in 2020 Construction and installation engaged in the development of started at oil treatment and trans- the Danilovsky cluster. portations facilities.

In 2020, we drilled 18 wells at the field, producing 0.3 mmt of liquid hydrocarbons.

1 Renamed to LLC Angaraneft in March 2021.

72 73 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

SREDNEBOTUOBINSKOYE FIELD

The Company is currently devel- of 12,792 m, including 10,310 m (590 mmcm per year) was oping the Central Block and the inside the reservoir. In 2020, a launched. The gas compressor is Kurungsky licence area of the total of 56 wells have been drilled, the key facility of the gas invest- Srednebotuobinskoye oil and gas including 38 multilateral ones. ment program, designed for APG condensate field, which is one of utilisation by injecting it into the Rosneft’s top-3 assets in Eastern Since the start of its commercial formation to maintain reservoir Siberia. operation, the field has produced pressure. The aggregate injec- 15 mmt. tion volume from the beginning of In 2020, production of hydrocar- development totalled 198 mmcm. bon liquids totalled 4.8 mmt, up Construction of an in-house gas mmt 21% year-on-year. Average daily turbine power plant with a design The gas compressor station will 4.8 production at the year end was capacity of 50 MW, and a 400- reach its design capacity in 2021 +21% of liquid hydrocarbon produced 13.7 kt per day, which corresponds bed shift camp was completed at upon completion of construction, (YoY) to the target level of 5 mmtpa. the field, while construction of a installation and commissioning The Company continues to roll high-pressure gas compressor for activities at the second and third out its multilateral well solutions, maintaining reservoir pressure and start-up complexes. including the fishbone design. The increasing APG utilisation rate is world's first 15-splitter multilateral continuing; well pads are being In 2020, the field produced 3 mmt well was drilled with a total length prepared for subsequent drilling. of hydrocarbon liquids.

YURUBCHENO-TOKHOMSKOYE FIELD VOSTOCHNO-MESSOYAKHSKOYE FIELD

Vostsibneftegaz is running a pro- Vendian and Riphean deposits, Vostochno-Messoyakhskoye field In 2020, the asset produced ject to develop an expanded which have a complex geologi- development (a joint project of 2.8 mmt1 of hydrocarbon liquids, high-priority area at the cal structure. The Vendian depos- Rosneft and Gazprom Neft) con- up 2% year-on-year. The growth Yurubcheno-Tokhomskoye field, its lie on top of the productive tinues. A total of 122 new wells was driven by active drilling oper- located in the Evenki District of Riphean deposits, the oldest on were drilled and commissioned, ations, new wells going on stream, the Krasnoyarsk Territory. the planet, which date back over including 76 multilateral wells well interventions on existing 1 bln years. In August 2020, the (100% share). The gas programme wells, and the reservoir pres- In 2020, the Company drilled Vendian deposits were penetrated was implemented; starting from sure maintenance system being 40 wells, including four multilat- by a production well with an ini- July 2020, associated petro- deployed. eral ones. The "controlled pressure tial flow rate of 149 t of oil per day. leum gas from the Vostochno- drilling" technology is successfully Subsequently, a multilateral well Messoyakhsky licence area has 3 mmt 2.8 mmt of hydrocarbon liquids used to reach the design depth of with four horizontal sidetracks was +2% of hydrocarbon been injected into the temporary produced in 2020 horizontal production wells. The built, a record-breaking design for liquids produced (YoY) underground gas storage at the Company relies on horizontal drill- Riphean deposits. The total length Zapadno-Messoyakhsky licence ing to effectively develop vuggy of the well is 5,280 m, while its area. fractured reservoirs with highly horizontal section is 2,220 m long. heterogeneous porosity and per- The initial oil flow rate was 281.5 t meability both along the vertical per day, which is several times axis and across the floor area. higher than the average rate of new wells in Russia. As part of the Yurubcheno- Tokhomskoye field develop- In August 2020, the first start-up ment, the Company is developing complex of the gas compressor

1 The Company’s share.

74 75 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

RUSSKOYE FIELD KUYUMBINSKOYE FIELD

The main hydrocarbon reserves achieved ahead of schedule. A total The Kuyumbinskoye field compressor station, the key facil- of the Russkoye field are concen- of 144 multilateral wells are to be is developed by Slavneft- ity of the gas programme, and trated in the Cenomanian deposits drilled at the field. Krasnoyarskneftegaz, a joint ven- procurement procedures for gas with heavy, highly viscous, sweet oil ture of Rosneft and Gazprom Neft. pumping units were initiated. with good commercial properties. According to well logging, the effi- Production of liquid hydrocarbons A special feature of the field devel- ciency of recovery for multilateral at the field increased by 50% in opment system is the large-scale wells can be 38% higher than for 2020 and reached 0.7 mmt3, with use of multilateral wells in order single-bore wells. At the same time, 42 production wells completed. to increase productivity and scope testing and research are imple- of reserves. In 2020, the Company mented using a new method of Rosneft continues to build field drilled and completed 58 hori- boundary mapping while drilling, facilities and supporting infra- 0.7 mmt 1.8 mmt zontal wells, including 21 multilat- based on mathematical models +50% of hydrocarbon structure. As regards the gas pro- + over 100% eral and multihole wells. A total of generated by standard well logging liquids produced (YoY) gramme implementation, areas for of hydrocarbon liquids 337 wells have been drilled here, surveys. This technology increased temporary underground gas stor- produced (YoY) including 69 multilateral wells. The the efficiency of oil-saturated res- age were confirmed; the design key goal of rolling out multilateral ervoir penetration by 17%. phase was completed for the wells to full-scale development was Together with the commission- ing of the Russkoye field CGF – Zapolyarnoye MS oil pipeline1 and SEVERO-KOMSOMOLSKOYE FIELD the Rospan International oil and condensate pipeline, the second The Severo-Komsomolskoye field As part of preparation for the phase of the Zapolyarnoye CGF proceeded with the pilot devel- launch of the first stage of full- facility was put into operation and opment programme for the PK1 scale field development, design the design scheme of oil delivery formation (joint venture with and estimate documentation was to Transneft's trunk pipeline sys- Equinor). Development drilling is developed and expert reviews tem in the flow mode was imple- underway, including the construc- were obtained for major construc- mented. Two mobile oil treatment tion of a fishbone multilateral well. tion facilities, extensive contrac- units were put into operation, tor selection and material and including the Company's innova- The field successfully uses intel- equipment procurement activities tive project – the unit developed ligent well completion systems were fulfilled to start construction by Sapphire Applied Engineering with an autonomous oil flow mon- and installation, and site prepara- and Training Centre2. itoring device. This helps mini- tion was completed for nine major 0.5 mmt +23% of hydrocarbon mise potential geological risks. standalone infrastructure facilities. Production drilling continues liquids produced (YoY) Advanced technologies also allow along with the construction of oil drilling wells with a horizontal dis- In 2020, 25 wells were drilled, treatment facilities. placement of up to 2 km. In 2020, including one multilateral well. The a record length of the horizontal asset produced 0.5 mmt of hydro- In 2020, the field produced section (2,404 m) was achieved carbon liquids in 2020, up 23% 1.8 mmt of liquid hydrocarbons, in onshore single-bore horizontal year-on-year. more than twice the level of 2019. wells drilled by the Company.

1 CGF – central oil gathering facility; MS – metering station 2 Sapphire Applied Engineering and Training Centre. 3 The Company’s share.

76 77 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

VOSTOK OIL – A LARGE-SCALE

WORLD-CLASS As a result of 2020 explora- tion activities, the Company discovered a large Zapadno- PROJECT Project highlights Infrastructure development Irkinskoye field with recovera- ble C1 + C2 reserves comprising • Proven world-class resource base • 15 shift camps, several heliports over 500 mmt of oil and 138 bcm of 6 bt of liquid hydrocarbons. and airfields, oil loading terminal of dissolved gas. The Zapadno- • 50 licence areas within the project with an annual capacity of 100 Irkinskoye field and the perimeter. mmt. • The light (40°API) and low-sulphur • 770 km of trunk pipelines Payakhskoye field are similar in (<0.05%) oil has a better quality and 7,000 km of infield pipelines. geological structure and form than Brent and ESPO crude • Power units with a total a single oil accumulation zone grades. capacity of 2.5 GW, including IN COMPLIANCE with unique reserves, which will • Expected cargo traffic along wind power generation, more be developed by implementing a WITH THE RUSSIAN the Northern Sea Route: up than 3.5 thousand km of power unified approach to exploration PRESIDENT'S INSTRUCTION to 30 mmt in 2024, up to 50 mmt transmission lines. in 2027, and up to 100 mmt • 50 vessels of various classes, planning and selection of devel- TO INCREASE in 2030 including 10 advanced ice- opment technologies. THE CARGO FLOW ALONG • An international partner (Trafigura) class tankers with a deadweight THE NORTHERN SEA ROUTE, joined the project. of 120 kt. The project has entered an active • Low carbon footprint (12 kg/ THE COMPANY CONTINUES phase of design, engineering boe) – 25% of large oil projects’ COMPREHENSIVE standard indicators. and survey and land manage- DEVELOPMENT OF THE NEW ment works. Sites for priority OIL AND GAS PROVINCE well pads for production drill- IN THE KRASNOYARSK ing, as well as areas for oil gath- TERRITORY’S NORTH ering, treatment and pumping facilities, for auxiliary infrastruc- AS PART OF THE VOSTOK Project's competitive edge Investment incentives ture (facilities for unloading and OIL PROJECT. • The synergy effect due • Infrastructure financing through material and equipment storage, to the proximity of extensive reduced MET rate imposed shift camps, aviation infrastruc- The project is implemented at the infrastructure and expertise on the existing producing fields ture, etc.) were selected. The gained during the development of the Vankor cluster included existing fields of the Vankor clus- design of the first phase is near- of the Vankor cluster fields will in Vostok Oil. ter, the Payakhskoye field and significantly reduce the time • Zero MET rate for oil until ing completion and the design licence areas prepared for devel- to complete and enhance efficiency the expiration of 16 years of the second phase of the trunk opment, the newly discovered of the project. from the year when 1% depletion oil pipeline from Payakha MPS 1 Zapadno-Irkinskoye field, and the • The proximity of the project is achieved for new fields to the Sever Bay MS, oil load- Company's exploration licences on fields ot the unique Northern of the project. ing terminal and Sever Bay port, Sea Route will help procure top • Regional tax incentives: reduced the Taimyr Peninsula. Investment has started. Some projects have quality feedstock (light sweet income and property tax rates incentives for infrastructure facil- crude) and a price with a premium for existing and new project been submitted to state expert itated the economic model’s effi- 500+ mmt of oil to the Brent grade. assets. review, and land use documents ciency and allowed Rosneft to • Vostok Oil's synergy • Gradual increase in the tax burden are being prepared. The first begin project implementation. and 138 bcm with the Zvezda hi-tech shipyard after the return on investment phase facilities will allow trans- of С1 + С2 gas – recoverable project in the Far East, where is achieved. portation and transhipment of reserves of the Zapadno- Rosneft is one of the shareholders up to 30 mmt of oil per year from Irkinskoye field discovered and anchor customer (the project 2024. The second phase will in 2020 will require up to 50 Arc7 ice- class tankers), will also enhance expand capacity to 100 mmt of the efficiency metrics. oil per year.

78 79 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

IN-HOUSE OILFIELD Horizontal drilling growth, % WELL WORKOVER HYDRAULIC FRACTURING 71 AND SERVICING 62 SERVICES In 2020, 21 of the Company's customer sites, 6.7% higher than 48 Today, RN-Service is the larg- hydraulic fracturing fleets were the business plan target, which The Company continues its drive for expansion 35 est company for well workover engaged in hydraulic fracturing was 5,922. In 2020, the average and improvement of its oilfield services to deliver high quality and servicing, with branches in 13 operations at customer sites. All monthly number of operations per and gain a competitive edge. Using the in-house services Russian regions. In 2020, it pro- the contracted hydraulic frac- fleet was 33. The Nizhnevartovsk as the Company's procurement pricing minimises vided well servicing to 21 Rosneft’s turing fleets executed work at branch achieved an average out- the risk of overpricing by third-party contractors. 2017 2018 2019 2020 upstream companies, covering Rosneft's fields in 2020. put of 40.4 hydraulic fracturing 48% of Rosneft’s needs for well operations per fleet, and in August DRILLING workover and servicing. In the reporting period, 2020 a record for this region was 6,323 hydraulic fracturing oper- set at 56.9 operations per fleet. In 2020, the Company’s drilling Key Achievements Actual orders processed per work- ations were performed at the service completed 6,533 thou- over and servicing crew amounted sand m of drilling (1,767 wells, to 57.5 per year (up 4.7% against • We expanded our mobile drilling business by acquiring 81 drilling rigs including 28 exploration wells). (new and used). the business plan target). Average The share of horizontal drilling • Rosneft successfully progressed with its programme to scale up service time reduced by 6.4 % reached 71% (+9 p.p. year-on-year). the technology for drilling two-string horizontal wells with oil based mud. against the target. TRANSPORTATION SERVICES • RN-Bureniye participated in drilling the world's first horizontal well having 15 downhole splitters and a total length of 12,792 m The operating fleet of the at the Srednebotuobinskoye field of Taas-Yuryakh Neftegazodobycha Company’s drilling service as at using the fishbone technology. In 2020, RN-Transport main- Upstream segment. 550 inefficient the end of 2020 stood at 344 drill- • A drilling crew of the RN-Bureniye’s branch in tained leadership in terms of or unused machines were with- ing rigs with an average age broke the industry record for the commercial monthly rate of well PROJECTS the Company's demand share drawn from operation. construction – 15,360 m per rig. of 10 years. The Company has among Group Subsidiaries in the 296 drilling crews. IMPLEMENTED IN 2020

Since May 2020, KEY ACHIEVEMENTS IN 2020: RN-Yuganskneftegaz rendered the average machine share of the operating fleet services for comprehensive well count – upgraded – preparation for hydraulic fractur- ing at RN-Yuganskneftegaz fields: 7,835.3 seven units for hydraulic fracturing vehicles; 10.1%; preparation and one unit for coil tubing preparation (141 pieces). services provided – 794 general and specialised use Construction and maintenance of vehicles supplied; winter roads for RN-Vankor (pilot 21,377.7 thousand area of the East-Tarkosalinskoye machine hours; field in Purpe) in the season fleet utilisation rate – 2020/21 (21 pieces). technical availability %. of the rolling stock – 70 90%;

80 81 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

OFFSHORE PROJECTS EXPLORATION DRILLING In 2020, the Company finished 9 licence areas in the Eastern Arctic constructing three wells in off- (the Laptev, Chukchi shore licence areas – Novaya-2 in and East Siberian seas) the Azov Sea and Vikulovskaya-1 and Ragozinskaya-1 on the Kara 19 licence areas Sea shelf. are located in the Western Arctic Drilling of the Novaya-2 explora- (the Pechora, Barents tion well in the Azov Sea started and Kara seas) on 21 October 2019. The drilling confirmed the oil and gas bear- ing potential of the Novoye field to the west. In August 2020, the well was classified as a production one.

The Company drilled Vikulovskaya-1 appraisal well in Vostochno-Prinovozemelsky-1 55 licence areas 20 licence licence area on the Kara Sea shelf, on the Russian continental shelf, areas with a commercial gas bearing with an aggregate resource potential of off the Russian far potential identified following the eastern coast (the seas btoe interpretation of geographic infor- 41 of Okhotsk and ) mation system (GIS) data and open-hole testing of prospec- tive intervals. This was how we discovered the field named after Marshal Georgy Zhukov. The State Commission for Mineral Reserves approved the field's recoverable gas reserves at 800 bcm.

Rosneft also drilled Ragozinskaya-1 appraisal well (Western Dome) in Vostochno- Prinovozemelsky-2 licence area in the Kara Sea, with a commercial 7 licence areas gas bearing potential identified in Russia's southern in the Upper and Lower Jurassic seas (Black, Caspian deposits following the interpre- and Azov) SEISMIC SURVEYS tation of GIS data and open-hole testing of prospective intervals. In the 2020 field season, Rosneft The discovered gas condensate completed 3D seismic surveys on field was named after Marshal the shelf of the Pechora and Kara Konstantin Rokossovsky. The State seas, covering 1,235 sq km at the Commission for Mineral Reserves Development of hydrocarbon resources on the continental shelf is one Yuzhno-Russky licence area and a approved the field’s recoverable of Russia's economic priorities and a key strategic area for Rosneft. OFFSHORE EXPLORATION total of 1,562 sq km in Vostochno- reserves at 514 bcm of gas and The largest holder of continental shelf licences, Rosneft carries IN RUSSIA Prinovozemelsky-1 and Severo- 53 mmt of gas condensate. out a full range of exploration operations in the Russian Arctic, Far Karsky licence areas. The seismic East and southern seas in accordance with its commitments, while In 2020, in line with its licence data collected in 2020 are under- Our comprehensive drilling pro- also developing offshore fields abroad as an operator or a member commitments, Rosneft continued going analysis (processing and gramme in the Kara Sea helped us of consortia and participating in joint international projects as part exploration and prospecting for interpretation), with optimal to create a new local oil and gas of such consortia. In implementing continental shelf projects, we focus oil and gas in offshore areas in the decisions on the future explora- cluster with estimated reserves on environmental monitoring of the areas of operations, mitigating Russian Arctic, Far East, and in the tion strategy to be made upon in excess of 1.7 tcm of gas and our impact and preserving biodiversity. seas of the south Russia. completion. ca. 200 mmt of oil and

82 83 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

condensate. The cluster comprises three fields, including the offshore Pobeda field discovered in the Kara Sea in 2014.

Going forward, Rosneft will con- tinue to tap into the oil and gas potential of the Kara Sea.

In 2020, we started the onshore drilling of Madachagskaya No. 2PO appraisal well in the Medynsko- Varandeysky licence area (Pechora Sea shelf). The drilling completion is expected in 2021.

REGIONAL GEOLOGICAL SURVEY

The Company continues to develop and update regional geo- updating the geological structure ENVIRONMENTAL MONITORING OFFSHORE OIL AND GAS PRODUCTION IN RUSSIA logical models of Russian and for- and oil and gas potential of the eign offshore fields located in the North Kara basin. The following environmental pro- SAKHALIN-1 PROJECT drilling and production platform NORTHERN TIP OF THE CHAIVO areas of its presence and interest tection activities were carried out that features the world’s heaviest FIELD (Russian Arctic, Far East, southern Innopraktika and Lomonosov under licence obligations: In 2020, we continued to success- topside. seas and foreign waters). The rock Moscow State University's • The mouths of previously drilled fully implement Sakhalin-1. Oil production at the northern material collected earlier during Department of Geology will con- wells were inspected in the Kara In 2020, the Sakhalin-1 project tip of the Chaivo field involves onshore field geology expeditions duct comprehensive laboratory and Sea, the , and Rosneft is a member of the pro- produced a total of 12.4 mmt of five wells drilled from the shore. in Sakhalin, the Severnaya Zemlya analytical studies of the samples the . All work was car- ject within the consortium that oil and gas condensate (Rosneft’s The wells have a unique, com- Archipelago, New Siberian Islands, to make oil and gas potential esti- ried out in line with the require- includes ExxonMobil (United share was 2.5 mmt), with over plex design and extended hori- Black Sea and the Caucasus mates for various age sedimentary ments of the Russian HSE laws. States), SODECO (Japan), and 2.4 bcm of gas (0.5 bcm attrib- zontal displacement and leverage region, underwent laboratory and basins in the Arctic more reliable The technical condition of the ONGC Videsh Ltd. (India). The utable to Rosneft) supplied to smart completion systems with analytical testing to mitigate the and substantiate a new geological inspected was sat- Company’s share is 20%, and the consumers. flow control devices to limit gas sub-surface risks related to all model of the North Kara region. isfactory, with no hydrocarbon project operator is Neftegas breakthroughs and maximise pro- elements of petroleum systems leakages detected. Limited. Oil from the Sakhalin-1 fields is duction. The offshore project's (source rocks for oil and gas, res- SOIL SURVEYS • Artificial reproduction of aquatic delivered to the Chaivo onshore operator is RN-Shelf-Far East, the ervoir rocks, and cap rocks) within biological resources was con- The Sakhalin-1 project involves oil treatment facility on Sakhalin Company's subsidiary. the Company’s offshore licence In 2020, soil surveys were per- ducted to compensate for any the development of four off- Island and then transported areas in the Far East and the formed for infrastructure facilities potential damage to water life shore fields: Chaivo, Odoptu-Sea, by pipeline to the De-Kastri oil The actual oil and condensate Arctic. The results will serve to at the Kaigansko-Vasyukanskoye and its habitats. Lebedinskoye (within the Odoptu export terminal in the output in 2020 was 0.5 mmt, while update the geological model of Sea field located offshore Sakhalin licence), and Arkutun-Dagi, Territory. the total amount of gas supplied the region and licence areas. in the Sea of Okhotsk. While implementing the biodiver- located in the Sea of Okhotsk on to consumers was 0.05 bcm. sity preservation programme for Sakhalin Island’s north-eastern In the fall of 2020, Rosneft, for The results of comprehensive off- the Company’s licence areas, we continental shelf. the first time in the history of the shore surveys provided full sets of prepared a reasonable list of indi- 12.4 mmt Arctic research, drilled ten shal- data for well design and construc- cator species to assess the sus- State-of-the-art technologies and (including Rosneft’s low stratigraphic wells in the north tion, facility construction tainability of Arctic ecosystems project management methods share of 2.5 mmt) of the Kara Sea during a large- and transportation of produced and analysed the occurrence rates are used to develop the project of liquid hydrocarbons scale expedition. The project's key hydrocarbons, including engineer- for various species existing in fields. At the Odoptu-Sea field, oil produced in 2020 0.5 mmt objective was to collect core, a ing and environmental protection. these areas. is produced from an onshore site of liquid hydrocarbons valuable rock material used as a Detailed data on soil composition using super-extended reach hori- produced in 2020 2.4+ bcm source of geological information in the area will enable experts to zontal wells; at the Chaivo field, of gas (including to determine the age (stratifica- predict geological and geological oil is extracted from an onshore Rosneft’s share 0.05 bcm tion), composition, and forma- engineering processes and address site and the Orlan platform using of 0.5 bcm) supplied of gas supplied tion conditions of the Arctic shelf risks that might arise during the wells with record-length bore- to consumers to consumers rocks. In total, we sampled 300 m drilling of production wells and holes; while Arkutun-Dagi is devel- of core, which is essential for field facility construction. oped using Berkut, a fixed offshore

84 85 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Achievements in gas business development

GAS BUSINESS • Despite the overall decrease in gas production • To expand gas production in the Yamal-Nenets in Russia over the year, the Company managed Autonomous Area, we acquired the Zapadno- to curb the decline pace. Minkhovsky subsurface site on the Gydan Peninsula ROSPAN AND KHARAMPUR ARE MAJOR (area of federal importance), including an area in the Taz • In 2020, we completed the construction Estuary of the Kara Sea, at an auction held in December GAS ASSETS VIEWED AS THE TOP DRIVERS of the first start-up complex for the full-scale Rospan 2020. OF THE COMPANY'S NEAR-TERM HYDROCARBON 20% development to ensure its launch in Q1 2021 (see share of gas more on pages 90–91). • In 2020, the Far Eastern LNG project saw a FEED PRODUCTION GROWTH. in the Company’s contractor selected following the tender and the onshore • Construction of key facilities at Kharampurneftegaz facilities of the offshore loading system dismantled total hydrocarbon is in the active phase. In 2020: production in 2020 as part of site preparations. works associated – • Sibneftegaz constructed the first multilateral horizontal with the development of the Cenomanian deposit gas well at the Beregovoye oil and gas condensate and the pilot operation of the Turonian deposit field, with two cased horizontal 1.1 km long at the Kharampurskoye field were on schedule; Rosneft’s strategic goal for gas the Russian continental shelf. As in total. The use of multilateral wells in complex business development is to con- at 1 January 2020, АВ1С1+В2С2 – the construction and installation at the gas geological conditions will help us achieve much higher flow rates as compared with single-bore horizontal wells sistently grow its shareholder recoverable gas reserves were treatment unit, which is key for the project, were more than 40% complete; and reduce geological risks. value through increased gas out- estimated at 8.7 tcm. • Rospan International drilled a horizontal well put supported by a high-perfor- 62.83 – the construction and installation bcm of the gas shipment pipeline were well on track, and simultaneously penetrated two lower Achimov mance long-term sales portfolio. Rosneft produces gas through total gas production the pipeline crossing over the road and railway formations (total length is 5,800 m, with a horizontal more than 35 subsidiaries and joint in 20201 and the crossings over the Vasseyakha, section 1,241 m long). The company conducted six The Company is developing ventures in Western and Eastern Shonyauyakha and Ayvasedapur rivers were hydraulic fracturing stages and injected 1,200 tonnes of proppant, which allowed to more than double the well vast gas reserves in Western Siberia, Central Russia, the south constructed, and the tie-in to Gazprom's trunk gas pipeline network was built; productivity. and Eastern Siberia and holds of European Russia, the Russian a unique licence portfolio for Far East, as well as in Egypt, and – following the feasibility study, the company started design and survey activities to ensure hydrocarbon development on Vietnam. the full-scale development of the Turonian deposit and the construction of associated field 8.7 tcm facilities. of recoverable gas reserves

1 Recovered gas volume excluding flared gas and gas used in liquid hydrocarbon production.

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GAS PRODUCTION KEY ASSETS AND HIGH-POTENTIAL PROJECTS OF THE COMPANY'S GAS PERFORMANCE GAS PRODUCTION BY REGION Gas production in key regions IN THE REPORTING YEAR of operation in Russia BUSINESS Rosneft’s largest gas-producing and abroad, bcm In 2020, Rosneft’s gas production region is Western Siberia, which both in Russia and abroad totalled contributed 70%, or 43.73 bcm, Map of key gas assets and potential projects 62.831 bcm, including 30.262 bcm of the total gas output in 2020, of natural gas and 32.563 bcm including 21.86 bcm of natural gas Gas supply regions LNG production projects of APG. The Company’s interna- produced mainly by Sibneftegaz, Gas production Gas processing plants (GPPs) tional projects, mostly in Egypt Rospan International, 62.83 High-potential projects and Vietnam, accounted for RN-Purneftegaz and Purgaz 4.5 bcm of the total gas out- and 21.87 bcm of APG produced put, including 4.49 bcm of natu- mainly by Samotlorneftegaz, ral gas, while its domestic output RN-Yuganskneftegaz and stood at 58.32 bcm. Some of the RN-Purneftegaz. Western Siberia 43.73 Russian gas was processed into Eastern Siberia 7.29 14 liquid hydrocarbons. In 2020, the In Eastern Siberia, gas was pro- Foreign Projects 4.50 15 Company’s gas output in Russia, duced at the Vankor group of Far East 3.22 5 including gas processed into liquid fields, the region's largest. In Volga-Urals 2.06 1 2 hydrocarbons, totalled 58.68 bcm. 2020, the output at these fields 10 6 Southern Russia 1.82 19 20 26 3 4 totalled 7.29 bcm, including 7 20 Other, including 0.21 9 18 Timan-Pechora 8 16 Gas production decreased by 5.32 bcm of APG, and 1.97 bcm of 23 13 22 25 6.2%, or 4.13 bcm vs 2019. The natural gas. 17 11 12 decrease is primarily due to APG 24 21 production going down as a result In the , Rosneft In Southern Russia, the of oil production cuts under the mainly produced associated Company's key gas asset is new OPEC+ deal, a drop in gas petroleum and natural gas from RN-Krasnodarneftegaz, which demand amid the COVID-19 pan- onshore fields and on the shelf produces both natural and asso- demic, and warm weather. off Sakhalin, with the bulk of the ciated petroleum gas. The region 1. Rospan 14. Bashneft-Polyus 23. Buzulukskoye GPP in the 3.22 bcm gas production in 2020 brought in 1.82 bcm in 2020. 2. Sibneftegaz 15. Minkhovsky cluster Orenburg Region coming from the northern tip 3. Kharampurneftegaz 16. Yurubcheno-Tokhomskaya 24. Shkapovskoye and of the Chaivo field operated by International projects, mainly the 4. Kynsko-Chaselskoye Neftegaz group Tuimazinskoye GPPs RN-Shelf-Far East. Zohr offshore field in Egypt, pro- 5. Vankor group 17. Agaleevsky licenсe area 25. RN-YuganskGazPererabotka duced 4.5 bcm. Our operations in 6. RN-Purneftegaz 18. Verkhnechonskneftegaz 8.4% In the Volga-Urals region, gas Vietnam also contributed. 7. RN-Yuganskneftegaz 19. Taas-Yuryakh Company's share was primarily produced from the 8. Samotlorneftegaz Neftegazodobycha in Russia’s fields owned by Orenburgneft, 9. Varyeganneftegaz 20. RN-Shelf-Far East, Sakhalin-1 total gas production Samaraneftegaz, and Bashneft- 10. RN-Nyaganneftegaz 21. Bratskekogaz Dobycha. Output there amounted 11. RN-Krasnodarneftegaz 22. Otradnensky and Neftegorsky to 2.06 bcm. 12. Orenburgneft GPPs in the Samara Region 13. Bashneft-Dobycha

1 Recovered gas volume excluding flared gas and gas used in liquid hydrocarbon production.

88 89 ROSPAN HISTORICAL BACKGROUND THIS IS THE COMPANY'S LARGEST GAS ASSET Rospan traces its history to 1994. AND THE TOP CONTRIBUTOR TO THE COMPANY'S In 2013 it joined Rosneft, which NEAR-TERM PRODUCTION GROWTH. proved to be a major turning point contributingsignificantly to the project’s growth. Rospan owns exploration and develop- ment rights for the Urengoyskoye, >21 bcm Vostochno-Urengoyskoye, and of gas produced per year Severo-Esetinskoye fields in the- Novo-Urengoysky, Vostochno- Urengoysky, and Resursny licence areas. The key development asset >5 mmt is the Achimov deposits. The pro- of gas condensate and oil produced per year ject’s complexity has to do with the low natural permeability of the deposits and abnormally high reservoir pressure. With success- up to 1.3 mmt ful long-term follow-up explora- of industrial propane/butane mixture tion programme, jointly prepared produced per year by the Company and the corpo- rate R&D institute, the project Total recoverable АВ1С1+В2С2 will help develop up to 97% of the reserves asset's reserves as opposed to the previously planned 83%. ca. 0.9 tcm of natural gas

ca. 0.2 bt ACHIMOV DEPOSITS DEVELOPMENT TECHNOLOGIES KEY FACILITIES of oil and gas condensate

The Achimov production complex of the low-permeability and hydro- • A gas treatment unit at the lies at the depth of four kilometres dynamically isolated reservoir, while Novo-Urengoysky licence area; 2020 RESULTS AND PROGRESS IN FEBRUARY 2021: and is characterised by abnor- also increasing well productivity. • a comprehensive gas and con- IN 2021: mally high reservoir pressure of In 2020, the resource base of the densate treatment unit at the • dry gas was transported from the Vostochno- 600 atm or more, which ensures deposits under the PRMS stand- Vostochno-Urengoysky licence • the main construction and installation activi- Urengoysky CGTU to the gas shipment pipeline high gas condensate content and ards grew significantly (by up to area consisting offourproduc- ties were completed, individual and comprehen- for further transportation through Gazprom’s gas contributes to successful commer- 30%), as verified by DeGolyer & tion lines; sive testing of process equipment was started transportation system; cial application of technologies MacNaughton auditors. The year • an oil treatment unit with a facil- to ensure the launch of key facilities of the • SGC transportation commenced from the for separating a propane/butane also saw the first assessment of ity to store and transship gas first start-up complex at the comprehensive Vostochno-Urengoysky CGTU to Vostochno- fraction. The abnormally high res- the Jurassic formations’ resource condensate and oil; gas treatment unit (CGTU) of the Vostochno- Urengoysky oil treatment unit for further ship- ervoir pressure helps extend the potential. It was conducted using • a railway terminal for loading Urengoysky licence area, and the railway termi- ment to Zapolyarnoye metering station; primary recovery stage and delay multivariate analysis of uncertain- industrial propane/butane mix- nal for the transshipment of industrial propane/ the use of booster compressor ties and risks using the probabilistic ture at the Korotchayevo station; butane produced per year; PLANS stations. The asset is being devel- approach. According to the assess- • trunk and oilfield pipelines; • all auxiliary infrastructure and linear facilities, oped with a widespread utilisa- ment, the Jurassic formations’ • compressor stations and power including well pads necessary to ensure the utili- • gradual ramp-up to design capacity at key pro- tion of hydraulic fracturing and resource potential may reach up to supply facilities. sation of the CGTU first start-up complex facili- duction facilities; cutting-edge HIWAY technique, 84 mmtoe. The Company continues ties are ready to commence operation; • continued construction of the second start-up including multi-stage hydrau- rolling out and improving the sys- • all seven units of the gas turbine power plant complex facilities; lic fracturing at horizontal wells. tem to monitor well performance at the Vostochno-Urengoysky licence area • commissioning the SGC loading site at the These technologies provide for the using multiphase stationary flow were launched; permanent power supply to the Vostochno-Urengoysky licence area’s CGTU. most comprehensive development meter. phase I facilities was set up.

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KHARAMPURNEFTEGAZ which is key for the project, were Also in 2020, as part of the project Research was also in progress • key facilities (the gas treatment over 40% complete: foundation for the Turonian deposit full-scale at the Kharampurskoye field to unit, gas shipment pipeline, and Also vital to Rosneft’s gas busi- concrete was cast, pile caps and development and field facilities study the geological structure field facilities); ness is Kharampur Gas, a pro- metalwork of racks, buildings 11+ bcm construction: and production potential of the • design and survey activities to ject we run together with BP to and structures were manufac- natural gas production • to enable pilot production in Berezovskaya suite's low-perme- enable the full-scale develop- build field facilities and develop tured and installed, equipment, at design capacity order to confirm reserves, study ability gas reservoirs. In 2020, we ment of the Turonian deposit natural gas deposits at the process pipelines, etc. were core samples, and update the worked with other major subsoil and field facilities construction, Kharampurskoye field. Its objec- installed; up to 25 geological model, the construc- users and the State Commission and expert reviews of the design tives include conventional gas • the construction and installa- bcm tion and installation were com- for Mineral Reserves to com- documentation. production from the Cenomanian tion of the gas shipment pipe- potential production pleted at two gas well clusters, plete guidelines for studying and deposit and the pilot and then line were well on track, the growth with low- downhole gauges were put into calculating free gas reserves in Gas production at the full-scale development of the pipeline crossing over the road permeability Turonian operation, and linear segments of Coniacian–Campanian depos- Cenomanian deposit is scheduled Turonian deposit. The Company and railway was constructed by deposits on stream gas gathering lines were tested; its (the Berezovskaya suite, to start in 2022. has the expertise and experience horizontal auger boring, cross- • based on a 2019 feasibility study etc.), pending approval at a to deliver such complex projects ings over the Vasseyakha, and the pilot production results, 2021 meeting of the commission's efficiently. Shonyauyakha and Ayvasedapur design and survey activities were Technology Expert Council. rivers were completed using initiated under the project. In 2020, construction of key directional drilling, and the tie-in Plans gas-related facilities remained in to Gazprom's trunk gas pipeline Total recoverable AB1C1+B2C2 To be completed in the near an active phase: network was built; reserves as at 1 January 2021, future: • the work progressed as planned; • construction of gas gathering including the Turonian deposit: • gas production infrastructure for • the construction and installa- networks and fit-up of well pads were ca. 1 tcm of natural gas; the Cenomanian deposit; tion at the gas treatment unit, and power facilities continued. 100 mmt of crude oil.

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SIBNEFTEGAZ Plans OTHER PROJECTS Limited design documentation for the pro- In 2021, we plan: and Bharat PetroResources ject’s first phase, which targets an This is our biggest gas-producing • to launch a gas and conden- In 2020, we produced In 2020, Rosneft continued to Limited continued to develop the annual output of up to 8.7 bcm. asset for the moment. sate treatment unit and related develop prospective gas produc- Srednebotuobinskoye oil and gas infrastructure; 9.8 bcm tion centres at its existing fields in condensate field, which is set to In 2021, Rosneft plans to receive In 2020: • to launch a booster compressor of natural gas Eastern Siberia and the Republic become the place of a major gas survey reports and complete the • production drilling continued; station at the Beregovoye field; with the cumulative of (Yakutia). production project. design documentation. • essential production facilities • to continue building other gas gas output reaching under construction included: and condensate treatment and Verkhnechonskneftegaz Kynsko-Chaselskoye Neftegaz To expand gas production in the – a gas and condensate transportation facilities. 135 bcm Rosneft and Beijing Enterprises In the long term, we plan to use Yamal-Nenets Autonomous Area, treatment unit and related Group Company Limited1 the infrastructure of the Kynsko- we also acquired the Zapadno- infrastructure for the devel- In addition, we will continue to drill were jointly exploring the Chaselsky licence area to cre- on As at 1 January 2021, Minkhovsky subsurface site opment of the Beregovoye multilateral wells. Based on this total recoverable Verkhnechonskoye oil and gas ate a new gas production centre the Gydan Peninsula (area of fed- field’s lower horizons; experience, we will decide whether АВ1С1+В2С2 natural condensate field in the Irkutsk in the south-east of the Yamal- eral importance), including an area – a booster compressor station the practice should be adopted gas reserves totalled Region. Nenets Autonomous Area. We also in the Taz Estuary of the Kara Sea, at the Beregovoye field. elsewhere. expect to develop seven previ- at an auction held in December Our strategic partnership with ously acquired licence areas and, 2020. bcm The first multilateral gas well was Thanks to production maintenance 522 Beijing Enterprises Group in the longer run, the adjacent drilled at the Beregovoye oil and projects at the existing fields and Company Limited is expected to areas in the eastern part of what gas condensate field, with two the non-capital-intensive devel- and oil and gas open up new opportunities for is open acreage today. The pro- cased horizontal boreholes 1.1 km opment of the Beregovoye field’s condensate reserves monetising gas reserves in Eastern ject’s expected annual output is long in total. The use of multi- lower horizons, annual gas out- amounted to Russia. 15.7 bcm, with a potential to grow lateral wells in complex geologi- put in the period until 2022 is to 19 bcm later. cal conditions will help us achieve expected to reach 13 bcm. 31 mmt Taas-Yuryakh Neftegazodobycha much higher flow rates as com- In the Republic of Sakha, Rosneft, In 2020, we completed the key pared with single-bore horizontal BP and an Indian consortium field works related to engineering wells and reduce geological risks. consisting of Limited, surveys, and started to develop

1 Beijing Enterprises Group Company Limited holds a 20% stake in Verkhnechonskneftegaz.

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GAS PROCESSING AND BETTER APG UTILISATION INTERNATIONAL GAS BUSINESS DEVELOPMENT

In 2020, the Company's APG utili- Tapping into gas markets abroad sation rate, including fields under and becoming a global player International gas assets development and greenfield pro- Our APG utilisation programme helps reduce the envi- in the world's LNG market are jects at early stages of develop- ronmental footprint and address ecological issues among Rosneft's priorities. The Egypt: a 30% stake in the unique project to develop the Zohr field ment, stood at 74.8% – or 3 p.p. Company’s involvement in inter- together with S.p.A., BP Plc, Mubadala, and EGAS, Egypt’s state oil in the producing regions by utilising associated petro- and gas company. lower than a year ago. If fields at leum gas. national gas projects will ensure a early stages of development are cost-effective increase in natural Vietnam: a 35% stake in the gas and condensate production project excluded, the rate was 94.3%. One of the Company's key objectives is zero routine gas reserves and a balanced risk at Block 06.1 (as the operator); a 100% ownership of Block 05.3/11 explora- flaring of APG. profile of its asset portfolio. tion project; and a 32.67% stake in the Nam Con Son gas pipeline. The Company continued its full- Brazil: a 100% stake in Solimões Basin exploration project as the operator. scale efforts to improve utilisation and completed 21 APG facilities in Mozambique: a 20% stake in three offshore exploration blocks (А5-В, Z5-C and Z5-D) with a potential for major gas discoveries. the reporting period. documentation was developed, and state expert review conclu- Latvia: a 10.56% stake in AS Latvijas Gaze, a major natural gas supplier To further develop our gas pro- sions were obtained. A decision in the Baltic markets, and AS Gaso, the operator of Latvia's gas distribu- tion networks. cessing capabilities, we worked on was made to initiate a procure- a project to build the Maisky gas ment procedure for the facility processing complex. The design construction services.

LNG PROJECTS1

To monetise gas reserves off The Company has the coast of Sakhalin as part of vast gas resources the Sakhalin-1 consortium, the in the north Company participates in the Far of the Krasnoyarsk Eastern LNG project set to build Territory and Yamal- an LNG plant with a capacity of Nenets Autonomous 6.2 mmtpa near the De-Kastri Area (including those port in the Khabarovsk Territory. of the Vostok Oil In 2020, the project saw a FEED project) and is run- contractor selected following the ning an extensive tender, the FEED contract signed, exploration pro- LNG marketing campaign devel- gramme. In the long oped, and the onshore facilities run, this will enable of the offshore loading sys- us to establish large- tem dismantled as part of site scale LNG produc- preparations. tion in the region. LNG will be exported In 2021, we plan to complete to Asia-Pacific FEED, start preparation of a ten- and European mar- der to select an EPC contractor, kets via the Northern and launch the LNG marketing Sea Route. campaign.

1 LNG – liquefied natural gas.

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DEVELOPMENT OF INTERNATIONAL THE ZOHR PROJECT IN EGYPT PROJECTS IN PROMISING OIL AND GAS In October 2017, Rosneft signed Actual production in 2020 (100% on as a full partner with a 30% of the project) totalled 21.7 bcm of REGIONS stake in the project. gas and 0.2 mmt of gas conden- sate (Rosneft’s share: 3.89 bcm The Zohr field was discovered of gas and 0.04 mmt of gas Rosneft is a global energy com- promising oil and gas regions, project development both in by Eni in 2015. It covers an area condensate). pany with a diversified portfo- grow its resource base, and Russia and abroad. Operating in of 231 sq km, with sea depths lio of international assets. The improve overall performance. regions such as South America, ranging from 1.2 to 1.7 km and a The entire volume of gas pro- Company’s mid-term strategic North and East Africa, the Middle gas deposit located at a depth duction goes to Egypt’s national objectives in international expan- Our main goal of building a sus- East, and the Asia-Pacific Region, of 3.4 to 4 km. Zohr is one the gas system. The due amount of sion include managing its current tainable and profitable interna- the Company actively develops biggest offshore fields in the gas is monetised under a long- asset portfolio effectively. Over tional presence is the creation of local partnerships that are aimed Mediterranean Sea. Gas pro- term state-guaranteed gas sup- the longer term, the Company additional value for our sharehold- at mutually beneficial implemen- duction at the field started in ply agreement with EGAS, an seeks to expand its international ers while acquiring new knowledge tation of development projects. December 2017. Egyptian state-owned company. presence in the world’s most and expertise for more effective Exploration on the Shorouk Block Actual production In 2020, two new production wells (including the drilling of a pros- in 2020 (100% were commissioned, bringing the pecting well) are planned to go on of the project) total number of wells to 15. The until the end of July 2022. totalled entire range of Zohr’s produc- tion wells, production capacities 21.7 bcm and infrastructure facilities allow of gas it to produce, process and supply up to 90 mmcm of gas per day to 0.2 mmt the gas transportation system of of gas condensate Egypt. In 2020, the project switched to a self-fi- nancing scheme

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OFFSHORE PROJECTS IN VIETNAM

Rosneft participates in exploration area is located in the region with and a joint international gas and confirmed oil and gas bearing condensate production project at potential and extensive infrastruc- Block 06.1 in the Socialist Republic ture, and borders on the currently of Vietnam (Rosneft Vietnam developed fields of Block 06.1. B.V. as the project operator holds 35%, ONGC – 45%, PVN – 20%). As part of the second exploration The project is implemented in phase at Block 05.3/11 in 2020, line with the Production Sharing the Company finished drilling Agreement (PSA). Block 06.1 con- three exploration wells. tains three gas condensate fields, which are located 370 km offshore Rosneft also participates in the in the Nam Con Son Basin at a offshore Nam Con Son pipeline water depth of up to 190 m. project, which involves the trans- portation of gas and gas con- Actual production Actual Block 06.1 produc- densate produced at offshore in 2020 (100% tion in 2020 (100% of the pro- blocks in the Nam Con Son Basin of the project) ject) totalled 3.2 bcm of gas and to the onshore processing facil- totalled 0.03 mmt of gas condensate ity and then to gas turbine power (Rosneft’s share: 0.6 bcm of gas plants for electricity genera- 3.2 bcm and 0.01 mmt of gas condensate). tion. Shares of the project partici- of gas pants: Rosneft Vietnam Pipelines On 22 June 2020, Rosneft B.V. – 32.7%, – 16.3%, and 0.03 mmt Vietnam B.V. marked 18 years PVN – 51%. of gas condensate of safe offshore operations with no lost-time injuries, an impor- The pipeline has a capac- 18 years tant milestone in its activity at ity of 7.7 bcm per year, carry- of safe offshore Block 06.1. ing ca. 5.6 bcm of gas in 2020, operations with no including the gas produced from lost-time injuries During the exploration at Block 06.1 and other operators in Block 06.1 in 2019, the Company the Nam Con Son Basin. Its opera- drilled a prospecting well on tional efficiency is 100%. OFFSHORE PROJECTS PLD’s Clastic Centre area, which showed that it contains a profita- IN MOZAMBIQUE ble hydrocarbon deposit. Rosneft Vietnam B.V. is now negotiat- Rosneft participates in a consor- In 2020, the consortium finished ing the timeline for drilling an tium implementing an exploration processing and interpreting seis- exploration well with Vietnamese project at three offshore blocks mic data for the blocks. regulators. (А5-В, Z5-C, Z5-D) in Mozambique which were obtained following In 2013, the Company signed a the fifth licensing round. The con- production sharing agreement for sortium includes Rosneft – 20%, the development of Block 05.3/11. ExxonMobil (operator) – 40%, The project is currently at the Mozambique’s state-owned ENH – exploration stage. The licence 20%, – 10%, Eni – 10%.

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BRAZIL IRAQ

Through its subsidiary, Rosneft Exploration in the past years led Bashneft International B.V. is the to the Iraqi side an application Brasil E&P Ltda, Rosneft engages to a number of gas discoveries. project operator and holds a 100% for potential commercial discov- in a prospecting and explora- In 2020, the Company continued stake in the hydrocarbon explora- ery and a further exploration pro- tion project at licence areas in the studying the geological structure tion and production agreement for gramme for the next two years. Solimões River Basin (State of and the oil and gas bearing poten- Block 12. As part of the further exploration Amazonas), holding a 100% stake tial of the basin. programme, the Company com- and operatorship in these licences. In December 2019, the second menced 3D and 2D seismic sur- exploration well, Salman-2, was veys in 2020. It plans to continue completed and tested by the exploration drilling in 2021. Company at Block 12 in Iraq’s south. In late 2019, following the testing, the Company submitted

IRAQ (KURDISTAN) MYANMAR

Since 2017, Rosneft has been run- The Company also continued seis- The Company participates in a Myanmar Oil and Gas Enterprise. ning a mic surveying and preparing for project at Block EP-4 in Central The first phase of exploration is and production project in Iraqi exploration drilling as part of the Myanmar through its subsidiary now underway. In 2021, as part of Kurdistan. The Company is the first subphase under the PSA. Bashneft. A respective PSA was the first phase, the Company plans project operator, holding an 80% signed in 2014 between Bashneft to drill a prospecting well on one stake in five PSAs. International B.V. (90%, opera- of the most promising areas of tor), Sun Apex Holdings Limited Block EP-4. In 2020, it successfully finished the (10%) and national regulator production piloting and started drilling the first exploration well at the Bejil field.

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DOWNSTREAM (REFINING KEY FOCUS AREAS IN 2020

AND MARKETING) REFINERY UPGRADE Refinery maintenance programme in Russia Retail coverage PROGRAMME IN RUSSIA Rosneft continues to implement Producing assets The Company ranks No. 1 in Russia in terms of refining The Company continued to imple- existing facility maintenance ini- Company’s refineries capacity and throughput. It operates 13 large refineries, ment the refinery upgrade pro- tiatives and refinery upgrade which processed 93 mmt of oil in 2020. Petrochemical plants gramme in the Russian Federation, programmes. The total spend- Ports of presence which involves the construction ing on Oil Refining maintenance Company’s GPPs and renovation of process units and upgrade projects under IFRS and facilities in order to increase amounted to RUB 34.4 bln in the depth of processing, light the reporting year. The Company product yield, and the output of remains focused on highly effi- high-quality motor fuels and pro- cient projects to debottleneck the vide the Company's sales chan- refinery configuration by overcom-

Kaliningrad nels with petroleum products ing production and technical con- Primorsk that meet the requirements of straints, and developing bitumen

Baltiysk Ust-Luga Saint-Petersburg the Technical Regulations of the production, as well as increasing Customs Union. operational efficiency and reducing Arkhangelsk operating costs. Vankorneft Most upgrade projects are in the active stage of implementation, Rosneft continued working to Rospan Sibneftegaz Moscow with the bulk of equipment pur- ensure compliance with the chased, engineering design final- instructions issued by regulatory Ryazan Yanos ised, construction and installation authorities, minimise environmen- Uganskzneftegaz Taas-Yuryakh Neftedobycha Samaraneftegaz De-Kastri in progress. Top priorities are tal risks, align rules and proce- Syzran Samotlorneftegaz Komsomolsk refinery refinery Prigorodnoe hydrocracking units at the Tuapse, dures with relevant requirements, Taganrog Volga Samara group refineries and Don Nizhnevartovsk Achinsk, Novokuibyshevsk and replace worn-out equipment, and Yeysk basin Ufa Group of refineries oil refining assocoation NPCC Komsomolsk-on- Vanino Caucasus Verkhnechonskneftegaz Komsomolsk refineries. implement target programmes at Azov Ufaorgsintez Rivers in Western SIberia Kholmsk Korsakov Taman Otradnensky the Company’s refineries in Russia. and Neftegorsky Tuapse GPSS When completed, the programme refinery Tuapse Achinsk refinery Buzuluksky GPP will improve the product portfo- In 2020, Rosneft continued to Angarsk refinery lio and boost the competitiveness implement: Orenburgneft Kozmino Angarsk polymer plant and profitability of the Russian • a large-scale programme to Nakodka Slavyanka refineries. comply with instructions issued Vostochny by the Federal Service for Achievements in 2020 Environmental, Technological KEY RESULTS AND FOCUS AREAS IN 2020 • The Kuibyshev Refinery com- and Nuclear Oversight pleted construction of a central () following (OIL REFINING) laboratory for the MTBE unit and the inspections of production obtained a certificate confirming facilities; In the reporting year, Rosneft’s 74.5% its compliance with the design • a programme for measuring Russian refineries processed refining depth in 2020 documentation. in-house material flows; 93.0 mmt of crude oil (104.0 mmt In 2020, the Company’s oil refining activities were • The Yaroslavl Refinery developed • projects for emergency recov- with foreign assets included). The aimed at satisfying the demand for quality petroleum 5 7.1 % a baseline design for the die- ery of gas fractionation section refining depth and light product products. light product yield sel fuel hydrotreating process as of the Achinsk Refinery's LK-6Us yield in 2020 were 74.5% and 57.1%, part of the deep conversion unit unit and a hydrocracking unit at respectively. construction project. Bashneft-Ufaneftekhim;

Rosneft continues to implement amounted to RUB 34.4 bln in constraints, and developing existing facility maintenance ini- the reporting year. The Company bitumen production, as well as tiatives and refinery upgrade remains focused on highly effi- increasing operational efficiency programmes. The total spend- cient projects to debottleneck the and reducing operating costs. ing on Oil Refining maintenance refinery configuration by over- and upgrade projects under IFRS coming production and technical

104 105 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

• measures aimed at reducing • The Angarsk Petrochemical • elementary sulphur complex at products. The catalyst produced its foreign peers to produce the than foreign-made alternatives. unscheduled production stop- Company began manufactur- the Ryazan Refinery; by the Angarsk Plant of Catalysts Euro-5 ultra-low-sulphur (below Another product, RN-Kat's cat- pages: replacement of worn-out ing an advanced mineral base for • construction of two additional and Organic Synthesis deliv- 10 ppm) diesel. alyst for hydrodesulphurisation equipment, implementation of drilling fluids. elemental sulphur production ers outstanding performance in of vacuum gasoil, is being pro- industrial and fire safety pro- lines at Bashneft-UNPZ. terms of its stability and product IDZ-028RN, an isodewaxing cat- duction-tested at unit 24/8 of jects, as well as targeted pipe- ENVIRONMENT yield from hydrocarbon feedstock. alyst developed by RN-TsIR, suc- the Syzran Refinery. Preliminary line replacement and reliability IMPORT SUBSTITUTION, In October 2020, the first com- cessfully passed pilot tests at results show it to be on par with improvement programmes. In 2020, the Company continued DEVELOPMENT AND LAUNCH mercial batch of the in-house pro- the Angarsk Plant of Catalysts the previously-used imported to implement a number of large- OF NEW PRODUCTS, duced hydrotreating catalyst was and Organic Synthesis. The alternatives. Finally, the Ryazan NEW PRODUCTS scale projects to minimise the AND PRODUCT APPROVAL loaded into the hydro- Novokuibyshevsk Catalysers and Strezhevskoy refineries are environmental impact of Rosneft’s PROCESSES treater 24/7-2bl at the Ryazan Plant has produced a commer- testing the guard beds of gasoline In 2020, the product range of operations, including: Refinery. Before that, the catalyst cial batch of the catalyst for the fraction hydrotreating catalysts Russian refineries was expanded • renovation/upgrade of waste- In 2020, the Ryazan Refinery produced by RN-Kat, Rosneft’s Kuibyshev Refinery. Meanwhile, developed by VNII NP. to meet market demand: water treatment facilities at switched another catalytic specialist subsidiary, had suc- Bashneft-UNPZ has been using a • The Syzran Refinery and Achinsk the Ryazan, Kuibyshev and reforming unit over to a catalyst cessfully passed production tests diesel fraction hydrotreating cat- The Saratov Refinery started Refinery started producing RMLS, Novokuibyshevsk refineries, and produced in house. It is the fourth at the Company’s Ufa Group of alyst developed by RN-TsIR and producing diesel fuel with a a low-sulphur marine fuel compli- an oil sludge disposal unit at out of five reforming units at the Refineries. This is the first diesel produced by the Angarsk Plant of new Russian-made additive ant with IMO requirements. The Bashneft-Ufaneftekhim; Ryazan Refinery to have success- fraction hydrotreating catalyst Catalysts and Organic Synthesis. RN-DDP-2401. The new additive fuel contributes to minimising the • construction of a new two-unit fully replaced costly foreign cata- for the Russian refining industry The catalyst, Ht-100RN, has so far demonstrates excellent perfor- bunker’s environmental footprint. desulphurisation system and an lysts with Russian-made capable of fully replacing proved more reliable mance, with some of its properties

106 107 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

being even better than those of In 2020, the Oil Refining seg- • adopt the process control sys- OIL REFINING foreign-made alternatives. It sub- ment met the approved energy tem started at six units as pro- stantially increases the cold filter saving target. The actual sav- vided for in the roadmap; RUSSIA FOREIGN ASSETS The Company also holds a 49% plugging point in cold-weather ings amounted to over 200 ktce • approving functional and engi- stake in India’s second-largest and winter diesel fuels and main- against the plan of 120 ktce. neering specifications for the Rosneft operates the largest In Germany, the Company’s high-tech refinery in Vadinar with tains their performance properties development and deployment oil refining capacities in Russia subsidiary Rosneft a total throughput capacity of during low-temperature storage. COMPREHENSIVE of the Digital Plant information and controls refineries in the key Deutschland GmbH holds inter- 20 mmtpa and a Nelson Index of ACCELERATED DIGITAL system at Bashneft; regions of the country. In 2020, est (24% to 54%) in three refin- 11.8. REFINERIES’ OPERATIONAL TRANSFORMATION PLAN • developing and updating the Company's domestic capac- eries, controls more than 12% of EFFICIENCY IMPROVEMENT 24 process unit models; ities processed 93.0 mmt of oil, the country's oil refining capaci- The Company joined efforts with IN 2020 In 2020, the Company continued • approving functional and engi- while their average Nelson Index ties, and ranks third by capacity its partners in Asia Pacific to working on initiatives under the neering specifications to build a stood at around 8.1. (12.8 mmtpa). Its facilities have an design a refinery and a petro- In 2020, the operational effi- consolidated strategy implemen- single information space at the average Nelson Index of 9.0. chemical complex in Indonesia and ciency improvement programme tation plan in Oil Refining. They production control centre of the finalise a refinery project in China. had an actual economic effect of included: Syzran Refinery; In Belarus, Rosneft indirectly RUB 22 bln (including quick diag- • approving the funding to roll out • a project launched to develop holds a 21% stake in the Mozyr noses and additional measures a standardised solution for opti- and deploy a manufacturing 8.1 Refinery. with an EBITDA impact). mised blending of dark petro- execution system in Oil Refining. average Nelson Index leum products at five refineries; of Rosneft’s Russian Measures to cut energy consump- • signing contracts for the imple- refineries tion produced an economic effect mentation of an optimised pro- of over RUB 1.4 bln, positively cess control system at 47 units affecting the energy efficiency by of the Ryazan and Saratov refin- 2.8 p.p. eries, and Bashneft. The work to

Rosneft’s refining capacities Main areas of operational efficiency improvement Key initiatives of 2020 23.5 programme

• Reducing the output of fuel oil and implementing new solutions to optimise dark output 1 7.1 • Upgrading intra-plant communications to streamline process flows and increase the output of high-margin 15.5 Capacity and product yield petroleum products optimisation • Replacing and upgrading fractionation trays of fractional columns at atmospheric and vacuum distillation 13.1 units 12.0 • Increasing the output through optimisation/alignment of overhauls and refinery operations without reduc- 10.2 9.0 9.3 tion in scope 8.5 8.3 8.5 7. 5 7. 5 7. 3 7.1 7.0 6.7 7.0 6.5 • Renovating heat and steam condensate systems at production facilities 5.9 6.3 Reducing energy • Improving efficiency of waste heat boilers and in-house energy generation 4.5 consumption • Comprehensive inspections and maintenance of process furnaces to enhance their efficiency rate • Improving efficiency of heat changersex 1.9 1.9

Tuapse Refinery Achinsk Angarsk Komsomolsk Ryazan Saratov Slavneft- Novo- Kuibyshev Syzran Ufa Group of Small Refinery Petrochemical Refinery Refinery Refinery YANOS kuibyshevsk Refinery Refinery Refineries refining Company (50%) Refinery facilities1 Planned capacity for 01.01.2021, mmt Crude input in 2020

Light products in %

Not calculated 50.6 51.1 64.1 50.7 58.6 50.5 55.6 55.1 58.4 55.7 65.7

1 Small refining facilities include Nizhnevartovsk Refinery, Krasnoleninsky Refinery, Purneftepererabotka and Strezhevskoy Refinery (50%); excluding processable waste.

108 109 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

REFINING CAPACITIES IN RUSSIA

NOVOKUIBYSHEVSK REFINERY SYZRAN REFINERY

Oil refining product mix, mmt In 2020, investments were aimed Oil refining product mix, mmt In 2020, investments were focused at maintaining the existing facili- on further construction of a vac- Processed in 2020: ties, building a hydrocracking and uum gasoil hydrotreating unit, Throughput in 2020: hydrotreating complex with off- mmt hydrogen and sulphur production site facilities, implementing oper- 6.7 units, off-site facilities, an FCC 6.5 mmt ational efficiency projects, and unit, a diesel fuel hydrotreatment The refining depth was 6.1 developing designs for other facil- 6.2 unit, as well as maintenance and The refining depth was ity upgrade projects. operational efficiency initiatives. 74.1% 79.0% In 2020, the Novokuibyshevsk Debottlenecking projects in 2020 Refinery carried out comprehen- included a contract to purchase a Naphtha — sive repairs of 18 units; a new Naphtha 0.2 vacuuming system for the ELOU- Motor gasoline 1.2 explosion-proof control room was Motor gasoline 1.1 AVT-6 unit with a supporting fluid 0.2 installed at AVT-11 distillation unit. Kerosene – discharge system to reduce cor-

Diesel fuel1 2.2 Diesel fuel1 2.2 rosiveness, sulphide content and Fuel oil 1.6 Fuel oil 1.3 water as part of the project to Other 0.8 Other 1.4 increase the vacuum gasoil extrac- tion at the ELOU-AVT-6 unit).

The Company launched produc- tion of RMLS 40, a low-sulphur residual marine fuel compliant with the IMO requirements intro- duced early in 2020.

KUIBYSHEV REFINERY RYAZAN REFINERY

Oil refining product mix, mmt In 2020, investments were focused Oil refining product mix, mmt In 2020, investments were aimed on further construction of a vac- at maintaining the existing facili- uum gasoil hydrotreating unit, Throughput in 2020: ties, implementing operational effi- Processed in 2020: hydrogen and sulphur production ciency projects, and developing units, and off-site facilities, as well 4.5 mmt designs for other facility upgrade 13.1 mmt as maintenance and operational projects. 4.1 efficiency initiatives. The refining depth was 12.6 The refining depth was The Company launched pro- 66.2% duction of RMLS 40 (type EII), a 74.3% low-sulphur marine fuel with sul- phur content below 0.5%, which Naphtha 0.5 Naphtha 0.3 makes it fully compliant with the Motor gasoline 0.6 Motor gasoline 2.7 International Convention for the Kerosene – Kerosene 0.8 Prevention of Pollution from Ships

Diesel fuel1 1.4 Diesel fuel1 3.7 (MARPOL).Process pipelines in workshop No. 1 were upgraded, Fuel oil 1.4 Fuel oil 3.3 with the tar and oil fuel block of Other 0.1 Other 1.8 the AT-6 unit connected.

1 Including marine fuel. 1 Including marine fuel.

110 111 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

SARATOV REFINERY ACHINSK REFINERY

Oil refining product mix, mmt In 2020, the refinery focused Oil refining product mix, mmt In the reporting year, investments on the maintenance of existing were focused on the comprehen- Processed in 2020: facilities, improving operational sive upgrade programme, including Throughput in 2020: efficiency, and highly efficient the construction of a hydrocrack- mmt mmt debottlenecking projects related 6.3 ing complex with off-site facilities 7.1 to facility configuration. and a petroleum coke production 6.1 The refining depth was 6.9 unit, as well as on operational effi- The refining depth was Turnkey upgrade of the process ciency improvement and main- furnaces P-1 and P-2 was com- 80.1% tenance of the existing facilities, 65.6% pleted at the diesel fuel hydro- including the restoration of a gas treater L-24-6, facility No. 2. A fractionation section of LK-6Us Naphtha 0.2 compressor with regulated air sup- Naphtha 0.1 unit. Motor gasoline 1.1 ply was installed at the bitumen Motor gasoline 1.0 Kerosene – production unit. Kerosene 0.1 Work started to assess the feasi-

Diesel fuel1 2.0 Diesel fuel1 2.3 bility of gasification of the Achinsk Fuel oil 1.2 Fuel oil 2.3 Refinery. Other 1.7 Other 1.0 The refinery started produc- ing RMLS, a low-sulphur marine fuel compliant with IMO 2020 requirements.

TUAPSE REFINERY ANGARSK PETROCHEMICAL COMPANY Oil refining product mix, mmt In 2020, investments were focused Oil refining product mix, mmt In 2020, investments were focused Processed in 2020: on large-scale renovation pro- on the comprehensive upgrade jects, including the construction of Processed in 2020: programme, including the con- 9.3 mmt a hydrocracking and hydrotreat- struction of sulphuric acid alky- ing complex with off-site facili- 9.0 mmt lation units and a diesel fuel The refining depth was ties. Other projects were related hydrotreater with off-site facilities, 9.0 to maintenance of the existing The refining depth was 8.2 as well as on operational efficiency % facilities. improvement and maintenance of 82.2 65.4% the existing facilities. The Company completed the con- struction to launch fuel oil qual- Naphtha 1.6 ity control procedures using Naphtha 0.3 Motor gasoline – an inline viscosity meter at the Motor gasoline 1.1 Kerosene – ELOU-AVT-12 unit. Kerosene 0.5

Diesel fuel1 2.8 Diesel fuel1 3.3 Fuel oil 3.1 Fuel oil 1.4 Other 1.4 Other 1.5

1 Including marine fuel. 1 Including marine fuel.

112 113 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

KOMSOMOLSK REFINERY SMALL REFINING FACILITIES

Oil refining product mix, mmt In 2020, investments were focused Oil refining product mix, mmt The Company holds inter- on the comprehensive upgrade ests in several small refin- programme, including the con- Throughput in 2020: ing facilities in Russia, including struction of a hydrocracking and the Nizhnevartovsk Refinery, hydrotreating complex with off- 5.9 mmt Krasnoleninsky Refinery, site facilities, as well as on oper- Purneftepererabotka and 5.7 ational efficiency improvement The refining depth was 1.8 Strezhevskoy Refinery (50%). In and maintenance of the existing 2020, these facilities processed facilities. 63.1% a total of 1.9 mmt of crude oil, including 1.5 mmt processed by the The ELOU AVT-2 crude oil distilla- Nizhnevartovsk Refinery, the larg- Naphtha 0.6 tion unit was upgraded, with inter- Naphtha 0.9 est of them. Motor gasoline 0.4 nals replaced in two of its columns. Motor gasoline — Kerosene – Repairs and recovery activities Kerosene 0.1

Diesel fuel1 2.0 were completed at the delayed Diesel fuel1 0.6 Fuel oil 2.1 coking unit. Fuel oil — Other 0.6 Other 0.1 A boiler house was upgraded.

BASHNEFT REFINING COMPLEX: NOVOKUIBYSHEVSK OILS AND ADDITIVES PLANT

Oil refining product mix, mmt Bashneft-Novoil, In 2020, the plant continued to proceeded with operational effi- Processed in 2020: Bashneft-Ufaneftekhim, implement its oil quality improve- ciency, environmental, infrastruc- and Bashneft-UNPZ Throughput in 2020: ment programme as part of the tural and capacity maintenance 936 kt In 2020, investments were largely hydrogenation facility construc- initiatives. of feedstock and made focused on maintenance of the 15.5 mmt tion projects (Phase 1 and 2) and existing facilities, aligning rules 390 kt 13.5 and procedures with relevant of marketable The refining depth was products requirements, implementation of a comprehensive upgrade pro- 86.0 % gramme and operational efficiency improvements. Naphtha 0.4 Motor gasoline 2.9 Kerosene 0.1

Diesel fuel1 6.1 Fuel oil 1.9 Other 2.2

1 Including marine fuel. 1 Including marine fuel.

114 115 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PETROLEUM PRODUCT QUALITY CONTROL

The motor fuels produced by Rosneft’s refineries have high per- formance and environmental char- acteristics and meet the K5 fuel class requirements outlined in the Technical Regulations of the Customs Union CU TR 013/2011 On Requirements for Motor and Aviation Gasoline, Diesel and Marine Fuels, Fuels for Jet Engines, and Fuel Oil. The qual- ity of Rosneft’s motor fuels has been confirmed by qualification and bench tests run by specialised R&D centres, and various awards and accolades.

Quality management systems at the Company’s refineries comply with the ISO 9000 international standards and ensure high-quality production and a minimum num- ber of customer claims.

The Company’s refineries have a multi-stage Quality Control sys- tem for feedstock and marketable products, including incoming con- trol of feedstock, chemicals, and additives supplied to the plants, as well as multi-stage monitoring The Company’s refineries regu- production of dispersant and and quality control of components larly hold Quality Days attended depressor additives for diesel fuels OVERVIEW OF INTERNATIONAL OIL REFINING ASSETS and marketable products through- by the employees of relevant units in 2020. out the entire production cycle, i.e. to study the best practices for AND PROJECTS from feedstock delivery to a facil- improving production efficiency Consistent measures to improve ity to product sales. and quality control, and share and control the quality of petro- ROSNEFT DEUTSCHLAND 24% and 54.17%, respectively. At Bavaria, one of the largest indus- experience in ensuring quality and leum products resulted in more GMBH (RDG) the same time, BP accumulated a trial regions of Germany, and in Since 2019, the Company has safety of petroleum products. stringent requirements for 100% share in the Gelsenkirchen Austria. been conducting enhanced qual- AI-95-K5 Euro-6 motor gaso- The Company entered the German Refinery. ity monitoring of oil delivered for In 2020, the Company continued line with improved environmen- petroleum product market in 2011 Rosneft is the third largest player refining. expanding the range of additives tal and performance properties. when it acquired a 50% stake in In December 2019, Rosneft in the German oil refining mar- that improve performance char- This gasoline contains less sul- Ruhr Oel GmbH (ROG). Following Deutschland GmbH closed the ket. Operating activities are car- The testing laboratories at the acteristics of motor fuel. These phur, benzene, aromatic and ole- ROG reorganisation in 2016, deal to acquire 3.57% of shares in ried out by its subsidiary, Rosneft refineries are equipped with state- activities helped reduce addi- finic hydrocarbons and resins, and Rosneft gained direct control Bayernoil Raffineriegesellschaft Deutschland GmbH, established of-the-art equipment and analyt- tives purchase costs by consid- has a longer shelf life. Its produc- over more than 12% of Germany’s mbH from BP Europa SE, increas- in 2017. Rosneft supplies almost ical instruments to ensure highly erably increasing the number of tion was launched at Bashneft oil refining capacities, with a ing its stake to 28.57%. As a a quarter (about 23 mmtpa) of accurate and reliable test results. available alternatives. As part (Bashneft-Novoil), Saratov total throughput capacity of result, the Company saw its crude oil imports to Germany. of the import substitution pro- Refinery, Ryazan Refinery and about 12.5 mmtpa. The Company share in the refining capaci- Product compliance is confirmed gramme, the Company’s refineries Syzran Refinery. The product will became a shareholder in three ties of Bayernoil grow to almost Following the joint venture through certification performed use only anti-wear additives pro- be marketed in the Republic of major refineries: Bayernoil (12.5%), 3 mmtpa, with its total through- restructuring agreement, Rosneft with the assistance of accredited duced by the Group Subsidiaries Bashkortostan, Krasnodar Territory, MiRO (12%), and PCK Schwedt put capacity at German refiner- and BP decided on the gradual testing laboratories and leading in Russia. In addition, Rosneft – Ryazan, Kaluga, Tula and Moscow (35.42%). It then doubled its ies reaching 12.8 mmtpa, which adaptation of the petroleum prod- research institutes. MP Nefteprodukt launched the Regions, and the city of Moscow. shares in the refineries to 25%, strengthened its positions both in uct sales chain to ensure full

116 117 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

and timely performance under the LIMITED The refinery owns a deep-water 7.6 thousand by 2024, selecting contracts with refinery customers port that can accommodate VLCC the most promising territories for during the transition phase, which MiRO GmbH & Co. Refinery KG is located in Karlsruhe, In August 2017, Rosneft closed the supertankers, while its power sta- development. was completed as scheduled. Baden-Württemberg. This is the largest deal to acquire 49.13% of shares in tion independently provides ample in Germany and one of the biggest and most innova- Essar Oil Limited (renamed Nayara power supply. Nayara Energy Limited is imple- On 1 January 2019, Rosneft tive plants in Europe. Capacity – 14.9 mmtpa (Rosneft's Energy Limited in May 2018), an menting a phased development Deutschland GmbH initiated share – 3.6 mmtpa), the Nelson Index – 9.4. Indian company that owns a major Nayara Energy Limited runs a large programme for its Vadinar refinery. direct sales of petroleum prod- refinery in Vadinar and a retail chain network of filling stations under the ucts manufactured at the three PCK Raffinerie GmbH is located in Schwedt, of filling stations across India. Essar and Nayara brands in India. In October 2020, the Board of German refineries partially owned Brandenburg. Thanks to its location, it can be supplied As at the end of December 2020, Directors of Nayara Energy Limited by Rosneft. The product mix with Urals through the Druzhba pipeline. Capacity – The Vadinar refinery has a capac- the network included 5,975 operat- made a final investment decision to includes gasoline, diesel, heating 11.6 mmtpa (Rosneft's share – 6.3 mmtpa), the Nelson ity of 20 mmtpa and ranks second ing stations and had three in-house green-light the first phase of this oil, jet fuel, LPG, bitumen, fuel oil, Index – 9.8. in the Indian market by throughput. and 13 rented oil depots. programme. and petrochemical products. The It is among the world’s Top 10 most Company is a leader in the German Bayernoil Raffineriegesellschaft mbH supplies complex refineries, with a Nelson Nayara Energy Limited operates in During this phase, the company petroleum wholesale market. fuel to Bavaria and northern Austria. Capacity – Index of 11.8. It is highly flexible as it 30 out of 36 regions of India and will reconstruct the catalytic crack- 10.3 mmtpa (Rosneft's share – 2.9 mmtpa), the Nelson can process heavy and extra-heavy accounts for around 5.8% of the ing facility and build new polypro- Apart from direct supplies from its Index – 6.8. crudes, which account for over 90% Indian market in terms of sales. The pylene production units with an refineries, the Company uses over of its annual throughput, and has company is planning to increase annual capacity of up to 450 kt. 30 export terminals in Germany achieved high operational efficiency the number of filling stations to to deliver petroleum products by for its assets. road, rail, and river. The compa- ny’s customer base includes more than 600 enterprises in Germany, consumed at Berlin airports. Due Poland, the Czech Republic, to COVID-19 restrictions, jet fuel , Austria, and , output decreased in 2020. as well as , and . As part of the initiative to cre- ate a marketing function, Rosneft The company owes the success of Deutschland GmbH deployed its large-scale sales to the sim- an advanced enterprise resource ilar experience it had with bitu- planning system SAP S/4HANA. men supplies in 2018. That year, The deployment project turned to Rosneft Deutschland GmbH was be the largest in the European oil supplying its products to over and gas industry and one of the 130 customers across Germany. biggest worldwide in terms of data volume transferred. S/4HANA is Apart from that, Rosneft a top-notch resource planning Deutschland GmbH signed con- solution. tracts on into-plane fuelling with airports in Munich, Berlin and MOZYR REFINERY Stuttgart to expand its jet fuel market presence in Germany. In The Company indirectly holds a the reporting year, customers of 21% stake in the Mozyr Refinery Rosneft Deutschland GmbH were (Belarus) through Slavneft. In successfully transferred to the 2020, Rosneft’s share in the new Berlin Brandenburg Airport. throughput of the Mozyr Refinery amounted to 1.9 mmt. The As a shareholder of PCK Refinery Company is completing its invest- in Brandenburg, Rosneft ment project to construct a heavy Deutschland GmbH supplies residue hydrocracking unit sched- about a half of the total kerosene uled to be launched in 2021.

118 119 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PROMISING FOREIGN PROJECTS PETROCHEMICALS

In order to expand its presence in the growing high-margin markets, Rosneft Petrochemical assets form a cru- In 2020, the Angarsk Polymer UFAORGSINTEZ is carrying out a number of promising oil refining and petrochemicals projects cial part of Rosneft’s production Plant processed 735.3 kt of hydro- in Indonesia and China. complex. High product quality carbon feedstock, while its output Ufaorgsintez is one of the larg- and continuous improvement of of high value-added marketable est petrochemical enterprises in REFINERY The Board of Directors of complex. Following a change production processes provide the products amounted to 576.8 kt. Russia. It focuses on the produc- AND PETROCHEMICAL PetroChina-Rosneft Orient in the Chinese petroleum prod- Company with a competitive edge tion of phenol, acetone, high-den- COMPLEX CONSTRUCTION Petrochemical has approved pro- uct market, the parties agreed to over other Russian and foreign NOVOKUIBYSHEVSK sity polyethylene, polypropylene IN TUBAN cess configurations of the refinery update the project’s feasibility players in the domestic market. PETROCHEMICAL COMPANY and its copolymers, synthetic rub- and the aromatic hydrocarbons study. ber, and other organic synthesis The project is implemented in Rosneft’s petrochemical complex The Novokuibyshevsk products. The plant accounts for cooperation with , comprises: Petrochemical Company is one of over 30% of phenol produced in an Indonesian oil and gas com- • Angarsk Polymer Plant; the largest gas processing, pet- Russia and is a leading producer pany, through the establish- • Novokuibyshevsk Petrochemical rochemical, and organic synthesis of acetone. Ufaorgsintez has a ment of a joint venture named Company; companies in Russia and Eastern capacity of more than 850 ktpa. РТ Pertamina Rosneft Pengolahan • Ufaorgsintez. Europe. dan Petrokimia (45% owned by The company’s products are Rosneft and 55% by Pertamina) Rosneft also has petrochemi- Its product mix comprises over widely used to manufacture plexi- on 28 November 2017. cal production lines at Bashneft- 30 articles, including tert-amyl glass, phenol formaldehyde resins, Ufaneftekhim (an aromatic methyl ether (TAME), synthetic alkylphenols, plastic films, indus- Its design capacity will be up to hydrocarbon production complex) phenol, synthetic ethanol and ace- trial rubbers, and other products 15 mmtpa for primary oil refining, and the Angarsk Petrochemical tone for industrial application, for industrial, agricultural, mechan- over 1 mmtpa for ethylene produc- Company (methanol, butyl alcohol, LPG, and para-tertiary butylphe- ical engineering, consumer goods, tion and 1.3 mmtpa for aromatic and amine production units). nol (PTBP). healthcare, electronics and electri- hydrocarbons production. cal engineering applications. ANGARSK POLYMER PLANT The company produces 300 ktpa In October 2019, РТ Pertamina of TAME, a high-octane addi- Some of its organic synthesis Rosneft Pengolahan The plant’s main products include tive for motor fuels, and has PTBP products are unrivalled in Russia. dan Petrokimia signed a contract ethylene, high-density polyeth- production facilities unrivalled in The company’s ethylene propyl- with Spanish Tecnicas Reunidas ylene, propylene, benzene, buty- Russia and the CIS. It is also the ene diene monomer (EPDM) rubber SA on the basic (BED) and front- lene-divinyl fraction, ethylbenzene, only synthetic ethanol manufac- is a component of various indus- end engineering design (FEED) styrene, polystyrene, etc. turer in the country. trial rubber products, including for an oil refining and petro- those used in the defence industry chemical complex in Tuban (Java, As of now, the Angarsk Polymer In 2020, the company processed and cable insulation in electrical Indonesia). The complex is sched- Plant is the only polystyrene and 877.4 kt of feedstock and manu- appliances. uled to be commissioned in 2026. high-density polyethylene man- factured 839.9 kt of marketable ufacturer in Eastern Siberia. The products. In 2020, the company processed PETROCHINA-ROSNEFT plant’s annual output includes 643.9 kt of hydrocarbon feedstock ORIENT PETROCHEMICAL over 200 kt of ethylene, over The company is carrying out a pro- and manufactured 576.2 kt of mar- COMPANY, TIANJIN (JOINT 100 kt of propylene, and 60 kt ject to build a pilot plant for the ketable products. VENTURE) of benzene. Ethylene is partially production of synthetic polyal- supplied to Sayanskkhimplast as phaolefin base oils (PAO) charac- The ownership structure of the feedstock, while the remainder is terised by high viscosity and a low Tianjin Refinery includes: used to produce high-density pol- freezing point. At present, polyal- • Rosneft (49%); yethylene and other petrochem- phaolefin base oils are not pro- • China National Petroleum icals. The plant uses straight-run duced in Russia. Corporation (51%). gasoline and hydrocarbon gases mainly produced by the Angarsk The refinery’s design capacity is Petrochemical Company as 16 mmtpa. feedstock.

120 121 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

GAS PROCESSING PRODUCTION OF CATALYSTS

NOVOKUIBYSHEVSK industrial tests of these catalysts for platinum-containing reform- The Company’s gas processing The plant continues a compre- unit and the Zaykinskoye GPP, CATALYSERS PLANT at the Kuibyshev Refinery (sched- ing catalysts and gasoline isom- assets process associated petro- hensive programme involving the processed 1.12 bcm of associated uled for 2021) are successful, the erisation catalysts. The unit with leum gas from Rosneft’s oil and upgrade and replacement of worn- petroleum gas and unstable gas In 2019, the Novokuibyshevsk production of isodewaxing cat- a capacity of 600 tpa is to be gas production facilities, and their out and obsolete equipment with condensate derived from the oil Catalysers Plant launched Russia’s alysts will be expanded, gener- launched in 2021. It is designed to output is mainly utilised as feed- advanced modular units poised to and gas fields of Orenburgneft. first-ever advanced pilot test- ating additional profits both for improve the quality of reforming stock for Rosneft’s petrochemical improve operational efficiency and Its main products are combus- ing facility for hydrotreating cat- Rosneft's refineries and the cata- and gasoline isomerisation cata- subsidiaries. increase automation. tible natural dry stripped gas, liq- alysts. The new facility is aimed lyst manufacturer. lysts, as well as reduce platinum uefied gases such as industrial at testing technologies to man- losses, increase production reli- Rosneft’s gas processing assets TUYMAZINSKOYE GAS propane-butane, autogas, indus- ufacture new catalysts designed In 2020, the catalytic regenera- ability and safety, and ultimately include: PROCESSING PLANT trial propane, motor propane and by Rosneft’s and Russian R&D tion unit of the Novokuibyshevsk meet the needs of all Russian • Otradnensky Gas Processing industrial butane, as well as sta- providers with a view to ramping Catalysers Plant recovered refineries for this type of advanced Plant (OGPP); In 2020, TGPP, part of Bashneft, ble natural gasoline and industrial up large-scale production. Using 319 tonnes of hydrotreat- catalysts. • Neftegorsky Gas Processing processed 22.7 mmcm of associ- sulphur. the pilot facility’s equipment, the ing catalysts to be reused Plant (NGPP); ated petroleum gas derived from plant can test both specific pro- at the Company’s refineries In 2020, the plant produced and • Tuymazinskoye Gas Processing the oil and gas fields of Bashneft- Currently, an investment project duction stages and the complete and 256 tonnes of catalysts to be sold 416 tonnes of catalysts, up by Plant (TGPP); Dobycha (Oil and Gas Production is under way to build a 1.2 mmcm production cycle of alumina-based used at other Russian refineries. 103 tonnes year-on-year. • Shkapovskoye Gas Processing Board (OGPB) Tuymazaneft) and gas desulphurisation unit at the catalysts. In 2020, the facility pro- Plant (ShGPP); 96.4 kt of NGLs using its own or Zaykinskoye GPP, which will ena- duced its first commercial batch of ANGARSK PLANT IDZ-028RN, an isodewaxing cat- • RN-Buzulukskoye Gas third-party feedstock. Its main ble BGPP to process additional diesel fuel isodewaxing catalysts OF CATALYSTS AND ORGANIC alyst developed by RN-TsIR, suc- Processing Plant (BGPP). products are liquefied gases such volumes of sulfur-associated developed by RN-TsIR. The cat- SYNTHESIS cessfully passed pilot tests at the as industrial propane/butane mix- petroleum gas from the prospec- alysts are designed to manufac- Angarsk Plant of Catalysts and OTRADNENSKY GAS ture, autogas, industrial butane, tive license areas of Orenburgneft. ture winter and Arctic diesel fuels The Angarsk Plant of Catalysts Organic Synthesis. PROCESSING PLANT isobutane fraction, and normal at the Kuibyshev Refinery with- and Organic Synthesis contin- butane fraction, as well as sta- out using depressor additives. If ues building a production unit Meanwhile, Bashneft-UNPZ has In 2020, OGPP processed ble natural gasoline and industrial been using a diesel fraction hydro- 224.3 mmcm of associated petro- sulphur. treating catalyst developed by leum gas derived from the oil and RN-TsIR and produced by the gas fields of Samaraneftegaz and SHKAPOVSKOYE GAS Angarsk Plant of Catalysts and Orenburgneft. Its main products PROCESSING PLANT Organic Synthesis. The cata- are dry stripped gas, natural gas lyst, Ht-100RN, has so far proved liquids, ethane fraction, and indus- In 2020, ShGPP, part of Bashneft, more reliable than foreign-made trial sulphur. processed 31.5 mmcm of associ- alternatives. ated petroleum gas derived from The plant continues a compre- the oil and gas fields of Bashneft- On 13 November 2009, the hensive programme involving the Dobycha (OGPB Ishimbayneft and Russian Government issued upgrade and replacement of worn- OGPB Ufaneft) and 124.5 kt of Resolution No. 1715-r On Russia's out and obsolete equipment with NGL using its own or third-party Energy Strategy, which seeks to advanced modular units poised to feedstock. Its main products are bring about a transition to domes- improve operational efficiency and liquefied gases such as industrial tically-made catalysts. In 2019, increase automation. propane/butane mixture, autogas, Rosneft contributed to this effort motor propane, industrial butane, by establishing RN-Kat, a special- NEFTEGORSKY GAS isobutane fraction, and normal ist subsidiary able to make 4 ktpa PROCESSING PLANT butane fraction, as well as sta- of hydrotreating catalysts as a ble natural gasoline and industrial replacement for imported alter- In 2020, NGPP processed sulphur. natives. This addition is expected 411.3 mmcm of associated petro- to strengthen the technologi- leum gas derived from the oil and BUZULUKSKOYE GAS cal self-sufficiency, independence gas fields of Samaraneftegaz and PROCESSING PLANT and economic performance of our Orenburgneft. Its main products refineries. In 2020, the plant pro- are dry stripped gas, natural gas In 2020, BGPP, which includes two duced 685 t of hydrotreating cat- liquids, ethane fraction, and indus- standalone production facilities, alysts, with 201 t loaded into the trial sulphur. the Pokrovskaya gas treatment Company's hydrotreaters.

122 123 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

COMMERCE AND LOGISTICS

OIL SALES The total sales to third parties in 2020 amounted to 120.6 mmt, Rosneft pursues a policy aimed including 5.2 mmt of oil sold at ensuring a balanced mix of oil domestically. monetisation channels, includ- ing sales under long-term con- OIL EXPORTS TO FSU tracts, through tender-based spot AND NON-FSU COUNTRIES transactions, and domestic market sales, as well as refining at its own In the reporting year, Rosneft’s facilities in Russia, Germany, and FSU and non-FSU oil exports India. totalled 115.4 mmt. Eastbound exports, particularly pipeline sup- The Company continuously mon- plies to China and sales via the itors the cost efficiency of its oil Kozmino and De-Kastri ports, monetisation channels to maxim- are the most profitable for the ise the share of high-margin chan- Company. nels in its overall sales structure. In 2020, eastbound supplies, In the reporting year, the Company including international trading, supplied about 93 mmt of oil to amounted to 61.9 mmt, their share Russian refineries. In addition to in the total external sales reaching shipments to its Russian refiner- 54%. Out of this amount, Rosneft ies in 2020, the Company supplied supplied 54.8 mmt, while interna- 4.6 mmt of oil to its partly owned tional traders shipped 7.1 mmt. refineries in Germany. In addition, the Company exported Export channels, % 47.2 mmt of oil to Northwestern, Central, and Eastern Europe, Mediterranean and other non- OIL SUPPLIES UNDER LONG- To maintain and expand relation- We continue to foster collab- The share of oil and petro- FSU countries, while also shipping TERM CONTRACTS ships with end consumers, Rosneft oration with end consumers of leum products supplied under 6.3 mmt to the CIS. signed a long-term contract with petroleum products. In 2020, we long-term contracts (1+ year) The Company continued sup- Total Oil Trading in 2020 to sup- shipped approximately 0.7 mmt of exceeded 90% of total exports 115.4 The bulk of crude oil is exported plying oil to China National ply oil to Leuna Refinery (Total stable natural gasoline to from Russia to non-FSU countries via Transneft's system, includ- Petroleum Corporation (CNPC) Group) in Germany via the Druzhba (JXTG Nippon). in 2020. ing its trunk pipeline network and under the China–Russia govern- pipeline for the period from April ports. In the reporting year, we pri- ment agreement. The supplies, 2020 to March 2022. Also in 2020, marily exported crude oil via the which total 40.0 mmtpa, includ- the Company began oil supplies Key achievements China (pipeline) 35 % following channels: ing 10.0 mmt transported via to Germany under the previously Central and Eastern Europe 15 % • Pipeline: approximately 96 mmt Kazakhstan, enable Rosneft to signed annual contracts with Shell (pipeline) In 2020, eastbound oil supplies, including international trading, accounted (83.2% of total FSU and retain its presence in this strategic and Eni. Additionally, Rosneft and for 54% of total FSU and non-FSU oil exports. International trading 12 % non-FSU exports), including export market. Indian Oil Corporation Limited Primorsk (sea) 9 % Supplies to China under long-term contracts remained robust 32.7 mmt shipped via ports and signed a contract to supply oil to at 40.0 mmtpa. Kozmino (sea) 9 % around 63.2 mmt transported EXPANDING COOPERATION India via the till Ust-Luga (sea) 7 % The share of oil and petroleum products supplied under long-term con- by pipelines to China, Belarus, WITH OIL AND PETROLEUM the end of 2020. In 2020, Rosneft tracts (1+ year) exceeded 90% of exports from Russia to non-FSU Republic of Belarus 5 % Central and Eastern Europe; PRODUCT CONSUMERS continued working with SOCAR countries. (pipeline) • Rail and mixed transport: Trading S.A. to supply oil to its STAR Novorossiysk (sea) 4 % 1.9 mmt, or 1.6% of total exports; In 2020, the Company continued Refinery (Turkey) from the port of De-Kastri (sea) 2 % • Other channels, including ship- to focus on end consumers. Total Novorossiysk, and with ENEOS Rail 2 % ments through the De-Kastri oil exports to them were around (JXTG Nippon) to supply ESPO and Varandey (sea) 1 % export terminal: 3.6 mmt. 67 mmt. Sokol crudes to Asia Pacific.

124 125 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PETROLEUM PRODUCTS SALES GAS SALES

EXPORT SALES OF PETROLEUM (including the Ufa group of refiner- Armenia, having shipped 194.0 kt Gas sales, bcm Gas revenue, RUB bln PRODUCTS ies) in total sales during the main of high-quality gasoline and die- trading session stood at: sel fuel to the country from its In 2020, petroleum product • 44% for motor gasoline; Russian refineries. Under our Long- exports amounted to 63.4 mmt1. • 40% for diesel fuel; term Development • 42% for fuel oil. We also maintained supplies Strategy we aim Rosneft supplies bulk quantities of gasoline and diesel fuel to 56.43 239.80 to become a lead- of oil products to Mongolia on a The Company exceeded on-ex- RN-Kyrgyznefteprodukt, our sales ing independent regular basis. In 2020, exports of change sales targets set by the subsidiary in the Kyrgyz Republic, gas supplier light and dark petroleum products joint order of the Russian Federal for resale via its own retail chain on the domestic to this country reached 1.2 mmt. Antimonopoly Service and the and wholesale channels. In 2020, market. Russian Ministry of Energy dated petroleum product shipments In Russia 51.98 In Russia 184.50 The Company continues to 12 January 2015. The reporting totalled 53.7 kt. Abroad 4.45 Abroad 55.30 focus on expanding its interna- year saw 27.3% of total motor gas- tional footprint and diversify- oline, 17.1% of diesel fuel, 25.2% of We continued to supply petro- ing its supply routes. During the kerosene, and 2.8% of fuel oil from leum products to the retail 2020 summer shipping season, Rosneft refineries (including the chain in Georgia, with volumes the Company exported diesel fuel Ufa group) sold on the exchange reaching 191.0 kt, up by 10.5 kt Rosneft supplies natural gas, regional sales companies in over The Sverdlovsk Region remains our using its fleet directly from the vs the required 10%, 6%, 10%, and year-on-year. dry stripped gas, and associated 40 regions. The bulk of gas sold key region in terms of gas sales. Syzran Refinery and the Saratov 2%, respectively. petroleum gas produced at the abroad is supplied by production Our supplies cover approximately Refinery to a foreign port on CFR MEETING FEDERAL Company's assets in Russia to facilities in Egypt and Vietnam. 80% of local gas demand from both terms. This logistic option enabled As requested by our counterpar- CUSTOMERS' DEMAND consumers in Russia and abroad industrial facilities and households. Rosneft to maximise the use of its ties, we supplied motor fuel in full (via its international assets). In 2020, gas consumption was tanker fleet and avoid the cost of and on time under the Northern Meeting federal customers’ Associated petroleum gas is pro- affected by warm weather To maximise gas monetisation, additional transshipment at sea Supply Haul programme. Some of demand for petroleum products is cessed both at the Company’s early in the year and a reduc- Rosneft has developed a com- ports. the shipments were made via the our key priority under the corpo- own gas treatment facilities and tion in gas demand brought modity transport flow optimisa- port of Arkhangelsk – this helped rate policy. In 2020, Rosneft and by external parties, such as about by COVID-19 restrictions. tion system used for calculating the DOMESTIC SALES us launch a new supply route its subsidiaries fully delivered on Holding and . Consequently, Rosneft’s natural operational gas balance. OF PETROLEUM PRODUCTS and increase sales as part of the their obligations to supply petro- gas sales in the domestic mar- Northern Supply Haul programme leum products to federal custom- The bulk of natural and dry ket decreased to 51.98 bcm, or We continued trading in natural gas In 2020, domestic sales of petro- development. ers. Next year, we will continue stripped gas is transported to RUB 184.5 bln. at the St Petersburg International leum products totalled 37.9 mmt2, working in this area. Russian consumers via Gazprom’s Mercantile Exchange (the exchange down 10% year-on-year. SALES OF PETROLEUM gas transportation system under International gas sales amounted launched gas trading in 2014). In PRODUCTS TO FSU COUNTRIES a gas transportation contract. to 4.45 bcm, with the bulk of the 2020, we sold 1.4 bcm, which rep- Rosneft is Russia’s largest motor The products are supplied both product coming from the Zohr resents 9% of the total trading fuel exchange trader. In 2020, we In 2020, Rosneft maintained sta- to Russian end consumers and field. volume. traded extensively in petroleum ble and uninterrupted tanker sup- products. The share of Rosneft plies of petroleum products to

1 Including export bunkering services. 2 Including domestic bunkering services.

126 127 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

RETAIL BUSINESS

• available at over 1,100 filling • tested demand for bundled stations in 33 Russian regions, insurance and service products Euro-6 at over 750 filling sta- in categories like cars; health- tions in eleven regions, and care, legal, and advisory ser- Active at over 130 stations in vices; and travel and property eight regions; insurance; • assured high quality at all stages • operated a network of 13 CNG of the product journey from units at existing filling sta- refinery to vehicle. The fuel qual- tions and a separate NGV sta- ity was assessed at oil depots tion in Stavropol, servicing up and filling stations in all regions to 3,600 vehicles daily. In 2020, where Rosneft operated its retail the network sold 22 mmcm network, with over 5,000 tests of natural gas as motor fuel, carried out daily in 74 fixed and up 19 % year-on-year. The 17 mobile laboratories; Company will continue this pro- • in 2020, the Federal Agency ject. Developing an NGV fill- for Technical Regulation and ing station network in Russia Metrology () con- is one of Rosneft’s priorities in ducted 24 independent inspec- the retail business and one of tions at eight oil depots and the most important focus areas, 85 filling stations across Russia. since it enables the Company to The inspections confirmed the expand its competitive advan- high quality of our motor fuel; tages in the domestic market; • refurbished 41 filling sta- • developed EV charging infra- tions in St Petersburg and the structure at its filling stations Leningrad, Kursk and based on demand forecasts and regions as part of the project to EV market trends to expand rebrand TNK and PTK stations as its innovative and environ- Rosneft and BP; mentally-oriented services. We • continued to expand the food have installed and now operate 2,092 shops. As at 31 December also maintaining high customer • to pay for fuel and complemen- offering at filling stations by 14 charging points for electric 2020, the Company had 129 oil service standards. Rosneft took tary goods from inside the car installing equipment for making vehicles at our filling stations, 3,057 filling depots (including two NGV filling all the necessary measures to via mobile apps (.Fuel, hot dogs, sandwiches, and hot including five fast-charg- stations stations) with a combined capacity protect the health of its staff Yandex.Navigator, Yandex.Maps). beverages at 602 locations; ing (50 kW) points in the in the Company’s retail of 2.3 mmcm and approximately and customers at the filling sta- By the end of 2020, about • promoted healthy eating by run- Moscow and Leningrad regions, network a thousand gasoline tanker trucks tions. The shops were systemat- 1,500 filling stations had been ning a Breakfasts and Lunches Vladivostok and Khabarovsk, in operation. ically inspected to ensure there connected to the fuel payment project at Rosneft filling stations and nine slow-charging were enough sanitisers and service in Moscow, St Petersburg, and launching a pilot project to (22 kW) ones in the Tver Region Amid the COVID-19 pandemic, health products to supply the Ufa and , as well offer made-to-order sandwiches; and the Krasnodar Territory. Rosneft’s retail chain ensures unin- the Company maintained a lead- increased demand. All shops and as in Krasnoyarsk, Samara, • continued to develop the kiosk Rosneft has joined forces with terrupted supply of high-qual- ing position in the Russian retail cafés at Rosneft filling stations Voronezh, Rostov, Krasnodar and café formats for filling stations some of Russia’s largest elec- ity motor fuels to customers in market for petroleum products. operated in strict compliance Volgograd together with their and complexes, respectively, tric power companies to con- 66 Russian regions, , In 2020, Rosneft’s petroleum with the guidance on preven- respective regions and territo- opening Zerno-branded kiosks / tinue expanding its EV charging the Republic of Belarus, and product retail sales amounted tive and protective measures ries, with 50 multi-purpose fill- shops with cafés as part of a infrastructure; Kyrgyzstan. Rosneft is a leading to 13.3 mmt, while average daily issued by the Federal Service ing stations offering contactless new pilot project in Moscow and • since 2017, all Marketing and Russian fuel brand in terms of rec- sales per filling station came in at for Surveillance on Consumer payment solutions for food; the Moscow Region; Distribution Group Subsidiaries ognition and quality perception. 11.7 t. Rights Protection and Human • started selling the Pulsar 95 • to expand the range of services, have been implementing plans Wellbeing (Rospotrebnadzor); gasoline in the Khabarovsk piloted parcel lockers together to reduce internal fuel con- As at 31 December 2020, the In accordance with its retail busi- • constantly worked on solu- Territory and the Bryansk Region with a leading e-commerce sumption, resulting in both sav- Company’s retail network com- ness strategy, the Company took tions for minimising contact and as part of a project to expand company and, at a number of ings and lower greenhouse gas prised 3,057 filling stations, includ- the following steps in 2020: maintaining social distance to retail sales of its own fuels. As at BP multi-purpose filling sta- emissions. ing 61 in Belarus, Abkhazia, and • ensured uninterrupted opera- support and improve sales. In the end of 2020, the Pulsar 92, tions, touchless (automated) car Kyrgyzstan. Our own and leased tion of its filling stations during particular, Rosneft kept develop- Pulsar 95, and Pulsar 100 gaso- washing; filling stations operated the COVID-19 pandemic, while ing services allowing customers lines were

128 129 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Germany, Georgia, the United SALES OF BITUMEN PRODUCTS Arab Emirates, Mongolia, and China. Sales of bitumen materials in 2020 reached 2.9 mmt. Sales In 2020, Rosneft expanded its of road bitumen compliant with refuelling network both in Russia the new GOST 33133-2014 stand- and abroad by launching: ard amounted to 1.1 mmt, up 10% • operations at the Ulan-Ude year-on-year. airport; • refuelling services at airports of The bulk of bitumen products , Stuttgart, Dubai and (96%) were sold domestically. Beijing. Rosneft continues to expand pro- BUNKERING BUSINESS duction of an innovative poly- mer-modified bitumen (PMB) Rosneft's bunkering business which substantially improves the extends to five Russian sea basins road surface quality. Sales of PMB and 20 ports, with trading sub- in 2020 grew by 110% to 0.22 mmt. sidiaries in London and Beijing in addition to ten regional represent- SALES OF LUBRICANTS ative offices. In 2020, sales of the Company’s Bunker fuel sales in 2020 lubricants and related products amounted to 1.9 mmt, including totalled 1.05 mmt, with 67% sold 34% sold in the domestic market domestically and 33% exported. and 66% to non-resident shipping companies. Sales of premium lubricants grew by 23% to 0.1 mmt. In 2020, the Company took action to increase the output of marine Angarsk Petrochemical Company DIGITAL TRANSFORMATION Rosneft also piloted a three-tier goods and services at filling sta- AIRCRAFT REFUELLING fuels compliant with the IMO launched production of Rosneft IN RETAIL ERP system to manage retail sales tions by scanning QR codes via BUSINESS sulphur content requirements Drilltec B2, a state-of-the-art min- of petroleum products and com- mobile apps of partner banks. (max. 0.5%): eral oil base for drilling fluids. The Company continues to plementary goods and services In 2020, sales of jet fuel from • the Achinsk and Syzran refiner- develop digital communica- at all stages from filling station to The Company took the following Rosneft refineries reached ies started producing RMLS 40, Rosneft supplied premium motor, tion channels for customers and head office. The Company intends steps to improve digital corporate 2.7 mmt, including 2.6 mmt sold a low-sulphur marine fuel tar- transmission, and hydraulic oils to suppliers. to roll out the new system across training resources for filling station domestically and 0.1 mmt abroad. geting the Far Eastern mar- BELAZ and to Minsk Automobile its retail operations. personnel: ket and those in the Black Sea Plant (MAZ) for the first fill lubri- As at 31 December 2020, we auto- • developed and introduced at The sales structure in 2020 was as and Northwestern regions, cation of mining trucks and special mated measurements at 119 oil The Company tested a block- Marketing and Distribution follows: respectively; purpose vehicles. depots and more than 2,900 fill- chain-based electronic workflow Group Subsidiaries a distance • 1.4 mmt sold to airlines and joint • the Nizhnevartovsk Refinery ing stations and provided meas- solution for ordering complemen- learning course in standards and ventures; began manufacturing DMF- uring instruments for nearly 100% tary goods and supplying them to rules for filling station personnel; • 1.3 mmt sold in bulk, including III, a marine fuel to be sold at of material flows at filling stations filling stations. • developed a VR-based simula- commodity exchange sales. river ports in the Volga and Don and 90% at oil depots. tor to practice unloading tank basins and in Western Siberia. Rosneft is now piloting an inno- trucks and piloted training ses- In Russia, jet fuel is sold through a In 2020, the Company developed vative technology that makes sions at RN-Moscow's training chain of Rosneft's own and part- Over one third of all inland bun- a prototype of a monitoring sys- it possible to pay for petroleum centre. ner refuelling facilities at 44 air- kering services in Russia are pro- tem to enhance end-to-end sup- products and complementary ports. The Company also sells jet vided by RN-Bunker. ply chain control from oil depot to fuel at ten airports in Spain, fuel nozzle.

130 131 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PRODUCTION PLANNING AND LOGISTICS

2020 PERFORMANCE PERFORMANCE PRIORITIES HIGHLIGHTS FOR 2021

• The Company’s needs for hydro- • The improvement of production • delivering IT solutions to better carbons and petroleum products programmes at refineries as part synchronise production, distri- transportation are 100% covered. of monthly production planning bution, and shipment processes. • Refineries’ production pro- is an absolute priority for the The Company is developing grammes and petroleum prod- Company. In 2021, the Company the Digital Core for Commerce uct sales destinations were will continue working to achieve and Logistics initiative, which developed to maximise consol- the above goals through: is expected to reduce the resi- idated netback while factoring • optimisation of production pro- due to 5.5 % of the technological in rapid changes in production grammes for the refineries and limits in 2021 and 8.3 % of the and sales volumes amid a slump distribution of hydrocarbons; technological limits in 2022 and in demand due to the Covid-19 • carrying on to reduce surplus onwards. pandemic. stock of petroleum products at • Average petroleum product the refineries by improving coor- stocks at refineries were reduced dination of production and ship- from 589 to 474 kt. ments cycles;

MARINE AND RIVER TRANSPORTATION BY ROSNEFTEFLOT

2020 PERFORMANCE PLANS FOR 2021 HIGHLIGHTS • Completion and launch of the • Rosnefteflot received and second Aframax tanker launched the first new-gener- • Implementation of the ation Aframax tanker, Vladimir Company’s river navigation Monomakh. programme • Rosnefteflot started operating • Concept development for ves- a new tanker, RN Primorye, to sels to cover the Company’s deliver light petroleum products ongoing and future projects in the Far East. (tankers and support fleet for the • Construction of a shuttle tanker Vostok Oil project, LNG bunker with a deadweight of 69 kt, tanks, offshore transshipment, commissioned by Rosnefteflot, port infrastructure) was commenced.

132 133 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

MARINE TERMINALS OWNED BY THE COMPANY

RN-MORSKOI TERMINAL NAKHODKA PETROLEUM TRANSSHIPMENT TERMINAL

The terminal transships mostly regulations. The terminal com- the weight of petroleum prod- export petroleum products from pleted the renovation of start-up ucts loaded onto the tanker). On the Komsomolsk Refinery, Angarsk complex No. 3 of the facility to 30 December 2020, the petro- Petrochemical Company, and treat industrial and storm water leum product measurement sys- Achinsk Refinery. It is also used discharged into the Novitsky Bay. tem was piloted. to ship petroleum products to • The rail weighing scales were the domestic market (, The terminal also implemented the commissioned as the main Chukotka, Kamchatka regions and Company’s target programmes, measurement system for petro- Sakhalin Island). In 2020, the total such as leum products in tank cars. transshipment volume (includ- • the target programme on ing bunkering) at the terminal in metrology, measurement auto- Nakhodka amounted to 5.2 mmt, mation, and quality control at including 0.07 mmt of third-party RN-Morskoi Terminal Nakhodka. products. In the fourth quarter of 2020, the terminal completed con- The terminal is upgrading its pro- struction and installation for duction assets to make them the second phase (petroleum compliant with the latest indus- products at the oil tanker pier) RN-MORSKOI TERMINAL TUAPSE PETROLEUM TRANSSHIPMENT TERMINAL trial, environmental and fire safety of the petroleum products requirements. In 2020, the work accounting system (installa- The terminal transships mostly products received from sea-going Rosneft’s subsidiary was recog- continued to upgrade the water tion of the petroleum product export petroleum products from ships increased to 644 kt (against nised as the best socially respon- treatment facilities to meet measurement system at the the Tuapse Refinery, Saratov 90 kt in 2019). The terminal is sible company in the Russian the requirements of applicable loading pipelines to measure Refinery, Samara group of refin- upgrading its production assets to oil and gas industry: in 2020, eries, Nizhnevartovsk Refinery, make them compliant with the lat- RN-Morskoi Terminal Tuapse won and Bashneft refineries, as well as est industrial, environmental and the Best Socially Responsible third-party products. The termi- fire safety requirements and car- Oil and Gas Company award in RN-MORSKOI TERMINAL ARKHANGELSK PETROLEUM TRANSSHIPMENT TERMINAL nal is also used to transship petro- rying out a production expansion the category “Promoting healthy leum products for the domestic programme to increase freight living in a company with up to The terminal transships mostly sensors are to be installed in 2021); which will contribute to safety of market (filling stations of Rosneft- turnover at the Tuapse Refinery. 4,000 employees”. export petroleum products from and performed design and sur- future operations at this facility Kubannefteprodukt) and provides In 2020, the terminal completed the Samara group of refineries and vey activities for renovation of the under the existing industrial safety bunker fuel transshipment ser- installation of safety equipment Angarsk Petrochemical Company engineered security systems to standards for hazardous produc- vices. In 2020, the total transship- to prevent falls of workers from and third-party products, as well comply with provisions of Russian tion facilities. ment volume (including export and height. The terminal piloted sev- as provides bunker fuel transship- laws on counter-terrorism security. domestic bunkering services) at eral components of the target ment services for RN-Bunker. It is the terminal in Tuapse amounted programme for measurement also used to deliver fuel to the Far To reduce loaded cars down- to 16.1 mmt (against 15.2 mmt automation and quality control, North and supply wholesale buy- time, the terminal implemented in 2019). The Company’s deep-wa- installing scales on tracks 1, 2, 3 ers in the Arkhangelsk Region. the technology for simultane- ter berth accounted for 10.1 mmt (first phase) and introducing a ous loading (into sea-going ships) of the total transshipment vol- monitoring system for material In 2020, the total transship- and unloading (from tank cars) of ume (against 9.3 mmt in 2019). flows in tanks and pipelines. The ment volume (including export catalytic cracking gasoline. Also RN-Morskoi Terminal Tuapse also terminal also continued design- and domestic bunkering ser- technical measures were taken to transshipped 0.14 mmt of crude oil ing the left bank water treatment vices) at the terminal amounted enable catalytic cracking gaso- for the Tuapse Refinery (0.95 mmt plants to 1.15 mmt, including 0.23 mmt of line separation, which will allow in 2019). The volume of petroleum third-party products. for loading and unloading of an additional petroleum product, if In 2020, the terminal completed necessary. installation of safety equipment to prevent falls of workers from As part of the overhauls, the height; continued works at APCS accident prevention system was getting ready to install hydrostatic upgraded at the pumping sta- pressure sensors at the tanks (the tion for light petroleum products,

134 135 3 MARKET OVERVIEW ROSNEFT / ANNUAL REPORT 2020 Strategy Performance Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

MACROECONOMIC GDP Growth Rates in Developed Economies, % year-on-year 5.5 5.5 5.1 5.0 4.2 4.3 4.2 4.1 4.5 3.6 4.1 3.6 3.5 3.1 3.1 3.1 ENVIRONMENT IN 2020 2.8 2.5 2.4 2.2 1.9 1.6 1.3 1.5 1.5 0.6 0.3 GDP 3 In 2020, the COVID-19 pandemic lockdowns, border closures swept the world, causing a global and other restrictions. -3.5 -3.4 slump in economic activity, bor- -4.9 -5.5 -5.4 -5.1 der closures, lockdowns, business To prop up the economy, shutdowns, market disruptions, the European Central Bank kept -7. 2 falling stock prices and bond its at 0% through- -9.0 -10.0 yields, lower incomes and demand, out the year, while the deposit World Emerging Markets USA Canada Eurozone Germany France Japan and rising unemployment. and short-term loan rates were at -0.4% and 0.25%, respec- 2019 2020 2021 (F) 2022 (F) According to January 2021 esti- tively. The regulator also launched Source: IMF mates from the International the Pandemic Emergency Monetary Fund (IMF), global econ- Purchase Programme (PEPP) omy in 2020 (PPP1 GDP in con- of private and public sector secu- GDP Growth Rates in Emerging Markets, % year-on-year stant 2011 prices) declined by 3.5% rities worth up to EUR 1.85 trln. 11.5 year-on-year. Developed econo- Under the programme, mies shrank by 4.9% year-on-year, the European Central Bank is able 8.1 while emerging markets lost 2.4% to buy, in particular, Greek debt 6.8 6.3 6.1 5.6 of their GDP year-on-year. obligations, which were left out 5.0 4.2 3.6 3.6 3.9 4.0 of the previous asset purchase 3.0 2.8 2.3 2.6 2.0 2.6 The service sector was hit programme. The programme 1.4 1.4 0.2 0.3 the hardest by the pandemic-re- is expected to last until the end lated lockdowns, which explains of March 2022. Provided the pan- the deeper contraction of devel- demic is successfully controlled, -2.4 oped economies compared the Eurozone is projected to grow -3.1 -3.9 to developing countries. by 4.2% year-on-year in 2021. -4.5 -7. 5 According to the IMF, the US GDP UK registered the most significant -8.0 decreased by 3.4% year-on-year GDP decline among developed Emerging Markets India China Brazil Russia Saudi Arabia in 2020 prompting the US Federal nations – 10.0% year-on-year, 2019 2020 2021 (F) 2022 (F)

Reserve to resort to exceptional fis- according to the IMF. Investment Source: IMF cal stimulus measures. The Fed cut fell by 11.3% year-on-year, while its interest rate three times during household expenditures dropped the year down to 0–0.25% in March by 12.1% year-on-year on the back quarter of 2020 during the pan- continues, the IMF projects China's Countries across Latin America 2020 in an effort to shore up busi- of the global pandemic and Brexit. demic’s first wave, China’s econ- economy to grow at 8.1% year-on- also suffered from economic ness and household demand omy subsequently gained traction year in 2021. downturn of various intensity, for loans, support living standards In some emerging economies, recording a 2.3% year-on-year with Brazil's GDP falling by 4.5% and economic activity. If COVID- the COVID-19 impact was exac- growth at year’s end – the low- COVID-19 drove India's GDP down year-on-year in 2020. 19 is successfully tackled, the US erbated by a slump in commodity est rate since 1976. China’s growth by 8.0% year-on-year in 2020. economy is expected to grow prices and geopolitical tensions. recovery in 2020 was mostly However, the lifting of the corona- The and Central Asia by 5.1 year-on-year in 2021. driven by investments2. Chinese virus restrictions following wide- recorded a significant contrac- China was the only major econ- exports grew at the year’s end, spread vaccination in 2021 coupled tion of their economies in 2020. The IMF estimates that Eurozone’s omy to avoid an absolute decline as pandemic-related disruptions with an increase in business activity Saudi Arabia’s year- GDP dropped GDP declined by 7.2% year-on- in GDP caused by COVID-19. around the world fuelled demand could help the country’s economy by 3.9% year-on-year. year in 2020 as a result of lengthy Contracting by 6.8% in the first for Chinese goods3. If this trend rebound by 11.5% year-on-year.

2 According to the January 2021 estimates from the International Monetary Fund (IMF). 3 https://www.reuters.com/article/idUSL1N2JT039, http://www.stats.gov.cn/english/Statisticaldata/nsdp/201508/t20150819_1232260.html 1 and competitive and competitive environment MARKET OVERVIEW MARKET Purchasing power parity.

138 139 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Under the IMF's upside sce- The COVID-19 pandemic contin- Major international rating agencies Russian Exports, USD bln nario, global economy is projected ues to present the greatest chal- confirmed the resilience of Russia’s 449.6 to grow by 5.5% year-on-year lenge to the global economy. economy and financial system. 424.6 in 2021, moderating to 4.2% The latter also suffers from con- S&P Global Ratings, Moody’s 357.3 in 2022. In 2021, GDP growth rates tinued trade and political tensions and Fitch affirmed Russia’s sov- 343.5 162.6 338.2 162.1 in advanced economies will rise between the world’s three main ereign investment-grade rat- 285.8 145.3 to 4.3% year-on-year while emerg- economic powers, particularly, ing at “BBB–,” “Baa3,” and “BBB”, 127.4 25.2 24.6 171.2 ing markets will enjoy growth the US and China. respectively, with a stable outlook. 119.6 54.4 12.7 18.5 49.6 of up to 6.3%. 46.4 12.2 41.9 78.2 66.9 17.2 In 2020, the number of those 34.2 67.5 58.2 32 employed decreased even further 46.1 45.3 GLOBAL TRADE building on the descending trajec- 129.2 121.4 89.6 73.7 93.4 72.4 tory of recent years. In December In 2020, widespread restrictions The greater decline in trade com- of projected world GDP growth, 2020, employment went down 2015 2016 2017 2018 2019 2020 and business closures resulted pared to that of GDP, both glob- suggesting a return to the global by 1.7 mln people or 2.3% year-on- Crude oil Source: Federal Customs Service in global trade contracting by 9.6% ally and in groups of advanced cooperation mode. year. The decline in employment Petroleum products of Russia year-on-year, according to the IMF. and developing economies, points was due to both a natural reduc- Gas (including LNG) This decline followed a sluggish to the prevalence of regional tion in the labour force by almost Other fuel and energy resources 1.0% year-on-year growth in 2019 rather than global integration 0.7 mln people (down 0.9% Others caused by global trade tensions. trends. year-on- year) and an increase in the number of unemployed Changes in Real Disposable Income and Wages in Russia, Trade in goods and services Under a favourable COVID-19 sce- by 1 mln people (up 27.6% year- % year-on-year in developed economies dropped nario, the IMF forecasts a global on-year). The unemployment 11.6 by 10.1% year-on-year in 2020, trade growth at 9.2% year-on-year rate in December 2020 was up 9.5 8.5 while also sinking by 8.9% year- in 2021 and 6.7% year-on-year by 1.3 p.p. year-on-year at 5,9%, 7.9 on-year in emerging markets. in 2022. These rates are in excess the highest in five years. 6.7 5.5 4.8 In 2020, the recession resulted 2.9 2.2 RUSSIAN ECONOMY in lower consumer purchasing 0.8 1.0 power, with the real disposable 0.1 As estimated by the IMF, dropped in value terms by 21.3% Russia’s budget deficit in 2020 income falling by 3.5% year- 2016 2017 2018 2019 2020 the Russian economy shrank year-on-year in 2020 (a decrease was at 4.5% of GDP, public debt on-year, according to Rosstat. by 3.6% year-on-year in 2020, of USD 89.9 bln) to USD 332.87 bln went up from 12.3% of GDP in 2019 However, real accrued wages -0.5 while according to the Russian vs USD 422.8 bln in 2019. to 19.1% of GDP as at 1 January increased in 2020 by 2.2% -3.5 Ministry of Economic Development 2021. year-on-year. -4.5 it declined by 3.8% year-on-year. In 2020, exports contracted Real disposable income Source: Rosstat According to an initial assessment almost across the board, According to the Bank According to the September 2020 Real wages from the Federal State Statistics with crude oil, petroleum products, of Russia, the country’s for- forecast from the Russian Ministry Nominal wages Service (Rosstat), Russia's GDP and gas (including liquefied nat- eign debt as at 1 January 2021 of Economic Development, in 2020 dropped by 3.1% year- ural gas – LNG) hit the hardest. stood at USD 470.1 bln, down economic recovery in 2021 on-year, less than the agency’s The reduction in oil exports was by USD 21.3 bln compared will be influenced by a number Taking into account these fac- Unemployment in Russia (at Year- original forecast. In 2019, the coun- largely due to the OPEC+ agree- with the beginning of the year. of competing factors. On the one tors, the Ministry of Economic End), % of Economically Active try’s economy grew by 2.0% ment to cut production. Debt obligations to non-resi- hand, as vaccines are rolled- Development projects a 3.3% Population 5.9 year-on-year. dents decreased in all sectors out and lockdowns and busi- year-on-year GDP growth in 2021 5.5 of the economy, with the great- ness restrictions are lifted, growth and at least 3.0% year-on-year 5.2 In value terms, crude oil exports 4.8 The downturn was mainly caused shrank by 40.4% year-on-year est decline in other sector foreign will be increasingly driven in 2022–2023 driven mainly 4.6 by widespread COVID-19 restric- in 2020 to USD 72.4 bln, petro- loans2. by the government stim- by expanding domestic demand, tion measures in Russia and across leum products dropped by 32.2% ulus initiatives supporting both consumer and investment. the world and their negative impact year-on-year to USD 45.3 bln, gas, As at 1 January 2021, Russia’s the national development goals. on foreign trade, including decline including LNG, slipped by 35.4% foreign reserves were up On the other hand, fiscal consol- According to the January 2021 in global demand and lower prices year-on-year to USD 32.0 bln. by USD 41.4 bln to USD 595.77 bln, idation and a gradual reduction forecast from the IMF, the Russian for Russian exports. In 2020, crude hydrocar- mainly due the increased share of the pandemic-related fis- economy will grow by 3.0% year- bons and petroleum prod- of monetary gold (69% contribu- cal support in 2021 are expected on-year in 2021, accelerating to up According to the Federal Customs ucts accounted for 44.3% tion). Therefore, Russia’s net debt to constrain economic growth. to 3.9% year-on-year in 2022. Service of Russia, during the global of total exports, down 11.8 p.p. is negative. recession, Russian exports1 year-on-year. 2016 2017 2018 2019 2020

1 According to the customs statistics. 2 https://cbr.ru/statistics/macro_itm/svs/ext-debt/

140 141 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

ENERGY PRICES. FOREIGN EXCHANGE RATES, MONETARY POLICY Monthly Average Brent ad Urals Prices in 2020, USD/barrel AND INFLATION IN RUSSIA 65

In 2020, oil prices plummeted supported by a new OPEC+ deal Amid continued geopoliti- 55 reflecting a crisis in the global to cut production and gradual cal tensions, lower oil prices, oil market caused by an unprec- lifting of lockdown restrictions, broader sanctions and the risk 45 edented decline in demand with the monthly average Brent of new sanctions against Russia, as a result of COVID-19 related price reaching USD 49.9 per bar- the country’s national cur- 35 restrictions. The annual average rel in December. Some decline rency was weakening in 2020. Brent price fell by 35.2% year- of prices in autumn was due According to the Bank of Russia, 25 on-year to USD 41.67 per bar- to the second wave of COVID-19 the annual average nominal USD/ rel.1 The annual average Urals and political tensions in the US RUB exchange rate went up 15 price dropped to USD 41.74 per related to the presidential election by 10.0% year-on-year in 2020 January February March April May June July August September October November December barrel, down by 34.2% year-on- campaign. to RUB 71.94 per USD. Urals Brent year and was slightly higher than the price of oil. Source: Platts

Throughout 2020, global oil prices Annual Average Brent and Urals Prices, USD/barrel As at 31 December 2019, the nom- rate. Between 7 February Annual Average Nominal USD/ were driven by mixed trends. inal USD/RUB exchange rate was and 24 July 2020, the Bank RUB 71.1 In January–April 2020, Brent crude 69.8 RUB 73.88 per USD, having grown of Russia reduced its inter- 71.9 went down from USD 63.5 per 63.4 64.3 by 17.4% over the year. est rate four times from 6.25% 66.8 62.9 64.7 barrel in January to USD 18.6 per 54.3 per annum at the beginning 58.3 51.4 52.4 53.1 barrel in April, while Urals crude However, compared of the year to 4.25% per annum, 43.7 dropped from USD 61.3 per bar- 42.1 41.741.7 with the currencies of other devel- which remained unchanged rel to USD 20.2 per barrel, respec- oping and oil-producing countries, through the year’s end. tively. The tumbling of oil prices RUB’s depreciation in 2020 was in March–April 2020 was caused not the most significant. According to Rosstat, inflation by the collapse of the OPEC+ deal accelerated in 2020 reaching 4.9% due to the failure of the coun- Unlike in the previous years, in December (vs 3.0% in December tries involved to reach agree- the Bank of Russia pursued 2019), not significantly deviating ment on limiting production amid 2015 2016 2017 2018 2019 2020 a rather soft monetary policy, act- from the 2019 target of around falling demand for oil and high ing resolutely to cut the interest 4.0% set in the Monetary Policy 2016 2017 2018 2019 2020 crude oil inventories. From May Urals Brent 2020 to the year’s end, there was an upward trend in oil prices Sources: Platts, Expert and Analytical Group estimates. Changes2 in Annual Average Nominal Exchange Rates of the Largest Emerging Markets’ and Oil-Producing Countries’ National Currencies to USD in 2020, % year-on-year

Saudi Iraq Australia Canada Indonesia India Norway Kazakhstan Russia Mexico Columbia South Turkey Brazil 0.1 Arabia Africa

China -0.1 -0.7 -1.0 -1.1 -3.0 -5.0 -6.5 -7.4 -10.0 -10.4 -11.2 -12.1

-19.1

-23.5

Source: Bank for International Settlements

1 Sources: Platts, Expert and Analytical Group estimates. 2 “+” means currency appreciation while “–” means currency depreciation.

142 143 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Индексы цен и тарифов Changes1 in Nominal Exchange Rates of the Largest Emerging Markets’ and Oil-Producing Countries’ National Currencies to USD at the End of December 2019 , % year-on-year Metric 2019 2020 9.0 Dec/Dec y/y Dec/Dec y/y 6.1 Consumer price index 103.0 104.5 104.9 103.4 2.8 2.0 Saudi Indonesia India South Columbia Mexico Russia Turkey Brazil Arabia Africa Industrial producer price index 95.7 102.9 103.6 97.1

Australia China Norway Канада 0.0 -1.2 Oil and natural gas production 89.2 102.3 90.7 78.9 -2.4 -4.6 -4.7 -5.3 Petroleum product output 84.7 97.0 96.8 89.8

Machinery manufacturing 102.5 103.0 104.9 104.6

Production, transmission and distribution of power 100.0 104.4 104.5 102.9

-19.7 Freight rate index 101.5 102.8 105.2 101.7

-24.8 Source: Rosstat -29.2 Source: Bank for International Settlements the annual average industrial pro- Inflation in Russia, % year-on- ducer price index in Russia was year as at December Changes Guidelines for 2021–2022 pub- products to grow. The higher By contrast, the annual average 97.1% (vs 102.9% in 2019). 5.4 in Transneft’s tariffs lished by the Bank of Russia. inflation was also a result consumer price index fell to 3.4% 4.9 • As at 1 January 2020, The rising inflation was pri- of monetary easing to help in 2020 (vs 4.5% in 2019). The Bank of Russia expects 4.3 Transneft’s rates marily driven by the weaken- tackle the fallout of COVID-19 measures to curb infla- for oil transportation via trunk ing of rouble’s nominal exchange and, finally, it reflected changes As at December 2020, tion in 2021 to bring it back pipelines increased by 3.42%. 3.0 rate against major currencies, in the international environment the annual average producer to the Bank’s target of no more • From 1 February 2020, 2.5 the oil transit rates through with increased prices of imported and poor yields of certain agricul- price index was 103.6% (vs 95.7% than 4.0%. The Ministry the Republic of Belarus goods causing prices of domestic tural products. in December 2019). In 2020, of Economic Development for OJSC Gomeltransneft expects a 3.7% year-on-year Druzhba were increased The Bank of Russia’s Interest Rate in 2020, % per annum increase in prices as at December by 6.6% (the forecast average annual inflation rate in Russia 2021 with an annual average rise plus 3 p.p.). 6.25 6.0 6.0 of 3.6% year-on-year. 5.5 5.5 2016 2017 2018 2019 2020

4.5 The Ministry forecasts that annual Sources: Bank of Russia, Rosstat 4.25 4.25 4.25 4.25 4.25 4.25 average industrial producer prices in Russia will go up by 5.0% year- Changes in Russian on-year in 2021. Railways’ tariffs The Russian oil companies’ oper- • As at 1 January 2020, railway ating costs are very sensitive transportation tariffs increased to changes in natural monopolies’ by 3.5%. January February March April May June July August September October November December transportation tariffs.

Source: Bank of Russia

1 “+” means currency appreciation while “–” means currency depreciation.

144 145 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

The greatest reduction was in OPEC per day, with crude oil and gas EIA’s Forecast of Global OIL AND GAS INDUSTRY OVERVIEW countries7 where liquid hydrocar- condensate production fall- Liquid Hydrocarbons Demand bon production dropped by 11.5% ing by 7.7% year-on-year to 11.3 and Output, mmb per day year-on-year to 30.9 mmb per day, mmb per day. Since April 2020, 97.7 101.2 GLOBAL OIL MARKET and FSU countries, where produc- production stopped at some 97.3 100.8 tion was down by 7.8% year-on- of US wells, including in the shale 2020 saw the greatest drop Global Demand for Liquid Global Output of Liquid year to 13.5 mmb per day. Crude regions, due to a significant over- in oil demand in modern his- Hydrocarbons by Region, mmb Hydrocarbons by Region, mmb oil production in OPEC countries supply in the domestic market. tory brought about by the pan- per day per day decreased by 12.9% year-on-year Crude oil and gas conden- demic-related restrictions across 99.3 99.7 100.5 100.5 to 25.7 mmb per day, with the larg- sate production in the US fell the world. In April 2020, global 91.0 94.0 est decline recorded in (by from 12.7 mmb per day in March consumption of liquid hydrocar- 11.7 11.6 14.8 15.2 0.7 mmb per day to 0.4 mmb per to 10 mmb per day in May. 10.5 14.6 1 8.3 8.3 bons fell by 23.9% year-on-year 7.6 day), Iraq (by 0.7 mmb per day to 76.3 mmb per day prompting to 4.0 mmb per day), and Saudi Some of the suspended wells 36.9 34.9 the OPEC+ countries to cut oil 35 35.4 30.9 Arabia (by 0.6 mmb per day were gradually put back into -0.4 –0.4 33.7 production by a record 9.7 mmb 7.7 to 9.2 mmb per day). production, with output vol- per day from an agreed baseline 4.7 4.8 7.7 7. 5 umes rising to 11.1 mmb per day 2021 (F) 2022 (F) 4.6 14.6 14.6 13.5 level2. The agreement was signed 14.3 14.3 In the USA, production of liq- in December 2020. 12.4 3.6 3.5 3.6 Demand on 12 April 2020 for the period uid hydrocarbons went down Production 25.4 25.3 between 1 May and 30 June 22.2 23 24.6 23.8 by 3.4% year-on-year to 16.6 mmb Oversupply and was later extended until 2018 2019 2020 Source: forecast by U.S. Energy Information 31 July 2020. Between 1 August 2018 2019 2020 Administration as at January 2021 and 31 December 2020, OPEC+ North America North America Commercial Crude Inventories in OECD Countries, bb OECD Europe countries reduced produc- 1300 FSU countries 3 FSU countries3 tion by 7.7 mmb per day day Asia Asia 1250 from the baseline level. Middle East OPEC 4 Others Others5 1200

In the first quarter of 2020, Source: IEA 1150 the global oversupply of liquid hydrocarbons reached 6.5 mmb per day in the fourth quarter. the world, most notably in North 1100 per day, increasing to 9.3 mmb As at the end of 2020, the global America (35% of the global drop), 1050 per day day in the second quar- oversupply of liquid hydrocarbons European countries of the OECD 1000 ter. In the third quarter of 2020, totalled 3.0 mmb per day, accord- (21%) and in the Asia-Pacific the oversupply was replaced ing to the International Energy region (20%). These regions 950 by a deficit of 1.6 mmb per day as Agency (IEA). accounted for 24%, 14% and 37% 900 a result of the OPEC+ (including of global oil demand in 2020, January February March April May June July August September October November December Russia) production cuts, reduced In 2020, global demand respectively. 2016 2019 Source: IEA production in other countries for liquid hydrocarbons decreased 2017 2020 (including the US), and grad- by 8.7% year-on-year (accord- The IEA estimates that the global 2018 2010–2015 ual demand recovery following ing to the IEA) to 91.0 mmb per production of liquid hydrocar- the lifting of some restrictions. day. In 2020, consumption of liq- bons6 fell by 6.5% year-on-year In Canada, production of liq- and Brazil (by 5.2% to 3.0 mmb in 2021 is set to grow by 6.0% The deficit increased to 2.2 mmb uid hydrocarbons declined across to 94.0 mmb per day in 2020. uid hydrocarbons in 2020 went per day on the back of the rise to 96.4 mmb per day. down by 4.3% year-on-year in output from offshore pre-salt to 5.3 mmb per day, with crude deposits). According to the forecast by the U.S. oil and gas condensate produc- Energy Information Administration tion falling by 7.1% year-on-year Commercial crude inventories (EIA), global demand for liq- to 3.1 mmb per day. in OECD countries reached approx- uid hydrocarbons in 2021 will rise imately 1.18 bb in 2020, up 8.5% by 5.8% year-on-year to 97.7 mmb In 2020, production of liquid hydro- from December 2019. per day, while global production carbons increased in Norway will increase by 3.3% year-on-year 1 Demand for liquid hydrocarbons hereinafter refers to consumption of petroleum products from oil and gas condensate; consumption of oil (by 15.2% to 2.0 mmb per day The IEA estimates from February to 97.3 mmb per day, with global as fuel; and consumption of hydrocarbon components from unconventional sources (biofuel, GTL, CTL, etc.). with the Johan Sverdrup field 2021 show that global demand supply shortages continuing 2 Production volume in October 2018 was set as the baseline level of oil production for all OPEC+ countries, with the exception of Russia and Saudi Arabia, whose baseline level was set at 11 mmb per day. brought on stream in October 2019) for liquid hydrocarbons in 2021–2022. 3 Excluding Estonia, Latvia and Lithuania. 4 13 member countries as at 31 December 2020. 6 Output of liquid hydrocarbons hereinafter refers to production of crude oil, gas condensate, gas condensate liquids, and production 5 Includes production in other countries, global biofuel output, and volume growth during refining. of hydrocarbon components from unconventional sources (biofuel, GTL, CTL, etc.). Global production of liquid hydrocarbons includes volume growth during refining. 7 13 member countries as at 31 December 2020.

146 147 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

GLOBAL GAS MARKET gas pipelines and 50% as LNG. With the recovery of the world Russia, the world’s largest gas economy in 2021 and 2022, The global demand for gas Gas Consumption by Region, bcm Gas Production by Region, bcm exporter, accounted for approx- IHS Markit projects the global in 2020 dropped by 4.6% year- imately 25% of gas exports gas demand to grow by 1.5% +4.1% on-year to 3.73 tcm1, driven +2.4% -5.5% globally in 2020 – 240.9 bcm and 1.3% year-on-year, respec- -4.6% 4,000 by reduced business activity due 3,906 3,843 according to the Federal Customs tively, while gas consumption 3,813 3,726 3,782 219 170 to the pandemic-related restric- 222 200 174 152 Service of Russia and CDU TEK; is expected to increase to 3.78 tcm 157 268 tions. Another factor contribut- 153 144 247 221 227 a decrease of 7.5% year-on-year. in 2021 and 3.83 tcm in 2022. 527 231 518 493 206 ing to decreased gas consumption 684 was the growing role of renewa- 645 676 819 853 bles in the electric power indus- 868 670 LNG MARKET 660 587 try. The demand, however, was 533 541 189 193 190 supported by lower gas prices 462 Despite the COVID-19 pandemic increased in Turkey (by 17.9% year- Pass LNG plant (Sabine Pass, 161 166 in regional markets, transition 157 675 687 654 and decline in the world demand on-year to 11.2 mmt) and the UK (by Cameron Parish, Louisiana) 445 453 434 from from coal to gas in power for gas, global LNG exports 5.1% year-on-year to 14.0 mmt). was expanded by 1.2 mmtpa generation, and the development 961 1,023 1,108 1,088 increased by 1.5% year-on-year and 3 mmtpa, respectively. of gas infrastructure in Asia. 990 968 in 2020 (the lowest growth rate Following the 2019 reduction, since 2015), reaching 362.1 mmt the Middle East and North Africa7 In total, 20.95 mmpta of new LNG 2018 2019 2020 2018 2019 2020 In 2020, gas consumption or 499.5 bcm5. The growth reported a slight rise in their LNG facilities came on stream in the US, North America North America was down across the world Russia Russia in LNG trade was driven by lower imports – by 0.6% year-on-year while the capacity of existing with the exception of the Asia- Other FSU countries4 Other FSU countries4 prices compared to pipeline gas to 7.1 mmt. Egypt, on the other trains was expanded by 4.2 mmtpa Pacific region, where demand Middle East Middle East in the period between the first hand, stopped importing LNG in 2020. for gas rose by 1.8% year-on- Asia Pacific Asia Pacific and third quarters of 2020. LNG and resumed gas exports after Europe Europe year (an increase of 15.2 bcm) Africa Africa accounted for 13.4% of global gas putting the Zohr field on stream. In 2020, the largest decline in LNG to 868 bcm, mainly driven Latin America Latin America consumption in 2020 (vs 12.6% The field is being developed exports was recorded in Trinidad by China. in 2019)6. by an international consortium, and Tobago (a decrease of 2.3 mmt where Rosneft has a share of 30%. to 10.7 mmt), Malaysia (down In Europe, gas consumption fell to 200 bcm (5.4% of global gas gas production in 2020 went Asia contributed the most by 2.2 mmt to 24.0 mmt), and Egypt by 6.3% year-on-year (a decrease consumption). Africa saw a reduc- down by 19.4 bcm (a decrease to the growing LNG trade in 2020, A major component of the export (down by 2.1 mmt to 1.3 mmt). of 33.4 bcm) to 493.1 bcm tion in consumption by 8.7% year- of 1.7% year-on-year) to 1.09 tcm. with supplies to the region ris- growth in 2020 were new LNG (13.2% of global gas consump- on-year ( a decrease of 13.7 bcm) In the CIS, gas production ing by 4.3% year-on-year to reach trains coming on stream in the US: The reporting year saw only one tion) as a result of lengthy lock- to 144 bcm (3.9% of global gas fell by 35.4 bcm (a decrease 256.7 mmt. LNG exports to China • second and third trains final investment decision (the few- downs and strong competition consumption). of 4% year-on-year) to 844.4 bcm increased by 12.2% year-on- of the Cameron LNG project est number in 23 years)8 on LNG with renewable energy sources and in Europe, it was down year to 69.2 mmt, while supplies (Cameron Parish, Louisiana) plant projects: the 3 mmtpa in the power industry. Demand The decline in demand led by 14.3 bcm (a decrease of 6.5% to India were up by 14.6% year-on- with a capacity of 4.5 mmtpa Energia Costa Azul LNG facil- for gas in North America, to a considerable reduc- year-on-year) to 206.2 bcm. year to 26.4 mmt. Japan, the larg- each; ity in Mexico is expected to come the world’s largest gas consumer tion in global gas production2, The Asia-Pacific region recorded est LNG consumer, once again • second and third trains on stream in late 2024–early (26.0% of global consumption), which fell by 5.5% year-on- the smallest reduction in gas pro- reduced its imports by 2.6% year- of the Freeport LNG facility (Gulf 2025 with shareholders including went down by 2.2% year-on- year to 3.78 tcm. Production duction (by 7.9 bcm or 1.1% year- on-year to 75.2 mmt. Coast, ) with a capacity Total (16.6%) and Sempra (83.4%). year (a decrease of 22.2 bcm) dropped in all regions, most sig- on-year to 676.1 bcm). The region’s of 5.1 mmtpa each; in 2020 to 967.8 bcm, which nificantly in the Middle East share in global gas produc- In 2020, LNG imports to Europe • second and fifth ot tenth The capacity of regasification ter- is equal to the 2018 consumption (by 82.8 bcm or 12.4% year-on- tion increased from 17.1% in 2019 went down by 3.2% year-on- trains of the Elba Island LNG minals grew in 2020 by 19.7 mmt9, level. The greatest reduction was year to 587.2 bcm), accounting to 17.9% in 2020. year to 84.6 mmt, including plant (Chatham County, with new facilities commissioned in the Middle East, where gas con- for 15.5% of global gas production, to France – by 14.9% year-on- Georgia) with a total capacity in India (the 5 mmtpa Mundra sumption dropped by 14.6% year- and Africa (by 40.8 bcm or 15.2% Every year approximately one year to 13.8 mmt, Italy – by 9.2% of 1.75 mmtpa. regasification terminal) and Brazil on-year (a decrease of 79.2 bcm) year-on-year, to 227.3 bcm), third of natural gas produced year-on-year to 9.1 mmt, Spain – (the Port of Sergipe 5.6 mmtpa to 462.3 bcm (12.4% of global gas accounting for 6.0% of global gas globally is exported. An esti- by 4.9% year-on-year to 15.4 mmt, In addition, the capacity of the first floating regasification unit) consumption). In Latin America, production. In North America (the mated3 0.97 tcm of gas were and the Netherlands – by 7.0% year- and second trains at the Corpus and two new importers – Myanmar demand for gas fell by 8.4% year- world’s largest gas producer – exported in 2020, of which on-year to 5.6 mmt. At the same Christi LNG plant (Gulf Coast, Texas) (a 1.1 mmtpa terminal) and Croatia on-year (a decrease of 18.5 bcm) 28.8% of global production), about 50% was supplied through time, LNG imports have significantly and first to fifth trains at the Sabine (a 1.9 mmtpa terminal).

5 IHS Markit conversion rate – 1,379. 6 Estimate, based on IHS Markit data. 7 Egypt, Israel, Jordan, Kuwait, United Arab Emirates. 8 1 Final investment decision (FID) is the decision to proceed with a project. As a rule, FID is taken after the design stage is completed, IHS Markit preliminary estimates. necessary permits obtained, an EPC (Engineering, Procurement, and Construction) contract signed, and financing sources and target 2 IHS Markit preliminary estimates. markets for the project products identified. 3 Based on data by IHS Markit and BP. 9 Including the floating storage regasification unit in Croatia, which arrived at the operation site on 1 December 2020, but the first fuel was 4 Excluding Estonia, Latvia and Lithuania. shipped on 1 January 2021.

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Increase in LNG Exports and Imports in 2020 by Country, mmt The demand for hydrocarbons is set Global demand for gas will be add- demand going up by 616 bcm vs to rebound as global economy ing an average of 1.4 % a year, 2019 to almost 1.5 tcm, exceed- -10.5 recovers. At the same time, the cur- reaching almost 5.2 tcm by 2040 ing the level of consumption +1.2 +1.1 +2.2 -2.0 +1.7 rent low prices for traditional energy and accounting for more than in North America (1.3 tcm in 2040, +11.3 -4.5 +3.4 resources discourage energy saving, a quarter of the global energy mix. an increase of 276 bcm against +7.5 while also making hydrocarbons 2019). -0.7 362.1 more price competitive against Strong growth in demand for gas the renewable energy sources. will be supported by its supe- North America will remain 356.8 356.8 rior environmental performance the leader in natural gas produc- According to top global energy as compared to other fossil fuels. tion (1.4 tcm of gas in 2040, 28% agencies, oil and gas producers, of global production). 1 Export Import consulting companies , and fore- Gas consumption is expected casts by Rosneft, until 2040, hydro- to increase in all regions The most considerable rise in gas carbons will remain the pillar except Europe. In the fore- output (around 29% of the global 2019 USA Australia Qatar Russia Others 2020 Others Europe Japan Turkey India China 2019 of the global energy industry, cast period, the Asia-Pacific increase) in the forecast period with their share in the world’s energy Region will be the largest region will be seen in the Middle East, Source: IHS Markit mix staying largely unchanged. by gas consumption, with its reaching over 970 bcm in 2040.

LONG-TERM FORECAST While oil2 will continue dominat- ing other resources in the energy Oil Demand by Region, mmt Gas Demand by Region, bcm FOR HYDROCARBON DEMAND mix worldwide, its share, along 4,945 5,183 with that of coal, will be declining 4,844 4,637 Technological progress has been Global Energy Consumption Global Energy Consumption in favour of natural gas, nuclear 4,127 476 527 698 by Fuel Type in 2019, % by Fuel Type in 2040, % 204 205 opening up new opportunities energy, and renewable energy 339 270 677 262 237 3,726 242 for the energy sector and energy sources. 203 293 313 217 175 201 511 531 469 591 needs of humankind at large. 229 518 346 356 144 735 Energy transition and climate By 2040, global oil demand will 524 200 306 636 change are reshaping the way increase by 420 mmt compared 935 856 493 1,266 we think about the global energy to 2019, amounting to more than 889 462 14,406 17,104 1,200 sector going forward. All sources mmtoe 4.9 bt. This growth in demand mmtoe 968 of energy, including renewa- will be mostly driven by the Asia- 1,822 1,950 ble energy, have inherent limi- Pacific Region, which will account 1,461 1,469 868 1,187 tations. The potential to replace for 39.4% of global oil demand fossil fuels with renewable energy in 2040 or over 1.9 bt. In North 2020 2030 2040 2020 2030 2040 sources is limited by consider- Oil 31.4% Oil 28.9% America and Europe, oil demand Asia Pacific Asia Pacific able technological weaknesses Gas 23.2% Gas 25.3% will decline in 2040 to 856 mmt North America North America Coal 26.2% Coal 19.4% of the latter, i.e. low energy flux (17.3% of global oil demand) Middle East Middle East Nuclear energy 5.0% Nuclear energy 5.3% Europe Europe density and intermittency. and 469 mmt (9.5% of global oil Hydropower 2.6% Hydropower 2.9% Central and South America Central and South America Other renewable 11.6% Other renewable 18.2% demand), respectively. Africa Africa The significant reduction in global energy sources energy sources CIS CIS oil and gas consumption in 2020 Until 2030, natural gas will be out- International aviation and Source: IEA Sources: forecasts by the IEA, OPEC, U.S. bunkering is due to the temporary restric- Department of Energy, IHS Markit, BP Plc, performing all other energy sources and Rosneft Sources: forecasts by the IEA, OPEC, U.S. Department of Energy, IHS Markit, BP Plc, tions on business activity related in terms of increase in global and Rosneft to the COVID-19 pandemic. demand in absolute terms.

1 IEA, OPEC, U.S. Department of Energy, IHS Markit, BP Plc. 2 Includes the consumption of petroleum products from oil and gas condensate and consumption of oil as fuel.

150 151 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

RUSSIAN OIL INDUSTRY In 2020, oil and gas condensate In the Northwestern Federal year-on-year; 0.1% of Russia’s production continued decreas- District production declined total production), in the Republic Russia is a top three oil pro- (down by 10.7% year-on-year ing in the Siberian, Northwestern by 11.6% year-on-year to 27.6 mmt of – to 0.12 mmt ducer globally (alongside the USA to 210.8 mmt; 41.1% of Russia’s Oil and Gas Condensate and North Caucasian Federal (5.4% of Russia’s total produc- (down by 25.8% year-on-year; and Saudi Arabia). In 2020, oil total production) and the Tyumen Production in Russia, mmt Districts. In the Siberian tion), including in the Nenets 0.02% of Russia’s total produc- and gas condensate produc- Region (down by 10.3% year-on- Federal District production Autonomous Area by 12.0% tion), in the Chechen Republic – tion in Russia stood at 512.8 mmt, year to 11.2 mmt; 2.2% of Russia’s +0.8% -8.5% dropped by 12.9% year-on-year year-on-year to 14.1 mmt (2.8% to 0.05 mmt (down 29.1% down by 8.5% year-on-year. total production). Crude oil pro- 555.9 560.3 to 44.6 mmt (8.7% of Russia’s of Russia’s total production) year-on-year, 0.01% Russia’s 512.8 The reduction in oil produc- duction increased in the Yamal- total production) mostly due and in the Republic of Komi total production), in the Republic tion in Russia was in compli- Nenets Autonomous Area (up to lower output in the Krasnoyarsk by 11.2% year-on-year to 13.0 mmt of Ingushetia – to 0.05 mmt ance with the OPEC+ decision by 2.9% year-on-year to 63.3 mmt; Territory (down by 15.4% year-on- (2.5% of Russia’s total production). (down by 7.5% year-on-year, 0.01% in April 2020 to significantly 12.3% of Russia’s total production). year to 20.2 mmt; 3.9% of Russia’s of Russia’s total production). decrease production against total production), Tomsk Region In the North Caucasian Federal the baseline level to balance In the Volga Federal District, (down by 24.5% year-on-year District, oil production con- In 2020, Russian oil and gas global demand. Russia’s baseline oil and gas condensate pro- to 6.9 mmt; 1.3% of Russia’s total tracted to 0.9 mmt (down by 12.9% condensate refining volumes level for oil production (exclud- duction declined the greatest production), and Irkutsk Region year-on-year; 0.2% of Russia’s decreased by 5.4% year-on-year ing gas condensate) was set in the Republic of Bashkortostan (down by 3.5% year-on-year total production), includ- to 270.0 mmt, while oil exports at 11 mmb per day, with the tar- (down by 31.2% year-on-year to 17.3 mmt; 3.4% of Russia’s total ing in the Stavropol Territory declined by 12.6% year-on-year get output level for the period to 11.1 mmt; 2.2% of Russia’s total production). to 0.7 mmt (down by 8.8% to 232.5 mmt. The export share between 1 May and 31 July 2020 production) and the Republic 2018 2019 2020 in total oil and gas condensate set at 8,492 kbpd and between of Tatarstan (down by 10.8% Source: CDU TEK Russian Oil and Gas Condensate Exports and Refining, mmt production totalled 45.3% in 2020 1 August and 31 December 2020 – year-on-year to 32.7 mmt; 6.4% (down by 2.2 p.p. year-on-year). 287.0 285.3 at 8,993 kbpd. of Russia’s total production). 280.0 266.2 270.0 In 2020, oil and gas conden- In the Southern Federal District, 257.0 257.7 Oil and gas condensate exports Oil and gas condensate produc- sate production also decreased oil and gas condensate production to countries outside the CIS 232.5 tion was cut in all of Russia’s in the Orenburg Region (down went down by 6.8% year-on-year went down by 11.8% year-on- oil-producing federal districts by 4.7% year-on-year to 20.7 mmt; to 13.6 mmt; 2.7% of Russia’s total year to 219.2 mmt. Almost 58% with the exception of the Far 4.0% of Russia’s total produc- production) most significantly of export volumes to countries Eastern Federal District, where tion), Samara Region (down in the Volgograd Region (down outside the CIS were transported oil production increased by 3.8% by 3.6% year-on-year to 15.5 mmt; by 23.0% year-on-year to 1.8 mmt; by sea (around 126.5 mmt), includ- year-on-year in 2020, to 34.5 mmt 3.0% of Russia’s total produc- 0.4% of Russia’s total produc- ing 15.1% via Primorsk and 15.0% (6.7% of Russia’s total produc- tion), the Perm Territory (down tion), Astrakhan Region (down via the Kozmino oil port. tion) owing to the output ramp-up by 6.0% year-on-year to 15.1 mmt; by 2.5% year-on-year to 11.0 mmt; in the Republic of Sakha (a rise 2.9% of Russia’s total produc- 2.1% of Russia’s total production), Oil and gas condensate exports 2017 2018 2019 2020 of 19.9% year-on-year to 16.2 mmt, tion) and Udmurtia (down by 9.7% and the Krasnodar Territory (down to CIS countries declined in 2020 3.2% of Russia’s production), which year-on-year to 9.5 mmt; 1.8% by 16.2% year-on-year to 0.6 mmt; Oil export by 24.1% year-on-year to 13.3 mmt, compensated for the production of Russia’s total production). 0.1% of Russia’s total production). Oil refining all of which was transported via decline in the Sakhalin Region Source: CDU TEK Belarus. (a decrease of 7.2% year-on-year Evolution of Oil and Gas Condensate Production by Federal District, mmt to 18.3 mmt, 3.6% of Russia’s 560.3 -24.8 production). -12.7 -6.6 -3.6 -1.0 -0.1 +1.3 512.8

The greatest reduction in oil and gas condensate produc- tion was recorded in the Ural Federal District (down by 8.0% year-on-year to 285.3 mmt; 55.6% of Russia’s total produc- tion) and Volga Federal District (down by 10.7% year-on-year to 106.2 mmt; 20.7% of Russia’s total production). In the Ural 2019 Ural Volga Siberian Northwestern Southern North Far 2020 Federal District, crude oil pro- Federal Federal Federal Federal Federal Caucasian Eastern District District District District District Federal Federal duction decreased in the Khanty- District District Mansi Autonomous Area – Yugra Source: CDU TEK

152 153 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

RUSSIAN GAS INDUSTRY

In 2020, Russia was the world’s year-on-year), while supplies Wholesale prices of gas produced No. 2 gas producer (surpassed to CIS countries totalled 35.2 bcm by Gazprom and its affiliates only by the USA) and the world’s (down by 7.9% year-on-year). and sold to domestic consum- largest gas exporter. ers are used as a benchmark. Exports of LNG4 grew by 1.2 bcm The prices are determined by orders Natural and associated gas in 2020 (up by 3.0% year-on-year) of the Federal Antimonopoly production in Russia in 2020 and reached 41.7 bcm. Service of the Russian Federation decreased by 6.1% year-on-year (regulated gas price). to 692. bcm1. Rosneft accounted Major gas consumers in Russia for around 8.4% of the nation’s include power generation com- Current wholesale prices of gas total production, or 58.3 bcm2. panies, households, utilities, for all categories of Russian and companies in the oil, met- consumers were set by Order Gas produced in Russia is sold als, and agrochemical industries, of the Federal Antimonopoly domestically and exported. which taken together account Service No. 638/20 dated 10 July for around 80% of Russia’s total 2020 (for consumers other than According to the Federal Customs gas consumption. households) and No. 636/20 Service of Russia and CDU TEK, dated 10 July 2020 (for Russia’s natural gas exports Rosneft supplies gas to indus- households). In accordance totalled 240.9 bcm in 2020, going trial consumers, households, with the Orders, gas prices for all down by 7.5% year-on-year. Export and municipal utilities. categories of consumers were volumes via Gazprom’s pipelines3 subject to indexation of 3.0 %. stood at 199.2 bcm (down by 9.4% Rosneft’s selling prices for end year-on-year), including 164.0 bcm consumers are not regulated Regulated gas prices in Russia dif- exported to countries outside by the Government and are based fer by region, generally depending the CIS (down by 9.8% on agreements with customers. on the distance from the gas pro- duction hub in the Yamal-Nenets Autonomous Area. Natural Gas Exports from Russia, bcm Natural and Associated Gas Production in Russia, bcm (previously by the FTS)5. Gas 260.4 24 7. 5 240.9 The indexation bench- transportation service prices 228.5 213.5 26.9 40.5 725.4 737.7 mark for regulated gas prices are based on a tariff consisting 200.3 691.1 692.9 15.7 41.7 14.7 36.6 38.2 635.5 640.2 is the Forecast of Social of two fees, one for the use of gas 14.9 34.3 34.0 35.2 and Economic Development pipelines and the other for gas 40.7 of the Russian Federation pub- pumping. The pipeline usage fee lished by the Ministry of Economic is set for the distance between 181.8 Development of the Russian the pipe inlet and outlet points, 178.5 184.0 144.7 164.7 164.0 Federation. while the pumping fee depends on Gazprom’s handling and trans- As the owner of the Unified Gas portation costs.

Supply System, Gazprom provides 2015 2016 2017 2018 2019 2020 independent companies with ser- Current tariffs were approved vices of gas transportation via by Order of the FTS No. 216- Countries outside the CIS Sources: Federal Customs Service of Russia, CDU TEK 2015 2016 2017 2018 2019 2020 CIS trunk gas pipelines. The transpor- e/1 dated 8 June 2015 and were LNG Source: CDU TEK tation charges are set by the FAS not indexed in 2016–2020.

1 Data by CDU TEK is based on temperature of 20°C, and pressure of 101,325 Pa. Data by international agencies: temperature of 15°C, and pressure of 101,325 Pa. 2 Excluding gas used in hydrocarbon liquids production. 3 Pursuant to Federal Law of the Russian Federation No. 117-FZ on Gas Export dated 18 July 2006, the exclusive right to gas export shall be granted to the owner of the Unified Gas Supply System or to its wholly-owned subsidiary. 4 Large-scale production of LNG in Russia concentrates at the Sakhalin-based LNG plant built as part of Sakhalin-2, a project operated 5 The Federal Tariff Service was abolished by Presidential Executive Order No. 373 dated 21 July 2015, and was succeeded by the Federal by Investment Company Ltd., and the Yamal LNG plant (Yamal-Nenets Autonomous Area) controlled by . Antimonopoly Service (FAS).

154 155 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Gazprom also provides independ- ent gas producers with under- ground gas storage services. The main gas consumption regions currently have 23 underground gas storage facilities. Their usage fees are non-regulated and are set by Gazprom on a case-by-case basis for each facility for the dura- tion of the storage season (from 1 April to 31 March of the next year). Rosneft relies on under- ground gas storage facilities to offset fluctuations in gas con- sumption by end consumers.

In recent years, the domestic gas market has seen increased competition for consumers and a gradually expanding share of independent gas producers in the total volume of domestic gas sales.

The St Petersburg International Mercantile Exchange (SPIMEX) was launched on 24 October 2014 pursuant to an instruction of the Presidential Commission for Strategic Development of the Fuel and Energy Sector and Environmental Safety. In 2020, the Exchange contin- ued to develop organised trade in natural gas. Trading is based Actual Growth in Regulated Gas Prices in Russia Indexation of Regulated Prices (Tariffs) for Infrastructure Sector Products (Services) for 2021–2023, on three balancing points (Nadym, forecast 622.5 Km (Lokosovo), and Parabel) 2016 2017 2018 2019 2020 with next month deliveries of nat- Metric 2021 2022 2023 Price increase for consumers July: August: July: August: ural gas. 0.0 other than households, % 3.9 3.4 1.4 3.0 Wholesale price indexation for all categories of consumers other July: 3% July: 3% July: 3% than households In 12M 2020, natural gas sales Price increase for house- July: July: July: July: August: holds, % 2.0 3.9 3.4 1.4 3.0 Wholesale price indexation for households July: 3% July: 3% July: 3% under exchange-traded contracts stood at 16.05 bcm, with total Source: Forecast of Social and Economic Development of the Russian Federation for 2021 and for the 2022 and 2023 Planning Periods (dated sales since the launch of SPIMEX 26 September 2020) now exceeding 89 bcm.

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As at 31 December 2020, Reserves-to-production ratio (SEC) in 2020, years3 COMPETITIVE ANALYSIS the Company’s reserves 21.0 19.9 under the PRMS (Petroleum HYDROCARBON EXPLORATION Global oil production, kbpd Resources Management AND PRODUCTION System) standards, accord- 13.9 ing to DeGolyer & 11.0 9.9 10.7 MacNaughton, totalled 9.6 Rosneft is the largest oil and gas 38,644 mmboe (5,221 mmtoe) 43,484 mmboe (5,884 mmtoe) 7.1 7.4 company in Russia and a leader as at 31 December 20201, while 71.945 in the 1P category, 83,761 mmboe in terms of reserves and hydro- its proved reserve life amounted kbpd (11,308 mmtoe) in the 2P cat- carbon liquid production among to more than 20 years and proved egory, and 126,216 mmboe global peers whose shares organic reserve replacement ratio (17,028 mmtoe) in the 3P cate- or depositary receipts trade (RRR) to more than 150%. The life- gory. In 2020, Rosneft’s PRMS 3P on international stock exchanges. of-field audit of the reserves reserves at existing assets Source: company reports. Efficient reserves management was performed by DeGolyer & USA 16 % (before acquisitions/divestments) and resource sustainability, includ- MacNaughton. Saudi Arabia 13 % increased by over 700 mmtoe Organic reserves growth (SEC),bboe3 Russia (excl. Rosneft) 7 % ing the reserves-to-production Rosneft 6 % as a result of successful explo- 9.0 ratio, organic reserves growth, Iraq 6 % ration and production drill- and cost of organic reserves Canada 5 % ing and the use of advanced 3.3 2.4 2.3 growth are among the key invest- China 5 % recovery enhancement tech- 1.9 1.8 1.6 1.4 ment highlights of an oil and gas Brazil 4 % niques to extract hard-to- 3 % company. recover reserves, among 38,644 Norway 2 % mmboe 1 % others. The key contribu- Under the SEC (U.S. Securities Proved hydrocarbon Others 17 % tors to the reserves base were and Exchange Commission) Other OPEC nations 15 % the fields of RN-Yuganskneftegaz, reserves (SEC) -1.4 classification, Rosneft’s proved Source: Wood Mackenzie. RN-Nyaganneftegaz, hydrocarbon reserves totalled Rospan International, Verkhnechonskneftegaz, 2018 Reserve replacement and F&D costs and RN-Purneftegaz. The reserves 2019 at Vostok Oil assets also grew 2020 250 % significantly. Source: company reports. 200 %

150 %

100 %

50 %

0 % 0 5 10 15 20 25 30 35 40 45 50 (3-year) 2 Rosneft Chevron Equinor Shell BP PetroChina Organic reserve ratio (RRR) replacement in 2018–2020

Organic finding and development (F&D)2 costs in 2018–20202. USD/boe Circle size shows organic reserve growth in 2018–2020.

Source: company reports.

1 After acquisitions/divestments, including fuel gas. 3 2 Including associates and joint ventures. PetroChina data does not include associates or joint ventures. Including associates and joint ventures. PetroChina data does not include associates or joint ventures.

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fields, to increase the output Hydrocarbon production in 2020, mmboe per day through organic growth. In compli- 5.2 ance with the Russian President's instruction to increase the cargo 1.0 4.4 flow along the Northern Sea Route, 3.8 we have embarked on a large- 3.5 3.4 1.9 3.0 2.8 scale hydrocarbon production 1.4 project, which will set the stage 1.4 1.6 1.1 0.5 2.1 for a comprehensive develop- 4.1 0.5 ment of the new oil and gas prov- 2.5 ince in the Krasnoyarsk Territory’s 2.3 2.3 2.1 1.8 1.9 north (Vostok Oil project). 1.7 Together with our partners, we will build a unique world-class oil and gas cluster in this location. Liquids In line with its plans, the Company Gas continues to run production pro- Source: company reports for 2020. jects outside Russia.

For years, Rosneft has invariably maintained a high reserve replace- To ensure production growth at our existing fields. Technology ment ratio (reserve replace- in the long run, we create an opti- advance is a key focus area ment cost in 2018–2020 was mal portfolio of major green- of the Rosneft–2022 Strategy USD 0.3 per boe). In 2021–2022, field projects, while also using and a powerful driving force we intend to replace no less than advanced production technologies behind our competitiveness. Exploration activities Kondinskoye, Tagulskoye, Oil and gas condensate 100% of our hydrocarbon pro- in 2020 helped discover Russkoye, Srednebotuobinskoye production in Russia, duction. The Company also Average hydrocarbon production growth over 10 years, % 208 deposits and 19 fields (Phase 2), Zapadno-Erginskoye, mmb per day plans to fast-track the develop- Rosneft 7.5% with a total of over 2 btoe Vostochno-Messoyakhskoye ment of new reserves by reducing 11.37 in AB1C1+B2C2 reserves. Appraisal and Kuyumbinskoye. The third 11.27 preparation timelines, acceler- PetroChina 2.8% 10.37 drilling in the Kara Sea resulted quarter of 2020 saw the launch ate viability-based resources 2.00 2.08 Chevron 1.1% in the discovery of two unique of a high-pressure oil pipeline 2.03 to reserves conversion, and make Arctic fields – the Zhukov gas field to the Priobskoye field, mark- 1.22 1.22 exploration drilling in Russia more Petrobras 0.9% 1.10 and the Rokossovsky gas conden- ing the start of the Erginsky 1.65 1.65 successful. Shell 0.2% 1.48 sate field, with reserves of 1.3 tcm license area’s full-scale develop- 0.58 0.58 Gazprom 0.1% and 55 mmt, respectively. As part ment (a key asset of the Erginsky 0.51 The Company accounts for around of the Vostok Oil project, a unique cluster). In the fourth quar- 40% of the total oil production LUKOIL –0.7% 4.58 4.61 Zapadno-Irkinskoye field was dis- ter of 2020, a pipeline 4.11 of Russia and approximately 6% BP –1.0% covered on the Taimyr Peninsula, to the Verkhnechonskoye field of the global oil output. On top with more than 600 mmtoe was put on stream to transport of that, we boast the highest ExxonMobil –1.7% 1.23 1.23 1.15 in C1+C2 hydrocarbon reserves. oil from the Severo-Danilovskoye 10-year average production 2018 2019 2020 field. In the medium term, we plan growth among peers. Sources: company reports; Wood Mackenzie (Gazprom, PetroChina). Rosneft is Russia’s leading to enhance the productivity Gazprom Neft Rosneft petroleum company in terms of mature fields and develop of launching new projects. new high-potential oil and gas LUKOIL In recent years, we have put projects, including the Vankor, Surgutneftegaz on stream a number of large Erginsky and Danilovsky clus- Other fields, including Suzunskoye, ters, Rospan, Kharampurskoye Source: CDU TEK Yurubcheno-Tokhomskoye, and Severo-Komsomolskoye

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REFINING AND MARKETING of its kind. In 2020, Nayara Energy quantities. Rosneft is a major As a result of successful efforts had a rapidly growing retail net- player in the Russian wholesale made in 2018 to create its own work in India, with more than motor gasoline and diesel fuel marketing function, Rosneft Rosneft is the largest refiner facilities, among other things to refineries in Russia and abroad. 5,975 operating filling stations (over market. We operate the largest Deutschland began market- in Russia. Its refining business by introducing advanced technol- In general, the Company con- 8% of all filling stations in India) retail network in Russia, offering ing and selling petroleum prod- includes 13 large refineries, as well ogies to cut energy consumption tinues successfully diversi- and 2,200 filling stations in various petroleum products in all fed- ucts in Germany in January 2019 as petrochemical and gas pro- in line with ISO 50001 (Energy fying its oil supply channels. stages of commissioning. eral districts. The Company relies and now acts both as a major cessing plants in five federal dis- Management Systems). Amid growing competition on extensive infrastructure, both refiner and a leading whole- tricts – Central, Volga, Southern, in the oil market, the Company Rosneft’s main competitors own and leased, to market and dis- sale supplier of petroleum prod- Siberian, and Far Eastern. Rosneft’s Innovation Development is focused on boosting export in Russian oil exports are verti- tribute petroleum products (oil ucts to this market. It supplies The Company’s oil refining oper- Programme is aimed at substi- volumes under long-term con- cally integrated companies such depots, filling stations), which petroleum products directly ations are focused on the strate- tuting imported technologies tracts, including oil supplies as LUKOIL, Surgutneftegas, takes into account the capacity from three German refineries par- gic task of supplying high-quality for the production of high-qual- to China National Petroleum and Gazprom Neft. All Russian oil of regional markets and consumer tially owned by Rosneft, as well petroleum products to the Russian ity petroleum products. One of its Corporation (CNPC) and supplies producers have their own export demand. The Rosneft trademark as from over 30 German terminals domestic market, including key objectives is for the Company’s to Europe under direct contracts. schedule for oil transportation is one of the most recognisa- by road, rail, and river. The compa- remote regions. The Achinsk, refineries to start using cata- Rosneft also captures opportu- outside the Russian customs zone ble for petroleum products across ny’s customer base includes more Komsomolsk, and Angarsk refiner- lysts produced in-house in order nities of expanding partnerships based on equal access to the oil the regions where the Company than 500 enterprises in Germany, ies are the key suppliers of motor to mitigate the exposure to for- through short-term contracts. trunk pipeline system and sea- operates and is associated Poland, the Czech Republic, fuels for the Eastern Siberian eign-made products, cut refining port terminals. Key competitors with quality fuel on sale at filling Switzerland, Austria, and France. and the Far Eastern regions, costs and boost the competitive- The Company is consolidat- supplying other crude oil grades stations. ensuring uninterrupted supply ness of Rosneft’s refining segment. ing its competitive position to export markets are international Alongside Rosneft, Russian oil and curbing price growth that in the European market through and national oil companies such The Company exports its petro- majors LUKOIL, Surgutneftegas, would inevitably be the case if Under the Rosneft–2022 Strategy, the operation of its German as Shell, ВР, ExxonMobil, Chevron, leum products, just like crude oil, Gazprom Neft, Tatneft and other petroleum products were delivered the Company's refineries con- refineries, whose total through- Total, Equinor, , to European, Asia-Pacific, and CIS oil companies offer petroleum from Central Russian refineries. tinue rolling out the Digital Plant put in 2020 stood at 10.97 mmt. NIOC, etc. countries. Its competitive advantage products on the domestic market. system to streamline production Rosneft is currently the third larg- lies in its ability to maintain sta- Key competitors in export markets In general, unlike those management. est player in the German refin- The Company consistently supplies ble relations with foreign partners, include transnational oil compa- of most of the Russian produc- ing market. Its capacities provide, petroleum products to the domes- and, specifically, expand and renew nies (Shell, ВР, Total, ExxonMobil, ers, the Company’s oil refiner- As an environmentally responsi- on average, an oil refining depth tic market in required petroleum product supply contracts. Chevron, etc.) and local refiners. ies are located far from export ble company, Rosneft is consist- of 93% and a refinery complex- markets, which limits the eco- ent in improving and expanding ity of 9.0, according to the Nelson nomic efficiency of oil refining. the development and output Index. The local operator Russia’s oil refining dynamics, mmt However, the Company continues of high-tech petroleum products is Rosneft Deutschland GmbH. its efforts to connect the refiner- with enhanced environmental per- This subsidiary manages the sup- 103.3 100.1 ies to Transneft’s oil trunk pipeline formance. The Company is also ply of crude to Rosneft-owned 93.0 system. expanding the sales geography refineries (PCK Raffinerie GmbH, of Euro-6 and AI-100 MiRO, Bayernoil) and the sales The oil refineries continue upgrade and boosting production of RLMS, of petroleum products. and maintenance projects related a low-sulphur marine fuel. 44.1 43.3 40.1 39.6 to their existing capacities. Rosneft is consistent in its expan- 39.4 38.33 7.1 38.536.0 Rosneft is an active player sion efforts in the Asia-Pacific In Oil Refining and Petrochemicals, in the domestic and foreign oil Region. Rosneft associate 18.2 18.6 18.1 13.0 13.5 13.3 10.3 11.6 8.8 7.0 9.6 10.3 9.1 we have been successfully imple- and petroleum product mar- Nayara Energy owns and oper- 6.9 6.9 4.9 4.7 4.7 menting an operational effi- kets and Russia’s largest oil ates the Vadinar refinery, which ciency programme. As part exporter. Its crude oil is exported accounts for approximately 8% Rosneft LUKOIL Gazprom Neft Surgutneftegas Gazprom Tatneft Novatek NNK Independent Mini-refineries refineries of the Rosneft–2022 Strategy, to European, Asia-Pacific, and CIS of Indian refining. With a Nelson 2018 2019 2020 we work systematically to reduce countries, sold on international Index of 11.8, it is one of the coun- operating costs at our production markets, and supplied try's most advanced facilities Sources: CDU TEK, Rosneft’s reports.

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As the oil and gas industry's with a membrane storage sys- Russia’s oil refining breakdown, vehicles at our filling stations, electric power companies, to con- with diesel fuel a new bio-com- environmental performance tem. In December 2020, it was mmt including five fast-charging tinue expanding its EV charging ponent – hydrotreated vegetable comes under closer scrutiny, licensed to build nuclear-pow- (50 kW) points in the Moscow infrastructure. oil (HVO). Rosneft seeks to fur- the Company is developing its gas ered vessels under the applica- and Leningrad regions, Vladivostok ther improve emissions manage- business with a focus on produc- ble Russian regulations. Zvezda and Khabarovsk, and nine To meet the tougher CO2 reg- ment by working in a number tion technologies and efficient gas had successfully passed inspec- slow-charging (22 kW) ones ulations in the EU, at Bayernoil of directions, in particular focusing monetisation. The latter includes tions of the Interregional Territorial 270 in the Tver Region and the Krasnodar and MiRO refineries in Germany on "green" hydrogen production. building a portfolio of long-term Department for Siberia and the Far mmt Territory. Rosneft has joined forces we have successfully implemented supply contracts, participat- East of the Federal Environmental, with some of Russia’s largest projects to import and blend ing in LNG production projects Industrial and Nuclear as well as in Russia’s gas motor Supervision Service, which made fuel development programme, it the only Russian shipyard OPERATIONAL AND FINANCIAL EFFICIENCY and the work to create equal con- allowed to build Project 10510 Rosneft 93.0 LUKOIL 40.1 ditions for access to infrastructure “Leader” ice-breakers. Gazprom Neft 3 7.1 The reporting year was marked profits, prompting companies barrel, with the RRR of 1P reserves facilities and consumers. Surgutneftegas 18.1 by a number of developments that to review their mid- and long- (under SEC classification) in 2016– In an effort to expand its innova- Gazprom 13.3 had a material impact on the whole term price forecasts, increasing 2020 rising from 151% to 156%. Developing an NGV filling sta- tive and environmentally-oriented Tatneft 11.6 oil and gas industry. The most sig- write-offs, and pushing net income tion network in Russia is one services, Rosneft is developing Novatek 7.0 nificant change that negatively into a negative territory. Low unit production costs NNK 4.7 of Rosneft’s priorities in the retail EV charging infrastructure at its Independent refineries 36.0 affected the balance of hydro- are yet another indicator business and one of the most filling stations based on demand Mini-refineries 9.1 carbon supply and demand Amid the uncertainty and vol- of Rosneft’s operational effi- important focus areas, since forecasts and EV market trends. was a decrease in consump- atility in the global oil market, ciency. In the reporting period, it enables the Company to expand We have installed and now oper- Sources: CDU TEK, Rosneft’s reports. tion caused by the COVID-19– Rosneft demonstrated high explo- we retained an undisputed leader- its competitive advantages ate 14 charging points for electric related restrictions. The OPEC+ cut ration and production efficiency, ship in production costs in Russia in the domestic market. accord resulted in supply con- while maintaining traditionally thanks to optimal technolo- straints, which together with par- low finding and development gies and stringent cost control. Rosneft is also building up its Russia’s motor fuel production, mmt tially improving demand brought costs and staying committed Rosneft's current operating costs trading potential and trading com- about a recovery in prices to the long-term organic growth per barrel are significantly lower petencies in the international LNG 77.5 78.4 78.0 by late 2020. However, plummet- of its hydrocarbon production. than those of international majors, market. ing oil prices in 2020 led to a sig- Our F&D costs over the last five and 15–30% lower than the lifting 13.0 14.5 16.0 nificant fall in oil and gas operating years averaged USD 4.75 per costs of Russian peers. In addition, the Company is suc- 7.0 7.1 cessfully expanding in new envi- 7. 2 10.8 10.4 ronmentally-oriented business 10.9 Unit capex in exploration and production2, USD/boe 39.5 40.2 38.4 segments. Zvezda 21.2 5.5 7. 2 16.5 16.8 16.1 19.6 Complex, created by a consor- 2.5 7.6 2.5 2.5 16.1 16.8 tium led by Rosneft, is building 8.3 7.6 8.0 14.8 14.2 “green” tankers to high environ- 8.0 7.9 13.5 7.1 30.3 13.5 13.1 12.8 13.3 13.3 29.6 2 7.8 11.9 mental standards, with their main 11.3 11.7 9.9 15.1 15.1 and additional power supply units 13.3 9.3 9.6 8.4 8.5 7.6 able to run on eco-friendly LNG. 6.8 7. 3 7, 0 7.4 7. 3 2018 2019 2020 2018 2019 2020 6.3 6.7 6.1 5.5 Russia’s first "green" Aframax Motor gasoline Diesel fuel tanker Vladimir Monomakh Rosneft1 was launched at the shipyard LUKOIL in May 2020. In July 2020, Zvezda Gazprom Neft became the only Russian shipyard Surgutneftegas to obtain an international licence Other 2018 2019 2020 to build LNG carriers

1 Reporting data. Rosneft’s diesel fuel volumes do not include marine fuel. 2 Petrobras unit capex in exploration and capex in Brasil

164 165 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Unit production costs1, USD/boe Free cash flow 2016–2020, comparative analysis (majors)3, USD/boe

13.3 13.4 22.5 12.3 12.1 11.6 16.3 11.1 14.4 14.1 10.9 10.8 10.6 12.3 10.1 11.1 11.1 11.8 9.6 9.7 8.5 10.1 9.0 6.9 7. 2 7. 5 8.5 4.9 4.6 3.3 3.3 4.0 4.0 3.7 2.0 1.7 1.5 1.8 7.1 6.8 6.8 6.4 5.7 5.8 5.1 -0.1 -1.1 -1.9 3.9 4.1 3.8 -5.0 3.6 3.3 3.7 -5.5 -5.7 3.1 3.1 2.8

2016 2017 2018 2019 2020

2018 2019 2020

Over many years, Rosneft has demonstrated a positive free During the turbulent 2020, the Company delivered 2 Net income in 2018–2020 (majors), USD/boe cash flow, which makes us stand positive net income and the lowest net debt / EBTIDA out among most competitors, 1 7.9 growth compared to the largest international peers, whose free cashflow perfor- 14.4 15.3 thanks to its financial resilience and quality asset 11.4 12.3 mance tends to be highly volatile 10.4 10.6 10.2 portfolio. 7.8 7.1 and sometimes negative during 5.9 5.0 periods that follow asset acquisi- Source: BP, Shell, Equinor, Total, ENI, Chevron, and ExxonMobil reports 2.6 2.7 3.0 1.4 0.3 tion or at the start of investment projects.

-5.1 -7.0 -7.7 CLIMATE AGENDA AND CARBON MANAGEMENT -16.2 -16.3 -16.9 -17.4 With climate change climb- our GHG emissions. In 2006, a programme to regularly monitor ing higher on the global agenda, we launched and have since been and optimise production losses, 2018 2019 2020 environmental, social and gover- expanding our Gas Investment and to ensure sustainable use nance (ESG) criteria are becom- Programme aimed at increas- of energy by our facilities. ing a key factor in determining ing the level of APG utilisation. the Company's investment appeal. During 2006–2012, Rosneft com- This ongoing initiative will enable Net debt / EBTIDA in 2019–2020 Investors have come to rely bined forces with the World Bank us to achieve lower GHG inten- on ESG ratings from international and a number of European state sity compared to peers. Following 4.2 3.5 3.5 agencies when making allocation funds to carry out three joint pro- the comparison of CO2 equivalent 3.0 2.7 2.8 decisions, and companies' climate jects under the Protocol. intensity in 2019, Rosneft ranked 2.3 change initiatives are starting Aimed to reduce APG flaring, in the first quartile of interna- 1.7 1.5 1.4 1.5 1.0 1.2 1.3 0.8 0.6 to represent a major competitive the projects resulted in a 2 mmt tional oil and gas majors in terms

advantage. decrease in annual CO2 emis- of direct emission intensity sions. Rosneft’s Energy Efficiency in upstream (alongside CNOOC Rosneft fully recognises Programme was approved and Equinor) and downstream. the importance of the climate in 2009 and is regularly updated agenda and makes sure to assess with direct input from the Board We are introducing and expanding 2019 2020 the systemic, environmental, infra- of Directors. In 2013, Rosneft the principles of low-carbon devel- structural and economic risks started a systemic assessment opment as part of our corporate associated with climate change. and monitoring of its GHG emis- governance framework. In 2019, We keep working to reduce sions. In 2017, we launched Rosneft set up the Carbon

1 Petrobras data, unit capex in Brazil 2 Per boe of hydrocarbon liquids production, including associates and joint ventures. 3 Per boe of hydrocarbon liquids production, including subsidiaries.

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Management Subcommittee of Directors in defining strategic and promoting eco-friendly pro- to assess the results of its GHG goals and growth targets, includ- duction. In July 2020, we released OVERVIEW OF KEY TAXATION initiatives. The subcommittee ing ESG goals and Rosneft’s a public statement regarding comprises heads of operations, contribution towards the UN the Company’s stance on human CHANGES IN THE RUSSIAN FEDERATION energy, economic and environmen- Sustainable Development Goals. rights and the Declaration tal functions. on Respecting Human Rights In June 2019, we joined to be used when interacting WITH THE LARGEST IMPACT As carbon management the Methane Guiding Principles with suppliers of goods, works increases in importance, initiative. and services. ON THE COMPANY’S FINANCIAL in 2020 the Company decided to transform the subcommit- On 20 December 2018, In December 2020, the Board AND BUSINESS OPERATIONS tee into the Carbon Management the Board of Directors approved of Directors discussed the long- Committee that directly reports the Company's ESG initiatives term Carbon Management Plan to the Rosneft’s Chief Executive and announced Rosneft's com- for the period until 2035, which Officer. The Committee started its mitment to the 17 UN Sustainable takes into account the views work in 2021. Development Goals. In June of the Company’s key share- TAXATION IN THE OIL INDUSTRY 2020, we released an updated holders and lays the founda- In April 2020, the Board public statement regard- tion for Rosneft’s environmental СOMPLETION INCENTIVES FOR PROJECTS tion of road, transport, engineer- of Directors voted to assign more ing the Company's contribu- agenda on developing a low-car- OF THE TAX MANOEUVRE IN NORTHERN RUSSIA ing and energy infrastructure responsibilities to the Strategic tion towards the UN Sustainable bon economy, including climate AND INTRODUCTION necessary for the develop- Planning Committee, renaming Development Goals. The state- risk management and defining OF THE TAX ON ADDITIONAL On 1 April 2020, the government ment of AIT Group 5 sites it the Strategy and Sustainable ment confirms our commitment opportunities and competitive INCOME FROM HYDROCARBON introduced tax benefits for pro- (deduction on infrastruc- Development Committee. to becoming the leader in minimis- advantages associated with future EXTRACTION (AIT) jects to develop hydrocarbon ture). The deduction cap is set The committee assists the Board ing the environmental footprint demand for clean energy. resources in the North of Russia: based on the positive difference The reporting year saw the gov- • there is now a new fifth group between the actual Urals price ernment continue to take steps of subsurface sites transferable and the baseline price (Pbas) towards completing the tax to AIT, comprising areas located equal to USD 42.45 per bar- manoeuvre, namely a phased north of 70 degrees of north- rel for 2020, subject to fur- reduction in export duties on oil, ern latitude within the borders ther indexation. On 1 January gas condensate and petroleum of the Krasnoyarsk Territory, 2021, the baseline price for cal- products until they are reduced the Republic of Sakha (Yakutia) culating the MET deduction to zero in 2024, with an equivalent or the Chukotka Autonomous on infrastructure was reduced increase in MET for oil and gas Area, with oil reserve depletion to USD 25 per barrel; condensate, and the introduction less than 0.1% as at 1 January • a zero MET rate is introduced of the reverse excise tax on petro- 2019; for the production of natural gas leum feedstock. • until the expiration of 12 years and gas condensate together after the start of the commer- with natural gas at subsurface Additionally, some fields con- cial production, Group 5 subsur- sites located in certain regions tinued to be subject to the AIT face sites are subject to a zero of the Russian Arctic and used regime providing for a lower MET MET rate and reduction coeffi- exclusively for the manufacture

as compared to the general tax cients (CGR) in the subsequent of liquefied natural gas (LNG) regime and a 50% AIT rate appli- four years (0.2, 0.4, 0.6, and 0.8). and/or petrochemicals at new cable to the tax base calculated On 1 January 2021, the period facilities, until the accumulated as free cash flow from a subsur- of the zero MET rate was extraction volume (250 bcm face development project after extended from 12 to 16 years; of gas or 20 mmt of gas con- return on investment (as pre- • a MET deduction was granted densate at the subsurface site) scribed in the Russian Tax Code). until 31 March 2030 for projects is reached or until the expira- As at 31 December 2020, the total located north of 67 degrees tion of 12 years from the first day number of subsurface sites trans- of northern latitude and south of the month in which the sale ferred to AIT was 36 (exclud- of 69 degrees of northern of the first LNG or petrochemical ing non-producing sites in 2020). latitude within the borders batch took place; In 2020, these subsurface sites of the Krasnoyarsk Territory, produced 29 mmt of oil. which provide for the construc-

168 169 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

OTHER TAXATION CHANGES was supplemented with a new seas and the southern part Excise rates for petroleum products in 2019–2020, RUB per tonne

IN THE OIL INDUSTRY increment (NBUG) in the amount of the , for which from 1 January from 1 January to 31 March from 1 January to 31 commensurate with the damper the date of the start of com- Excisable goods to 31 December 2019 2020 December 2020 To compensate for additional (the changes were introduced mercial hydrocarbon produc- budget expenses arising out in 2019 to allow for increased tion falls after 1 January 2020, Motor gasoline of changes in the damper mech- excise deductions as compared are reclassified to Group 4 in terms • Non-compliant with EURO-5 13,100 13,100 13,100 anism (part of the reverse to the previous formula). of oil extraction complexity (the excise tax on petroleum feed- most attractive tax benefits) • Non-compliant with EURO-5 12,314 12,752 12,752 stock), from 1 January 2020 From 1 April 2020, new offshore for the purposes of MET. Straight-run gasoline 13,912 14,720 14,720 the CMGDF coefficient used hydrocarbon deposits located to increase the MET rate for oil in White, Pechora and Okhotsk Diesel fuel 8,541 8,835 8,835

Jet fuel 2,800 2,800 2,800

EXCISE TAX ON PETROLEUM FEEDSTOCK AND PETROLEUM Motor oils 5,400 5,616 5,616

PRODUCTS Benzene, paraxylene, orthoxylene 2,929 3,058 3,058

Middle distillates 9,241 9,535 16,1911 In 2020, the Company con- The deduction also includes From 1 April 2020, the middle dis- 2 tinued to apply the so-called a damping component cal- tillate category used for excise Heavy marine fuel 2,100 2,100 - reverse excise tax introduced culated as the difference tax purposes was significantly from 1 January 2019 as part between global and notional expanded to comprise nearly of completing the tax manoeu- domestic prices for gaso- all heavy petroleum products, vre. The scheme envisages levying line and diesel fuel and can be with certain exceptions listed excise tax on petroleum feedstock both positive (reimbursable in Article 181 of the Russian Tax supplied for refining in Russia from the budget) and negative Code and heavy marine fuel and granting the relevant tax (payable to the budget) depend- excluded from the list of excisable deduction. ing on the said price difference. goods as a standalone item. Given the macroeconomic condi- The petroleum feedstock tions, starting from February 2020 Other changes include a tax excise rate is calculated based the damper was negative. deduction for middle distillates on current global oil prices, used as fuel for electricity and/or USD/RUB exchange rate, From 1 January 2020 the gov- heat generation, and an increased the quantity and types of refin- ernment increased the excise tax deduction for the sale of mid- ing products. Certain constitu- tax for petroleum products, dle distillates as bunker fuel ent entities of Russia (including with the exception of jet fuel exported from Russia as supplies. the Krasnoyarsk Territory and heavy marine fuel, by 3.2– and Irkutsk Region) apply higher 5.8% as planned. regional coefficients.

1 An average rate for the period. The monthly rate is calculated using the following formula: 9,585 – (PDSexp – 48,300) x 0.65 if PDSexp is ≤ RUB 48,300 per tonne and 9,585 if PDSexp is > RUB 48,300 RUB per tonne (PDSexp is the average price of the export alternative for class 5 diesel fuel for the tax period). 2 For fuel produced at refining facilities located in the Khabarovsk Territory; in other cases the excise is equal to zero.

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FURTHER CHANGES IN TAX LEGISLATION CHANGES IN AIT TERMS coefficients depending on the tax deductions for owners of the petro- period and subsurface site group. leum feedstock supplied for pro- The reporting period saw duties on incremental produc- In addition, depleted sites may In addition to the subsurface The old 1.163 coefficient remains cessing. Eligible for the mark-up the adoption of several federal tion resulting from such deduction now be transferred to AIT (Group 3 site categories above, start- in effect for Group 5. are the companies that before laws significantly changing the fis- (the difference between the actual for the purposes of AIT). Starting ing 1 January 2021 the right 1 October 2021 sign investment cal regime for the oil industry start- and baseline production (without 1 January 2024, these sites to switch to AIT has been granted There are new details on defining agreements with the Russian ing from 2021. Some of the new tax the deduction) set out by the oil are eligible for tax deductions for the sites that are: the unit cost value for calculating Ministry of Energy. measures with the greatest impact production agreement). of 20% from the MET amount, • located entirely or partially the minimum AIT tax base: the unit on the Company include: which become applicable once within the North Caucasian cost value is taken to be RUB 7,140 The definition of middle distillates ADJUSTMENT TO FISCAL the depletion level reaches 80% Federal District or the Sakhalin per tonne until 31 December 2023 has been updated as follows: TAX DEDUCTION BENEFITS FOR PROJECTS (for the purposes of deduction, Region (except for offshore and RUB 8,600 per tonne start- • the density threshold for a mix- FOR THE PRIOBSKY IN NORTHERN RUSSIA depletion calculations account fields); ing 1 January 2024, multiplied ture of hydrocarbons to be SUBSURFACE SITE for increments and write-offs • located north of 65 degrees by the deflator. recognised as a middle distil- As mentioned above, in the oil reserves after 2006, of northern latitude and entirely late has been lowered, mean- A monthly tax deduction from 1 January 2021 the period unlike the similar calculation used within the The MET rates for subsur- ing a number of heavy of RUB 3,830 mln is applied to oil of the zero MET rate for AIT to determine the Cd coefficient). (and meeting the criteria set face sites transferred to AIT petroleum products (e.g. tar production at subsurface sites Group 5 subsurface sites was For the depleted sites in the Sea by the Russian Tax Code for AIT increased for certain Group 2 and fuel oil) are now excluded meeting the statutory criteria extended until the expiration of Okhotsk, the specified deduc- Group 4), as well as six sub- sites due to the cancella- from the category; (including the Priobsky site) until of 16 years from the start of com- tion comes into force starting surface sites in the Orenburg tion of lower rates for sites that • the criteria for defining high-vis- the accrued deduction reaches mercial production. Moreover, 1 January 2021. and Samara regions (the geo- as at 1 January 2021 had no cosity products not belonging RUB 460 bln. the government increased the cap graphical coordinates can be grounds for applying the MET tax to middle distillates have been for MET deduction on infrastruc- The Russkoye field, which is being found in the Russian Tax Code). holidays under the general tax refined, which also means that The tax deduction is appli- ture on the back of a lower base- developed by the Company regime and due to higher rates a number of products are no cable to a certain month pro- line price (Pbas) of USD 25 per and has high-viscosity oil reserves, Starting 1 January 2021, there for individual sites for 2021–2023. longer subject to excise tax. vided an oil production barrel for the whole period, is also eligible to the AIT regime. have also been certain changes agreement has been signed and granted a statutory exemp- in calculating AIT and MET on oil The resolutions on revised fiscal In addition, starting 1 January 2022 with the Russian Ministry of Finance tion from oil export duties CHANGES IN FISCAL TERMS for subsurface sites transferred terms passed in 2020 are compre- the reverse excise tax will be intro- and the Ministry of Natural for the period of the MET relief. FOR FIELDS THAT APPLIED to AIT. hensive and balanced in nature. duced for ethane and lique- Resources and Environment REDUCED EXPORT DUTIES Overall, the new taxation param- fied petroleum gas (LPG) if such (Rosneft signed the agree- CHANGES IN FISCAL TERMS ON OIL There is now a temporary limita- eters bear no adverse impact ethane and/or LPG are supplied ment with the said federal FOR DEPLETED SITES tion on the carry-forwards of his- on the Company’s plans as regards for processing into goods that executive bodies in January AND SITES CONTAINING HIGH- Starting 1 January 2021, no torical losses: they may not reduce its oil production projects. constitute petrochemical products. 2021) and the Urals price has VISCOSITY OIL longer effective are special for- the tax base for 2021–2023 exceeded the baseline set out mulas for calculating export by more than 50% (this limitation EXCISE TAX ADJUSTMENTS by Article 96.6 of the Russian Starting 1 January 2021, reductions duty rates for certain subsur- does not apply to subsurface sites Budget Code. in the MET rate for high-viscosity face sites specified by the Federal falling under AIT Group 5). There have been adjustments oil and oil extracted on depleted Law of the Russian Federation to certain aspects of the reverse On top of that, the deduction can- sites (the Cd coefficient) are can- On the Customs Tariff, as well Also, there have been changes excise tax on petroleum feed- not exceed the federal budget’s celled, while the Cdp reduction as reduced MET on oil produced in the loss indexation coefficient: stock effective from 1 January additional notional revenue coefficient for the MET rate in such areas. Until the end instead of a universal carry-for- 2021. In particular, an investment from the applied deduction deter- for depleted deposits of hard-to- of 2021, these sites may be trans- ward loss indexation coefficient mark-up (Cinv) has been intro- mined as a sum of MET and export recover oil remains in effect. ferred to the AIT regime. (1.163), there are now different duced, which increases excise

172 173 4 SUSTAINABLE DEVELOPMENT ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

HEALTH, SAFETY, ENVIRONMENT. CLIMATE CHANGE. 4 STRATEGIC GUIDELINES Rosneft understands its respon- has continued to focus on main- sibility for the health, safety taining high occupational safety and well-being of its employees, standards; together with enhanced contractors and local commu- controls and efficient risk man- and safety management systems - and 66 Group Subsidiaries nities from its operating activi- agement processes to ensure ISO 45001:2018 while maintaining received certificates of conform- ties, as well as for the protection accident-free operations; ensur- its conformance with the require- ance with these international man- of the environment in the regions ing safe labor conditions ments of the Environmental man- agement system standards after of its operations. for employees and implement- agement system - ISO 14001:2015. the completion of independent ing programs to minimize envi- Rosneft Headquarters audits in 2020. The global economy faced huge ronmental impacts. The Company challenges in 2020 with the coro- has also continued to strengthen navirus pandemic causing many its carbon management agenda HSE GOALS OF THE COMPANY disruptive changes across all to manage physical risks associ- industries. In these current chal- ated with the impacts of climate Rosneft strives to continuously The Company has also invested of the Board of Directors in 2020. lenging conditions the Company change and the energy transition. conduct accident-free operations, in a number of environmental This vision outlines Rosneft’s maintain safe working conditions improvement projects and envi- 2030 environmental operating for employees and contractors, ronmental programs to achieve principles, the technical envi- support the health of communi- its strategic environmental goals ronmental programs and goals HSE MANAGEMENT PRINCIPLES ties in the areas of the Company’s defined in the Rosneft-2022 to 2030 and the areas for align- operations and minimize envi- Strategy. ment with the UN Sustainable In December 2018, the Rosneft “Climate Action” and “Partnerships ronmental impacts from its Development Goals and 2030 Board of Directors approved for the Goals”. In support of these operations. HSE performance Rosneft’s ‘2030 Environmental national environmental goals the Company’s strate- priority goals, Rosneft strength- is benchmarked against interna- Vision’ was reviewed of the Russian Federation. gic development guidelines ened its HSE risk management tional peers. by the Committee for Strategy related to the implementa- system, improved the HSE gov- and Sustainable Development tion of the United Nations (UN) erance processes and proce- Sustainable Development dures, strengthened its carbon Goals. Thus, the mission, values, management goverance pro- FROM COMMITMENTS TO ACTIONS goals and strategic guidelines cesses and increased its focus of the Company are consist- on competency development Five meetings of the compa- Meetings of the Carbon in December 2020 and then com- ent with the 17 United Nations planning. The company also ny’s HSE Committee were held Management Sub-committee municated externally. At the end Sustainable Development Goals. improved its monitoring of HSE in 2020 to review HSE perfor- were also held on a quarterly of 2020, the status of the Carbon programs to improve implemen- mance, review progress of key HSE basis to review progress against Management Sub-committee The company also focused on five tation and embedding across all programs and agree the HSE pri- actions in Rosneft’s 2020 Carbon was upgraded to the Carbon priority SDGs to help guide operations. orities of the Company. Progress Management Plan. In August Management Committee report- the work of its operations: “Good against the Company’s HSE tar- 2020, a team was established ing directly to the Chief Executive Health and Well-being”, “Clean In 2020, Rosneft adopted gets is reviewed on a quarterly by the Carbon Management Sub- Officer. and Affordable Energy”, “Decent the international stand- basis, first by the HSE Committee, Committee to develop a long Work and Economic Growth”, ard for occupational health which includes representatives term Carbon Management Plan of the Company's management, to 2035. This plan was reviewed and then by Rosneft’s Board and approved by the CEO of Directors. and the Board of Directors SUSTAINABLE Development

176 177 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

ENSURING THE SAFETY AND HEALTH OF OUR PEOPLE delivered. Training will continue across all the Company Group IS THE HIGHEST AND UNCONDITIONAL VALUE OF ROSNEFT Subsidiaries in 2021. Company specialists were also trained The highest priority of the com- and take measures to stop work on the ISO 14064 standard related The HSE priorities pany is the safety of all employ- if the safety or health of any per- to the system of accounting, moni- ees, contractors, operations son is at risk. There are also trade for 2020 were: toring and reporting of greenhouse and the communities in which union representatives across who gas emissions, which was con- Developing leadership the Company operates. Rosneft have the authority to provide • ducted by external certified train- and safety culture; strongly believes that 'all acci- additional support to ensure com- • Embedding the Golden Rules ers. Information sessions were also dents are preventable'. pliance with occupational safety of Safety; held for managers and employ- procedures. • Improving contractor safety; ees of various departments Reducing road traffic cidents;ac The HSE priorities for 2020 • of the Company's central office • Implementing Process Safety included the development, intro- The Company is commit- improvements; and the Group Subsidiaries, includ- duction and implementation of key ted to continuously developing • Improving the Risk-based ing those involved in development industrial safety and occupational the capability and competence approach to operational of the methane leak detection activities; safety programs that focused of employees especially in areas pilot projects. In 2021, a corpo- • Developing a 2035 Carbon on leadership and safety culture, of the highest occupational safety Management Plan; rate training programme on car- compliance with the Golden Rules risks. This contributes to strength- • Development bon management will be delivered of Safety, contractor safety man- ening the processes to preserve of an Environmental Vision across all Company Subsidiaries. to 2030. agement and road safety. In 2020, worker health; reduces the expo- the Company delivered all nec- sure to personal or process safety One of the most impor- essary health and safety activ- risks and increases the focus tant priorities of the Company ities, with the overall spending on environmental protection Offices and Group Subsidiaries is the preservation of the envi- of ca. RUB 48 bn due to employee from operational activities. These were trained on Requirements ronment for the benefit of pres- remote working and additional capability development programs of international standards ISO ent and future generations. epidemic-related measures help- include specific internal corporate 45001:2018 and ISO 14001:2015. The Company's expectation ing to protect employee health. HSE training, external safety train- Internal audit of HSE IMS for ISO is that each employee incorpo- ing, direct coaching and through 45001:2018 and ISO 14001:2015. rates individual actions to protect and specialists of the Company's LEADERSHIP AND SAFETY information shared in HSE to be able to build the capability the environment in work plan- structural units and more than CULTURE interventions and Corporate and understanding of the require- ning and execution while com- 200 Group Subsidiaries as well and Subsidiary HSE campaigns ments of these HSE management plying with all environmental as representatives of Rosneft's 130,000+ HSE Leadership commitments based on specific identified risks. systems. requirements, thereby contribut- international partners – Equinor employees completed the “Golden are in place for top managers ing to Rosneft's growing environ- and BP. One of the focus Rules of Safety” of the Company, as well as both In 2020, over 25,000 subsidiary In the fourth quarter of 2020, mental culture. Last year, at all areas of the Congress was training conducted General Directors and other top employees were trained internally the HSE Department organ- levels of the Company, meetings the discussion of the progress by internal trainers managers in Group Subsidiaries. on the following HSE courses: ized a survey of Group Subsidiary were held were held on the topic towards Strategy-2022 goals Leaders demonstrate this commit- “Procedure for the Internal employees on the topic of occu- “Environmental Culture and the Company's long-term ment by personal example as they Investigation of Incidents”, “HSE pational safety culture, including and Environmental Protection environmental management discuss health, safety and envi- Risk Management” and “HSE questions on motivation; HSE risk Leadership”. Managers at all lev- and carbon management goals. and the importance ronmental risks with employ- Leadership”. assessment; Golden Safety Rules; els, from top managers to line In addition, measures were also of environmental indicators ees and contractors while they personal protective equipment; managers of operational units discussed to align these Company to the Company's investment case. are planning or conducting oper- As part of cooperative arrange- attitudes towards occupational of the Group Subsidiaries, held goals with the UN Sustainable ational activities, and also work ment with the National University safety; incident reporting; HSE video and audio conference meet- Development Goals, Russian GOLDEN RULES OF SAFETY with them to identify opportu- of Oil and Gas “Gubkin University”, communications and compliance ings (due to Covid 19 restrictions) Federation's National Goals nities for improved HSE perfor- the Company’s internal trainers with Covid-19 Company protocols to clarify environmental issues, and 2035 Energy Strategy. Also Despite the limitations caused mance. In addition, managers at all together with staff of the Gubkin and hygiene practices. The results increase employee involvement included in the Congress agenda by the coronavirus infection, addi- levels define clear HSE guide- University prepared a num- from the survey provided many and awareness of environmen- were specific topics on indus- tional measures were implemented lines in accordance with the uni- ber of distance training courses important HSE insights and also tal compliance and encour- trial ecology, conservation in 2020 to embed the Golden fied “Leadership Principles” for Group Subsidiaries' managers demonstrated an improving safety age employees to participate of biological diversity and the use Rules of Safety in all Rosneft of the Company which ensure safe and their deputies, with 355 Group culture among our employees. in actions to protect the environ- of new environmental technolo- Group Subsidiaries with access working conditions for all employ- Subsidiary managers successfully ment, both at work or at home. gies for environmental monitor- to the Training and Development ees and contractor organizations. trained in 2020. In 2020, the Company commenced ing and improving operational Portal and Distance Learning cor- its carbon management training The 7th Rosneft General performance. A separate item porate training systems. A distance Employees and contractors, wher- In November and December 2020, for Executives and senior repre- Corporate Congress of Ecologists on the agenda of the Congress learning “Golden Rules of Safety” ever they work, must adhere a number of employees from both sentatives of Central corporate was attended by top managers was the topic of socially responsi- interactive training program to the “Golden Rules of Safety” the Corporate functions with over 15 sessions of the Company, heads ble investing (ESG) was launched

178 179 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

in 2020 and this program will to the Company's facilities were • Eliminating accidents due to reduce the number of major from 2019–2020 where subsid- be widely shared with the Group also implemented in 2020. A new to vehicle malfunctioning or due accidents resulting from leaks iaries carrying higher risk activi- Subsidiaries to maximize avail- risk assessment procedure to rank to health risks of drivers; and integrity incidents as well ties were prioritized, in addition ability to Company employees. contractors of potential HSE risk • The use of a risk-oriented ‘bar- as to minimize any consequence to those which were certified 23 oil and gas In 2020, 130 thousand employ- from the nature of their operational rier’ approach in the road traffic resulting from their occurence. against the ISO 45001 and ISO subsidiaries ees completed the “Golden Rules activities was also introduced. HSE safety management process . 14001 management system participate of Safety” training conducted expectations and requirements In 2020, the Company launched standards. in the 2020–2025 by internal trainers. for contractors are included within In addition, the following priority the start of a new 5-year pipeline Pipeline Reliability their contractual obligations. These activities were implemented as part integrity program (2020 - 2025) An important result of the imple- Improvement SAFETY OF EMPLOYEES improvements in the contractor of this 2020-2022 Road Safety for risk assessing and improv- mentation of the HSE risk man- Programme OF THE COMPANY management procedures allowed plan to reduce driving safety risks: ing the reliability of pipelines. agement process in all Group AND CONTRACTORS the Company to effectively man- • Defensive driving training pro- with twenty-three (23) oil and gas Subsidiaries is the identifica- age risks and minimize injuries grams for drivers; production subsidiaries being part tion of weaknesses in existing In 2020, in addition to the man- and accidents during operational • Installation of in-vehicle monitor- of the Program. The main goals safety barriers. These findings In 2020, to support the imple- agement of HSE risks from oper- activities. ing systems (IVMS – GLONASS), of the Program are to: will help to prioritize strength- mentation of the risk barrier ational activities, the Company video recorders, the use of port- • Reduce field pipeline failure rate ening of the most critical safety approach, guidelines were devel- also managed the significant ROAD-TRAFFIC SAFETY able vehicle speed measurement by 20 % vs 2019; barriers linked to the highest risk oped to assess and analyze risk of the spread of the corona- devices; • Increase the scope of in-line activities and operations. This will the risks associated with fires virus infection across the oper- The Company's 'Vehicle Safety • Creation of the unified cor- inspections to pro-actively mon- contribute significantly to reduc- and well control safety. In addition, ations. In response, Rosneft Management System' sets require- porate telematics platform itor the condition of pipelines; ing serious accidents and occupa- several typical risk bow-tie dia- took responsible steps to pre- ments for Company, contractor for GLONASS satellite monitoring • Select, test and implement new tional safety risks for employees grams were developed to create vent the spread of the virus, and sub-contractor drivers, vehi- of the Company's vehicles; technologies that ensure corro- and contractors in the oper- a standardized approach to con- protect the Company’s employ- cles and equipment. • Publication of articles on road sion and scale protection; ations, as well as reduce inci- ducting these risk assessments ees and contractors and ensure safety in regional/corporate • Develop and implement tools dents that can negatively impact and to improve the level of under- the continuous operation In 2020, the Company approved media; and for operational control and anal- the environment. standing of the overall strength of of production facilities. This the Rosneft Concept for Road • Implementation ysis of the operation and condi- operational safety barriers across was achieved through the plan- Safety 2020–2022 as part of a Communication support tion of the field pipeline fleet. In 2020, there was significant various activities. ning and organization work, of the transport safety manage- plan. focus to analyze the strength including shift rotations, main- ment system to prevent road traf- The scope of this program and condition of safety risk taining strict sanitizing precau- fic accidents. This concept takes During the year, Group Group includes the reconstruc- barriers at facilities located tions, introducing tight control into account the main goals Subsidiaries and contractors tion of 7,000 km of pipelines in the Arctic zone of the Russian and quarantine measures, work and objectives of the Decree also organized accident preven- and completing maintenance Federation and permafrost zoning and work monitor- of the President of the Russian tion campaigns “We are for road repairs to 6,000 km of pipelines regions, as well as in tank farms. ing. Employees were required Federation dated May 07, 2018 safety – 2020”, “Safe road – 2020” on the transportation network to undergo compulsory medical No. 204 and the Road Safety and “Beware, Children!” to contrib- examinations and were provided Strategy of the Russian Federation ute further to the reduction in road RISK-ORIENTED APPROACH with personal protective equip- for 2018–2024, including: traffic accidents. ment at the required level. All • Reduction of injury rates The HSE risk management pro- controls were carried out in com- and incident severity from road PROCESS SAFETY cess was updated to include pliance with legal and corporate traffic accidents; uniform assessment criteria standards and requirements. • Compliance with HSE legal The Company uses a risk assess- and decision-making levels as well requirements for driving; ment approach using preven- as the introduction to the risk pre- New regulations and procurement • Continuous improvement tion and response barriers vention safety barrier approach. procedures for the qualification of road traffic safety perfor- to plan and implement programs These changes were introduced and admission of contractors mance indicators ; and activities. This is both across 135 Oil and Gas subsidiaries

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ENVIRONMENTAL RESPONSIBILITY

GREEN INVESTMENTS

In 2020, the Company imple- gas (APG), investment in pipeline ~RUB bln mented a number of activities reliability; improvement in waste- 120 spent by Rosneft and investment projects to mini- water treatment, improvement on green investments mize its environmental footprint. in waste management practices in 2018–2020 During the period 2018–2020 and remediation of contaminated "Green investments" for reduction land, was around 120 bln RUB. of flaring of associated petroleum

CARBON MANAGEMENT - RISK AND OPPORTUNITY MANAGEMENT

In December 2020, the Company's in the context of the energy Board of Directors reviewed transition process and to allow and approved the Rosneft 2035 maximum monetization

Carbon Management Plan. This of the Company's proven reserves. 14% reduction in air plan was approved by the CEO pollutant emissions and outlines a long-term approach NON-GREENHOUSE GAS in 2020 to reducing the Company’s car- EMISSIONS bon footprint in alignment with the global energy transi- In 2020, the Company reduced 2020 while facilities for the treat- LAND REMEDIATION tion to a low-carbon economy. the volume of non-GHG air pol- This is achieved through the imple- ment and disposal of wastewa- The main goals of the Plan are: lutants by 14 %, with some of this mentation of infrastructure mod- ter were commissioned at Rospan The Company continued to imple- • the prevention of 20 million reduction resulting from the imple- ernization projects and the use International JSC in October 2020. 4.7+ mmt ment measures for land protection tons of CO -equivalent (Scope mentation of the APG utilization of the best available technologies. drilling waste and rehabilitation with more than 2 processed by Rosneft 1 and 2) absolute greenhouse program. One of the key meas- In 2020, the company continued DRILLING WASTE AND OILY 500 hectares of contaminated in 2020 gas emissions from forecasted ures for the implementation of this to reduce the volume of con- WASTE HANDLING land reclaimed in 2020. growth; program in 2020 was the com- taminated wastewater disposal • the reduction of Upstream GHG missioning of priority APG by the construction and upgrade In 2020, the Company reduced intensity (Scope 1 and 2) by 30 % utilization facilities at Yurubcheno- of water treatment facilities as part the previously accumulated vol- against a 2019 baseline; Tokhomskoye field of the East of the refinery modernization pro- ume of drilling waste by around • the reduction of methane inten- Siberian Oil and Gas Company. gram. The upgraded waste-water 1.3 mln tons and processed sity to below 0.25 % treatment facilities of Bashneft- around 850,000 tons of oily • the achievement of ‘zero routine WATER PROTECTION Ufaneftekhim also reached its waste. Rosneft is working contin- flaring’ of associated gas by 2035. operating design capacity, while uously to improve the contracting One of the Company’s strategic pri- efficiency of other water treatment processes for waste manage- Implementation of the plan will orities is to minimize the demand facilities were improved. Local ment and the execution of mod- help to strengthen Rosneft's for fresh water in align- treatment facilities and a recycling ern waste management practices position as one of the lead- ment with the United Nations water supply unit were commis- to maintain the improved rates ers in the global energy market Sustainable Development Goals. sioned at NZMP LLC in February of waste management.

182 183 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

IMPROVEMENT the Cooperation Agreement of 2020, field research was con- OF THE EFFICIENCY OF OIL for a national project ‘Ecology’ ducted on the wild reindeer spe- PERSONNEL AND SOCIAL SPILL MANAGEMENT which focuses on cooperation cies on the Taimyr Peninsula on biodiversity conservation. and in Evenkiya. Scientists PROGRAMMES Rosneft is continuing to improve The goal of the project is to assess from the Siberian Federal its spill prevention, management the current natural state and pop- University and the Arctic Research planning and response prepar- ulation dynamics of key species Center used aerial surveys as well No Company goal can be achieved without our core asset – highly qualified personnel edness for emergency response in the marine and terrestrial eco- as satellite transmitters placed motivated to work effectively, whatever the market environment. teams building on the improve- systems of the Arctic. These spe- on tagged collars for remote ments that have already cies include the wild reindeer, ivory tracking of migration routes. been made by the Company. gull, Atlantic walrus and polar The research was conducted using In 2020, the average headcount Average headcount Average headcount The Company has now centralized bear which are listed in the Red daily observations at fixed loca- of Rosneft Group Subsidiaries in 2020 (as per the business as at 31 December 2020 the spill prevention and response Book of the Russian Federation. tions as well as by using motor- was 342.7 thousand employees1, plan) (as per the business plan) organizational function to drive ized monitoring along the banks which is up 27.3 thousand com- the implementation of measures In 2020, as part of this work, of the Kheta and Khatanga rivers. pared to 2019 (315.4 thousand to prevent environmental dam- expeditionary field work was car- Over 50 samples were also taken employees). age from both on-shore pipeline ried out to study the polar bear for further laboratory research ruptures and from environmen- habitats on the to improve scientific knowledge The increase was primarily 342.7 355.9 tal accidents in the shelf area archipelago (Cape Zhelaniya) of the health, diets and habitats due to a higher average head- thousand thousand of the Russian Federation . and the walrus populations of these species. count in Group Subsidiaries employees employees on the islands of the Franz driven by business expan- Given the importance of the Arctic Josef Land archipelago as well The Group Subsidiaries carried sion2 and the acquisition natural ecosystems, Rosneft has as the Oran Islands and Victoria out large-scale work to enhance or inclusion of several new assets 3 Exploration and Produc- 25.3% Exploration and Produc- 24.7% also developed a wildlife response island. In addition, during the field the population of aquatic species in the Company's business plan . tion, including gas tion, including gas action plan as part its offshore work in July-August 2020, work according to preliminary results, Commerce and Logistics 17.5% Commerce and Logistics 17.9% project work. This plan focuses was organized on Vize Island more than 70 mln juvenile fish The average employee Corporate Services 16.3% Corporate Services 16.2% on the rescue and rehabilita- to study the ivory gulls. The actual species were released into the river age increased by 0.3 years In-House SerZvices 16.0% In-House Services 16.0% (Oilfield Services) (Oilfield Services) tion of wildlife in the event of oil cost of these activities in 2020 systems of Russia. The largest to 40.6 years vs 40.3 years Oil Refining and Petro- 15.6% Oil Refining and Petro- 15.7% and chemical spills. This action was more than 119 mln rubles. production subsidiary of Rosneft, as at the end of 2019. 43.9 thou- chemicals chemicals plan is a part of each RN-Yuganskneftegaz made sand employees held manage- Other 4.1% Other 4.1% Response (OSR) plan and it pro- The Company has continued the greatest contribution to this rial positions vs 40.8 thousand Research 3.9% Research 4.1% Head Oce (Rosneft) 1.3% Head Oce (Rosneft) 1.2% vides guidance to the RN Group the work started in 2016 to publish release with more than 55 mil- as at the end of 2019. The number Subsidiaries and project teams scientific data obtained from both lion juveniles of Siberian stur- of employees categorised as man- for the planning and management field research work conducted geon, muksun and peled raised agers remained virtually flat of response efforts for vulnerable in collaboration with the lead- in fish hatcheries as part of river year-on-year and made up 12.3% species in their areas. ing research institutes of Russia, ecosystem preservation meas- of the total average headcount and those collected by Rosneft ures. All juveniles were released in 2020 (vs 12.2% as at the end BIODIVERSITY CONSERVATION itself from its field operations. into the rivers of the -Irtysh of 2019). As a result of this work, Rosneft basin. The Company pays special atten- published both the "Environmental tion to activities aimed at biodi- Atlas for the Barents Sea" WORKFORCE PRODUCTIVITY AND ORGANISATIONAL versity conservation. In December and the "Species as biological 2019 Rosneft and the Ministry indicators of the state of Arctic EFFECTIVENESS of Natural Resources and Ecology marine ecosystems" in 2020. of the Russian Federation signed In the autumn-winter period Improvement of workforce pro- productivity target on a compa- Development Programme. ductivity has been, and remains, rable basis. We developed a list Workforce productivity met- a key priority for the Company. of relevant improvement initi- rics are used as an individual KPI As at the end of 2020, atives, which we update annu- to assess the performance of some the Company achieved its overall ally as part of our Long-Term of the Company’s top executives,

1 As per the Company’s business plan. 2 RN-Yuganskneftegaz (+0.6 thousand employees), Kharampurneftegaz (+0.7 thousand employees), RN-Okhrana Group (+1.2 thousand employees), etc. 3 Sibintek Group subsidiaries (+19.3 thousand employees), Petersburg Fuel Company (+1.3 thousand employees) and Samaraneftegeofizika (+1.0 thousand employees).

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including the CEO and senior man- them to the Group Subsidiaries. we continued to roll out uni- • professional retraining for target • special training for employ- in Rosneft’s annual conference agement of the Group Subsidiaries Their phased implementation form corporate HR, compensation personnel groups in oil and gas ees engaged in providing air- for best mentors and gave a talk within Rosneft's major businesses. is planned until the end of 2022. and social development standards practical engineering and tech- craft to support the Company’s on BP’s experience with develop- based on SAP and 1C. In 2020, nology, oil and gas engineer- operations. ing a mentoring system at produc- In 2020, we designed five standard To capitalise on the automa- they were implemented at another ing economics, organisational tion facilities. organisational structures for func- tion of methodologically stream- seven Group Subsidiaries. development and effective HR The Company’s initiative tional areas and communicated lined HR business processes, management in the oil and gas to continue the educational pro- Together with Rosneft industry (87 people trained); grammes in the unfavourable sit- International Centre for Research • retraining in geology and explo- uation received support not only and Development (RICRD, Qatar) TALENT POOL MANAGEMENT ration (as part of an educational from traditional training provid- and leading international experts, project run in collaboration ers in Russia and abroad but also we ran the Moving into the Digital with Lomonosov Moscow State from Rosneft’s international Era through Digital Transformation University); partners. course for our IT team. As part of the talent pool We gathered informa- As part of talent pool selec- management plan for 2020, tion on additional candi- tion and individual development • training for in-house coaches the Company strengthened dates selected to be included planning in 2020, we assessed and line personnel at oil depots As part of educational cooper- the talent pool for target first- in the talent pool for first- managerial and professional and filling stations of R&D ation with BP, we held a video and second-level management level management positions skills of 2,382 employees. and manufacturing facilities; conference on personnel assess- positions in the Company’s Head in the Group Subsidiaries. We provided the talent pool Office and first-level manage- with 1,004 man-courses in man- • professional retraining for target ment, a round table on digital ment positions in the Group To ensure HR security within agement training. personnel groups in HSE; communication between employ- Subsidiaries. the Company and Group Subsidiaries, we continuously We also reviewed the Company’s • retraining in compliance, busi- ees and their employer, a joint The talent pool commit- develop our management tal- internal regulations on talent ness ethics compliance, seminar on developing HR com- tee for Regional Sales chaired ent pool, which includes a mul- pool management, with all nec- anti-corruption and anti- petencies and a webinar on cre- by the relevant top manager ti-tier competency assessment essary amendments now pend- fraud (over 30.7 thousand ating corporate training centres. of the Company held a meeting to select candidates, iden- ing approval. to review the candidates to be tify their priority growth areas man-courses); BP representatives took part included in the business' talent and design related individual pool. plans.

PERSONNEL TRAINING AND DEVELOPMENT

Amid the 2020 pandemic, As part of talent pool develop- (Italy), NOVA University Lisbon the Company managed to main- ment under the Rosneft–2022 (Portugal), and Qatar branch tain the stable development of its Strategy, we organised the follow- of HEC Paris (France, Qatar). corporate training system. ing management training courses: • MBA programmes for manag- The following educational pro- Together with partner educational ers, talent pool and high-po- grammes were successfully institutions in Russia and abroad, tential employees of the Head completed: we reviewed and updated edu- Office and Group Subsidiaries • training for young engi- cational programmes and imple- (95 employees); neers from upstream facilities mented distance learning formats • Leader of the Future (Strategic in the following jobs: techno- employing IT platforms, as well Level, Operational Level, Young logical monitoring and con- as solutions for group and individ- Talents) (93 employees). trol in well construction (drilling ual online learning and knowledge supervisor), well construc- testing. These programmes are run tion supervisor, oilfield chemist, in partnership with the Graduate and project manager (108 people In 2020, we provided 761.9 thou- School of Management trained); sand man-courses as part of St Petersburg University, • training of shop managers of the mandatory vocational Moscow State Institute from the upstream facilities and management training, overa- of International Relations under the professional retraining chieving the 2020 target by 38%. (MGIMO), Gubkin Russian programme to improve perfor- State University of Oil and Gas mance and production methods Our training programmes cover all and foreign universities, including (79 people trained); of the Company’s business areas. the Polytechnic University of Turin

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with 191 and 215 mentors Vostok Oil project staffing and Petrochemicals, In-house and Petrochemicals, In-House Services, Corporate Services (R&D Services, Corporate Services from the above groups making and manufacturing), Shipbuilding and Shipbuilding and Ship Repair it to the second round. A priority of the Vostok Oil project To ensure sufficient train- aid for those injured at production staffing is timely and proper train- ing of the Subsidiaries’ person- sites, industrial safety, fire safety, and Ship Repair, with winners units (the second round). ing of workforce and professionals nel for Vostok Oil project purposes, electrical safety, transport safety, named for each business. We also held an online confer- qualified for the project. as well as boost the efficiency environmental safety, including The first round welcomed ence for winners and runners-up of the hands-on training provided oil and petroleum products spill We also staged 5,634 mentors of blue-collar of the Best Mentor 2019 com- With that view, in 2020, to vocational and higher educa- response, etc.). the Company and the Krasnoyarsk tion students of the industry-spe- the Best Mentor 2020 competi- employees and 1,564 mentors petition, with 30 best men- In addition, the corporate training Territory ministry of education cific fields, in 2020, the Company tion in the Group Subsidiaries (the of young specialists from 89 Group tors from 26 Group Subsidiaries centre now includes social amen- developed and implemented developed and approved the con- first round) and across Upstream, Subsidiaries, attending as participants. ities (residential hotel, canteen, a comprehensive programme cept of a corporate training cen- sports and health centre). Downstream, Gas Processing of the regional subsidiaries inter- tre at RN-Vankor, Eastern Siberia. action with the local second- The concept involves equipment On average, some 68 thousand ary vocational education entities of the corporate training centre man-courses, including hands-on and the Institute of Petroleum with advanced facilities for theoretical training, are expected to be com- and Natural Gas Engineering COOPERATION WITH FOREIGN PARTNERS and applied training (computer-based pleted at the corporate training of the Siberian Federal University. simulation, distance learning sys- centre every year. As a global company, Rosneft The programme covers the fol- tems, VR rooms, theme-based labs). In 2020, Rosneft helped arrange • continue a programme lowing update and development The programme is to cover 51 class- is fostering partnerships training for Venezuelan, Cuban for the second group of the oil and gas curricula in line rooms seating over 1,500 students. with foreign oil and gas producers and Mongolian specialists at part- of 20 Cuban students; with the business needs; pro- vision of up-to-date software The Company plans to create a train- and the world’s best educational ner universities: • organise training and equipment to the educational ing facility with 16 training sites/work- institutions to provide compre- • complete a programme for 41 Mongolian students. institutions for efficient adminis- shops for hands-on training in key hensive training to its employees for 27 Venezuelan students tration of training; a programme production and service operations and enable them to perform well in July 2020; of student and teacher internship (drilling, oil and gas production, oilfield at the Group Subsidiaries’ facilities services, energy, transport) as well in any international project. in the Krasnoyarsk Territory. as health and safety training (first PROFESSIONAL STANDARDS

DEVELOPMENT OF IN-HOUSE TRAINING In 2020, the Company contin- standards can be implemented for Professional Qualifications ued to implement professional in the Company, with 68 of them in the Oil and Gas Industry. We leverage our in-house train- Additionally, we are working In 2020, in-house coaches con- standards. classified as mandatory quali- Pursuant to the Council’s ing centres, coaches, experts to create the following facilities: ducted 207 corporate training ses- fication requirements (depend- Action Plan, the Nefteyugansk and workplace mentors to provide • a corporate training centre sions (5,113 man-courses). In pursuance of Directive ing on the subsidiary's type Corporate Institute, Rosneft's 63% of training (479.6 thousand at RN-Vankor in Krasnoyarsk, of the Russian Government of operations). The qualification Professional Expertise Centre, man-courses). Eastern Siberia (part We ran a training programme No. 5119p-P13 dated 14 July 2016, standards apply to over 49 thou- drafted two industry standards of the Vostok Oil strategic for in-house coaches covering Rosneft’s Board of Directors sand employees, of whom and submitted them for approval All in all, there are 64 train- investment project); 68 groups and 850 man-courses held two meetings in the report- over 96% have an educa- by the Ministry of Labour ing centres operating as part • an electrical engineer- (99 at the Company’s Head Office ing year to discuss the roll- tional background meeting and Social Protection. In 2020, of the Group Subsidiaries or local ing and testing site and 751 at Group Subsidiaries). out of professional standards the requirements. the Ministry approved three indus- educational institutions across at the Samaraneftegaz training across Rosneft and the Group try standards developed earlier our footprint. They have testing centre; On top of that, over 422 thou- Subsidiaries. According to the lat- In 2015, Rosneft by Rosneft. sites and offer hands-on voca- • a training centre at Zvezda sand man-courses were available est monitoring, more than a quar- and other oil and gas produc- tional training, including manda- Shipbuilding Complex; in the distance learning format. ter of 1,360 approved professional ers joined the National Council tory courses, to help blue-collar • a regional training centre employees and specialists develop at RN-Komsomolsk Refinery; As a result of the company-wide professionally. • a training centre mentoring programme, we compiled at Orenburgneft. an integral rating to assess the effi- In 2020, the Company cre- ciency of relevant initiatives imple- ated a corporate training cen- We are also developing an inter- mented by the Group Subsidiaries tre at Bashneft-PROFI to train nal training system to preserve in 2020. The assessment covered employees of Group Subsidiaries and transfer knowledge within 89 Group Subsidiaries in Upstream, operating in Bashkortostan. the Company. Downstream, Gas Processing

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PERSONNEL SKILL ASSESSMENT PRE-UNIVERSITY TRAINING

Our comprehensive personnel of managerial competencies. at corporate research and design In accordance with its Youth Rosneft classes help digital- This helped the schools main- assessment framework estab- In 2020, the Company used institutes. In 2020, we continued Policy, Rosneft consistently imple- ise education at partner schools, tain education during the pan- lishes uniform knowledge and skill the model to evaluate to implement relevant projects ments a school-to-workplace upgrade facilities and equipment, demic and continue implementing requirements for employees across 11.19 thousand employees. across the following functions: approach to training. The initial boost the efficiency of training the project run by Rosneft all business segments, includ- internal audit, HR management project run in close partnership and career guidance activities, and Lomonosov Moscow State ing the Head Office and Group The assessment of professional and social programmes, petro- with the state educational system and support gifted students University to provide dis- Subsidiaries. skills uses materials drafted chemicals, and HSE. is pre-university training. and teachers committed to ongo- tance learning for teachers in the course of the target inno- ing professional development. in 2020. In the reporting period, We assess employees when plan- vative project (TIP) to introduce In 2020, we assessed We organise Rosneft classes Educational Processes in Digital ning competency training, cre- a skills-based approach to person- over 16.18 thousand people based at top-ranking schools, colleges, In 2020, the Company sup- Format, a virtual summer school ating a talent pool and expert nel development across all busi- on the TIP materials as well and gymnasiums in regions where ported 122 classes in partner- for teachers, was held in cooper- communities, recruiting, or chang- ness segments. as those used to evaluate the pro- we operate. The initiative is sup- ship with 64 secondary schools ation with Lomonosov Moscow ing job descriptions. The assess- fessional competencies of the key ported by the Group Subsidiaries in 57 towns and settle- State University and the Russian ment helps check managerial, The project involves special- blue-collar staff in Oil Refining that have a strong need for quali- ments located in 27 Russian Academy of Education. 186 teach- corporate, professional and tech- ised universities, such as Gubkin and Petrochemicals, Exploration fied labour to implement contem- regions. The classes saw ers from 33 schools of 17 Russian nical skills across all personnel Russian State University of Oil and Production, and In-House plated growth plans and capacity some 2,776 attendees. regions took part in the training. categories: managers, specialists and Gas (oil refining and procure- Services. ramp-ups. and blue-collar employees. ment projects), Tomsk Polytechnic In order to expand the contin- Rosneft provides career guid- University (oil and gas produc- To ensure reliable power sup- Rosneft classes offer school stu- uing education opportunities ance for students of all partner Its aim is to identify knowledge tion and offshore projects) and Ufa ply and safe operation dents a high-quality second- for schoolchildren and teach- secondary educational institu- gaps, determine priority devel- State Oil Technical University (pet- of the Company’s power gener- ary education with a strong focus ers and support digitalisa- tions. The key corporate initia- opment areas, optimise training rochemicals and oil refining pro- ation facilities Rosneft started on technology and natural sciences tion in educational institutions tive of the 2020 Rosneft classes costs, and improve qualifications jects), as well as leading Russian developing company-wide pro- to enable them to continue engi- where Rosneft classes are held, programme was the Stairway and performance. and foreign consulting firms. fessional requirements (includ- neering studies at universities. the Company provided 55 part- to Success, a series of work- ing a set of assessment tools After graduation, young talents ner schools with distance learning shops that took place in 57 towns We launched a corporate training As part of the initiative, and educational programmes) are employed by the Company. equipment. and settlements and development portal to col- we developed and introduced for employees of the Energy func- lect personnel assessment results professional competencies along tion. In 2020, we developed pro- and integrate them into the shared with employee assessment fessional standards for five most HR database of Rosneft Group and development tools in the fol- common jobs: electrical mainte- Subsidiaries, Head Office, lowing areas: offshore projects, oil nance technician, electrical, relay- and training resources. refining, oil and gas production, ing and automation equipment marketing and distribution, logis- maintenance technician, boiler The corporate and managerial skills tics and transport, capital con- operator, boiler equipment repair- assessment relies on the dedi- struction, economics and finance, man and internal combustion cated model approved by the Chief procurement, energy efficiency, engine operator. Six more internal Executive Officer. The model takes gas, design and survey at research regulations are to be developed into account the Company’s cul- institutes, oil refining, gas process- in 2021. ture, values and the description ing, petrochemicals and energy

YOUTH POLICY

Rosneft’s Youth Policy aims pre-university training of school- full implementation of projects to ensure a steady influx children (Rosneft classes), coopera- under the Rosneft–2022 Strategy, of young, qualified special- tion with universities and students, including Rosneft classes and pro- ists from among the top gradu- and work with young specialists. grammes for young talent. The lat- ates of educational institutions, ter reflects the Company’s support and their fast and effective In 2020, the Company’s top pri- of the Russian Government's onboarding at the Company's facil- ority in terms of the Youth Policy educational policy and com- ities. To this end, Rosneft is work- was to maintain efficient coop- pliance with the main goals ing hard to build an external eration with educational insti- of the Education national project, talent pool comprised of students tutions and continue productive including Continuing Education, of local educational institutions. work with young specialists amid Looking for Talents, Smart School, The Company’s Youth Policy covers the pandemic, as well as ensure and Teacher of the Future.

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across eight federal districts. of Group Subsidiaries involved partner educational programme Some 2,761 schoolchildren in the pre-university training in an online format involv- (122 Rosneft classes) participated project. ing 986 students from Rosneft in the workshops. classes across 25 regions. Among other things, the Rosneft The programme included To improve the effectiveness classes project seeks to identify, three modules developed jointly of Rosneft classes, schools support and provide education by Sirius and Rosneft’s Corporate introduce early career guidance to the gifted youth. The attendees Research and Design Complex. and preliminary training for fifth of Rosneft classes take an active During the competition, Sirius to ninth grade kids. This helps part in various academic con- expert council ranked the par- them decide on their future career tests. In the school year 2019– ticipants and selected 108 win- and make an informed choice 2020, 985 students became ners from 30 Russian towns of the major at high school, thus winners and runners-up in a wide and settlements. improving the selection of stu- range of olympiads, competitions dents for Rosneft classes. and conferences, with 517 winning The project proved to be a suc- the top awards and other prizes cess as evidenced by the num- For a unified approach at various stages of the National ber of Rosneft-class graduates to the programme implementa- Olympiad of Schoolchildren. who received relevant higher edu- tion, Rosneft’s HR Department cation and signed employment has developed a concept of early The Company continued its coop- contracts with the Company. career guidance and preliminary eration with the Sirius Educational In 2020, 106 graduates started training to provide methodology Centre to reach out to more young work at 34 Group Subsidiaries, support to teachers, school stu- talents in the country’s regions. with a total of 896 employed dents and employees In 2020, we held the third by 63 Group Subsidiaries.

WORK WITH YOUNG TALENT

In 2020, 101 Group Subsidiaries To fast-track the onboard- at developing professional, cor- Department’s corporate por- target audience. Some 1.5 thou- that they be included in the stra- employed 3,621 young profession- ing of the young talent, we have porate and managerial com- tal. 97 out of 395 participating sand employees participated tegic pipeline of young talent. als, with 1,009 university gradu- put in place dedicated courses, petencies. We also organised young specialists from 77 Group in the training sessions. As game winners, these employ- ates hired during the year. set up 71 young specialist coun- in-person (regional conferences Subsidiaries became winners, run- ees will receive further training cils and introduced mentorship that took place in the first quar- ners-up or nominees. The con- In an effort to build up a stra- under the Three Steps programme. The programmes programmes across the Group ter of 2020) and online R&D con- ference also saw 89 projects tegic talent pool, we staged In 2020, we trained 148 young for young specialists are based Subsidiaries. As part of the Three ferences for young specialists recommended for implemen- assessment business games specialists who had topped on the Company's Regulations Steps programme, Rosneft offers using corporate digital resources. tation. As part of the confer- for prospective young lead- in the 2019 assessment games. on Organising Work with Young the young talent training and pro- 3,634 employees of the Company, ence, we developed and held ers in their third year of employ- Specialists, which covers the fol- fessional growth opportunities including 2,716 young employees 15 training sessions for young ment. The games took place In December 2020, we held lowing areas: aligned with their individual devel- from 97 Group Subsidiaries, took talent, organised exchange from September to October 2020 an annual conference for chairs • onboarding; opment plans. part in regional and cluster R&D of experience among HR divi- and brought together 382 employ- of young professionals’ coun- • training and development; conferences. sions of the Group Subsidiaries, ees from 88 Group Subsidiaries. cils to help boost the efficiency • identifying and development In 2020, the Company con- created the conference’s website Based on the results, we selected of their work. The event saw some of potential leaders; tinued carrying out youth For the first time an interre- and digital magazine. The event 157 participants from 61 Group 84 participants. • progress assessment; training and development activ- gional R&D conference was held opening and wrap-up were Subsidiaries who had demon- • financial support and social pro- ities. To that end, we pro- on three information and commu- streamed. The new format helped strated strong corporate and man- tection of young specialists. vided 1,146 man-courses aimed nication portals, including the HR greatly expand the conference’s agerial skills, and recommended

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COOPERATION WITH UNIVERSITIES SUPPORT FOR EDUCATIONAL INSTITUTIONS

In 2020, Rosneft worked together • a new Master’s programme • works completed on the cre- Rosneft and the Group Subsidiaries • training for teachers; Master’s students doing intern- with 70 Russian and foreign on Digitalisation in Fossil ation of a vocational training provide charitable assistance • career-guidance and team-build- ships at Rosneft's business universities from the major- Fuel Geology was launched centre to be run by the Faculty to educational institutions of var- ing events for schoolchildren. units, as well as promising edu- ity of regions where it operates. by the Department of Geology of Vocational Education ious levels offering courses rel- cators. 849 corporate scholar- Of these, 26 universities are part- and Geochemistry of Fossil of Millionshchikov Grozny State evant to the Company's needs In 2020, RUB 225.2 mln was given ships and 130 corporate grants ners of Rosneft. Cooperation Fuels of the university’s Geology Oil Technical University. The cen- and taking part in projects and pro- to partner schools. were provided in 2020. agreements with higher education Faculty; tre’s opening ceremony timed grammes of the corporate School– institutions allow the Company • a new Master’s programme with the university’s 100th anni- University–Company framework Vocational and higher educa- In 2020, Rosneft continued issu- to actively engage in joint efforts on Genomics and Human versary took place on 20 August for continuing education. tion institutions received financial ing grants for relevant exploratory focused on employee train- Health (led by Prof. Evgeny 2020. The centre has become support: research by academics at its part- ing and retraining, and research Rogaev, corresponding mem- a high-tech educational platform Some of this aid is devoted • to improve and develop ner universities (68 grants were and innovation, as well as help ber of the Russian Academy for students of Grozny State Oil to class programmes supported their hard and soft capabilities; issued). As a result, 16 exploratory develop the research and edu- of Sciences and head Technical University, employees by Rosneft Group Subsidiaries. • to maintain studies were carried out at 11 part- cation capabilities of universities of the Genetics Department of the Company and residents The funding targets include: their specialised departments ner universities. so that their graduates are qual- of the Biology Faculty) signi- of the Chechen Republic; • additional education in rele- and Master’s courses as required ified enough to meet our current fied the launch of a novel field • Rosneft Days were vant subjects involving lecturers by the Company’s strategic The aid provided to vocational business needs. Below are some of research at Lomonosov held offline and online from partner universities; projects; and higher education institutions of the 2020 highlights: Moscow State University; to provide career guidance • class programmes sup- • to help finance large-scale infra- for the said purposes totalled • 25 university departments con- • work continued on projects aimed to, and improve the Company’s ported by Rosneft Group structure projects; RUB 889.9 mln. tinued to operate and one new at enhancing curriculum via more image among more than Subsidiaries, including mate- • to provide corporate scholar- specialised department was sophisticated university infra- 14.5 thousand students; rials and equipment for dedi- ships and grants to talented established, with 68 employ- structure (the Marine Engineering • 2,475 students completed cated classrooms and distance students looking for profes- ees of the Company involved Scientific and Educational internship with the Company; learning equipment for teachers sional development within in their activities in 2020; Centre at St Petersburg State • In 2020, the Head Office and schoolchildren; the Company's perimeter, • Rosneft Scientific Marine Technical University, arranged a long-term intern- and Educational Centre focusing a Rosneft drilling laboratory ship for 129 Master's students on digital technology in the oil at Tyumen Industrial University, of Rosneft's partner universities. and gas industry was created the Rosneft – Ufa State Oil jointly with Lomonosov Moscow Technical University research State University; and education centre, etc.);

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SOCIAL PARTNERSHIP AND SOCIAL BENEFITS CORPORATE PENSIONS AND SOCIAL SUPPORT FOR VETERANS

Rosneft pays special attention – a meeting between • the Russian Government The corporate pension pro- • in 2020, the number of people to its social partnership pro- the Company’s HR approved the Temporary gramme is an integral part benefiting from monthly pension gramme with two focus areas: and social service manage- Rules of Rotation-based Work of the Company’s HR and social payments under the programme • corporate social part- ment and leaders of trade amid the COVID-19 Pandemic policy, as it is aimed at improv- totalled 23 thousand; 3.4 nership – strengthening union organisations affiliated and later extended them ing the social protection of retired • in 2020, pensions rose by 5% thousand our meaningful cooperation with ITUO Rosneft; to 2021; employees. Pension contribu- as a result of indexation; of the Company’s with the Interregional Trade • the Russian Trilateral tions made by Rosneft and Group veterans received additional financial aid Union Organisation of Rosneft • industrial social partner- Commission approved, Subsidiaries under private pen- ACTIVE LONGEVITY in 2020 (ITUO Rosneft), which rep- ship – liaising with the Russian and the State Duma adopted sion schemes totalled RUB 13.9 bln PROGRAMME resents most of the trade Association of Oil and Gas in the first reading, a draft in 2020. • as part of the Rosneft–2022 unions of Group Subsidiaries. Employers. In 2020, more than amendment to the Russian Strategy, in 2020 we carried In 2020, the Company carried 50 Rosneft Group Subsidiaries Tax Code on recognising costs The corporate pension programme on with the Active Longevity on with its traditional activities joined the Industry for health resort treatment includes the following elements: Programme designed to improve in this domain: Agreement on the Companies tours for employees as payroll the social security of retir- – decision-making of the Oil and Gas Industry expenses. PRIVATE PENSION SCHEMES ees. In 2020, the investment on the improvement and the Construction of the Oil FOR EMPLOYEES income of NPF Evolution To mark the 75th anniversary of the Standard Collective and Gas Industry Facilities, effec- • the programme covers more was used to finance a 6.18% of the victory in the Great Patriotic Agreement of Rosneft tively gaining certain advantages than 280 thousand employ- increase in some 40.2 thousand War of 1941–1945, the Company Group Subsidiaries. in implementing the Russian ees of Rosneft and Group pensions. launched a programme to com- In 2020, three amend- Labour Code. Subsidiaries who entered into pensate annual housing and util- ments and additions were a pension agreement with Non- Under collective bargaining ity bills for veterans of the Great made to the Agreement Cooperation with the Russian State Pension Fund (NPF) agreements, Group Subsidiaries Patriotic War and persons to enhance social security Association of Oil and Gas Employers Evolution1; allocated RUB 700 mln to pro- of equivalent categories. for employees; led to the following results: vide financial aid to pension- SOCIAL SUPPORT ers on national holidays, one-off The above programmes help FOR VETERANS financial aid for family reasons, enhance social security not only SOCIAL PROGRAMMES • the Company has been running aid to relatives upon a pensioner’s for the employees of Rosneft a veteran support programme death, funding of tours for health and Group Subsidiaries but also For many years, Rosneft has been Key Social Policy Costs in 2020, for over 17 years; resort treatment, etc. for pensioners who retired earlier. one of the most socially responsi- RUB bln, % ble employers in Russia. In 2020, the Company continued to imple- ment the Rosneft–2022 Strategy to ensure better motivation RUB and social security for its employ- ees and retirees. 27.6 bln In 2020, the Company allocated RUB 27.6 bln to create opti- mal working conditions, promote healthy lifestyles, and provide Private pension schemes 50% Healthcare, healthy lifestyle 42% healthcare and social guaran- promotion, and other social tees for its employees. Rosneft’s contributions management has always been Healthcare facility and 5% social infrastructure committed to maintaining maintenance 3% high social security standards Housing for our employees.

1 Formerly known as NPF Neftegarant.

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COMPREHENSIVE HOUSING PROGRAMME In 2020, resort treatment pro- Quality medi- coverage as an additional source grammes for employees cal assistance provided of support for employees For over 15 years, the Company subsidised mortgage loans and their families in Russia by high-tech multidisciplinary with lost-time injuries (causing has been successfully running at an interest rate of 5.25% and Cuba were partly suspended clinics accessible for employ- temporary or permanent inabil- a comprehensive housing pro- (Bank of Russia’s key rate +1%) due to the COVID-19 pandemic. ees at their place of residence ity to work) or their families in case gramme, a crucial incentive to Rosneft employees who take 1,158 or workplace is the key to improve of a materialised insured event. included in the corporate social part in the corporate mortgage employees A total of 30.8 thousand employees, the health of our employees policy. The initiative enables programme. of the Company members of their families and retir- and extend their careers. Corporate healthcare and personal improved the Company to attract and retain ees received treatment services insurance programmes help sup- their living conditions highly qualified, and ensure In addition, relocated profes- under the subsidised in Russia, primarily at the Company’s Amid the COVID-19 pandemic, port and build on the Healthcare long-term engagement of val- sionals are provided with cor- mortgage programme own health resorts and regional the voluntary health insur- national project. uable professionals by provid- porate housing, with the total in 2020 wellness centres. ance gave us an opportunity ing housing through the following number of apartments available to take prompt measures to curb arrangements: in the Company’s regions of opera- Rosneft plans to resume the Cuba the spread of the disease, includ- • mortgage lending; tion exceeding 1.5 thousand. wellness and recreation pro- ing organised mass testing • provision of corporate housing. gramme in the second half of 2021 of our employees for COVID-19 (a With its comprehensive hous- if the global epidemiological situ- total of over 780 thousand tests) Starting August 2020, ing programme, Rosneft also ation improves. and providing medical treatment partner banks (Russian contributes to the implemen- to employees working at remote Regional Development Bank tation of the national Housing In the reporting year, personal production facilities. and Dalnevostochny Bank) give programme. insurance programmes (voluntary health and accident insurance) Group Subsidiaries continued covered more than 340 thousand to provide voluntary accident HEALTHCARE AND PERSONAL INSURANCE employees of the Company. insurance policies with a 24/7

In order to protect and strengthen As part of the Rosneft–2022 pandemic and related restric- the health of its employees, pre- Strategy approved by the Board tions, around 12 thousand vent diseases and promote of Directors, the Company contin- Rosneft employees underwent a healthy lifestyle, Rosneft contin- ued to run a number of designated medical examination. uously implements the following programmes aiming to: healthcare and personal insurance • supply industrial healthcare The Company keeps running its initiatives: facilities with modern train- Live Longer! programme to pro- • provision of emergency ing equipment. In the reporting mote a healthy lifestyle. In 2020, and routine medical services period, 52 Group Subsidiaries given the epidemiological situation for employees, including those that have such facilities received in Russia, the majority of the pro- stationed at remote and hard- a total of 670 units of equip- gramme’s initiatives aimed at iden- to-access production facilities ment to develop emergency tifying and eliminating health of the Company; medical care skills; risks, promoting a healthy lifestyle • voluntary health insurance • create and develop a corporate and improving physical and mental for the Company's employees telemedicine network. In 2020, health of the Company’s employ- providing access to the required the network covered 33 healthcare ees were held online and in the for- healthcare services at the fin- facilities at remote production mat of information campaigns. est Russian medical institutions sites, which allowed them to con- as an add-on to the mandatory duct some two thousand online Resort treatment and reha- government healthcare scheme; medical consultations with large bilitation opportunities aimed • provision of resort and rehabil- regional consultation centres; at preserving employees' health, itation treatment opportunities • perform preventive medical extending their careers and pre- for employees; examination of the Company's venting diseases are an inte- • implementation of programmes employees focusing on early gral part of the social security net aimed at disease prevention detection of cardiovascu- offered to the Company’s employ- and mitigation, and promotion lar and oncological diseases. ees, their families and retirees of a healthy lifestyle. In 2020, given the COVID-19 (veterans of labour).

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SOCIAL AND ECONOMIC DEVELOPMENT OF REGIONS AND CHARITY IN 2020

The Company’s systematic supply facilities, protect communi- Allocation of Funds in 2020, % approach to making a social ties and territories from emergen- impact helps reduce social risks cies, and ensure fire safety. and achieve our key charita- ble goals as we remain com- In 2020, Rosneft and the Group RUB mitted to fully implementing Subsidiaries continued their char- both the social and economic itable tradition of financing 5,614 programmes under our agree- projects to build, repair, equip mln ments with regional authorities or support kindergartens, orphan- and individual charitable initia- ages and schools. Promoting tives. In our charitable activities, mass sports, physical training, we mainly seek to: healthy lifestyles, culture, science, Physical education and 43.0% • promote social and economic and higher education, reviving sports, including children’s, promotion of healthy development in our regions cultural heritage and protecting lifestyles of operation; the environment also remained Infrastructure development 23.8% in regions, districts, and • foster partner relation with local high on our agenda. municipalities governments; Kindergartens 9.3% • help advance the federal educa- The Company’s social policy seeks Education and science 7.6 % tion policy; to preserve the traditions, cul- Culture and revival 5.3% of cultural heritage • support federal programmes ture and heritage of indigenous Other (including pensioners, 4.9% for healthcare, physical training peoples in its regions of opera- low-income families, youth organisations, municipal and sports, science and tech- tion, with the well-being and com- events, social and nology, environmental protec- fort of the northerners as a clear agricultural institutions, and seeks to make the latest digi- the virus. We supported them respirators, multi-layered face tion, etc. priority. We use the local natu- environmental projects) tal technology available in remote in rolling out a full set of meas- masks, particle filtering half Healthcare 3.3% ral resources with utmost care Charities, NGOs, 1.0% locations so the people can access ures to protect the local com- masks, helmets, shoe covers, Our social policy and make a point of restoring humanitarian aid e-government services and dis- munities and vital infrastructure. coats, etc.), as well as spray- is about delivering high liv- them. Rosneft maintains an active Support for veterans, the 0.8% tance learning. The Company Among other things, we pro- ers, blood pressure gauges, disabled, and people in need ing standards across the foot- dialogue with, and provides full Support for indigenous 0.6% also continues to help protect vided mobile CT units and other and antiseptics. This helped print (including for employees support to indigenous minorities peoples of the North public health in Russia. In 2020, medical and personal protective reduce COVID-19 rates among of Group Subsidiaries), maintain- of the North, enabling them to live Orphanages 0.3% we introduced a wide range equipment (PPE) to healthcare healthcare workers and contrib- ing a strong focus on the socie- their lives as they always have. of administrative and sanitary institutions and aid to med- uted to successful anti-epidemic ty's needs, and getting the most We work to ensure that domestic measures and restrictions to pre- ical workers at the forefront measures. out of our projects. We pay special reindeer herding and other indig- vent COVID-19 from penetrating of the pandemic response. attention to improving the infra- enous trades remain an impor- into, and spreading across our pro- structure of municipal districts tant part of their lifestyle, duction facilities. With our support, ambulance and settlements and provide which we look to preserve along crews and infectious diseases funds to upgrade municipal terri- with their national languages Rosneft also put much effort wards in hospitals received tories, repair or replace engineer- and folklore. At the same time, into assisting the country’s the latest PPE (protective suits ing and transportation system Rosneft promotes higher educa- regional authorities across its and goggles, waterproof over- equipment and power and heat tion and healthcare in the region, footprint with their fight against alls, heavy-duty aprons, valved

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COMPANY SPONSORSHIP ACTIVITIES

As part of its sponsorship activities, Rosneft is supporting large-scale projects aimed at protecting the environment and developing science, culture, education, and sports. In 2020, Rosneft spent RUB 1,220.6 mln on sponsorship activities. Sponsorship projects of the Company and Group Subsidiaries confirm Rosneft’s reputation as a socially responsible business, adding up to a stronger public image overall.

Reviving and building up the tra- of the artist's death and show dition of partnership between both his and his followers’ out- business and culture is an impor- standing works. In 2020, Rosneft spent tant element of the Company’s operations. In 2020, with the sup- For many years, Rosneft RUB 1,220.6 port of Rosneft, the Pushkin has been the general spon- mln State Museum of Fine Arts sor of the D. D. Shostakovich on sponsorship in Moscow arranged a unique St Petersburg Academic activities exhibition of the British art- Philharmonia and, together ist Thomas Gainsborough. with BP, has provided support The State Hermitage Museum to the Russian-British Britten- continued to host the perma- Shostakovich Festival Orchestra. of the Nazis by the Soviet Army of historical aircraft. The Company Another integral part nent historical display Ancient and navy. The project won provided money to restore of our corporate culture Colonisation of the Northern To celebrate the 70th Anniversary a special prize of the All-Russian an Il-2 ground-attack aircraft that and socially responsible approach By late 2020, Rosneft Black Sea Region after unveiling of Victory in the Great Patriotic MediaTEK 2020 Award. Soviet flyer Valentin Skopintsev is environmental protection. We provided sustenance it in 2019 with our financial help. War, Rosneft, together piloted during WWII. In 2020, do not hesitate to go the extra for The Company was also the gen- with the TASS agency, imple- Rosneft acted as the general it flew over St Petersburg as part mile to ensure environmen- eral sponsor of the After Raphael sponsor of the Wings of Victory of the celebrations. tal safety, preserve or restore mented the Fuel of Victory 34 polar bears exhibition. In December 2020, special project to inform peo- Foundation seeking to preserve In addition, the Company spon- natural resources and pro- in 16 zoos across the museum opened ple about the contribution of oil Russia's military and historical sored the Immortal Air Regiment tect rare animals – in addi- the country it to mark the 500th anniversary industry workers in the defeat heritage by building a collection open air exhibition on Tversky tion to our extensive efforts Boulevard in Moscow display- to study marine mammals. ing aircraft found by search In 2020, the Company continued teams and recovered by spe- its comprehensive programme cialists of the Wings of Victory to protect polar bears living supports a number of projects Foundation. in Russian zoos, which has been on studying polar bears, reindeer, running since 2013. By late 2020, sable, and Atlantic walrus. Rosneft is a patron of profes- Rosneft provided sustenance sional and amateur sports. for 34 polar bears in 16 zoos Together with the Russian Arctic It finances the CSKA Moscow across the country. National Reserve, the Company Hockey Club and is a sponsor runs a programme to study human of the Arsenal Tula Football Club With the support of Rosneft, impact on the Arctic’s extraordi- and the Avers Basketball Club, the P. P. Shirshov Institute nary ecosystem. This is the first among others. Rosneft sup- of Oceanology of the Russian time such a study is being carried ports the domestic automakers Academy of Sciences was out in Russia. As part of the pro- and contributes to the develop- able to look further into gramme, an expedition was organ- ment of motor sports in Russia the life of Black Sea dolphins. ised to Heiss Island (Franz Josef by funding the Sport The research is the first Land archipelago) to look into ROSNEFT racing team. of its kind since the early 1980s the environmental condition The Company is also the gen- and is essential for acquiring data of Arctic territories with the help eral sponsor of the International on the overall state of the Black of aerial systems and take sam- SAMBO Federation. Sea. In addition, the Company ples of core for further analysis.

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ENERGY EFFICIENCY AND ENERGY SAVING

FUEL AND ENERGY CONSUMPTION

Rosneft is a major fuel and energy consumption totalled 18.9 mil- For energy consumption and costs consumer in Russia. In 2020, lion tonnes of coal equivalent by business segment in 2020, see the Company’s1 fuel and energy (mmtce)2, or RUB 216,946 mln. the table below.

Energy consumption and costs by business segment in 2020

Segment Fuel and energy consumption In ktce / RUB mln Share, %

electricity, th. kWh / heat, th. Gcal / fuel, kt / RUB mln RUB mln RUB mln

Oil and gas production 37,750,767 / 133,233 2,752 / 7,125 1,547 / 3,453 7,093 / 143,811 3 7.4

Oil refining 6,001,792 / 19,863 19,460 / 19,806 4,093 / 15,529 9,786 / 55,198 51.6

Petrochemicals and gas 2,308,307 / 6,335 6,799 / 5,604 405 / 1,170 1,843 / 13,109 9.7 processing

Gas production 340,630 / 1,746 113 / 264 61 / 102 142 / 2,112 0.7 and distribution

Marketing and distribution 319,479 / 1,674 70 / 86 5 / 32 55 / 1,792 0.3

Services 92,343 / 452 248 / 451 2 / 21 48 / 923 0.4 ENERGY EFFICIENCY AND ENERGY SAVING POLICY

Total 46,813,318 / 163,303 29,442 / 33,336 6,111 / 20,307 18,967 / 216,946 100 In accordance operating procedure for mon- in Exploration and Production, with its Energy Efficiency itoring the energy efficiency and Oil Refining, Gas and Energy Saving Policy of electrically-driven centrifugal Processing and Petrochemicals, ENERGY SAVING PROGRAMME and the Energy Management pumps and implementing tar- with individual roadmaps System: Requirements and Use geted energy saving initiatives drafted to address the iden- In 2020, the Company embarked 2020. The Programme promotes business lines. For actual fuel Guidance Standard, the Company before any equipment failures tified gaps in 2020–2022. on its 2020–2024 Energy a more efficient use of electric- and energy savings in 2020, see took the following steps in 2020: or well interventions; Another assessment is sched- Saving Programme approved ity and heat, as well as boiler the table below. • amended the list • arranged for corpo- uled for 2021; by the Board of Directors in March and furnace fuel across key of Group Subsidiaries cov- rate training in energy effi- • had its own energy efficiency ered by the 2021–2025 ciency (five courses). In 2020, and energy saving divisions per- Actual fuel and energy savings in 2020 Energy Efficiency Programme, 471 employees took training form an internal energy effi- adding the following in the dedicated corporate train- ciency audit of 386 production Segment Savings in 2020 In ktce Share, % assets: RN-Buzulukskoye ing centre; facilities and units of equipment electricity, heat, fuel, Gas Processing Plant, • put into effect Order No. 71 at 35 Group Subsidiaries to iden- th. kWh th. Gcal tce and Saratovnefteprodukt. Given On Drafting and Implementing tify their energy saving potential Oil production 1,356,788 2 957 164.1 41.0 asset combinations and divest- Targeted Programmes and exploit it under the Energy

Oil refining 33,649 236 175,129 212.2 54.0 ments and with no new energy to Introduce an Energy Saving Programme; saving initiatives planned Consumption Monitoring • had Taas-Yuryakh Petrochemicals 3,458 40 9,373 15.3 4.0 for 2021–2025, the Programme System in Oil Refining, Gas Neftegazodobycha certified Gas distribution 26,931 0 0 3.2 0.8 covered 82 Group Subsidiaries; Processing and Petrochemicals for compliance with ISO 50001 • drafted regulations on how dated 3 February 2020 to cre- (Energy Management Marketing and distribution 4,612 0 144 0.7 0.2 to use the Electrically-driven ate an automated instrumen- Systems). All in all, 42 Group In-house services 1,554 1 365 0.7 0.2 Centrifugal Pumps module tal database for fuel and energy Subsidiaries accounting for 98%

Total 1,426,991 279 185,967 396.3 100.0 of the Mechanical Resources resources and develop/deploy of the Company's total energy information system at Group in-house software for energy consumption in 2020 hold Subsidiaries in Upstream, which use regulation, planning ISO 50001 certificates. resulted in Rosneft becom- and reporting; ing one of the first companies • performed an internal assess-

1 Information on the most energy-intensive assets operated directly by Rosneft, for 2020. in Russia's oil and gas industry ment of energy management 2 Natural units of electricity and heat are converted into tonnes of coal equivalent in accordance with GOST R 51750-2001, and those to introduce a production well systems at 21 Group Subsidiaries of fuel – in accordance with Resolution of the Federal State Statistics Service (Rosstat) No. 46.

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POWER GENERATION DEVELOPMENT LOCALISATION AND DEVELOPMENT The reporting year saw the fol- Refinery (Phase 2); APCS On top of that, the Company lowing generating facilities built pre-commissioning almost renovated a 1.36 km CHP-Okha OF INDUSTRIAL CLUSTERS or commissioned to help meet completed at the 105 MW heat line, an important facility the projected Group energy needs gas turbine power plant for the communities of the Sakhalin in Exploration and Production: at the Vostochno-Urengoysky Region’s northern part. • In-house power plants: license area of Rospan IMPORT SUBSTITUTION AND EQUIPMENT LOCALISATION – 50 MW gas turbine power International; plant commissioned FOR ROSNEFT’S NEEDS at the Srednebotuobinskoye • 110 kV grid facilities: field of Taas-Yuryakh – two 110 kV substa- In 2015, Rosneft launched R&D cooperation In 2020, Rosneft launched com- Neftegazodobycha; tions with a total trans- an Import Substitution by Dukhov Automatics Research mercial operation of a proprietary – main construction and instal- former capacity of 100 MVA and Equipment Localisation Institute (VNIIA). A five-well pilot hydrotreating catalyst. A commer- lation operations completed and 64 km of 110 kV over- Programme. testing of this equipment is sched- cial batch of these unique cat- (96.6%) and pre-commission- head lines commis- uled for 2021. alysts was loaded into a diesel ing started at the 153 MW sioned at Orenburgneft Aligned with strategic goals fuel hydrotreater at the Ryazan gas turbine and thermal and RN-Yuganskneftegaz. and objectives set forth The pilot testing of an ice condi- Refinery. This is the first diesel power plant at the Tuapse in the Rosneft–2022 Strategy tions monitoring system that was fraction hydrotreating catalyst and the Company’s Long-Term developed within the Company for the Russian refining industry Development Programme, has been completed, with the sys- capable of fully replacing its for- IMPROVED RELIABILITY tem currently being put into oper- eign peers to produce the Euro-5 the Programme seeks to: ation. The Company has also ultra-low-sulphur (below 10 ppm) Every year, the Company takes Rosneft's Energy and HR depart- • work started to draft profes- • facilitate the development developed three components diesel. a number of steps to ensure ments have defined the key per- sional qualification guidelines of Rosneft as a high-tech oil of an iceberg towing system uninterrupted energy sup- sonnel development and training for the eleven most common and gas company; (towing rope, buoys, and tow- The Komsomolsk Refinery ply of the existing and prospec- priorities for the Energy func- blue-collar energy professions • secure the Company’s techno- ing nets) and filed utility model (part of Rosneft’s refining seg- tive production assets. In 2020, tion, with the following steps in Exploration and Production, logically sustainable position applications. ment) launched the final stage as part of its efforts to improve taken to improve employee and Oil Refining, Gas Processing in the hydrocarbons mar- of building a hydrocracking com- the supply efficiency and reliabil- competencies: and Petrochemicals, with five ket by increasing the share With an agreement on technolog- plex with an integrated diesel ity, the Company conducted eight • group and individual devel- already covered; of Russian-made products ical partnership in the production fuel hydrotreating unit. When technical audits to check the qual- opment courses created • eleven dedicated courses and implementing projects and maintenance of import-sub- launched with a design capacity ity of power facility management for the Energy function included in the corporate curric- to localise the manufacturing stituting solutions signed of 3.65 mmtpa, this hydrocrack- and drafted a remedial action plan (Upstream) to do in 2020–2021 ulum for 2021; of foreign oil and gas equip- between Rospan International ing and hydrotreating complex to eliminate the gaps. The report- after completing pilot tests • Exploration and Production, ment in Russia in cooperation and Rosatom, the parties are now will increase the Komsomolsk ing year saw 106 remedial actions and undergoing an assessment and Oil Refining, Gas Processing with leading global producers; working on a domestic multiphase Refinery’s refining depth to 92%. completed, with deadlines of professional skills; and Petrochemicals coaches • facilitate the development flow meter to measure flow rate for another 166 not yet expired. • professional competency pro- trained by their colleagues of infrastructure supporting in gas condensate wells. In 2020, In 2020, Rosneft commissioned This helped achieve a 12.7% year- files created for Oil Refining, Gas from the Energy Department upstream and downstream pro- the related R&D efforts were com- Russia’s first pilot testing facility on-year reduction in power fail- Processing and Petrochemicals, to operate in-house power jects as part of localisation pleted with the key deliverables for hydrotreating catalysts built ures across in-house electricity subject to an ongoing revision, and heating plants and emer- efforts. presented. in 2019 at the Novokuibyshevsk networks. together with the test questions, gency shutdown systems, per- Catalysers Plant. Its operation following pilot tests involving form switching, and make As part of the programme, Other equipment that was pilot- will have a significant economic As part of technical audits, Energy Department experts; the preparations to maintain Rosneft keeps investing in pro- tested includes a corporate coiled effect as the Company will spend the Company also checks if its or repair energy equipment. prietary solutions and products tubing simulator by RN-VECTOR less buying third-party cata- sites operate equipment in com- with a view to sustaining its tech- used to plan prevention actions, lysts and for logistics reasons. pliance with health and safety nological self-sufficiency. estimate residual life and exer- For example, the Company’s refin- requirements. cise day-to-day operational con- eries need approximately 2 kt As it works to develop crit- trol. The testing showed that of hydrotreating catalysts each ical prospecting, explo- RN-VECTOR’s simulator performs year putting the annual costs ration and development as claimed. at ca. RUB 2.5 bln. The new tech- technologies, Rosneft approved nological capabilities will consid- a pilot testing programme Russian-made catalysts are key erably reduce Russia's reliance for RN-Yuganskneftegaz to test to sustaining the technological on imported catalysts for refining the multi-parameter logging while self-sufficiency of the Company’s purposes. The new pilot testing drilling equipment developed refining segment ending its reli- facility features nine main produc- as part of the Rosneft–Rosatom ance on foreign technologies. tion lines and five auxiliary units

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comprising production equipment which pre-determines a surge full-scale hydraulic fracturing FOSTERING THE INDUSTRIAL CLUSTER for oil refining catalysts and a vari- in demand for isopropanol operations. This simulator is com- ety of controls, measurement in Russia and worldwide. An mercialised for external users, In 2020–2025, the industrial The Target Innovative Projects of the Company’s offering and production process manage- industrial-grade acetone-to-iso- with its licences available for pur- cluster based on the Company’s are already producing great with a focus on the maintenance, ment tools. It has a daily capacity propanol unit and in-house unit chase to the Group Subsidiaries capacities, will be focusing on: results with an URPSV-10000 repair and rental of tubing, electric of nearly 200 kg of different cata- for isopropanol-based windscreen and third parties. Rosneft has • establishing R&D and manu- preliminary water discharge submersible pumps for RN-Vankor lysts (6 t per month). wiper fluid are to be constructed now completed its R&D efforts facturing infrastructure to sup- and oil treatment unit (intel- and Chekmagushevsky produc- at Rosneft’s Novokuibyshevsk designed to identify further port re-engineering, innovations, lectual property of Rosneft) tion area of Bashneft-Dobycha. In 2020, the scientists of RN-TsIR Petrochemical Company that has development areas for RN-GRID and import substitution; manufactured and deliv- The Company has also certified (Rosneft’s R&D institute) devel- the relevant petrochemical profile. as required to add new capabilities • running pilot projects and tests ered to RN-Nyaganneftegaz and received licence to manu- oped an innovative technology in line with the newest hydrau- in line with the Company’s Target and a strategy for the devel- facture and repair tank contain- to convert Rosneft-produced ace- The development of proprie- lic fracturing challenges, and has Innovative Projects; opment and pre-production ers required to ensure year-round tone into higher-margin isopro- tary research-intensive special- launched R&D work to develop • supplying capacities to support of mobile modular technologi- supply of fuels and lubri- panol, which is mainly imported ist software is another strategic RN-GRID 3.0. localisation projects in cooper- cal solutions for water-oil emul- cants to the Vostok Oil project. to Russia today. The technology focus area for the Company. It ation with foreign technology sion preparation being drafted. Repair and maintenance of oil- provides for the hydrogenation has created RN-GEOSIM 1.0 soft- As regards RN-Sigma, a corpo- partners as well as joint ven- Cooperation with the R&D cen- field equipment is now availa- of acetone using the Company’s ware suite for geological model- rate suite for geomechanical mod- tures with Russian R&D centres tre is not limited to manufacturing ble to East Siberian Oil Company, own heterogeneous metal-con- ling and, starting from 2021, plans elling of stability while and enterprises. new equipment only. For example, Slavneft-Krasnoyarskneftegaz, taining catalyst produced to deploy it across the Group drilling, it was upgraded to ver- the cluster’s pilot facilities deal Tyumenneftegaz from raw materials available Subsidiaries. The developed com- sion 2.0. The new version fea- Industrial cluster companies with the automation and roboti- and Samotlorneftegaz. in the country. The isopropanol plex can replace 50% of imported tures extra functions for real-time together with the Company’s R&D sation of daily operations involved will be used as an anti-icing agent geological modelling software. geomechanical drilling support centre take an active part in imple- in repairing the tubing and elec- The industrial cluster is committed in the production of the high-qual- and building dynamic wellbore menting the Target Innovative tric submersible pumps and in well to not only unleashing the domes- ity, odourless (as opposed The Company has also completed stability models. Projects. In 2020, RN-Remont NPO servicing and workover. tic potential, but also attracting to propylene-based isopropanol), the development of a new version acting as the management com- and cooperating with technology frost-free car windscreen wiper of RN-KIM hydrodynamic simula- The suite was pilot-tested pany for the industrial cluster, The industrial cluster development partners. To this end and to share fluid for the Company’s retail net- tor boasting new capabilities. by the Group Subsidiaries. set up an Engineering, Design, strategy provides for expand- experience and best practices, work. Isopropanol is also used Technology and Development ing the geography and diver- the Company has signed a cooper- as a basis for highly effective Other software – a hydraulic frac- Policy Office responsi- sifying the range of services ation agreement with the indus- antiseptics designed to combat turing simulator – has been used ble for the Target Innovative provided. To deliver the strategy, trial cluster of the Republic the spread of infections, to design more than 21 thousand Projects and import substitution. the last year saw the development of Tatarstan.

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INDUSTRIAL AND SHIPBUILDING CLUSTER Pre-commissioning opera- "green" Aframax type tankers, within an unprecedentedly short tions are nearing completion gas carriers). This is the first time time frame even to international IN THE RUSSIAN FAR EAST at one of Zvezda’s key facilities – all the vessels in the shipyard’s standards. a dry dock with an adjacent area production programme are built Upon instruction from the Russian To cater to the needs of import • over 144 th. cub m of concrete and outfitting quays. The dry in Russia. Another important milestone was President, Rosneft is ramping up substitution and equipment poured; dock is a unique hydraulic struc- the launch of a unique icebreak- a shipbuilding cluster in the Far localisation, an industrial clus- • over 31 th. sq m of enclosing ture measuring 485x114x14 metres In November 2020, Zvezda ing supply vessel named Katerina East to foster the domestic ship- ter for shipboard equipment structures and roofing installed; which can accommodate con- reached an important milestone Velikaya in December 2020, which building industry and energise and components is emerging • more than 4 kt of steelworks struction of the majority of exist- launching the production of gas will also operate in the Russian the development of the coun- around the Zvezda Shipyard. assembled; ing and future types of vessels carriers (foreign-built until then). Arctic. try’s continental shelf. Zvezda • over 6.1 th. sq m of fire protec- with virtually no restrictions The shipyard started cutting steel Shipbuilding Complex in Bolshoy Despite the challenging COVID- tion added; on tonnage and launching weight for the flagship vessel of the Arctic In 2020, the shipyard also deliv- Kamen will be the core shipyard 19 situation, restricted workforce • 10,593 linear m of cable lines of the hulls, including the world’s LNG 2 project. This was the result ered to Rosnefteflot its first ves- and Russia’s first-ever facility mobility and the need to comply laid for the power supply most powerful nuclear ice-breaker of a great deal of produc- sel, a Russian Aframax type tanker for the construction of large-ca- with the related health and safety and light current systems; "Leader". tion and organisational efforts Vladimir Monomakh that has suc- pacity vessels. regulations, the Company man- • four distribution transformer taken such as employee train- cessfully passed its sea trials. aged to arrange for a large substations assembled; The shipyard’s order portfo- ing, receiving Russia’s first licence Importantly, the shipyard scope of construction works • over 12.1 th. linear m of heat lio already counts 56 vessels, to manufacture and assemble This means that in just five years after will be manufacturing icebreakers at the shipyard: and gas supply networks laid; all of them being engineering- cargo systems for LNG trans- incorporation, Zvezda Shipbuilding and reinforced ice-class vessels, • 625 th. cub m dredged • more than 8.7 th. linear m and technology-intensive vessels, portation, making pre-produc- Complex has mastered the entire along with LNG-powered ves- to deepen the waterways; of water supply networks mostly of high ice-class (sup- tion arrangements and securing shipbuilding cycle – from cutting sels. The shipyard boasts a unique • in excess of 56,432 cub m of soil and sewerage system laid. ply vessels, research vessels, ice- technology partnership so that steel to trials and delivery of vessels set of competencies unparalleled replaced; breakers, Arctic shuttle tankers, the project is implemented to the customer. among both domestic and leading • over 3.5 kt of sheet piles global peers. and 1,803 piles installed;

VRK SAPPHIRE PLANT

STEERABLE THRUSTERS The plant has been in operation since 2019. The first two 7.5 MW An industrial cluster for ship- steerable thrusters were installed board equipment and compo- on a higher ice-class multifunc- nents is emerging around Zvezda tional support vessel put afloat Shipbuilding Complex. The clus- in December 2020. ter accommodates a workshop to manufacture steerable thrust- In 2020, the plant contin- ers for ice-class vessels, including ued to upgrade its capacity gas carriers. with the goal of manufacturing higher-power steerable thrust- VRK Sapphire Plant, a joint ven- ers. Concurrently, VRK Sapphire ture of Rosneft and General Plant secured a purchase order Electric, manages the project for 15 MW steerable thrusters to develop and localise the pro- intended to be installed on gas duction of steerable thrusters, carriers. a key component of marine elec- tric propulsion system.

210 211 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

with a view to enhancing its pro- These principles are imple- Over 464 thousand suppli- SUPPLIER AND CONTRACTOR curement efficiency, all in line mented under the Regulations ers are registered on the trading with recommendations of the fed- on Procurement of Goods, platform2. RELATIONSHIPS eral executive bodies. Rosneft’s Works and Services applied procurement is centralised in the Company and the Group To enhance transparency and effi- at 64%, including 50.5% han- Subsidiaries. ciency of minor procurement In recent years, Rosneft has been a major consumer of goods, works and services in Russia. dled by the Head Office and 13.5% (worth below RUB 500 thousand), The annual spend by the Company (Rosneft and Group Subsidiaries) on externally procured sourced regionally. To ensure procurement trans- TEK-Torg’s electronic trading plat- goods, works and services amounted to RUB 2.76 trln. parency, increased competition form is expanding its Corporate When choosing suppliers and con- and equal access for market par- Internet Shop (CIS). trading platform. Preliminary (up to 18 months) accreditation tractors, the Company adheres ticipants, the Company manages The Company’s ongoing devel- review of potential suppli- which helps considerably reduce to the principles of openness, its procurement procedures elec- For reference opment involves engaging ers or contractors for compli- costs incurred by potential sup- competitiveness, reasonable- tronically via TEK-Torg’s electronic a wealth of products, advanced ance with the approved standard pliers participating in procure- ness, effectiveness, and non-dis- trading platform (Rosneft sec- The Corporate Internet Shop technologies, new contractors requirements makes it easier ment procedures. Suppliers may crimination, as stipulated tion). The Company conducts vir- helps boost, control and stream- and suppliers. for them to prepare for and par- obtain accreditation both prior in the applicable Russian laws tually all competitive procurement line the Company’s internal busi- ticipate in the Company’s pro- to and in the course of procure- and the Procurement Policy procedures electronically. ness processes as well as those Therefore, the Company’s pro- curement procedures in relevant ment procedures. adopted by the Company in 2020. of the Group Subsidiaries leading to shorter times, lower operat- curement activities are focused categories. The Policy sets out the key goals, In 2020, the Company ing costs and lower procurement on building long-term partner- As a vertically integrated hold- objectives and guiding princi- and the Group Subsidiaries initi- prices due to a better compet- ships with suppliers and contrac- To establish long-standing ing company, Rosneft relies ples of the Company’s supplier ated over 137 thousand procure- itive environment. As a result, tors. Signing long-term contracts relationships with suppliers, on the consolidated procure- relations, as well as procurement ment procedures on TEK-Torg’s the Company managed to attract new counterparties (mostly and placing long-term orders facil- the Company’s internal regula- ment of goods, works and services management priorities for Rosneft electronic trading platform SMEs). itate stable development of the oil tions provide for long-term for the Group Subsidiaries and the Group Subsidiaries. (Rosneft section). and gas industry, the machine building industry and the mainte- nance services market, while also helping to create jobs in all indus- tries and drive innovation. Thus, in 2020, 75% of the 2021 central- ised requirements were covered by long-term contracts.

The Company keeps implementing the category management in pro- curement, including by leveraging category/procurement strategy as its key enabler. In 2019–2020, Rosneft developed 26 strategies in the most capital-intensive pro- curement areas.

As part of its work to implement the category management in pro- curement and build a frame- work for long-term counterparty qualification1, the Company con- tinues to develop standard sup- plier and contractor requirements for certain groups of materials, equipment, works and services. The information on the applicable standard requirements is available at TEK-Torg’s electronic

1 The validity period is 18 months. 2 Cumulative total since the launch of TEK-Torg’s electronic trading platform.

212 213 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

• contract management and ref- implemented a new joint project – on Respecting Human Rights erence data support for cen- Rosneft Procurement mobile to be used when interacting tralised list of items, reporting application to facilitate the han- with suppliers of goods, works on procurement processes. dling of the Company’s procure- and services. The declaration ment procedures. is available at the Company’s offi- As at 31 December 2020, the SSC cial website, and the requirement had a headcount of 175 employ- Rosneft Procurement application to comply with all its guiding prin- ees and had service contracts enables employees and owners ciples is part of the procurement signed with Rosneft, regional pro- of potential and current suppliers documentation. curement operators and 19 Group of Rosneft or Group Subsidiaries Subsidiaries. to choose the relevant pro- The Company expects its suppli- cedures swiftly, to be noti- ers and contractors to pay particu- To recruit and train young profes- fied of new purchases and to be lar attention to health protection, sionals, the Company maintains updated on the news of the trad- maintaining the right to favour- its cooperation with the Samara ing platform, relevant documents able environment, and creating State Technical University, and procedural changes. comfortable and safe labour con- Samara’s flagship in higher edu- ditions in line with the applica- cation, with a plan to train, hire The Company continues deploy- ble labour safety requirements and attract young talent in 2021 ing cutting-edge robotic auto- of the Company, the Russian in place. mation in procurement. Robotic Constitution, Labour Code, health scripts are already applied and disease control regulations In July 2020, Gubkin Russian State in delivery monitoring, reporting and standards and/or other legal University of Oil and Gas awarded and inventory reallocation. Optical instruments of their jurisdic- first masters degrees in procure- recognition is used in accred- tion / regions of operation, as well ment upon two-year training itation of potential suppliers as the international law. at the Department of Procurement and contractors. As at 31 December 2020, on procurement opportunities, for the Company’s right to priori- Chain Management for the Oil over 41 thousand organisa- Rosneft and SME Corporation tise Russian-made goods, works and Gas Industry (under the aus- To ensure compliance with major tions were registered in the CIS, held 13 workshops/events and services where and as required pices of Rosneft). There were international human rights instru- including over 30 thousand small on the Company’s procurement by the applicable laws. 14 graduates, and 7 of them were ments, the Company adopted and medium-sized enterprises activities in 2020. The work- The Company also regularly carries awarded honours degrees. a Declaration (SMEs). In 2020, the Company shops were held in Ivanovo, out purchases of Russian-made published over 55 thou- Sochi, Khabarovsk, Ulyanovsk, equipment of its own accord. The educational programme sand procurement procedures Tuapse, Nizhnevartovsk, involved managers and employees For reference with completed procurement the Republics of Bashkortostan The Company continues of Rosneft’s procurement func- worth over RUB 3.6 bln, almost and Tatarstan, the Volgograd, the roll-out of a Shared Service tion, leading industry and interna- Rosneft relies on automa- doubling year-on-year. Sakhalin and Tomsk regions, Centre (SSC) in Samara with a view tional experts. tion tools to unlock resources The Company is commit- and the Krasnoyarsk Territory. to centralising and pipelining pro- previously engaged in routine ted to promoting cooperation curement operations and category In autumn 2020, the second and algorithm-driven operations so as to: with SMEs. The annual value The Company continues management functions. In 2020, intake of master’s degree stu- • refocus its employees on more of Rosneft Group’s contracts with the Import Substitution the following functions were suc- dents (26 persons) was launched sophisticated tasks, with SMEs is at least RUB 100 bln. and Equipment Localisation cessfully transferred to the SSC: with on-campus and remote • mitigate risks of errors (human It is worth noting that SMEs Programme for Rosneft’s Needs • contractor accreditation, pub- learning combined. factor) while managing big data, account for over 50% of potential for 2019–2021 with an out- lishing procurement docu- • exponentially accelerate suppliers accredited with Rosneft. look for 2028. The Regulations ments, monitoring due delivery In cooperation with the operator routine operations supporting To better inform suppliers on Procurement of Goods, Works time, purchase and supply plans of TEK-Torg’s electronic trading a 24/7 continuous workflow. and contractors, including SMEs, and Services provide approval; platform, the Company

1 In January–May 2020. 2 Including those held online/remotely due to the pandemic.

214 215 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

• formation of the Frolov petro- • of critical specialist software • computations using graph- RESEARCH, DESIGN, leum region. Its integration tech- products, Rosneft commer- ics processing units or com- nology for multi-scale studies cialised its RN-GRID simula- puter clusters and create models AND INNOVATIONS of the Jurassic high-carbon for- tor to serve external consumers; for oil and gas condensate fields mation in the Sredneobskaya licenses to use the simulator that require computation-in- oil and gas bearing region were made available for pur- tensive analysis. Rosneft also RESEARCH AND INNOVATIONS of Western Siberia was upgraded, chase. The Company contin- developed a module that deter- adapted and tested to conduct ues to issue RN-GRID licenses mines the optimal irregular well Rosneft carries out its inno- • development, production, petrophysical studies and ana- to all Russian oil and gas com- placement by applying artifi- vative activities in accordance and launch of new world-class lyse logging and seismic data. panies. In 2020, 115 commer- cial intelligence technologies with the 2020–2024 Innovation innovative products and services; Total R&D costs cial licenses and over 40 test (similar to Google DeepMind's Development Programme • support to the Company’s mod- in 2020 amounted to RESEARCH-INTENSIVE licenses for RN-GRID were AlphaZero). As a result, more approved by its Board of Directors. ernisation and technological TECHNOLOGY SOFTWARE granted to 23 oil and gas pro- than 80% of digital field model- The Programme aims to achieve advancement through high-im- RUB 26.8 bln duction and service companies. ling tasks were performed using the Company’s strategic goals pact improvements in key per- • New algorithms were added In addition, four leading partner RN-KIM. Going forward, the pro- drawing on its strategic prior- formance indicators for business to RN-SMT, an integrity moni- universities were granted more prietary simulator will not only ities, such as efficiency, sus- processes; toring system for oilfield pipe- than 50 academic licenses to use cover 90–95% of the Company’s tainable growth, transparency, • enhancement of the Company’s lines. They allow us to calculate RN-GRID in teaching. To improve needs for hydrodynamic model- social responsibility, and inno- shareholder value and competi- results and state registration the maximum possible pressure the field design accuracy ling, but also allow us to actively vations. The Programme pro- tive edge in the global market. of intellectual property rights. subject to technical condition and select the most appropriate apply artificial intelligence tech- vides for a range of activities The R&D efforts in 2020 resulted of the facilities, carry out factor hydrocarbon extraction technol- nologies in field development. with a focus on: In the reporting year, Rosneft in 60 intellectual property appli- analysis of changes in pump- ogies, Rosneft makes extensive • Rosneft developed RN-GEOSIM • development and deployment continued with a success- cations submitted by, and 64 pat- ing energy efficiency, and moni- use of field models created by its 0, a geological modelling soft- of new technologies; ful implementation of R&D ents granted to, the Company. tor pipeline inhibition. The system proprietary RN-KIM hydrody- ware system (similar to lead- provides an opportunity to fully namic simulator. ing foreign geological modelling digitalise all the processes • This advanced software software packages) that will KEY ACHIEVEMENTS IN 2020 related to pipeline operations, product has been widely assist in building geological mod- reduce operating risks and assist exploited by the Company els of fields. The Company is also The Company implements pro- • corporate software package • suite. The map will be used in management decision-making. for over six years and adapted developing modules for kine- jects in various fields, including oil as part of the Company’s R&D by RN-Yuganskneftegaz to drill Once completed, RN-SMT will to the geological and oper- matic interpretation of seismic and gas production, oil refining, activities. The module was used over 20 horizontal MSHF wells turn into a single corporate soft- ating conditions of the fields information. The newly devel- and petrochemicals. by RN-Yuganskneftegaz to cal- in 2021–2023. ware suite capable of fully sup- the Company is developing. oped system features unique culate the optimal drilling score • Rosneft developed a con- porting pipeline operations. In 2020, we released a new ver- capabilities of modelling process UPSTREAM for 2021–2025. solidated methodology that • To support the national oil sion of this software product management and can automat- • RN-Yuganskneftegaz continued allows evaluating local perme- and gas industry in its efforts with composite modelling that ically update geological models • RN-Yuganskneftegaz contin- to deploy the newly developed ability and porosity properties to substitute imports makes it possible to perform with new field data ued to deploy a low-permeability MSHF technology in an ultra- of the Berezovskaya suite depos- reservoir development technol- low-permeability its. With the new methodology, ogy involving the use of horizon- reservoir at the Bazhenov suite the Company refined its technol- tal production and injection wells (YuS0 formation). Nine horizontal ogy used to locate Berezovskaya and multi-stage hydraulic frac- MSHF wells were commissioned suite reserves in its license area turing (MSHF). In 2020, the tech- in 2020. Their average initial flow in Western Siberia. A new strati- nology was deployed at more rate amounted to 55 t per day graphic plan of upper cretaceous than 120 wells. Unlike the stand- in a flow mode (or 6.8 t per day deposits in Western Siberia was ard development scheme (one per hydraulic fracturing stage), developed. horizontal production well which is in line with the best • Rosneft partnered and two directional injection global practices. MSHF wells with the National Intellectual wells), the new scheme is based demonstrated 1.5–3 times bet- Development Foundation on one horizontal injection well ter performance as compared (Innopraktika) to conduct zoning instead of two directional injec- to the previous project devel- of the Frolov petroleum region tion wells. This results in both opment phase. Also in 2020, in terms of movable hydrocarbon cost savings and higher oil pro- we finalised our technology fluid resources, occluded hydro- duction. Also in 2020, a new soft- designed to locate potentially carbon compounds, and organic ware module, Decision Support productive areas of the Bazhenov matter in the Jurassic high-car- in Development of New Areas suite. With this technology, bon formation. The Company of Low-Permeable Reservoirs, we updated a map of potentially identified oil exploration targets was added to the RN-KIN productive areas of the Bazhenov in the Jurassic high-carbon

216 217 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

• received. RN-GEOSIM is antic- • to solving industry-specific – disassembly tasks), designing In 2020, RN-SIGMA capabili- technology operations. At present, • deployed by the Company ipated to cover up to 80% applied problems. In 2020, and 3D printing a robot-based ties were expanded considerably, the simulator undergoes pilot test- in the Arсtic, and collect hydro- of the Company’s needs for geo- the number of hackathon top- gripper tooling. The organis- with the following features added: ing by more than 100 dedicated logical, meteorological and ice logical modelling. ics was increased to three, which ers provided the contestants geomechanical drilling support experts at 24 Group Subsidiaries. data. The Company will rely • Rosneft developed RN-Simtep 0, reflects to the Company’s grow- with all the required technical in real-time mode, wellbore sta- on its results to design facilities a software product for modelling ing interest in IT technologies devices. bility dynamic modelling based • In 2020, Rosneft created and perform operations across its oil and gas production processes. and their potential applications – The IT marathon ended on time-dependent structural RN-VISOR, a software product license areas on the Arctic shelf. Currently, the product is being to address current challenges with Rosneft Proppant changes of rock formations, assess- for real-time visualisation of coil • Meteorological surveys were con- tested at corporate research of the industry. Check Challenge (RPCC). ment of sand ingress risks and risks tubing/hydraulic fracturing data. ducted in the area of the Khastyr and design institutes. Going for- Its online finals took of cement sheath failure during temporary field base (the ward, RN-Simtep will cover up – The first IT marathon event, place on 28 November. well operation. The new features RN-VISOR is a real-time data Khatanga Bay, the ), to 80% of the Company’s needs Hackathon of Three Cities, Representatives of 35 univer- cover a full range of tasks associ- acquisition, processing and visual- with meteorological and actino- for production process mod- was held on 24–25 September sities from 28 countries par- ated with data acquisition, analysis isation tool installed on the coil metric data collected. Provisional elling and eventually tap into in Ufa, and Samara ticipated in the challenge. This and pre-processing, 1D geome- tubing/hydraulic fracturing control local operating conditions oil refining and petrochemicals simultaneously. Over 250 stu- was an absolute record for IT chanical model building and trans- station. for the Khatanga license area processes. dents and postgraduates competitions held in Russia’s fer, drilling failures prediction, well were developed. • New features were added comprising 52 teams were oil and gas industry. path and well structure optimisa- RN-VISOR collects integrated • The Company developed to the RN-PETROLOG corpo- solving a classic “postman – During the 2.5-month online tion, and calculation of the mud data coming from control sta- a commercial technology rate software suite for interpre- problem” (finding the shortest Proppant Check Challenge, weight window for safe operation. tion sensors, enables data storage to manufacture two dispersant tation of core samples and well route to deliver “letters” to all 942 contestants (822 teams) and visualisation of coil tub- compositions to be used in emer- log data. These features allow addressees), but in the con- were estimating the linear At present, RN-SIGMA has all the ing or hydraulic fracturing oper- gency oil clean-up operations uploading large projects (more text of oil and gas. size and quantity of prop- required algorithms and interface ations and data transmission at sea. The dispersant agents than 10 thousand wells), con- – The competitions continued pant grains by analysing solutions to build a 1D geomechan- through a user-friendly interface, were tested on a large test facil- necting external modules, with a hackathon for robot- a series of images. Ten teams ical model of wellbore stability and has over 50 flexible adjust- ity in comparison with a foreign processing metadata of a petro- ics programmers in Ufa State that presented the best PC and includes a number of mod- ment parameters. commercial dispersant. The test physical project, obtaining Aviation Technical University and smartphone solutions ern non-default capabilities, such results confirmed that the newly statistics on data availability on 16–17 October. The pur- to the Company’s experts as elastic anisotropy tracking, tem- • While developing an informa- developed dispersants are highly in the project, filtering well data pose of the hackathon was qualified for RPCC finals. perature tracking, etc. tion modelling technology for oil effective. in the project tree (making flexi- to find new approaches and gas production and refining • Another expedition, Iceberg ble data requests). The Company to solving operating prob- • The Company is work- • In 2020, the Company devel- facilities, the Company created Spring 2020 in the Barents Sea, intends to drastically reduce its lems with the use of robots ing to expand the function- oped RN-VEKTOR, a proprietary over 20 standardised CAD work was organised as part of the cor- dependence on foreign vendors and robot-based mechanisms, ality of RN-SIGMA, one of its coil tubing simulator. This indus- stations, prototypes of IT sys- porate ice monitoring system by developing proprietary petro- as well as to promote a career most rapidly developing soft- trial software product is capa- tems for geotechnical monitor- development programme. During physical software and integrating in robotics among students ware products. RN-SIGMA was ble of mathematical modelling ing and feasibility assessment the expedition, the crew tested it into its digital universe. of Russian higher education designed to solve the problems and analysis of production oper- of project design documents, ice monitoring system compo- • The Company organised a series institutions. The teams were of geomechanical modelling ations involving the use of coil a centralised design documen- nents and staged six experiments of competitions for Russian pro- writing a programming algo- and stability analysis of direc- tubing. The simulator offers more tation archive and a 3D image on diverting potentially danger- grammers. Hackathons1 help rithm for a four-axial robot tional and horizontal wellbores. than 50 algorithms for stress, directory. This technology will ous ice formations. Technical aids Rosneft to draw attention manipulator (to perform man- hydraulic and fatigue wear cal- drastically increase the automa- were developed to ensure ice- of the global IT community ufacturing equipment culations to model various pro- tion of design processes in oil berg safety of marine oil and gas duction operations conducted and gas production and refin- field structures. The project won with the use of coil tubing, such ing and will provide for a single the first prize in the international as wellbore cleanout, well stimu- database of information mod- contest for R&D, engineering lation and development, milling els used in design, construction and innovative projects aimed operations to restore the full bore and operation. at development and exploration of the well, fishing operations, of the Arctic and its continental cement and parker plug placing ARCTIC SHELF shelf. and drilling, acid treatment, geo- • The Company launched a new physical surveys, sand blast per- • Two research expeditions were project called Development foration, etc. organised in the Kara and Laptev of Regional Stratigraphic Seas to conduct geophysical Modelling Technology The coil tubing simulator is used and environmental studies, per- for Underexplored Sedimentary in the oil and gas industry to plan, form maintenance of the measur- Basins in the Arctic with the Use monitor and analyse coil tubing ing infrastructure of Marine Shallow

1 A hackathon is a forum for software developers where experts from various software development career fields (programmers, designers, managers) solve a certain problem collectively in a time-constrained environment.

218 219 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

• Wells Data. During the project's • process. The decision to com- • The Company successfully com- • developed initial design data of Quality Grade 3 crude oil means that all MPWDU equip- first stage in 2020, Rosneft drilled mercialise the new product pleted R&D activities to develop for an industrial facility to pro- (according to GOST R 51858- ment is mobile and can be the northernmost stratigraphic will be made after the cata- uniform technical specifica- duce the ruthenium catalyst 2002 Crude petroleum. General transported between fields wells on the Russian Arctic lyst is tested at the Angarsk tion for neutralisers intended for the DCPD metathesis polym- Specifications) with resid- and warehouses. shelf. The results of the expedi- Plant of Catalysts and Organic to ensure chemical protection erisation process. The ruthenium ual of less than • Rosneft is developing tion were broadcast by Russia-1, Synthesis (tests scheduled against corrosion of the conden- catalyst is intended for the pro- 1.0%. The treated bottom water a 15 MW steerable thruster. Russia-24 and Discovery chan- for 2021). If the decision is pos- sation and cooling equipment duction of polymers and polymer is up to the industry stand- It completed the preliminary nels and presented in a number itive, the product will fully sub- of atmospheric and vacuum dis- composites based on polydicy- ards. The tests demonstrated design stage with “Released of federal print media. The initial stitute imported catalysts tillation units at the Company’s clopentadiene (PDCPD), such productivity of 400 t per day for Implementation” status analysis of core samples shows for the integrated hydrotreat- oil refineries. As a result, as an ultra-lightweight poly- with a potential to ramp up and submitted applications the unique nature of the acquired ment/isodewaxing process the specification for neutral- meric proppant for hydraulic capacity. Implementation for the protection of intellec- geological material, which at the Angarsk Petrochemical isers will be amended accord- fracturing, polymer composite of the technology does tual property created during will be used to make reliable pre- Company. ingly. These efforts will improve , dispersant and depressor not affect the engineer- the project implementation. dictions of oil and gas occur- • In December 2020, operational performance of crude additives, etc. ing and technical infrastruc- The Company intends to final- rence in the explored Arctic shelf the Novokuibyshevsk Catalyst oil distillation units (decelerate ture, as it is not expected to be ise the design in 2021 following waters and determine prospec- Plant produced the first com- corrosion and sedimentation, HIGH-TECH EQUIPMENT connected to the existing oil the assembly of the first steera- tive targets in the Company’s mercial batches of an isode- cut operating costs associated and gas collecting pipelines. It ble thruster. Severo-Karsky license area. waxing catalyst IDZ-028RN with chemical protection against • In July 2020, Rosneft com- and a hydrofinishing cata- corrosion, and mitigate the risks pleted successful produc- ASSOCIATED PETROLEUM GAS lyst HG-017RN. The catalysts of unscheduled downtime due tion tests of a pilot mobile MONETISATION were delivered to the Kuibyshev to clogged heat exchangers preliminary water discharge Refinery in preparation in the atmospheric and vacuum unit (MPWDU) at an Arctic • Rosneft continued with the GTL for production testing sched- distillation units). facility located in the Tazovsky technology project. The Company uled for March 2021. Following District of the Yamal-Nenets developed a plan for its pilot the production tests, Rosneft POLYMERIC MATERIALS FOR OIL Autonomous Area. testing and commenced engi- will decide on the commence- PRODUCTION The technology is designed neering of a GTL-1.5 pilot unit. ment of full-scale produc- to provide primary treatment • It partnered with the National tion of the innovative catalyst • Rosneft designed of the formation fluid directly Intellectual Development at the Company’s plants and its a dicyclopentadiene-based at the field, near the well pad, Foundation to design and man- further use at Rosneft’s oil refin- binding substance for the pro- to avoid transporting ballast ufacture a pilot APG desulphuri- eries. The new catalytic system duction of polymer compos- (formation water) to the central sation unit based on microporous will be the first domestic catalyst ites and a technique to produce preparation and gathering facil- membranes. The unit was added system for the production of win- polymer composite pipe seg- ity. The tool is based on a unique to the preliminary water dis- ter and Arctic grades of ultra- ments. It also developed patented technology of mass charge facility at Orenburgneft. low-sulphur diesel fuel. a strength calculation meth- transfer coalescers enabling • With the goal of reducing odology for polymer composite the production OIL REFINING the Company’s dependence pipes. The Company produced on foreign suppliers of cata- and tested representative sam- • The Company developed a tech- lysts, Rosneft developed tech- ples of polymer composite pipes. nology for the reactivation of die- niques to obtain isodewaxing Following the tests, the bind- ADAPTATION AND ADOPTION OF ADVANCED TECHNOLOGIES sel fuel hydrotreatment catalysts. and hydrofinishing catalysts ing substance composition was It is capable of restoring catalysts for the production of high-viscos- altered. The representative sam- to more than 95% of the activ- ity index base oils. ples of pipe segments made As part of its efforts to adopt by 19 Group Subsidiaries. A total following prior tests. Rosneft ity demonstrated by fresh cata- • Rosneft successfully completed of PDCPD-based polymer com- promising efficient technologies of 314 tests were conducted spent RUB 1.86 bln to deploy lysts. The technology drastically an R&D phase to develop diesel posites were found to fully com- developed by Russian and for- as part of the pilot projects, and roll out 3.7 thousand improves the catalyst efficiency fuels with improved environmen- ply with physical and mechanical eign companies, the Company resulting in 69 kt of incremen- solutions. and reduces their purchase costs. tal properties and performance requirements. Results of ulti- arranged for testing, adapta- tal oil production. The Company • The Company successfully com- for the Company’s oil refineries. mate collapse pressure tests tion, and adoption of innova- and its relevant business units As part of its efforts to imple- pleted the development of a die- Based on the results of qualifica- were 40% better than those tions while running pilot projects review the results, assess ment the Target Innovative sel fraction isodewaxing catalyst tion and laboratory engine tests, expected. This indicates that in 2020. These tests helped the economic viability of imple- Projects, the Company signed with a higher tolerance to sulphur the Company issued recom- the pipe has a good margin evaluate their key features menting proposed solutions, over 30 licence and subli- compounds, and its production mendations for the commence- of strength. and conduct feasibility studies and prepare plans for their roll- cence agreements for the trans- technology. The Novokuibyshevsk ment of commercial production • Rosneft created an industrial as to their fitness for the geolog- out and implementation. As part fer of its software and solutions Catalyst Plant released a catalyst of diesel fuel with improved envi- technology to produce a ruthe- ical and operating environment of the implementation pro- (RN-KIN, RN-GRID and the man- with a higher tolerance to sulphur ronmental properties and per- nium catalyst for dicyclopen- of the Company’s upstream sub- gramme, the Company introduced ufacturing process for oils worth compounds for an integrated formance at the Saratov Oil tadiene (DCPD) metathesis sidiaries. In 2020, 127 technolo- and rolled out 72 new technolo- over RUB 30 mln, including to pro- hydrotreatment/isodewaxing Refinery. polymerisation. It gies were put to test gies which proved their viability vide training to students

220 221 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

at the industry-related depart- methods, big data systems, tech- software comprising more than ments of the leading Russian nologies for transition to green 10 software products for all key oil DIGITAL TRANSFORMATION universities. In 2020, the com- and resource-saving energy, and gas production processes. bined proven economic effect and technical regulations. FOCUS ON DIGITAL TRANSFORMATION AND TECHNOLOGY from the Target Innovative Projects In 2020, the corporate R&D insti- implemented over the last three Rosneft has taken the lead among tutes completed more than Digital transforma- piloted at Rosneft such as those of IT solutions in Russia. To sup- years exceeded RUB 40 bln. Russian companies in this area 1,500 projects ranging from geol- tion and innovations powered by IoT, big data, AI, wire- port import substitution initia- with its proprietary geosteer- ogy and development to the design are at the forefront of Rosneft’s less connectivity and blockchain. tives in relation to IT hardware ROSNEFT'S RESEARCH ing service, which was created of field infrastructure and oil efforts to develop informa- and software, the Company AND DESIGN CLUSTER from scratch based on the old- and gas processing and petro- tion technology. To engage Rosneft places a strong focus partners with Sberbank IS THE LARGEST TECHNOLOGY est corporate Institute for Geology chemical facilities, reviewed with the domestic mar- on enhancing cooperation and . CLUSTER IN EUROPE and Development of Fossil by authorised state bodies. ket, embrace new technology in the digital industry and build- Fuels (IGiRGI). Savings resulting and explore innovation oppor- ing its own digital ecosystem. Rosneft’s endeavours to meet its Research fostered by Rosneft from the abandonment of for- The technology cluster’s labs have tunities in IT, the Company held The Company works with lead- business development targets helped create Europe’s largest eign services totalled more than examined 26 km of core sam- Rosneft Pitch Day, an online exhi- ing national universities, including and create an industry standard (and unprecedented in the world) RUB 1.7 bln. ples – about 2.8 million studies bition of domestic IT solutions Gubkin Russian State University in IT are guided by the Company’s corporate system set to solve of 100 thousand samples have inviting Russian manufactures of Oil and Gas, Lomonosov IT strategy that defines informa- applied and fundamental problems Over 300 internal regula- been conducted to provide evi- to showcase their IT achievements Moscow State University, MIPT, tion technology as a tool for opti- of the Company and the whole oil tions of Rosneft stem from its dence of the Company's reserves that can be of benefit to Rosneft’s National Research University mising and transforming business and gas sector. To date, over 800 best technical solutions gov- growth, including hard-to-recover core operations. Following Higher School of Economics processes. Some examples proprietary technologies have been erning the operations of Group reserves, and to boost the effi- the event, the Company selected and others, specialised agencies, of the relevant projects are listed developed and patented. Subsidiaries, as well as part- ciency of hydrocarbon production. a number of technologies to be vendors and developers below: ners, counterparties, equipment 19 new fields and 208 new depos- Rosneft currently operates 34 and service providers. its have been discovered based research and technology cen- on inputs from the institutes. tres employing over 20 thou- We have established targeted sand highly qualified professionals process to search for and roll out Our research centres for oil refin- and scientists. The Company's effective design solutions. Each ing manufactured more than technology cluster is home year, Rosneft creates more than 10,000 tonnes of petrochemi- to 44 competence centres for ded- 100 design solutions to improve cals to provide the Company's icated and research-intensive the reliability and technical effi- own facilities with base oils, activities. ciency of facilities subject import-substituting additives to approval by the Company's for fuels and oils. The scope of work and the range Scientific and Technical Council. of competencies of corporate R&D Together with Innopraktika, facilities is growing every year. For the purposes of systemic a non-governmental development Currently, we are focused on R&D import substitution and cost opti- institute, Moscow State University, in bleeding-edge smart production misation, Rosneft's corporate insti- and Rosgeologia, we made two technologies, robotic systems, new tutes have developed a range unique expeditions to develop materials and design of research-intensive technological and explore the Arctic.

Pilot projects

Metric Total projects / Projects tested / Costs, Total incremental Economic effect, technologies deployed RUB thousand, oil production, kt RUB thousand incl. VAT

Technology testing 127 314 392,063 69 370,448

Technology 72 3,704 1,866,049 275 540,538 deployment

222 223 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

ACHIEVEMENTS IN 2020 UNDER BUSINESS DIGITALISATION PROGRAMMES

UPSTREAM. DIGITAL FIELD

• 100% of Russian Group optimisation technology helped that help accelerate and improve Subsidiaries involved the Company save up to 52 management’s decision-making, in production that days per year within the pro- reduce the risk of, and the time are part of the Exploration duction well building and work- of response to, incidents and Production business over cycles. After pilot testing and emergencies. were given access to geologi- had confirmed there was a sig- cal drilling support that relies nificant effect, the Company on data visualisation powered started developing a single cor- by advanced analytics. porate solution for all its drilling • integrated modelling of a pro- technology that is being pur- • protected standby capaci- • RN-GRID, a unique hydraulic facilities. duction asset that combines sued by a number of govern- ties in different geographies; fracturing simulator, is in charge • Digital twins were created models of the formation, well, ments coupled with the COVID-19 implementing a set of meas- of 100% engineering calculation for the fields of six Group production infrastructure, accu- pandemic, changes in the envi- ures to enhance remote work- required to design and perform Subsidiaries in Exploration mulation and storage system; ronment and regulatory frame- ing at the Company, upgrading hydraulic fracturing. and Production. Digital • integrated planning work, the emergence of new the IT infrastructure, mobile • Rosneft’s own mathemati- twins are 3D models based and management in production digital technologies and the need ecosystem security system, etc.; cal modelling and schedule on advanced data visualisation and drilling; for higher returns from IT solutions • creating a corporate store • prediction of equipment failures; force the Company to adapt its IT of basic digital apps to support • computer vision. strategy. the implementation of digital OIL REFINING. DIGITAL PLANT scenarios across the Company’s In 2020, the Company analysed To this end, the Company seeks processes; 26 digital scenarios and launched to leverage information tech- • developing solutions to digital- 14 digital projects. nology to improve the effective- ise management and production ness of its business, focusing processes across the Company There are 35 digital projects on the following: using AI technology. currently underway as part • deploying digital technologies of the Comprehensive Plan across its operations to build to Deliver the Rosneft–2022 a single digital environment Strategy. These cover areas such and migrating to big data-pow- as Digital Field, Digital Plant, ered products; creating self-suf- Digital Supply Chain and Digital ficient IT solutions and using • Projects to introduce advanced • Piloting a solution template solution for optimised blend- Filling Station. proprietary developments; process control systems to automate repair, mainte- ing of heavy petroleum products improving the corporate data are being rolled out at six Group nance, and equipment control at five refineries. The external challenges that come processing centre and creating Subsidiaries. was approved for two Group from a consistent policy of sanc- a network of regional data pro- • 24 engineering models have Subsidiaries. tions in relation to providing cessing centres, including been developed and updated • Functional and engineering for process units at refineries requirements and the architec- in Oil Refining. tural concept were approved to create a standard

224 225 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

PETROCHEMICALS CYBER SECURITY

Information security is a key fac- in information security that apply procedure has been established tor underlying the Company’s in Russia and the jurisdictions to interact with the National sustainable operation amid dig- of the Company’s operation. Computer Incident Response italisation and improvement and Coordination Centre. of business management, con- To streamline the implementa- Scheduled and ad hoc cyber drills trol and industrial automation tion of the information security are arranged on a regular basis systems. strategy, the Company has built to ensure the staff are prepared an extensive portfolio of pro- to counter cyber attacks. Since 2018, the Company has jects aimed at planned upgrad- been implementing its information ing and testing of innovative In 2020, amid the unfavourable • Software robots were developed business processes relat- security strategy aimed to ensure information security solutions. epidemiological situation expe- to manage inventories (seven ing to inventories and pro- secure digital development The Company places a strong rienced both in Russia and glob- robots) and procurement pro- curement at Novokuibyshevsk of the Company. focus on promoting the corpo- ally, the Company paid particular cedures (two robots) as part Petrochemical Company. rate culture and digital hygiene attention to safe and sustaina- of a pilot project to automate In 2020, Rosneft's Board and improving the staff's aware- ble operation of its IT infrastruc- of Directors approved the revised ness of, and skills in, information ture as employees were moved Information Security Policy, security. to remote working. COMMERCE AND LOGISTICS which addresses the new chal- lenges. The policy is a core doc- Rosneft continues its efforts ument that sets the framework to comply with provisions for protecting business pro- of Russian laws on critical infor- cesses and interests from risks mation infrastructure protec- and threats to information secu- tion. Group Subsidiaries conduct rity and ensuring compliance regular compliance monitor- with laws and local regulations ing. On top of that, a centralised

• The Company is developing the residue to 5.5% of the tech- the Digital Core for Commerce nological limits in 2021 and 8.3% and Logistics initiative, of the technological limits which is expected to reduce in 2022 and onwards.

REGIONAL SALES. DIGITAL FILLING STATION

• 1,500 of the Company’s fill- • 50 filling complexes saw the roll- • Five suppliers of complemen- ing stations allow payment out of contactless payment tary goods for filling stations from inside the car. solutions for products bought took part in testing of block- • 23 self-service terminals have in the café and store and deliv- chain-based electronic workflow. been installed at 12 filling sta- ered to the customer’s car. tions of the Company.

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MESSAGE FROM THE CHAIRMAN OF THE BOARD 5 OF DIRECTORS

DEAR SHAREHOLDERS promising project. The invest- AND INVESTORS, ment community highly appreci- ated the Company’s performance 2020 saw the Company con- and, as a result, its shares have tinue with the implementa- hit fresh highs in this year of 2021, tion of Rosneft–2022, one outperforming the MOEX Russia of the industry’s most comprehen- Index growth rate several fold. sive strategies. Consistent efforts of our management and employ- In April 2020, the Board ees supported business continu- of Directors voted to assign more ity and paved the way for further responsibilities to the Strategic growth. Planning Committee, renaming it the Strategy and Sustainable In October, the Board resolved Development Committee. to make some changes The Committee assists the Board to the Management Board of Directors in defining strategic to help the team better address goals and growth targets, includ- the pandemic-related chal- ing ESG goals. lenges and to strengthen the ties with Rosneft’s major regional In 2020, the Company contin- divisions. ued to introduce innovations and develop its R&D capabili- The Company places health ties as part of the Rosneft–2022 and safety among its top pri- Strategy, came up with new meth- orities. To contain the spread ods to produce synthetic oil, of the coronavirus, Rosneft pro- researched into minimising car- cured personal protective equip- bon footprint, and deployed digital Gerhard SCHROEDER ment for employees at all its production management plat- Chairman of the Board of Directors production facilities, filling sta- forms for oil refineries and stor- tions and offices and introduced age facilities. Commissioned strict sanitary and anti-epidemic by the Company, Russia’s first cutting the methane emissions The results of 2020 controls at its shift camps, estab- green tanker Vladimir Monomakh intensity, and achieving zero rou- are a testament to the correctness lishing observation and isolation completed its inaugural voyage tine flaring of associated petro- of the Company’s focus on busi- units and staffing them with med- after successfully passing its sea leum gas (APG). ness development and imple- ical personnel. Beyond the Arctic trials in 2020. mentation of new high-potential Circle, Rosneft introduced tele- In December, projects in strict compliance medicine at its facilities. As a key item of its environmen- the Board of Directors assessed with the highest environmental tal agenda, the Board of Directors the Company’s performance and carbon footprint standards. In the reporting year, Rosneft’s reviewed our Carbon Management over the reporting period Board of Directors recommended Plan for the period until 2035. It and approved a business plan giv- record high dividends for 2019 – focuses on preventing GHG emis- ing the go-ahead for the man- RUB 354.1 bln1 – and approved sions, reducing the upstream agement to continue investments Vostok Oil, a large-scale and very emissions intensity by 30%, in promising projects.

1 CORPORATE Governance Including dividend payment for the first six months of 2019.

230 231 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

CORPORATE GOVERNANCE GUIDING PRINCIPLES FOR THE COMPANY’S GOVERNING BODIES

Commitment to shareholders

Rosneft has adopted the world’s best corporate governance practices A substantial share of the Company’s net and complies with the Bank of Russia’s Corporate Governance Code to ensure income is distributed as dividends. the following: KEY CORPORATE GOVERNANCE PRINCIPLES AND IMPROVEMENTS • equal rights and opportunities for, and equitable treatment of all shareholders; In 2020, our shareholders were IN 2020 • professionalism and independence of the Board of Directors who act in the best paid interests of all shareholders; • efficiency of the the Risk Management and Internal Control System (RM&ICS); RUB 191.5 bln • timely disclosure of complete, valid and up-to-date information on the Company’s activities that is most relevant to shareholders and investors for them to rely We continue enhancing Shareholder's Personal Account, a powerful tool on in making informed decisions. Our corporate governance framework and guidelines for its development take into account for shareholders to stay in contact the major role that Rosneft plays in its domestic and export markets. The Company with the Company. is committed to creating a favourable environment for effective cooperation with its shareholders, employees and business partners. Innovation and global leadership Partnership with non-governmental organisations and cooperation with state institutions

Continuous improvement and global leadership are the prior- The Company is a party to the UN Global Compact. ities that encourage us to develop and invest in cutting-edge technologies. In 2020, we released an updated public statement regard- ing the Company's contribution towards achieving the UN In 2020, Rosneft demonstrated new developments in environ- Sustainable Development Goals. mental safety and seismic surveying. Rosneft is the largest taxpayer in Russia.

Favourable environment Protection of shareholders for sustainable growth and key stakeholders

The Company cares for its employees, their families, The Company implements best internal control and risk man- and members of local communities across its footprint. agement practices, develops technologies for industrial safety and information security, and ensures product safety, protect- We at Rosneft keep a clear focus on employee health, hav- ing its customers and contractors. ing adopted an integrated framework to respond to epidemic threats. Amid the pandemic, we adopted a practice of test- ing our employees for COVID-19 and provided all of them with personal protective equipment.

The Company takes care of the environment by introducing Rosneft maintains compli- carbon management initiatives and implementing best waste management practices. Commitment to environmental safety ance with the Bank of Russia’s is an integral part of our corporate culture. Corporate Governance Code at a high level of 95.2%. The Company supports scientific research, culture, and sports. The minimum threshold as recom- mended by the Federal Agency Rosneft respects and honours human rights and freedoms for State Property Management in accordance with the Universal Declaration of Human Rights, Social Charter of the Russian Business, relevant generally (Rosimushchestvo) is 65% (for eval- accepted standards, and the laws of the Russian Federation uation of compliance with the Bank Adhering to high corporate governance standards and other countries where the Company operates. of Russia’s Code see Appendix 3 is a strategic priority that powers the long-term sus- to this Annual Report). tainable growth of Rosneft’s shareholder value.

232 233 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

GOVERNANCE AND CONTROL STRUCTURE

The Company operates a two-tier management model where management functions are split Executive Bodies between the Board of Directors and executive bodies. Executive bodies manage the day-to-day operations for the benefit of the Company and report to the Board of Directors and the General Shareholders Meeting. BOARD OF DIRECTORS EXECUTIVE BODIES Chief Executive Officer Management Board

The Board of Directors performs two key functions: • The law requires companies to have a sole exec- Sole executive body Collective executive body • strategic management of the joint-stock company, utive body. At Rosneft, it is the Chief Executive which includes approving strategic documents Officer. In dealing with third parties, this person and material transactions; is authorised to act on behalf of the Company • oversight of the executive bodies. without a power of attorney. • Rosneft has established a collective execu- Coordinating and consultative bodies tive body (Management Board) which is chaired by the Chief Executive Officer. Pursuant to the laws Coordinating and consultative bod- • Budget Committee; • Information Technology Expert of the Russian Federation, the Management ies of the Chief Executive Officer carry • Council for Business Ethics; Council; Board and its members (except for the CEO) out in-depth reviews of matters that • Carbon Management Committee • Expert Council for Quality and Safety are reserved to them. These bodies • Central Procurement Committee; of Oil Products; are not authorised to enter into transactions include: • Central Conflict Resolution • other coordinating and consultative or execute legal acts on behalf of the Company • Technological Council; Commission; bodies of the Company. without a power of attorney. • Investment Committee; • Commission on Energy Efficiency;

Head of Internal Audit and Corporate Secretary are appointed by the Board of Directors

Reporting Reporting Administrative subordination General Shareholders Meeting

Rosneft’s supreme governing body responsible for decision-making on key matters of the Company’s business. Internal Audit Service Corporate Secretary Reporting, set-up, Election Reporting assessment Assesses the robustness and effectiveness Ensures the governing bodies’ compliance with the appli- Board of Directors of the Company’s business processes, identifies internal cable laws, the Company Charter and internal regulations, potential for improving its financial and business perfor- which guarantee protection of shareholders’ rights and legit- mance, including that of the Group Subsidiaries. imate interests. Organises the work of the Board of Directors Board of Directors provides strategic management of the Company’s activities; it reports to the General and is responsible for efficient communication between Shareholders Meeting and acts on behalf and for the benefit of all shareholders within its remit. the Company’s shareholders, governing and supervisory bod- ies, and management. Set-up

Committees of the Board of Directors

Functional Audit Committee HR and Remuneration Committee Strategy and Sustainable subordination Development Committee Reviews and then issues rec- Reviews and then issues recommendations ommendations for overseeing for assessing effectiveness of the Company’s HR Assists in defining the Company’s the Company’s business; preparing and succession policies and the appointment strategic goals and growth tar- complete and accurate account- and remuneration system; evaluating Board gets, including ESG goals, and issues ing (financial) statements and other and management candidates; reviewing inde- strategic and business planning External auditor Audit Commission reports; and ensuring reliability pendence of independent directors; and con- recommendations. and effectiveness of risk manage- ducting performance assessments of the Board A commercial organisation selected through a procurement Oversees the Company’s financial and business operations ment and internal control systems, of Directors, the executive bodies, and top man- process and approved by the General Shareholders Meeting and performance of its governing bodies, executives, business compliance, internal audit, and cor- agers of the Company. upon recommendation of the Board of Directors based units and functions, branches and representative offices. porate governance. on the Audit Committee’s assessment. Head of Internal Audit Audit Head of Internal is in direct contact with the Committee

Reporting

Election 234 235 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

GENERAL SHAREHOLDERS MEETING BOARD OF DIRECTORS

Elected Age Composition by the General Shareholders Meeting, the Board of Directors Annual General Shareholders Meeting, a supreme provides strategic manage- governing body, on results of 2019 took place in 2020. The procedure for convening, preparing ment of the Company’s activities for, holding and following on behalf and for the benefit of all up on the General shareholders. Shareholders Meeting ANNUAL GENERAL SHAREHOLDERS is set forth by Rosneft’s Regulations It is run by the Chairman MEETING on the General Shareholders Meeting. and Deputy Chairmen and has a number of dedicated commit- Pursuant to Article 2 of Federal The existing tools for remote com- tees to carry out in-depth reviews Under 45 years 1 Independent 36% Law No. 50-FZ dated 18 March munication and the Company’s of matters that are reserved 46–55 years 2 Non-executive 55% 2020, the Board of Directors had own corporate services, namely As at 31 December to them. 56–65 years 2 Executive 9% resolved to use absentee voting Shareholder’s Personal Account, 2020, all resolutions 66 or over 6 as the format for the Company's enabled our shareholders to par- of the Company's Information on the mem- Annual General Shareholders ticipate in corporate proceedings Annual General bers and activities of the Board Meeting, which was held on 2 June in full and without restrictions Shareholders of Directors and its committees 2020 (vote by means of ballots). and provided unconditional abil- Meeting 2019 were is published on the Company’s offi- ity to exercise shareholder rights implemented in full. cial website. This resolution was made due without physical presence. to the COVID-19 pandemic Key competencies of directors and associated restrictions The holders of 90.8% on public events. of the Company shares took part Director Competencies in the meeting. Strategy Oil Corporate Law Finance Risk Politics/ HSE HR and gas governance and audit management GR Rosneft's shareholders, their safety and M&A and well-being are the top priori- They approved the Annual Gerhard Schroeder х х х х ties of our governing bodies. Report, annual accounting (finan- cial) statements and net income Igor Sechin х х х х х х х distribution for 2019 (includ- Matthias Warnig х х х х х х ing for dividend payment), Faisal Alsuwaidi х х х х elected the Board of Directors Hamad Rashid х х х х х and the Audit Commission, Al-Mohannadi determined the remuneration Oleg Viyugin х х х х х For information on of the Board and Audit Commission Robert Dudley х х х х х х х Shareholder's members for the period, Bernard Looney х х х х х х Personal Account, and approved the Company’s Novak х х х х х see the section Auditor. Maxim Oreshkin х х х х Official Channels Hans-Joerg Rudloff х х х х of Communication During the exercise, sharehold- with Shareholders. ers had an opportunity to ask Directors who left the Board of Directors on 2 June 2020 their questions on the agenda via Andrey Belousov х х х х х х х their personal accounts, the share- Guillermo Quintero х х х х х х х holder hotline, or by mail.

236 237 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Born in 1960. Federation, member of the Boards of MEMBERS OF THE BOARD Graduated from the Leningrad State Trustees of Lomonosov Moscow State University in 1984, holds a PhD in University, National Intellectual De- Economics. velopment Foundation, St Petersburg OF DIRECTORS 2000–2004: Deputy Head of the Rus- State University, Graduate School of sian Presidential Administration. Management of St Petersburg State 2004–2008: Deputy Head of the Rus- University, St Petersburg Mining Uni- sian Presidential Administration, Aide versity, Russian Federal Public Acade- (AS AT 31 DECEMBER 2020) to the President. my of Education, Moscow State Insti- 2008–2012: Deputy Prime Minister of tute of International Relations, Russian the Russian Federation. Geographical Society, Lomonosov Chief Executive Officer Moscow State University High School, The directors elected The Board is made up of eleven 2012 – present: and Chairman of the Management Primakov Gymnasium, and Church by the Annual General directors from different coun- Board. Construction Support Fund in Moscow, Shareholders Meeting in 2020 tries and backgrounds, includ- First elected to the Company's Board Chairman of the Supervisory Board of perfectly fit the Company's ing experience in public Igor SECHIN of Directors in 2004. Chairman of Genetic Technologies, member of the international profile and scale service and with major oil and gas the Board of Directors in 2004–2011. Supervisory Board of the Global Ener- of operations while also bringing and financial companies. We want Deputy Chairman, Chief Executive Officer, Chairman of the Management In November 2012, he was re-elected gy Association (international research the strategic governance expertise to make sure that the Board’s Board to the Board of Directors, and from and energy projects), and member of and professional competencies resolutions are unbiased. This June 2013 holds the position of the the Supreme Supervisory Board of the needed to make informed, unbi- is why four out of eleven directors Deputy Chairman. Boxing Federation of Russia. ased economic, financial, risk man- are independent, as recommended Involvement in other Holds 13,489,350 shares of Rosneft agement and other decisions that by the Corporate Governance companies (0.1273 % of the Company’s charter will help deliver on Rosneft's goals. Code of the Bank of Russia. Chairman of the Boards of Directors capital). of ROSNEFTEGAZ and Inter RAO, and Chairman of the Supervisory Board of CSKA Professional Hockey Club1. Involvement in non-profit organisations Active in the areas of social, scientific, sports and education development; Born in 1944. Involvement in other serves as Chairman of the Board of Graduated from the University of companies Trustees of the Russian Research Cen- Goettingen (Germany), the Department Chairman of the Shareholders’ Com- tre for Radiology and Surgical Technol- of Law, in 1976. mittee of Nord Stream AG (Switzer- ogies, Deputy Chairman of the Super- Foreign fellow of the Russian Academy land), Chairman of the Board of Direc- visory Board of the Russian of Sciences. tors at Nord Stream 2 AG (Switzerland), 1998–2005: Chancellor of Germany. Deputy Chairman of the Supervisory Elected to the Board in Septem- Board at Herrenknecht AG (Germany), ber 2017. and member of the Executive Board at BVUK (Betriebliche Vergutungs- und Versorgungssysteme fur Unternehmen und Kommunen, Germany).

Holds no shares of Rosneft. Gerhard SCHROEDER Chairman, independent director

1 For more information on the positions held in the governing bodies of other organisations, see the Management Board section and the Company's official website.

238 239 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Born in 1955. Involvement in other Born in 1952. Involvement in non-profit Graduated from the Bruno Leuschner companies Graduated from Lomonosov Moscow organisations Higher School of Economics (Berlin) Member of the Supervisory Boards State University in 1974, holds PhD in Active in the areas of strategic devel- in 1981. of VTB Bank, and FC Gelsenkirch- Physics and Mathematics. opment, entrepreneurship, corporate 1990–2006: was engaged in the en-Schalke 04 e.V. (Germany), mem- 2004–2007: Head of the Federal Ser- governance and education; serves as financial activities of ber of the Administrative Council of vice for Financial Markets. a member of the Board of the Centre Group AG in Frankfurt, St Petersburg, GAZPROM Schweiz AG (Switzerland), 2007 – present: Professor of National for Strategic Research, Agate Youth and Moscow and held the positions member of the Board of Directors of Research University Higher School of Entrepreneurship Foundation, mem- of President, Chairman of the Board Transneft, and Chairman of the Admin- Economics. ber of the Boards of Trustees of EUSP of Directors, and Chief Coordinator of istrative Council of Gas Project Devel- 2013–2015: Senior Advisor for Russia Endowment Fund, NES Endowment Dresdner Bank AG in Russia. opment Central Asia AG (Switzerland)1. and CIS at Morgan Stanley Bank (con- Fund, and Forum Analytical Centre, and 2006–2016: Managing Director of tractor agreement). Holds 92,633 shares of Rosneft member of the Praesidium of National Nord Stream AG (Switzerland). Elected to the Board in June 2015. (0.0009% of the Company’s charter Corporate Governance Council. 2008 – present: Director of Interatis capital). Involvement in other AG (Switzerland) companies Holds no shares of Rosneft. Matthias WARNIG 2015 – present: Executive Director of Oleg Viyugin Nord Stream 2 AG (Switzerland). Chairman of the Supervisory Board of Deputy Chairman, independent Member of the Strategy the , Chairman of director Elected to the Board in June 2011. and Sustainable Development the Board of Directors of NAUFOR, Chairman of the HR and Remuneration Committee, and Audit Committee, Committee, member of the Audit independent director Advisor to CEO of SAFMAR Financial Committee Investments, member of the Board of Directors of , member of the Su- pervisory Board of National Settlement Depository and SF Holdings Co PLC.

Born in 1954. Born in 1955. Involvement in non-profit Graduated from Merton Technical Col- Graduated from the University of Illi- organisations lege (UK) in 1978. nois in 1977. Active in the area of energy sector de- 2012–2018: President of Research and Bachelor of Science in Chemical En- velopment; serves as Chairman of the Development at Qatar Foundation. gineering. Holds a Master of Science's Global Energy Board. 2018 – present: Member of the Board degree in International Management Holds no shares of Rosneft. of Trustees at from Thunderbird School of Manage- Qatar University. ment (USA) and MBA from Southern 2018 – present: Representative of Methodist University (USA). Qatar Investment Authority. 2003–2008: Chairman of the Supervi- Elected to the Board in June 2017. sory Board, President, CEO at TNK BP Management. Holds no shares of Rosneft. 2009–2020: Director and member of the Board of Directors at BP p.l.c. 2010–2020: CEO of BP Group. Faisal ALSUWAIDI Robert Dudley 2016–2020: Chairman of the Oil and Gas Community of the World Economic Member of the Strategy Chairman of the Strategy and Sustainable Development and Sustainable Development Forum. Committee, and HR and Remuneration Committee 2016 – present: Chairman of the Oil Committee and Gas Climate Initiative. 2020 – present: BP RIL Consultant. Elected to the Board in June 2013.

1 For more information on the positions held in the governing bodies of other organisations, see the Board of Directors section and the Company's official website.

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Born in 1970. Involvement in non-profit Born in 1982. Involvement in non-profit Graduated from University College organisations Graduated from the Higher School of organisations Dublin (Ireland) in 1991, Stanford Uni- Active in the areas of geography and Economics with a Bachelor's degree in Active in the areas of social, scientific, versity (USA) in 2005. related sciences; member of the Board Economics in 2004 and with a Master's sports and education development; Bachelor of Science in Electrical Engi- of Trustees of the Russian Geographical degree in Economics in 2006. serves as Co-Chairman of the Supervi- neering, Master of Science in Manage- Society. 2002–2006: 1st Category Economist, sory Board of the National Association ment. Lead Economist, Chief Economist, Sec- of Technology Transfer, member of the Holds no shares of Rosneft. Fellow of the Royal Academy of tor Leader at the Balance of Payments Supervisory Boards of the Analytical Engineering and the Energy Institute. Department of the Bank of Russia. Centre for the Government of the Rus- Mentor in the FTSE 100 Cross-Compa- 2006–2013: held various positions at sian Federation, and Agency for Strate- ny Mentoring Executive Programme. commercial banks. gic Initiatives to Promote New Projects, 2013–2016: Chief Operating Officer for 2013–2016: Head of the Long-term Chairman of the Board of Trustees of Production of BP p.l.c. Strategic Planning Department (2013 the Novgorod Museum Reserve, and 2016–2020: Chief Executive Officer for to 2015), Deputy Minister of Finance of member of the Boards of Trustees of Upstream of BP p.l.c. the Russian Federation (2015 to 2016). the Skolkovo Foundation, Russian Pres- Bernard Looney 2016–2020: member of the Board of Maxim Oreshkin 2016 – January 2020: Minister of idential Academy of National Economy Directors of Aker BP. Economic Development of the Russian and Public Administration, and Russian Chief Executive Officer, BP p.l.c. Aide to the President 2020 – present: Chief Executive Officer of the Russian Federation Federation. Geographical Society. and member of the Board of Directors January 2020 – present: Aide to the Holds no shares of Rosneft. of BP p.l.c. President of the Russian Federation Elected to the Board in June 2020. Elected to the Board in June 2020. Involvement in other companies Chairman of the Boards of Directors of the Russian Post, Channel One, and Professional Football Club CSKA, member of the Bank of Russia’s Nation- Born in 1971. of Rosatom and the Global Energy al Financial Board, and member of the Graduated from Norilsk Industrial Association (international research Supervisory Boards of Sberbank, VEB. Institute in 1993 and from Lomonosov and energy projects), Chairman of the RF, and the Management Company of Moscow State University in 2009. Board of Trustees of Moscow Power the Russian Direct Investment Fund. 2008–2012: Deputy Minister of Fi- Engineering Institute, member of the nance of the Russian Federation. Boards of Trustees of Siberian Federal 2012–2020: Minister of Energy of the University and Gubkin Russian State Russian Federation. University of Oil and Gas, and Chair- 2020 – present: Deputy Prime Minister. man of WEC RNC, Russian Basketball First elected to the Board in June 2015 Federation, Solovki Archipelago Pres- and served as a director until ervation and Development Foundation, June 2017. Re-elected to the Board in and International Sustainable Energy Born in 1940. Involvement in other September 2017. Development Centre under UNESCO Graduated from the University of Bern companies (Switzerland) in 1965. Member of the Foundation Board of Involvement in other auspices. 1998–2014: Chairman of the Manage- International Centre for Monetary companies Holds no shares of Rosneft. ment Board at Barclays Capital. and Banking Studies (ICMB), advisor to Alexander NOVAK Chairman of the Boards of Directors of 2002 – present: Chairman of Marcuard the Board of TB Holdings NV (Thys- Deputy Chairman of the Strategy and Transneft, member of the Holding. sen-Bornemisza Group) and director at and Sustainable Development Board of Directors of Gazprom. Committee 2003 – present: Executive Director of Decolef and Guardian Capital. Involvement in non-profit ABD Capital S.A. Holds no shares of Rosneft. organisations 2015 – present: President of ABD Cap- Active in the areas of education and ital Eastern Europe S.A. sports development, and energy sec- First elected to the Board in tor; member of the Supervisory Boards June 2007. Member of the Board of Di- rectors from June 2007 to June 2013. Re-elected to the Board of Directors in Hans-Joerg Rudloff June 2018. Chairman of the Audit Committee, member of the HR and Remuneration Committee, independent director

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Born in 1958. Energy and Sustainable Development. Directors' Attendance at Board and Committee Meetings in 2020 Graduated from Portland State Univer- 2017–2020: Chairman of the Board of sity (USA) in 1981. Trustees at The Community College of Board of Directors Audit HR Strategy Between 1985 and 2018, he held the Qatar. Committee and Remuneration and Sustainable following positions: Representative of Qatar Investment Member of the Board Status (executive/non-executive/ Attendance Committee Development of Directors independent) • Head of the downstream business of Authority. Committee Qatar Petroleum; Elected to Rosneft’s Board of Directors Gerhard Schroeder Independent 31/32 • Chief Executive Officer of Qatar Pet- in June 2019. Igor Sechin Executive 32/32 rochemical Company (QAPCO); Holds no shares of Rosneft. Matthias Warnig Independent 31/32 17/17 14/14 • Chairman of Qatar Shipping Com- Hamad Rashid pany; Non-executive 32/32 15/15 Al-Mohannadi • Chief Executive Officer of RasGas Faisal Alsuwaidi Non-executive 32/32 7/ 7 15/15 Company; • Member of the Boards of Directors Oleg Viyugin Independent 32/32 17/17 15/15 of Qatar Petroleum and RasGas Robert Dudley Non-executive 29/32 15/15 Hamad Rashid Company; Bernard Looney Non-executive 16/16 • Member and Chairman of the Board AL-MOHANNADI Alexander Novak Non-executive 31/32 15/15 of Trustees of Qatar University. Member of the Strategy 2015 – present: member of the Board Maxim Oreshkin Non-executive 16/16 and Sustainable Development of Trustees at the Abdullah Bin Hamad Hans-Joerg Rudloff Independent 32/32 17/17 14/14 Committee Al-Attiyah International Foundation for Directors who left the Board in 2020 Andrey Belousov Non-executive 15/16 5/5 Guillermo Quintero Non-executive 15/16 7/ 7

Note: the first figure stands for the number of meetings attended by the director, the second figure stands for the total number of meetings DIRECTORS WHO LEFT THE BOARD IN 2020 they were entitled to attend. For reference: Gerhard Schroeder, Chairman of the Board, and Igor Sechin, Matthias Warnig, Robert Dudley, Guillermo Quintero, Bernard Looney, and Hans-Joerg Rudloff, directors, did not vote on a number of agenda items that could involve a potential legal and/or commercial conflict of interests.

Born in 1959. 2012–2013: Minister of Economic Andrey Graduated from Lomonosov Moscow Development of the Russian Federation. BELOUSOV State University in 1981, Doctor of 2013–2020: Aide to the President of INDUCTION Economics. Russia. Member of the Strategy and Sustainable Development 2006 – present: Chief Researcher 2020 – present: First Deputy Prime The Company ensures prompt corporate and organisational The induction Committee1 (part-time) at the Institute of Economic Minister. onboarding of new directors structure, and corporate govern- procedure for Board Forecasting of the Russian Academy of Elected to the Board in June 2015. in line with the established induc- ance practices. They have been members is described Sciences. Chairman of the Board of Directors tion procedure. In 2020, Maxim briefed on the Succession Plan in Rosneft Regulations 2008–2012: Director of the Depart- from June 2015 to September 2017. on the Induction Oreshkin and Bernard Looney for Directors and Management of Rosneft Board ment of Economics and Finance of the 2 Holds no shares of Rosneft. nominated by JSC ROSNEFTEGAZ Board members and received Members. Russian Government. and BP Russian Investments an explanation of the confiden- Limited were elected to the Board tiality and insider information of Directors for the first time. requirements, and the procedure for their participation in the meet- Guillermo Born in 1957. 2014–2016: President of BP Explora- Rosneft’s management promptly ings of the Board of Directors Graduated from the University of cion de Venezuela S. A. introduced the elected direc- and its committees. Quintero Southern in 1979. 2016 – present: Director of GQO tors to the Company’s day- : Regional President Brazil, Consultants LTD. Member of the HR 2010–2015 to-day operations, strategy, and Remuneration Committee Uruguay, Venezuela and Columbia, Elected to the Board in June 2015. BP Energy do Brasil Ltda and BP Brasil Holds no shares of Rosneft. Ltda, and President and Director of BP Brasil Ltda. 2011–2015: President of BP Exploration do Brasil Ltda. 2011–2016: Director at BP Petroleo y Gas S. A.

1 Strategic Planning Committee until April 2020. 2 The Document was approved by resolution of Rosneft's Board of Directors on 29 May 2020.

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ACTIVITIES OF THE BOARD OF DIRECTORS To this end and to help maintain • Energy Saving Programme strong performance in other areas, Rosneft Oil Company's for 2020–2024 and report Regulation on Evaluation Matters considered the Board approved the Action of Rosneft Board on the programme implementa- The Board Plan to Improve the Performance of Directors Performance. tion in 2019; HR and Remuneration 11 (8%) of Directors is governed by the Regulations of Rosneft’s Board of Directors that • report on the Company's HSE Directives of the Russian 13 (9%) on the Board of Directors takes into account the 2019 exter- activities in 2019 and preliminary Government of Rosneft Oil Company. Transactions 35 (25%) nal assessment by Ernst & Young Committee, with additional pow- results of 2020; Corporate governance 27 (20%) as an independent consultant. ers to review ESG-related matters, • report on the Information Policy Report reviews 18 (13%) In 2020, the Board of Directors the Board will be able to focus implementation in 2020; Finance, business projects 14 (10%) held 32 meetings (3 in person Update of the Succession Plan more closely on the Company's • report on the Innovative Audit, risks 5 (4%) and 29 in the form of absentee for Directors and Members green projects. Development Programme pro- Approving/amending 6 (4%) voting) and considered 139 items of the Management Board gress in 2019; internal regulations (16 at in-person meeting and 123 to reflect Bank of Russia’s recom- The following internal documents • reporting on the identifica- Strategy items 7 (5%) at meetings held in the form mendations and the 2019 exter- were approved/amended: tion of company-wide financial Other 3 (2%) of absentee voting). nal assessment of the Board • Policy on Onshore Oil and operational risks for 2021. by Ernst & Young. The Plan Production; seeks to guarantee succession • Policy on Gas Business; The following documents and cri- BOARD RESOLUTIONS IN KEY FOCUS AREAS in the Company’s management • Information Security Policy; teria related to remuneration bodies and preserve the Board • Working Capital Management were approved: of Directors and Management Policy; • performance indicators Review of the Rosneft–2022 meeting’s (ONOMM) decisions set- • introducing tax monitoring; Board’s best practices ensuring • Policy on Internal Audit; of Rosneft's top managers Strategy execution. The Board ting Rosneft’s oil production level • improving labour productivity; consistency with the Company’s • Regulations on Rosneft Board for 2020; of Directors noted achievement in Russia for the period until May • updating Rosneft’s Long-Term development strategy. Committees. • normalised KPIs of top managers of most of the Strategy’s key goals 2022. The Board of Directors took Development Programme for the 2019 annual bonus cal- for 2020. notice of the preliminary results to reflect the Company’s 2019 In 2020, the Board of Directors The following programmes culation, and their performance of the business plan performance results. continued expanding its and reports were reviewed/ and bonus amount for 2019. Renewal of Rosneft’s Long- and normalisation in 2020. ESG and sustainable growth approved: Term Development Programme Amendments to the terms agenda. In particular, by vesting • Sustainability Report 2019; The Board of Directors con- to account for external factors, It approved the implementation of Rosneft’s Open Market Share the Strategic Planning Committee, • reports on the activities ducted corporate procedures the independent auditor’s rec- concept for Vostok Oil, a project Buyback Programme. To bring which was renamed the Strategy of the Board's committees with respect to more than 60 ommendations, the Company’s to create a new oil and gas prov- it in line with the current market and Sustainable Development in 2019–2020; interested party transactions. updated strategic targets ince in Russia’s north. environment, the programme was and the Programme implementa- amended to simplify the buyback tion results in 2019. The Board approved procedure. the business projects to develop Approval of Innovation the Suzunskoye and Lodochnoye Evaluation of the independ- Development Programme fields, Erginsky and Chupalsky ent directors against independ- for 2020–2024 with an outlook licence areas, and Russkoye field. ence criteria (Gerhard Schroeder, for 2030 to support Rosneft’s Matthias Warnig, Oleg Viyugin development as a high-tech energy It reviewed the Comprehensive and Hans-Joerg Rudloff). company, ensure its technological Plan for the Enhancement leadership in oil and gas production of the RM&ICS in 2020–2022 Self-assessment review and oil refining, and meet the strin- and the report on the implementa- of the Board’s performance gent international environmental tion of the Plan in 2019. in 2019 and 2020. and industrial safety standards. To ensure compliance All surveyed Directors, senior Approval of Rosneft’s busi- with the orders of the Russian executives, and heads of busi- ness plan for 2020–2021. President and the Russian ness units praised Rosneft’s Board The document aims to maintain Government the following items performance as generally highly the Company’s production poten- were considered: effective. tial and ensure stable financial per- • addressing the impact formance and leadership in unit of COVID-19; The self-assessment has revealed production costs with due account • reducing crude oil production areas for the Board’s perfor- of the Russian Government’s to provide for Russia’s compli- mance improvement and efficiency Directives No. 6883p-P13 dated ance with the OPEC and non- increase. 4 August 2020 on implementing OPEC ministerial meeting’s the OPEC and non-OPEC ministerial decision to that effect;

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PLANS FOR 2021 ACTIVITIES OF THE BOARD COMMITTEES

The Board of Directors approves • implementation/revi- The committees of the Board AUDIT COMMITTEE its work plans and meeting sched- sion of Rosneft’s Long-Term of Directors plan their activities ule semi-annually. Development Programme; taking into account the sched- • approval of management’s col- ule of the Board of Directors’ Statement of Hans-Joerg Rudloff, The work plan takes into account lective and individual KPIs; meetings. Chairman of the Audit Committee the proposals of members • assessment of the Board 2020 was a hard year for many companies all over the world. Due of the Board, executive bodies performance; to the pandemic, Rosneft had to reorganise internal processes and top management, and always • preparations for the General and organisational systems across all its units. Working from home includes the following matters: Shareholders Meetings. and lack of interaction between employees and businesses caused • oversight of the Strategy a number of hard challenges, and it is the commitment and disci- performance; The Company’s Corporate pline of our staff that helped us tackle them. In spite of all the dif- • reviewing the business plans Governance Code defines the list ficulties, the Company conducted over 200 audits, 30 ad hoc and results; of additional issues that the Board inspections that involved our new objectives, such as supporting new projects, for example, those related to shipbuilding, and other of Directors seeks to consider business expansion initiatives. In addition, we provided continu- in person. ous training in new systems and technologies. Although the Audit Committee members were unable to meet in person, the audit function exercised its duties and carried out its mission due In 2020, the Audit Committee to the high quality of available written materials. held 17 meetings (one in person COMMITTEES OF THE BOARD OF DIRECTORS and 16 in the form of absentee voting) and considered 40 items In general, we overcame the last year’s challenges and adapted The Board of Directors has three The committees are set up (two at in-person meet- to a new way of doing business. Therefore, our shareholders can committees: and their chairs elected at the first The committees ings and 38 at meetings held be certain that the Company's internal control system is function- in the form of absentee voting). • Audit Committee; meeting of the Board of Directors are appointed ing to its full potential. and perform their functions • HR and Remuneration in its new composition (in 2020, in accordance Committee; the meeting was held in absentia). with Rosneft Regulations Procedure for Formation • Strategy and Sustainable and Work of Rosneft KEY RESOLUTIONS Development Committee Board of Directors Committees The Committee recom- • report on the status mended that the Board of the Comprehensive Plan The auditor’s fees for 2020 of Directors approve the pro- for the Enhancement recommended to the General Committees of the Board of Directors posal to the General Shareholders of the RM&ICS in 2019 Shareholders Meeting: • audit of Rosneft’s RAS Meeting regarding the distribution and on approval of the Plan accounting (financial) Members of the Members of the HR Members of the Strategy of the Company’s profit for 2019, for 2020–2022; statements – RUB 7,200,000, Audit Committee and Remuneration Committee and Sustainable Development the amount of dividends for 2019, • reporting on the company-wide including VAT; Committee and the payout procedure. financial and operational risks • audit of Rosneft’s IFRS consolidated financial materialised in 2019; Hans-Joerg Rudloff – Chairman Matthias Warnig – Chairman Robert Dudley – Chairman statements – up (independent director) (independent director) To ensure proper preparation • reporting on the identifica- to RUB 79,906,950, including VAT. Alexander Novak – of accounting (financial) state- tion of company-wide financial Matthias Warnig Hans-Joerg Rudloff Deputy Chairman ment and impartiality and inde- and operational risks for 2021; The external audi- (independent director) (independent director) pendence of the external audit, • report on internal investigations tor’s actual remuneration 1 Faisal Alsuwaidi the Committee: conducted by Rosneft in 2019; for the audit of financial state- 1 Oleg Viyugin Faisal Alsuwaidi • reviewed the consolidated finan- • results of the survey on strategic ments and other services is dis- (independent director) Oleg Viyugin cial results, financial statements risks in 2020. closed on the Company’s website (independent director) in the Corporate governance – and the relevant audit reports Internal control and audit – Hamad Rashid Al-Mohannadi (on a quarterly basis); The Working Capital Management Company auditor section. • recommended Ernst & Young Policy was updated to set out as the Company’s auditor a risk-oriented approach to man- and the amount of the auditor’s aging working capital elements, fees. the Company’s adherence to infor- mation transparency, and absence To ensure efficiency of the risk of restrictions on competition management and internal control in managing accounts payable system, the Committee conducted and receivable. preliminary review of the following:

1 Faisal Alsuwaidi was elected to the Committees on 5 June 2020.

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To ensure the impartiality In the area of corporate govern- The matters related to financial STRATEGY AND SUSTAINABLE DEVELOPMENT COMMITTEE and independence of the internal ance, the Committee: statements and information pro- audit, the Committee reviewed: • updated Rosneft’s Policy vided by the auditor were first dis- • reports on the internal audit per- on Internal Audit to reflect cussed during conference calls Statement of Robert Dudley, formance in 2019 and first six the amendments to Federal between the Committee members, Chairman of the Strategy and Sustainable Development months of 2020, and information Law No. 208-FZ On Joint-Stock management, and representatives Committee: on the independence and objec- Companies dated 26 December of internal and external auditors. tivity of the internal audit; 1995 with respect to the require- The Committee name was changed in 2020 to emphasise • the assessment and results ment to prepare and disclose our focus on environmental and social responsibility, improving the corporate governance system and enhancing its transparency, of the quarterly monitoring to shareholders an internal audit as well as supervision over the Company's strategic investment of potential conflicts of interest report on the safety and effi- projects. related to the Head of Internal ciency of the Company’s risk Audit serving on the Management management and internal con- Board in Q1–Q3 2020. trol system.

KEY RESOLUTIONS in 2019 and preliminary results in 2020. In 2020, the Strategy To determine the Company’s pri- and Sustainable Development HR AND REMUNERATION COMMITTEE orities, the Committee reviewed: To run the Company's business Committee held 15 meetings in the form of absentee voting • status of the Rosneft–2022 projects, the Committee recom- and considered 28 items. Strategy; mended that the Board of Directors Statement of Matthias Warnig, • Rosneft’s 2019 Sustainability approve key metrics and budgets Chairman of HR and Remuneration Committee Report; for a number of business projects. • Rosneft’s updated Long-Term One of the most notable events for the Company in 2020 was Development Programme To promote innovation, the change in our approach to the Management Board forma- and the audit of its implementa- the Committee recommended that tion. Five CEOs of key Group Subsidiaries joined the Management tion results in 2019; the Board of Directors approve Board in 2020 to give a more important role to our regional busi- • adjustment of Rosneft’s busi- Rosneft’s Innovation Development nesses implementing major oil and gas projects. Alongside ness plan for 2020; Programme for 2020–2024 that, the Committee focused on assessing the effecitveness of the Company’s HR and succession policies. The Committee • the Company’s business plan with an outlook for 2030. ensured the independence of nominees and Board members. for 2021–2022, its implementa- Motivation was another focus of the Committee. tion results and normalisation When reviewing the key matters, for 2019; the Chairman and Committee mem- • renewal of the Company’s bers consulted the Company’s man- KEY RESOLUTIONS • renewed the Succession Plan Accounting Function agement, requested additional for Directors and members In 2020, the HR Development Strategy information and received written To attract skilled talent of the Management Board. and Remuneration Committee to 2024, with its name changed and oral clarifications. to the Company’s management held 14 meetings in the form to Rosneft’s Programme of absentee voting and consid- and create conditions for high To assess the performance ered 29 items. to Improve the Efficiency performance, the Committee: of the Company’s manage- of Rosneft's Accounting • reviewed proposals regarding ment and governing bodies, Function to 2024. the remuneration of the mem- the Committee reviewed: bers of the Board of Directors • top management's collective in the operations of Rosneft With respect to HSE matters, and Audit Commission for 2019– and individual KPIs for 2020, and Group Subsidiaries in 2021. the Committee approved reports 2020, as well as the compen- their normalised KPI per- on the Company's HSE activities sation of the expenses related formance criteria for 2019, Key matters related to their functions; and the results considered to the Committee activities • provided recommenda- in the 2019 annual bonus were discussed in due course tions for appointments calculation; with the Committee mem- to the Management Board; • self-assessment of the Board’s bers with the involvement • verified the ompliancec of candi- performance; of the Company’s management. dates to the Board of Directors • reports with independence criteria; and action plans for introduc- ing professional standards

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EXECUTIVE BODIES BOARD COMPOSITION

Rosneft’s executive bodies are: AS AT 31 DECEMBER 2020 Chief Executive Officer Management Board Igor SECHIN

As per Rosneft’s Charter, the per- the Management Board’s agenda, The activities of the Company’s executive son performing the functions and chairs the Board’s meetings. bodies are governed by Regulations Chairman of the sole executive body on the Sole Executive Body (Chief Executive of the Management Board, Officer) and Regulations on the Collective Chief Executive Officer and Chairman of the Management The procedure for Management Executive Body (Management Board) Board is the Chief Executive Board formation, the rights, duties of Rosneft Oil Company. Officer. and liability of Management Board members, and proceed- Since 2012, the position ings of the Management Board of the Chief Executive Officer are governed by the Regulations has been held by Igor Sechin. He on the Collective Executive Body manages the Company’s day- (Management Board) of Rosneft. to-day operations, formulates

Born in 1960. In 1984 graduated from Leningrad State University. PhD in Economics. CHANGES IN THE BOARD COMPOSITION Holder of government and ministerial awards. 2000–2004: Deputy Head of the Russian Presidential Head Office. To better address the pandem- • Dina Malikova, President, and assisting the Management 2004–2008: Deputy Head of the Russian ic-related challenges, improve Chairman of the Board at RRDB Board in their respective areas Presidential Head Office, Aide to the President. production and economic effi- Bank (JSC). of expertise. 2004–2011: Chairman of Rosneft’s Board ciency, and strengthen the links of Directors. with Rosneft’s major regional divi- The Management Board is also The size of Rosneft’s Management : Deputy Prime Minister sions in implementing promising comprised of senior execu- Board did not change in 2020, 2008–2012 of the Russian Federation. oil and gas production projects tives responsible for key areas totalling 11 members. Nine mem- that could become the Company's of the Company's activities: bership positions have been filled, 2012 – present: Chief Executive Officer and Chairman of the Management Board. growth drivers in the medium term, upstream, downstream, finance while two remain vacant. the Board of Directors resolved and strategic planning. From June 2013: Deputy Chairman of Rosneft’s to change the composition Board of Directors. of the Management Board starting The membership of RRDB Holds positions in various non-profits and takes on 30 September 2020. Bank’s President and Chairman part in social, scientific, sport and education of the Board in Rosneft’s development (for the full list of positions in non- profit organisations, see the Board of Directors The newly appointed members Management Board aims section). of the Management Board are: to ensure continuous monitoring Holds 13,489,350 shares of Rosneft (0.1273% • Igor Tabachnikov, of financing availability. of the Company’s charter capital). General Director of LLC RN-Yuganskneftegaz; The Vice Presidents, who • Khasan Tatriev, General Director had previously been mem- of Bashneft; bers of the Management • Vladimir Chernov, General Board, continued to work Director of LLC RN-Vankor; for the Company performing • Ilgam Kuchukov, General their functional responsibilities Director of JSC Suzun;

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Zeljko Didier Ilgam KUCHUKOV Dina MALIKOVA RUNJE CASIMIRO Deputy Chairman of the Management Board, First First Vice President Advisor to the Chief Executive Officer in the rank Advisor to the Chief Executive Officer in the rank Vice President for Oil, Gas, of Vice President, General Director of JSC Suzun of Vice President, President of RRDB Bank (JSC). and Offshore Business Development

Born in 1954. Born in 1966. Graduated with honours from the University Born in 1977. Born in 1975. of Alaska Graduated with distinction from Ghent University (Belgium) in 1991, and from Ghent In 2008 graduated from Tyumen State Oil In 1996 graduated from Ulyanov-Lenin Has Acknowledgement from the President University (Belgium) / Lisbon University and Gas University. Kazan State University, PhD in Physics of the Russian Federation, Order of Friendship (Portugal) in 1992. and Mathematics. holder. 2000–2015: held various positions in the oil 1996–2005: held executive positions at BP. and gas industry. Holder of government and ministerial awards: 1979–1993: held various management positions Acknowledgement of the Ministry of Energy in Arctic Alaska drilling and production projects. 2005–2012: held executive positions at TNK-BP. 2015–2018: First Deputy General Director for Production, Chief Engineer (2011), Labour Glory , third degree, 1993–1997: worked on oil projects in Yemen, From May 2012: Vice President of Rosneft. at LLC RN-Yuganskneftegaz. from the Ministry of Energy (2018), Order Algeria, Australia, Thailand, Japan, Angola, From March 2013: Vice President for Commerce of Honour of the Russian Federation (2019). and Turkmenistan. and Logistics at Rosneft. 2018 – present: General Director of JSC Suzun and LLC Tagulskoye (concurrently), Deputy 1995–2003: held various positions in a number 1997–2012 : held various executive positions From January 2015: Vice President for Refining, General Director for greenfield development of credit and finance organisations. in the Sakhalin-1 project in his capacity as Vice Petrochemical, Commerce and Logistics at LLC RN-Vankor (concurrently). 2003–2011: Head of Treasury, member President of ExxonMobil Russia Inc. at Rosneft. From September 2020: Advisor to the Chief of the Board at RRDB Bank (JSC). From October 2012: Vice President of Rosneft. From July 2020: First Vice President of Rosneft. Executive Officer in the rank of Vice President, 2011–2013: Senior Vice President, member Member of Rosneft’s Management Board since From March 2013: Vice President for In-House member of the Management Board at Rosneft. of the Board at RRDB Bank (JSC). Services at Rosneft. June 2012. Holds no shares of Rosneft. 2013–2014: Acting President of RRDB In November 2012, appointed member Chairman of the Board of Directors Bank (JSC). of Rosneft’s Management Board. at PJSC Saratov Refinery, Rosneft – 2014 – present: – President, Chairman MP Nefteprodukt, LLC RN-Commerce, From December 2019: First Vice President of the Board at RRDB Bank (JSC). for Oil, Gas, and Offshore Business LLC RN-Refining, PJSOC Bashneft, From September 2020: Advisor to the Chief Development of Rosneft, Deputy Chairman LLC RN-Foreign Projects, Chairman Executive Officer in the rank of Vice President, of the Management Board. of the Supervisory Board at PRJSC LINIK, member of the Board of Directors member of the Management Board at Rosneft. Chairman of the Supervisory Board at OJSC NGK Slavneft, PJSC Slavneft-YANOS, Chairman of the Board at PJSC Rosneft-Sakhalin, Chairman JSC SPIMEX. of Directors at PJSC PERESVET Bank, member of the board of directors at JSC RN RN-Shelf- of the Supervisory Board at RRDB Bank (JSC). Far East, JSC Verkhnechonskneftegaz, Holds 457,598 shares of Rosneft (0.0043 % LLC RN-GAZ, LLC RN-Upstream, member of the Company’s charter capital). Holds 4,360 shares of Rosneft (0.00004 % of the Board of Directors at PJSOC Bashneft, of the Company’s charter capital). CJSC Rosshelf, JSC FESRC, LLC RN-Commerce, LLC RN-Commerce, and PJSC NGK Slavneft. Holds 377,318 shares of Rosneft (0.0036 % of the Company’s charter capital).

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Andrey POLYAKOV Igor TABACHNIKOV Khasan ТATRIEV Vladimir CHERNOV

Vice President – Chief Geologist Advisor to the Chief Executive Officer Advisor to the Chief Executive Officer in the rank of Vice Advisor to the Chief Executive Officer in the rank at Rosneft in the rank of Vice President, General Director President, General Director of Bashneft of Vice President, General Director of LLC RN-Vankor of RN-Yuganskneftegaz

Born in 1976. Born in 1985. Born in 1963. Born in 1970. In 2002 graduated from Lomonosov Moscow In 2007 graduated from Plekhanov In 2002 graduated from the Tyumen State In 1999 graduated from the Novosibirsk State State University. St Petersburg Mining University, in 2010 gradu- University. Academy of Water Transport, in 2009 – 2002–2004: Geologist, Chief Geologist, ated with honours from the Academy of National Holder of government and industry awards: from Tomsk Polytechnic University. Geological Group Leader at CJSC Modelling Economy under the Russian Government. Medal of the Order “For Merit to the Fatherland,” Holder of government and ministerial awards: and Monitoring of Geological Objects. In 2010–2011 completed the post-graduate pro- second degree, (2018), Order “For Merit of the Russian Federation gramme at the Department of Economic Policy, 2004–2005: Senior Specialist, Geology to the Fatherland,” fourth degree, (2019). (2019), Certificate of Merit of the Russian Ministry Lomonosov Moscow State University. and Geophysics Section, EP Analysis 2002–2012: held executive positions at various of Energy (2019). and Forecast Centre, CJSC Exploration & In 2018–2019 completed the SKOLKOVO oil and gas industry companies. 2000–2010: held executive positions at various Moscow School of Management’s Production. 2012–2013: General Director oil and gas industry companies. Executive MBA programme. 2005–2013: Deputy Director, Director at OJSC RN-Ingushneft. 2010–2011: Deputy General Director Holder of Acknowledgement of the Russian of the Corporate Research and Development 2013–2015: General Director for Production at CJSC Vankorneft. Ministry of Energy. Centre, Division of Scientific and Technical at OJSC Samotlorneftegaz. 2011–2014: Deputy Chief Engineer, Acting Deputy Development and Innovation, Department 2007–2015: held various positions 2015–2019: General Director General Director for Production Development of Exploration and Licensing, Department in Russia’s oil and gas industry companies at RN-Yuganskneftegaz, Director of Rosneft’s at CJSC Vankorneft. of Resource Base and Reserves, Audit (ОJSC Severneftegazprom, CJSC Vankorneft). Office in the Khanty-Mansi Autonomous Area – 2014–2015: Director of the Capital Construction Department, Rosneft. 2015–2016: General Director Yugra (Nefteyugansk). Department at CJSC Independent Oil and Gas 2013–2017: Division Head, Deputy Director, at OJSC Taimyrneftegazodobycha. 2019–2020: President, Chairman Company. Director of the Exploration and Licensing 2016–2019: General Director at JSC NNK- of the Management Board at Bashneft. 2015–2017 – Vice President for Oil and Gas Department, Vice President for Subsurface Pechoraneft, CJSC Kolvinskoe. Production at CJSC Independent Oil and Gas and Reservoir Management, JSC Independent From June 2020: General Director of Bashneft. 2019–15 March 2021 : General Director Company. Oil and Gas Company. From September 2020: Advisor to the Chief at LLC RN-Yuganskneftegaz, Director Executive Officer in the rank of Vice President, 2017 – present: General Director 2017–2019: Vice President of Rosneft’s Office in the Khanty-Mansi member of the Management Board at Rosneft. of LLC RN-Vankor, JSC Vankorneft (concurrently) for Subsurface and Reservoir Management, Autonomous Area – Yugra (Nefteyugansk) 2020 – present: General Director JSC Neftegazholding. (concurrently), General Director at Kondaneft Chairman of the Board of Directors (concurrently) of LLC NGKh-Nedra, From December 2019: Vice President – Chief (concurrently). at PJSC Ufaorgsintez, member of the Board LLC Taimyrneftegaz-Port, LLC Taimyrneftegaz- Geologist and member of the Management of Directors at Bashneft. From September 2020: Advisor to the Chief Estate, LLC PSMO-36 Board at Rosneft. Executive Officer in the rank of Vice President, Holds no shares of Rosneft. From September 2020: Advisor to the Chief Chairman of the Board of Directors member of the Management Board at Rosneft. Executive Officer in the rank of Vice President, at PJSC Samaraneftegeofizika, member Holds no shares of Rosneft. member of the Management Board at Rosneft. of the Board of Directors at LLC RN-Upstream, LLC RN-GAZ, LLC RN-Assets, LLC RN-Foreign General Director of LLC Vostok-Oil Projects, JSC Vankorneft. Holds no shares of Rosneft. Holds 18,757 shares of Rosneft (0.0002 % of the Company’s charter capital).

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Due to changes in the Management Board’s composition, the powers of the following Board members have been terminated: Gennady Bukaev, Eric Liron, Yury Kurilin, Peter Lazarev, Elena Zavaleeva, Andrey Shishkin and Ural Latypov.

Gennady BUKAEV Eric Maurice Liron Yury Kurilin Peter Lazarev Elena Zavaleeva Andrey Shishkin

Vice President, Head of Internal Audit Vice President for Oil and Gas Vice President, Chief of Staff Financial Director Advisor to the Chief Executive Officer, Vice President for Informatisation, Services of Rosneft of Rosneft Vice President Innovation and Localisation

Born in 1947. Born in 1954. Born in 1972. Born in 1967. Born in 1981. Born in 1959. In 1971 graduated from Leningrad State In 1980 graduated from the School Graduated from Lomonosov Graduated from Plekhanov Moscow Graduated from Moscow State Social Graduated from Gubkin Moscow University. PhD in Economics. of Radio Engineering, Electronics Moscow State University in 1994 Institute of National Economy in 1990. University of the Ministry of Labour Institute of the Petrochemical and Gas Holder of government and ministerial and Computer Science (Paris, France). and from California State University 1990–1993: held various positions and Social Development in 2003, Industry in 1985, from Financial awards. 1980–2000: held various executive (Hayward) with an MBA degree in 1998. at the Soviet Ministry of Finance majoring in Law. Academy under the Government of the Russian Federation in 1996, 2000–2004: Minister of the Russian positions at Schlumberger managing 2003–2008: Head of the Head and the Russian Ministry of Economy Holder of government awards. and from Moscow International Higher Federation for Taxes and Levies. complex projects in the Middle East, Office of the Office of the President and Finance. Works at Rosneft since 2008. Africa, and the Asia-Pacific Region. and Chief Executive Officer, Head Business School MIRBIS in 2002. 2004–2012: Assistant to the Prime 1993–1995: held various posi- 2013–2017: held a number of posi- of the Office of the President Holder of government and ministerial Minister of the Russian Federation. 2000–2005: manager of Complex tions in the Office of Securities tions, including Deputy Director – Projects in Russia, managing at TNK-BP Management. of the International Joint-Stock Bank awards. 2012–2013 годы: Advisor Head of Federal Authorities Relations the oilfield services project for Sibneft 2008–2011: Commercial Director at BP of Savings Banks. 1992–2005: held executive posi- to the President of the Republic of the Government and Management at Schlumberger Oilfield Services Group companies. tions in various credit and finance of Bashkortostan. 1995–1996: member Relations Department; First (Russia). 2011–2014: worked in procurement of the Management Board, Deputy Director of the Government organisations. From 2013: Advisor to the President 2006–2013: held various executive performance planning and manage- Head of the Office of Securities and Management Relations 2005–2010: General Director of Rosneft. positions at TNK-BP Management, was ment at BP America (, USA). of the International Joint-Stock Bank Department, Acting Director of OJSC Ural Energy Management From March 2015: Head of Internal Vice President of the Wells Division. 2014–2017: Director for Corporate of Savings Banks. of the Department. Company, OJSC TGK-10, OJSC Tyumen Audit at Rosneft. From April 2013: Vice President Affairs and Interaction with Business 1996–1999: held senior positions 2017: Director of the Government Energy Selling Company. 2016–2020: member of Rosneft’s of Rosneft for Drilling, Development, Partners at BP Exploration Operating in ACB Center, CJSC Finance Company and Management Relations 2008–2009: First Vice President Management Board. and Services. Company Ltd. (UK), Moscow Branch. Finko Investment and Russian Department. of OJSC Integrated Energy Systems June 2016 – present: Vice President, 2013–2019: First Vice President 2017–2020: member of Rosneft’s Industrial Bank. September 2017–2020: State (IES Holding). Head of Internal Audit Service of Rosneft overseeing the production Management Board. 2000–2004: Head of the Promissory Secretary, Vice President of Rosneft. 2010–2012: Deputy Minister of Energy of Rosneft business. March 2017 – present: Vice President, Note and Investment Programmes 2018–2020: member of Rosneft’s of the Russian Federation. Gennady Bukaev was not author- 2019–2020: Vice President Chief of Staff of Rosneft. in the Finance Department of Rosneft, Management Board. From July 2012: Vice President ised to participate in voting on mat- Deputy Departmental Director, for In-House Services at Rosneft. October 2020 – present: Advisor of Rosneft. ters within the Management Board’s Head of Securities in the Finance 2013–2020: member of Rosneft’s to the Chief Executive Officer, Vice From March 2013: Vice President competence related to the Company’s Department. Management Board. President of Rosneft for Energy, Health, Safety operations, which could be objects 2004–2012: Head of Treasury December 2020 – present: Vice and Environment. of audit / managerial decisions at Rosneft. with regard to audited entities (subject President of Rosneft for Oil and Gas From August 2014: Vice President 2011–2020: member of Rosneft’s to Board of Directors review). Services of Rosneft for Energy and Localisation. Management Board. From April 2016: Vice President February 2012 – present: Financial of Rosneft for Energy, Localisation Director of Rosneft. and Innovation. 2015–2020: member of Rosneft’s Management Board. November 2019 – present: Vice President for Informatisation, Innovation and Localisation of Rosneft.

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Age Diversity on the Management Gender Diversity MANAGEMENT BOARD’S ACTIVITIES IN 2020 Board on the Management Board Ural In 2020, the Management Board • approved amendments consultative bodies: Information LATYPOV held 86 meetings, reviewed to 36 transactions for the sup- Technology Expert Council, Risk 189 matters and adopted ply of oil and oil products, asso- Management Committee, Carbon a number of decisions, including ciated petroleum gas and gas Management Committee, Expert the following: condensate, well drilling, con- Council on Pricing in Capital Vice President, Head of Security Service • the Vostok Oil project, struction and installation opera- Construction, Commission with the Management tions, loan agreements, etc.; for Emergency Prevention, Board recommending that • approved winding up / reorgani- Response and Fire Safety, the Board of Directors approve sation of nine Group Subsidiaries Conflict Resolution Commission, Born in 1972. the acquisition of a 100% stake as part of the Company’s corpo- and others, as well as docu- Graduated from the Bashkir State Under 45 years 4 Men 91% in Taimyrneftegaz; rate structure optimisation; ments on: University . in 1997 46–55 years 2 Women 9% • approved the transactions that • approved Rosneft's partici- – management of receivables 1996–2016: officer of law enforcement 56–65 years 2 would terminate the Company's pation / termination of par- and payables, agencies. 66 or over 1 participation in projects ticipation (direct and indirect) – remuneration and social 2016–2019: Deputy Head of Security in Venezuela; in 31 profit and one non-profit security of employees, Service of Rosneft, Acting Vice • approved four field develop- organisations; – supply of goods, works President – Head of Security Service ment and refinery construc- • approved KPIs for the heads and services, of Rosneft. tion projects for the Group of Rosneft’s standalone busi- – government relations, 2019–2020: member of Rosneft’s Subsidiaries; ness units and the sole executive – energy management, etc. Management Board. The members of the Management Board know Russian, English, French, German, Spanish, Portuguese, Dutch • approved Rosneft’s organisa- bodies of key Group Subsidiaries June 2019 – present: Vice President, and Croatian. tional structure (as amended); for 2020, reviewed their perfor- Head of Security Service of Rosneft • approved entering into: mance in 2019; – 195 transactions for oil • approved the lists of nomi- and oil products deliveries nees to the boards of directors to foreign and domestic mar- of the key Group Subsidiaries, Management Board Tenure kets, supply of gas and gas as well as for the posi- condensate, loans, as well tions in the executive bodies Management Board member Membership start Period as transactions with shares of the key Group Subsidiaries; date and stakes in the Group • approved the amended Igor Sechin From 2012 8 years Subsidiaries, etc.; templates of charters Zeljko Runje From 2012 8 years – two charity transactions; and regulations on governing – four transactions for pro- bodies for the Group Subsidiaries Didier Casimiro From 2012 8 years viding operator services as well as the updated charter

Ilgam Kuchukov From 2020 Less than a year (performing works) related of a key Group Subsidiary; to the production of crude oil, • approved internal regulations / Dina Malikova From 2020 Less than a year natural and associated petro- modifications of internal reg-

Andrey Polyakov From 2019 1 year leum gas, transshipment, ulations on the procedures storage, well drilling, etc.; of the Company’s collective/ Igor Tabachnikov From 2020 Less than a year

Khasan Tatriev From 2020 Less than a year

Vladimir Chernov From 2020 Less than a year

260 261 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

MANAGEMENT BOARD WORK PLANNING CORPORATE SECRETARY

The Board prepares its work plan • Rosneft's participation / termi- In 2021, Starting February 202111, the posi- • supporting the activities • communicating with the reg- quarterly taking into account pro- nation of participation in profit the Management tion of the Company’s Corporate of the Board of Directors istrar, the government bod- posals of the Board members, and non-profit organisations; Board will con- Secretary is held by Yury Kurilin2. and its committees, act- ies and the corporate relations top managers and heads of func- • winding up and reorganisation tinue implement- ing as the Management Board and securities market regulatory tional units, including the follow- of the Group Subsidiaries; ing the Company's The Corporate Secretary is func- Secretary; authorities; ing matters: • termination and appoint- Development tionally accountable to the Board • preventing corporate conflicts; • implementation of business ment of the governing bodies Strategy in accord- of Directors, appointed and dis- • facilitating the exercise of share- The Corporate Secretary’s function projects, investment pro- of the Group Subsidiaries. ance with the Board missed by the CEO on the basis holders' rights; is supported by the Company’s grammes, entering into trans- of Directors’ resolu- of the Board of Directors’ resolu- • implementing the disclosure separate business unit – Corporate actions / amending transaction tions. tion. policy; Governance Department. terms, including non-core assets • managing the compliance and real estate transactions; The Corporate Secretary’s key with regulatory and inter- functions are: nal requirements for counter- The Corporate • improving the corporate govern- ing the illegal use of insider Secretary’s activities are governed ance system; information; by the Regulation • arranging and holding general on the Corporate Secretary. shareholders’ meetings;

Born in 1972. and Interaction with Business Partners at BP Exploration Graduated from Lomonosov Operating Company Ltd. (UK), Moscow State University Moscow Branch. in 1994 and from California State University (Hayward) with an MBA In March 2017: appointed degree in 1998. Vice President, Chief of Staff of Rosneft. From September 2003 to December 2008: From April 2017 Head of the Head Office to September 2020: member of the Office of the President of Rosneft’s Management Board. and Chief Executive Officer, Head of the Office of the President Holds no shares of Rosneft. Yury Kurilin at TNK-BP Management.

December 2008 – October 2011: Commercial Director at BP Group companies.

October 2011 – November 2014: worked in procurement perfor- mance planning and management at BP America (Houston, USA).

November 2014 – March 2017: Director for Corporate Affairs

1 As at 31 December 2020, the Corporate Secretary's position was held by Svetlana Gritskevich. Her powers were terminated by the resolution of the Board of Directors. Information about Svetlana Gritskevich is available in Rosneft’s previous annual reports. 2 Minutes of the Board of Directors No. 17 dated 11 February 2021

262 263 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

REMUNERATION OF MEMBERS REMUNERATION OF THE BOARD OF DIRECTORS OF THE MANAGEMENT

In 2015, the Board of Directors approved Rosneft’s Regulations on Remunerations The existing complex incentive system for the top management is described in Rosneft’s and Compensations Payable to Members of the Board of Directors drawing Standard for Rewards and Compensations to Top Managers and ensures their focus on results on the recommendations of the Bank of Russia’s Corporate Governance Code which lists all and commitment to achieving the Company’s strategic goals. types and terms of payments to directors, thus ensuring a transparent remuneration process.

Incentive system Total remuneration payable to members of the Management Since 2015, the Company has of the Board of Directors, Total remuneration payable Cash remuneration Fringe Non-financial Board, RUB mln been paying the following pre-approved by the HR to members of the Board benefits incentives 3,927 amounts to members of its Board and Remuneration Committee, of Directors over time of Directors as fixed remuneration resolved to pay the following 3,854 3,385 3,380 3,380 and additional compensation: amounts to members of its Board Top managers’ remuneration No loans or borrowings were • fixed remuneration paya- of Directors pro rata to the time 11 11 11 depends on the Company’s per- issued to members of the Board ble to each Board member served: formance and implementation of Directors and the Management and amounting to USD 500,000; • Gerhard Schroeder – of major projects, provided that Board in the reporting year. 3,570 • additional compensation paya- USD 600,000 (including com- team-based and individual key 3,531 ble for: pensation for chairing the Board performance indicators are met. The total remuneration paid – chairing the Board of Directors); to members of the Management of Directors and amounting • Hamad Rashid Al-Mohannadi – The KPIs, actual performance Board in 2020 amounted 565 565 565 to USD 100,000; USD 530,000 (including com- and annual bonuses are approved to RUB 3.531 bln1, down by 1.1 % – membership in the Board pensation for membership by the Board of Directors year-on-year. 2017 2018 2019 2020 committees and amounting in the Strategy and Sustainable 2017–2018 2018–2019 2019–2020 on an annual basis with input to USD 30,000; Development Committee from the HR and Remuneration Since 2017, the total remu- Total remuneration, USD '000 – chairing the Board com- of Rosneft’s Board of Directors); Committee. neration payable to members Number of Board members mittees and amounting • Faisal Alsuwaidi – USD 530,000 Average remuneration of the Management Board went to USD 50,000. (including compensation of a Board members, USD '000 The KPI framework and its integra- down by 10.1 %, or RUB 396 mln. for membership in the Strategy tion with the Company’s Strategy and Sustainable Development • Hans-Joerg Rudloff – are detailed in Section Company Rosneft’s Regulations Committee of Rosneft’s Board USD 580,000 (for chair- KPIs of this Report. on Remunerations and Compensations of Directors); ing the Audit Committee Payable to Members • Matthias Warnig – and membership in the HR of the Board of Directors sets USD 580,000 (including com- and Remuneration Committee out amounts pensation for chairing the HR of Rosneft’s Board of Directors); payable to directors as fixed remuneration and Remuneration Committee • No remuneration for 2019– and additional and membership in the Audit 2020 corporate year was paid compensation. Committee of Rosneft’s Board to Andrey Belousov, Robert The remuneration is payable of Directors); Dudley, Guillermo Quintero, to directors pro rata to the time • Oleg Viyugin – USD 560,000 Alexander Novak, Igor Sechin. served and performance of addi- (including compensation tional duties. for membership in the Strategy The total remuneration paid and Sustainable Development to members of the Board On 2 June 2020, the Annual Committee and Audit of Directors for 2019–2020 General Shareholders Meeting Committee of Rosneft’s Board corporate year amounted acting on the recommendation of Directors); to USD 3,380,000.

1 Information on remuneration and reimbursement of expenses paid to the collective executive body (the Management Board) in 2020 was published on 12 February 2021 in accordance with the Russian regulatory requirements for information disclosure by issuers of issue-grade securities as part of Rosneft’s Issuer Report (Quarterly Report) for Q4 2020.

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To foster dialogue with the share- CIVIL LIABILITY INSURANCE holders, the Company's website For Shareholders: features contacts for shareholders, FOR THE MEMBERS OF THE BOARD including the shareholder hotline. Shareholder Relations Division, Corporate Governance Department, Rosneft BOARD OF DIRECTORS OF DIRECTORS AND THE MANAGEMENT Phone: 8-800-500-11-00 (toll-free within Russia); +7 (495) 987-30-60; Fax: +7 (499) 517-86-53 The Board of Directors is respon- E-mail: [email protected] sible for managing any conflicts Dear shareholders, Outside working hours, you can text us at +7 (926) 685-44-86. In 2020, the Company and The contract stipulates USD 150 mln third-party liability coverage. of interest in the Company. Please include your full name, and we will get back to you. extended the civil liability insurance contract for mem- It also provides for additional liability insurance for independent direc- The Regulations on the Board bers of the Board of Directors, tors, as well as additional liability limits for environmental pollution of Directors determine the duties executive bodies, employ- and environmental management. of Board members related to pre- With respect to any issues that As part of its major role ees of the Company and all vention and management of any may, in the opinion of a Board in ensuring transparency of the Group Subsidiaries. conflicts of interest. member, result in a conflict and timely and full disclosure, with the Company's interests, the Board of Directors approved In particular, Board members shall the director shall not participate the rules for disclosing insider refrain from any actions which in voting and, where necessary, information. result or may result in a conflict in the discussion of such issues. between their interests and those The Company's Chief Executive of the Company. For the avoidance of any poten- Officer exercises day-to- MANAGING POSSIBLE CONFLICTS tial conflicts among the Company’s day control over compliance Board members must report any employees, the Board of Directors with regulatory and internal OF INTEREST actual/potential conflicts of inter- introduced rules for conducting requirements related to insider est to the Chairman of the Board transactions in financial instruments information. of Directors or the Corporate by persons included in the insider Integrity is one of the Company’s Secretary. list and their related parties. priorities and key values. It Rosneft’s Regulations on Internal Control Rules for the Prevention, Detection and Suppression of Illegal Use of Insider Information allows Rosneft to balance inter- in Rosneft and/or Market Manipulation. ests of shareholders with inter- ests of management and ensures trust and high standards of business culture and ethics in their interaction.

The Company is committed The Corporate Secretary (see the Corporate Secretary to managing possible conflicts section) is in charge of compliance with regulatory of interest at all corporate govern- and internal requirements for countering the illegal use ance levels. of insider information.

Rosneft's Charter contains a num- ber of restrictions for related party transactions that could benefit certain members of the governing SHAREHOLDERS effective day-to-day interaction bodies or shareholders. with shareholders, and contributes Rosneft's Charter regulates to preventing corporate conflicts. The internal documents availa- the basic rights and obliga- ble on the Company’s website set tions of shareholders, as well The Corporate Secretary forth the values and principles as the decision-making procedures is required to promptly notify underlying the Company's corpo- for the most significant issues. the Board of Directors of any rate culture, as well as key rules potential violation of the appli- aimed at preventing and manag- The Corporate Secretary coordi- cable laws or shareholder rights ing conflicts of interest at all cor- nates the efforts to protect share- and any potential conflicts porate governance levels. holder rights and interests, ensures of interest.

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EXECUTIVE BODIES ANTI-CORRUPTION EFFORTS

The Regulations In the reporting period, Andrey Polyakov, member on the Management Board of the Management Board, Vice President – Chief Rosneft works to maintain com- 1. and guiding principles, and reg- 1. of the Company's activities, and on the Chief Executive Geologist, reported his potential conflict of interest, pliance with the requirements ularly assesses the efficiency (i) reviews reports on implemen- Officer contain special sections partially related to the positions held in the governing of the anti-corruption laws of such efforts; considered tation, execution and operat- 2 with the following rules to pre- bodies of other organisations. The Corporate Secretary, of the Russian Federation, includ- and approved the results ing efficiency of the anti-fraud vent a conflict of their interests Chief Executive Officer and Chairman of the Board ing through a set of measures of a review of the anti-corrup- and anti-corruption risk man- with the interests of the Company: of Directors were duly notified. In the reporting period, aimed at building an organisa- tion risk management and inter- agement and internal control 3 • these persons shall refrain all grounds for this conflict of interest were resolved tional structure and elements nal control process. system , (ii) approves the results from any actions that may cause in accordance with corporate procedures. of corporate culture, and estab- 2. Rosneft's Chief Executive of collecting and analysing a conflict of interest and, should lishing rules and procedures Officer ensures the implemen- ethical declarations in order such a conflict arise, imme- to prevent corporate fraud tation of the Company's Policy to identify conflicts of inter- diately notify the Chairman and corruption. on Combating Corporate Fraud est among the Company's of the Management and Involvement in Corruption employees in accord- Board / the Chairman as at compliance with the anti-cor- The effort was also aligned Activities, and approves ance with the Regulations of the Board of Directors and/or ruption laws of the Russian with the National Anti-Corruption the relevant internal regula- on Managing Conflicts the Corporate Secretary; Federation. The Policy defines Plan for 2018–2020 approved tions. In 2020, Rosneft: of Interest in Rosneft and Group • while in office, these persons the Company’s efforts in build- by Presidential Executive Order – approved and implemented Subsidiaries. may not hold and/or control 20 ing anti-corruption elements No. 378 dated 29 June 2018 the Company’s Regulations or more percent of voting shares of the corporate culture and organ- (Instruction of the Russian on Coordinating Anti- Moreover, as part (interests or stakes) in any entity isational structure, as well as rules Government No. DM-P17-4575 Fraud and Anti-Corruption of the Comprehensive Anti-Fraud The rules for the avoidance and prevention competing or having any busi- of conflicts of interest are set forth and procedures intended to prevent dated 23 July 2018). Processes, including the fol- and Anti-Corruption Programme ness interest in maintaining rela- in the Corporate Governance Code corporate fraud and corruption. lowing procedures: (i) assess- for 2019–20204, the Company and the Code of Business and Corporate tions with the Company; Ethics. The new anti-corruption pro- ment of corporate fraud in the reporting period: • these persons may not accept The list of special rules aiming cedures were developed and corruption risks; (ii) pro- • updated its employees on typ- any gifts from persons interested and “corruption” and set out to prevent the securities market in accordance with the applica- tection of whistleblowers; ical violations of anti-fraud in resolutions passed as part the procedure for preventing cor- manipulation and the illegal use ble international anti-corrup- (iii) reporting of suspected and anti-corruption rules of their duties or otherwise ben- porate fraud. of insider information is laid down tion laws, Federal Law No. 273-FZ corporate frauds or corrup- (including management of con- efit from such persons. in the Company's Regulations On Combating Corruption dated tion and investigations; (iv) flicts of interest) on a quarterly The Company’s Council on Internal Control Rules 25 December 2008, the guidelines training and communications basis; TOP MANAGERS for Business Ethics also con- for the Prevention, Detection of the Russian Ministry of Labour in combating corporate fraud • on an ongoing basis informed AND EMPLOYEES tributes to managing conflicts and Suppression of Illegal Use and the Federal Agency for State and corruption; (v) monitor- the relevant units about new of interest. of Insider Information in Rosneft. Property Management, as well ing and control of anti-fraud regulations and government ini- Possible conflicts of interest as International Anti-Corruption and anti-corruption pro- tiatives aimed at combating are also regulated by a number The Company continuously works The document is publicly avail- Standard ISO 37001:2016 “Anti- cesses (Order No. 61 dated corruption; of internal documents, including to prevent corporate fraud. Special able on the Company's official bribery management systems — 20 January 2020); • assessed/reassessed the risk the Corporate Governance Code, rules for its prevention are gov- website and establishes the rules Requirements with guidance – updated the Company's of corporate fraud and corrup- Code of Business and Corporate erned by the Company’s Policy for access to insider informa- for use”, and the ICC Guidelines Procedure for Documenting tion on a quarterly basis in line Ethics, and the Regulations on Combating Corporate Fraud tion and its disclosure, the proce- on Conflicts of Interest and Reporting Business with the approved methodology. on Managing Conflicts of Interest and Involvement in Corruption dure for conducting transactions in Enterprises. Expenses and Other in Rosneft and Group Subsidiaries. Activities. The Policy establishes in financial instruments by per- Transactions with Employees – Clause 2.6 a comprehensive set of principles, sons included in the insider list All of the Company’s governing (Order No. 366 dated 22 June of the Recommendations These documents establish procedures and initiatives aimed and their related persons, as well bodies contributed to these efforts 2020). for Public Joint-stock the rules for preventing the con- at preventing and combating cor- as the rules for protection of con- within their remit: Companies to Organise flicts of interest, define the terms porate fraud and involvement fidentiality of the insider informa- 1. Rosneft's Board of Directors 3. The Rosneft Council Risk Management, Internal “conflict of interest” in corruption, as well tion of Rosneft. (the Audit Committee for Business Ethics, which Controls, Internal Auditing, of the Board of Directors) includes senior executives and the Work of Auditing approved strategic documents1 responsible for key areas Committees under Boards Special rules for the prevention “The Board of Directors reviews, on a regular basis, of corporate fraud information on assessment and monitoring of poten- are governed tial conflicts of interest of the Head of Internal Audit by the Company’s Policy on Combating 1 The Company’s Policy on Combating Corporate Fraud and Involvement in Corruption Activities was approved by resolution of Rosneft's and considers the Company’s efforts to minimise Corporate Fraud Board of Directors (Minutes No. 19 dated 21 May 2018). and Involvement this risk as adequate.” 2 in Corruption Activities. The results for 2019 were reviewed and approved by Rosneft's Board of Directors (Minutes No. 19 dated 3 April 2020). 3 The Report for 2019 was approved on 8 June 2020 by the resolution of the Council for Business Ethics (Minutes No. 13). 4 Approved by the Council for Business Ethics on 10 December 2018 (Minutes No. 7).

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– of Directors (Supervisory on their positions in governing • and property-related obligations Managing Conflicts of Interest In the reporting year, the Company Boards) 1 establishes a quali- bodies of other entities, on inter- of their spouses and minor chil- were updated (to reflect changes kept on updating the Executive tative indicator of risk appe- ests (stakes) held in other entities, dren who are included in the list in key internal documents). Office of the Russian Government tite for corporate fraud or other information required to be of persons required to submit on its progress towards 37,000+ and corruption risk in order disclosed by the applicable laws, such declarations; Participated Instruction of the Russian calls received to reflect the Company’s zero the Company’s Charter or internal • carried out an annual cam- in the 5th International Government No. DM-P17-4575 by the Security Hotline tolerance to this risk (Minutes regulations). paign to collect ethical declara- Corruption in Business conference dated 23 July 2018 on the imple- in 2020 of the Risk Management tions of the Company’s officers/ and workshop. mentation of the National Anti- Committee of Rosneft The Board members’ obligations employees in order to monitor Corruption Plan for 2018–2020. No. 4–2020 dated to disclose a conflict of inter- their compliance with restric- The Company operates a 24/7 2 November 2020); est are set out in the Regulation tions, prohibitions and require- Security Hotline to report on sus- on the Holding by Members ments of anti-corruption laws, pected, proven and potential • conducted ongoing anti-cor- of Rosneft Board of Directors with the results of the analy- cases of corporate fraud, corrup- The Corruption Control section on the official corporate website has: ruption audits of draft internal of Rosneft Shares, Shares sis of such ethical declarations tion and conflict of interest. regulations; of and Equity Stakes in Group being approved by the Business • the Company’s statement on its zero tolerance for corruption; • published the quarterly All Subsidiaries. Ethics Council2; Identified/prevented dam- Corruption Control • key provisions of Russian section about Compliance informa- • informed employees of the mat- age amounted to RUB 38.7 mln. and applicable international anti- tion bulletin, and distrib- In the reporting period, ters related to the manage- The Company took disciplinary corruption laws; uted the bulletin devoted Andrey Polyakov, member ment of the conflict of interest actions against 96 employees, • internal corruption control to the International Anti- of the Management Board, Vice (in October 2020, method- terminated 32 employment con- regulations of the Company (Rosneft’s Code of Business Corruption Day to all Rosneft President – Chief Geologist, ology support on frequently tracts, and submitted findings and Corporate Ethics and Policy employees on 9 December 2020. declared his potential con- asked questions related to con- of 18 audits to law enforcement on Combating Corporate Fraud flict of interest, partially related flicts of interest was circulated authorities. and Involvement in Corruption The Company manages conflicts to the positions held in the gov- to the Company's employees); Activities); of interest at all levels. erning bodies of other organ- • required new hires Members of the Company’s • Security Hotline contact details; • information on cooperation with law isations. The Corporate and employees appointed Board of Directors are updated enforcement authorities. The rules for the avoid- Secretary, Chief Executive Officer to new positions to sign on the Security Hotline operation ance and prevention of con- and Chairman of the Board an anti-corruption clause, which on a quarterly basis. flicts of interest are set forth of Directors were duly notified. forms part of their employ- in the Corporate Governance In the reporting period, this con- ment contracts and includes Code, the Code flict of interest was resolved the restrictions, prohibitions of Business and Corporate in accordance with corporate and requirements aimed at pre- Ethics, the Company's Policy procedures. venting the conflict of interest. on Combating Corporate Fraud and Involvement in Corruption To abide by Clause 12 – All Group Subsidiaries have Activities, and the Regulations of the National Anti-Corruption set up conflict of interest on Managing Conflicts of Interest Plan for 2018–2020, commissions. in Rosneft and Group Subsidiaries. as well as ensure compliance with the anti-corruption laws Pursuant to Clauses 22 and 28 The Regulations set out a frame- for the prevention and settle- of the National Anti-Corruption work to classify conflicts of inter- ment of conflict of interest, during Plan for 2018–2020, the Company est, including conflicts of interest the reporting period the Company: runs ongoing corporate training between shareholders and mem- • introduced a procedure that programmes in the field of coun- bers of the Company’s govern- requires participants of procure- tering corporate fraud and corrup- ing bodies (e.g. decisions made ment procedures to declare any tion for its employees, including by corporate governing bod- conflict of interest (Order No. 69 those whose job responsibilities ies that might adversely affect dated 27 July 2020); include participation in combating the Company’s financial and oper- • collected annual declara- corruption, and new hires. ating performance; the Company tions on property and prop- failing to make a statutory disclo- erty-related obligations of its Multimedia training courses sure or members of corporate gov- officers/employees, as well on Countering Corporate Fraud erning bodies underreporting as on income, property and Business Ethics Compliance:

1 Letter of the Bank of Russia No. IN-06–28/143 dated 1 October 2020. 2 Minutes of the Council for Business Ethics No. 14 dated 12 August 2020.

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AUDIT COMMISSION RISK MANAGEMENT AND INTERNAL

The Audit Commission comprises five members elected CONTROL SYSTEM on an annual basis and monitors the Company’s financial The Audit Commission is governed and business activities. 1 by the Regulations In accordance with the Corporate Governance Code of the Bank of Russia , Russian regulatory on Rosneft’s Audit requirements2 and the best practices, the Company has established and is continuously The Audit Commission audits for the General Shareholders Commission. improving its Risk Management and Internal Control System (RM&ICS). the Company’s financial Meeting in the form of an opin- and business operations, ver- ion of the Audit Commission ifies the accuracy and reliabil- on the accuracy and reliabil- In accordance with the Corporate The objectives of the RM&ICS (COSO) and the Federation The procedure ity of data included in Rosneft’s ity of data included in Rosneft’s for calculating Governance Code of the Bank are set out in the Company’s of European Risk Management annual reports and annual Annual Report and annual and paying of Russia, Russian regulatory Policy on the Risk Management Associations (FERMA)). These accounting (financial) statements, accounting (financial) state- remunerations requirements and the best prac- and Internal Control System3 are intended to provide reasonable and compensations and prepares proposals and rec- ments as at 31 December 2020, to the members tices, the Company has estab- drawing on recommenda- assurance that the Company will ommendations for improving and in the report on interest- of the Audit lished and is continuously tions of international firms achieve its following goals: Commission is described the asset management efficiency ed-party transactions entered into in Rosneft’s improving its Risk Management engaged in risk management, and streamlining the risk manage- in the reporting period. Regulations and Internal Control System internal control and audit ser- on Remunerations ment and internal control system. and Compensations (RM&ICS). vices (including the Committee Payable to Rosneft's of Sponsoring Organisations In 2020, the Audit Commission Audit Commission of the Treadway Commission Members. held two meetings that, among The annual compensation other things, adopted its action awarded by the Annual General Shareholders Meeting to the members plan and approved an audit of the Audit Commission amounted programme. to RUB 440,000 in 2020. Strategic goals contributing to the accomplishment of the Company’s mission No compensation was paid to pub- 1 The findings of the Audit lic officers serving on the Audit Commission were communi- Commission. cated as part of the materials 2 Operational goals relating to the Company’s financial and operating performance and asset integrity On 2 June 2020, the Annual General Shareholders Meeting

resolved to elect the Audit Commission as follows: Goals of maintaining compliance with applicable laws and local regulations, including HSE requirements and requirements for information and personal security Chairman Members of the Audit Commission Sergey Poma 3 Born in 1959. Zakhar Sabantsev Olga Andrianova Graduated from Nakhimov Black Sea Born in 1974. Born in 1958. Higher Naval School and St Petersburg Goals of preparing reliable financial statements or non-financial reports and non-financial reports for internal and/ Graduated from the Moscow State Graduated from the All-Russian State State University. or external users in a timely manner University of Economics, Statistics, Distance-Learning Institute of Finance 4 Vice President of the National and Informatics. and Economics (ARDLIFE). Association of Securities Market Holder of ministerial awards – Letter Holder of a ministerial award – Certificate Participants (NAUFOR). of recognition from the Minister of Merit of the Russian Ministry of Energy. The main principles of the RM&ICS for managing financial and busi- of Finance of the Russian Federation Chief Accountant – Head of Finance Pavel Shumov operation, approaches to iden- ness risks and control procedures (2007), For Excellent Work in Finance and Economics at JSC ROSNEFTEGAZ. tify and assess risks related reducing business process risks badge of the Ministry of Finance Born in 1978. to financial and business oper- are set out in the Company’s low- of the Russian Federation (2012). Graduated from the Moscow State Tatyana Zobkova ations and business processes, er-level regulations4. Section Head, Bank Sector Monitoring, University of Economics, Statistics, Born in 1976. Consolidated and Analytical Work and Informatics. as well as to develop measures Graduated from Moscow State Section, Financial Policy Department, Head of unit, Deputy Director, Pedagogical University and National Ministry of Finance of the Russian Department of State Regulation Research Nuclear University (MEPhI). Federation. of Tariffs and Infrastructure Reforms.

Lead advisor, deputy head of unit, head 1 Corporate Governance Code recommended by letter of the Bank of Russia No. 06-52/2463 dated 10 April 2014. of unit, Deputy Director of Corporate 2 Federal Law No. 402-FZ On Accounting dated 6 December 2011, Federal Law No. 208-FZ On Joint-Stock Companies dated 26 December Policy and Property Relations in the Fuel 1995, etc. Producing Industries, Pricing and Audit 3 Rosneft’s Policy on the Risk Management and Internal Control System No. P4-01 P-01 approved by Resolution of the Company’s Board in the Fuel & Energy Industry, Ministry of Directors, Minutes No. 8 dated 16 November 2015. of Energy of the Russian Federation. 4 The Company’s Standard on the Corporate-Wide Risk Management System, the Company’s Standard on the Internal Control System, and the RM&ICS regulations and guidelines.

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RM&ICS STAKEHOLDERS

Strategic level Business Units Providing Certain RM&ICS Employees

Board of Directors and Audit Committee of the Board of Directors Functions • Implement risk management controls and initiatives • Prepare and consolidate RM&ICS reports • Assist the Company’s management in managing risks • Approve RM&ICS focus areas • Approve corporate reports on financial • Monitor the RM&ICS reliability • Manage the roll-out of RM&ICS elements and develop • Help identify, assess and report on risks and internal controls, and follow up on their progress and business risks and performance proposals for the risk management methodology and conduct self-assessment of internal controls • Approve risk appetite • Assist the Company’s management in conducting self- assessment of internal controls

Operational level

Chief Executive Officer Management Board Risk Management Committee RM&ICS independent monitoring and performance assessment • Validates RM&ICS focus areas • Ensures the establishment • Validates the RM&ICS issues reported • Validates RM&ICS reports and operation of an effective RM&ICS to the Chief Executive Officer • Validates risk appetite • Resolves RM&ICS operational disputes Internal Audit Service Audit Commission

• Assesses the RM&ICS reliability and performance • Audits the Company’s financial and business operations, • Conducts audits verifies the accuracy and reliability of data included • Monitors the implementation of RM&ICS improvement in Rosneft’s annual reports and annual accounting (financial) proposals made by internal auditors statements • Assists the Company’s executive bodies in investigating abusive/unlawful practices by the Company’s employees and third parties Management Risk and Internal Control Security Service

• Distributes roles and responsibilities Methodology Department • Develops, updates, among employees • Plans RM&ICS focus areas and introduces internal anti-fraud • Manages risks • Develops, implements and updates and anti-corruption regulations • Develops and implements control Company-wide RM&ICS guidelines and implementing documents procedures • Prepares reports on risks and internal • Participates in ensuring compliance • Conducts self-assessment of internal controls with internal regulations controls • Manages the RM&ICS roll-out and implementing anti-fraud and operation across Rosneft’s and anti-corruption initiatives taken business units and Group Subsidiaries by Rosneft’s executive bodies • Provides guidelines to key RM&ICS • Manages the Security Hotline stakeholders, trains them in risk • Conducts inspections/investigations management and internal controls into abusive/unlawful practices by the Company’s employees and third parties

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RM&ICS ENHANCEMENT TO ACHIEVE THE ICS OBJECTIVES, THE COMPANY NEEDS TO:

Owing to ongoing improvements in its RM&ICS, the Company can Define and update key ICS focus areas in alignment with the Company’s needs and stakeholder requirements promptly respond to changes The Comprehensive RM&ICS Enhancement Plan 1 in the external environment for 2020–2022 was endorsed by the Company’s Risk and internal business processes, Management Committee and Chief Executive Officer achieve better performance, and approved by Rosneft’s Board of Directors. and increase its shareholder value. Assess business process risks, develop, adopt and follow controls, including the development of uniform guidelines 2 to support efficient ICS operations Key targets and objec- tives of the RM&ICS enhance- ment, as well as critical steps Identify shortcomings in existing controls, develop and implement initiatives to address the same; streamline to achieve them, are set out 3 and upgrade controls in the Comprehensive RM&ICS Enhancement Plan.

Develop and implement tools to facilitate communication and information sharing among all RM&ICS stakeholders, 4 including via information systems

RM&ICS ENHANCEMENT HIGHLIGHTS FOR 2020 The Company’s management and employees ensure the ICS efficiency by managing the relevant functions and performing their job duties. RM&ICS Enhancement Initiatives Results Improving RM&ICS guidelines. Employee Temporary recommendations for managing risks related to business projects (including trainings the Company’s major projects), together with recommendations for assessing the probabil- CORPORATE-WIDE RISK MANAGEMENT SYSTEM (CWRMS) ity of risk materialisation and the risk impact, were developed and communicated to heads of the Company’s businesses. Employees of Rosneft and Group Subsidiaries and risk and internal control experts were Key CWRMS components trained in the RM&ICS. Developing the Company’s risk manage- The approach to identify and evaluate the Company’s strategic risks, including the assess- ment and internal control infrastructure ment of strategic threats for possible impact on the achievement of the Company's strate- Risk management and procedures gic targets as set out in its development strategy was updated. NNUAL PLANNIN process 1. A G The Company’s quantitative risk assessment models were verified (back-tested). A model (algorithm) was developed to evaluate the risk of accumulation of unclaimed liq- uid and non-liquid inventories. 2 . A combination of risk management G R Implementing and maintaining the Internal Group Subsidiaries and processes were selected for a self-assessment of internal controls. N IS elements supported by the existing I K Control System The Company’s employees were trained in self-assessment, including control procedure R O ID organisational structure, internal pol- testing. IT E N N icies and regulations, risk manage- T O I M F ment procedures and techniques that ONGOING I Improving the RM&ICS processes across The corporate-wide risk management system was implemented by nine Group Subsidiaries. C K are applied across all management S A I ENHANCEMENT Group Subsidiaries T

R I levels and functions of the Company

. OF THE CWRMS O 6 Improving information resources to support Risk and internal control experts from Rosneft’s business units and Group Subsidiaries N to make its risks acceptable

INFRASTRUCTURE REGULATIONS

and maintain the RM&ICS received an overview training in the Risk Management and Internal Control information in the context of achieving Rosneft’s

resources. AND PROCESS AND POLICIES

strategic goals

INTERFACES DISTRIBUTION

INTERNAL CONTROL SYSTEM 5 BETWEEN OF ROLES WITHIN .

R

I THE CWRMS THE CWRMS S T

K N AND OTHER R E E PROCESSES M The internal control system (ICS) is an integral part of the RM&ICS P S Risk management O S E R S T S infrastructure I • ICS is fully aligned with RM&ICS. Implementation and Maintenance reliability of financial statements, N A G K • The ICS is governed by the Company’s of the Internal Control System. and compliance with the applicable IS . R A set of elements that pro- Policy on the Risk Management • The Company relies on these regulations laws and internal regulations. 3

and Internal Control System, to identify risks inherent in its business vide a Company-wide basis, tools, and framework for risk management Standard on the Internal Control processes and implement controls, 4. RES KS System, and Regulations on Design, thus improving manageability PONDING TO RIS and efficiency across business processes,

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Risk management at Rosneft processes) and implemented at all Heads of the Company’s busi- Changes in legislation and regulatory environment External constraints is governed by the Company’s management levels by all employ- ness units arrange for, and steer

Policy on the Risk Management ees of the Company. risk management processes within The Company’s operating results are very and makes projections as to their likely Since 2014, the USA, EU and some and Internal Control System1 their remit. When choosing a risk sensitive to changes in the applicable effect on the Company’s operations. other countries have been impos- and Standard on the Corporate- All strategic and financial and oper- response and specific mitigants, laws, including tax, currency and customs Rosneft’s experts are regular members ing various economic constraints Wide Risk Management System2. ational risks of the Company risk owners seek to find an opti- regulations, etc. Rosneft continuously of working groups drafting bills in various on the Russian Federation, among monitors and assesses such changes, fields of law. other things, affecting operations are reported within the CWRMS. mal trade-off while maintain- of certain companies in the Russian The CWRMS is a combination Risk reports are delivered ing an acceptable risk level (risk energy and other industries (including of interrelated elements embed- for review/approval to the members appetite). Rosneft and some of its subsidiaries). ded into various business pro- of the Board’s Audit Committee / COVID-19 pandemic cesses of the Company (including the Board of Directors and commu- Rosneft factors in and continu- strategic and business planning nicated to the management. ously monitors existing constraints In 2020, the COVID-19 pandemic affected on the achievement of the Company’s to minimise their adverse effects, Rosneft’s operations and key mar- mid- and long-term goals, develops and consistently implements its kets. The Company’s management fac- and implements measures to reduce such Import Substitution and Equipment tors in the epidemiological situation impact, as well as initiatives to protect Localisation Programme in Russia. when assessing the impact of finan- employees. cial, operational and strategic risks ROSNEFT’S RISKS3

Industry-wide risks Financial risks RISK APPETITE OF THE COMPANY

Risk of accidents Risk Risk of tax claims and risk of losing of environmental tax benefits In 2020, Rosneft’s Board of Directors Risk of occupational damage (due to pipe ruptures on land approved the Company’s risk appetite for 2021: injuries Market risks and accidents on the Russian shelf Risk Financial and economic Health, safety and environment Corporate governance causing adverse Credit risk related to crude oil, petroleum products, of failure to achieve oil performance environmental natural gas, petrochemicals and gas processing Recognising the nature and scale The Company has zero tolerance for any and gas condensate impact) products supply contracts of the footprint of its business, products form or manifestation of corporate fraud production targets The Company strictly com- plies with its financial covenants. and services, the Company feels respon- and corruption. Counterparty risk related to long-term advance Risk of failure The Company ensures that all its sible for safe and accident-free opera- Risk related to rising payment crude oil and petroleum products supply to achieve natural short- and long-term commitments tion and protects health and safety of its purchase prices contracts gas employees and local residents in regions for electric power are fulfilled as they fall due. and gas condensate of its operation. production targets Risk of default/cross-default Risk of failure to achieve natural gas As part of its commitment to prevent any Risk of accumulation price targets potential adverse impact on the environ- of unclaimed liquid ment, the Company makes every effort and non-liquid Legal and country risks Risk of lower quality inventories to protect, preserve and restore natural of refinery feedstock resources. Risk related Risk of breach Risk to international of competition laws of failure to comply projects in Commerce with the repair plan and Logistics (Nayara Risk in Oil Refining Energy) of adverse judgements CORPORATE INSURANCE in legal proceedings Risk of failure Risk of losing overseas to which the Company Rosneft relies on insurance resulting from business interrup- No. 225-FZ On Compulsory to achieve natural gas assets in Commerce is a party as a risk management tool ena- tion due to accidents and other Insurance of Owners of Hazardous sales targets and Logistics bling it to pass financial losses accidental exposures, as well Facilities against Civil Liability from the risks materialised as liability insurance against for Damage Caused by Accidents on to insurers. the risk of legal action by third at Hazardous Facilities. Clause 1 parties arising out of its onshore of Article 1 of the above Law pro- Rosneft’s corporate insurance pro- and offshore operations. vides for the compulsory insur- gramme covers: ance of property interests • fixed assets of the Company; The most material risks are rein- of the facility’s owner and its obli- • civil liability; sured with international firms gation to indemnify for damage • business risks. rated A– or higher by S&P, caused to the affected party. AM Best or Fitch. 1 Rosneft’s Policy on the Risk Management and Internal Control System No. P4-01 P-01 approved by Resolution of the Company’s Board Rosneft has insurance cover- of Directors, Minutes No. 8 dated 16 November 2015. age in place for its fixed assets Rosneft insures its liabil- 2 Rosneft’s Standard on the Corporate-Wide Risk Management System No. P4-01 P-01 put into effect by order No. 660 dated 22 October against the risk of damage to (loss ity as required by federal 2018. 3 of) property and potential losses laws, including Federal Law For Rosneft’s key risks, see Appendix 2 to this Annual Report.

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INTERNAL AUDIT REPORTING AND ACCOUNTABILITY LINES OF INTERNAL AUDIT

In its 2020 operations, Rosneft’s Functionally, the Internal Audit • administering internal audit pol- management decisions on audited Internal Audit Service was gov- Service reports to Rosneft’s Board icies and procedures. entities and affecting the impar- erned by the Code of Ethics Rosneft’s internal audit function is performed by the Vice of Directors. This implies: tiality of internal audit. of the International Institute President – Head of Internal Audit and the Company’s • approving Policy-level inter- The existing reporting lines of Internal Auditors, international functional units, specifically the Operational Audit nal regulations on internal whereby the Head of Internal The internal auditors provide writ- professional standards of inter- Department, the Corporate Audit Department, audit (specifically, the Policy Audit reports to the Board ten confirmation of their per- nal audit and the Company’s key the Regional Audit Department, the Internal on Internal Audit that sets out of Directors and the Company’s sonal impartiality to the heads internal regulations on the Internal Audit Methodology and Management Division, its goals, objectives, and roles); executive bodies provide suffi- of the Internal Audit func- Audit Service: and the Economic and Organisational Analysis Division. • deciding on the appoint- cient independence for performing tional units and to the Head • Policy on Internal Audit; In accordance with Rosneft’s organisational structure ment and removal of the Head internal audit functions. of Internal Audit at least once • Regulations on the Internal approved by the Board of Directors, units of the Internal of Internal Audit; a year, thereby raising aware- Audit Quality Assurance Audit Service report directly to the Head of Internal Audit. • reviewing internal audit plans Heads of the Internal Audit ness among the Internal Audit and Improvement Programme. and performance reports; functional units do not partic- employees about potential con- • approving the Internal Audit’s ipate in managing functional flicts of interest and related issues, The Internal Audit Service assists budget and remuneration areas of the Company’s business as well as response procedures Rosneft’s Board of Directors the Company will achieve its • room for improvement available of the Head of Internal Audit; requiring management decisions to situations which may influence and its executive bodies goals. It also helps ensure: across the Company’s financial • the Board’s Audit Committee on audited entities. the independence and impartiality in enhancing the Company’s man- • accuracy, reliability, and integrity and business operations, includ- reviewing material limitations of internal audit. agement efficiency and improving of information on the Company’s ing those of Group Subsidiaries; of authority and other restric- In 2020, the Head of Internal its financial and business perfor- financial and business opera- • integrity of the Company’s tions likely to adversely affect Audit also acted as: The Head of Internal Audit pro- mance, including through a sys- tions, including those of Group assets, including those of Group performance of the Internal • member of the Management vides Rosneft’s Chief Executive tematic and consistent approach Subsidiaries; Subsidiaries. Audit Service. Board of Rosneft (until Officer, Board of Directors (its to the analysis and evaluation • efficiency and effective- September 2020); Audit Committee) with confirma- of the RM&ICS as well as corpo- ness of the Company’s opera- Administratively, the Internal • member of the Management tion of the organisational inde- rate governance, therefore pro- tions, including those of Group Audit reports to Rosneft’s Chief Board of Bashneft (until pendence of the Internal Audit viding reasonable assurance that Subsidiaries; Executive Officer. This implies: June 2020). Service and individual impartiality • allocating necessary funds of internal auditors at least once within the approved budget; For that reason, the Company a year, as part of the internal audit Rosneft’s Internal Audit Service is mainly responsible for: • approving internal audit plans; provided for ongoing monitor- performance report. • reviewing internal audit perfor- ing of potential conflicts of inter- • developing an internal audit plan • analysing audit targets to look • assisting the Company’s executive mance reports; est. To ensure independence based on the risk-oriented approach; into, and evaluate specific aspects bodies in investigating abusive/ • facilitating the coopera- and impartiality of internal audit, • assessing the RM&ICS reliability of their activity; unlawful practices by the Company’s and performance as well • developing recommendations employees and third parties, tion with Rosneft’s and Group the Head of Internal Audit did as its adequacy given the scale for streamlining business processes, including negligence, corporate Subsidiaries’ business units; not vote on matters requiring and complexity of the Company's including their integrity, risk management fraud, corrupt practices, abuses business; and internal controls; and various wrongdoings detrimental • assessing corporate governance; • advising the Company’s executive bodies to the Company; • conducting audits and activities in line on risk management, internal controls, • cooperating with the Company’s with the internal audit plan approved and corporate governance (provided that business units on internal audit by Rosneft’s Chief Executive Officer the internal audit remains independent matters; and endorsed by the Board’s Audit and impartial); • implementing the Internal Audit Committee; • monitoring the Company’s progress Quality Assurance and Improvement • performing other inspections and tasks in addressing breaches and shortcomings Programme; as instructed by Rosneft’s Board identified during audits; • performing other functions essential of Directors (its Audit Committee) to meet the tasks assigned. and/or the Company’s Chief Executive Officer;

280 281 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

INTERNAL AUDIT PERFORMANCE IN 2020 Key Focus Areas in 2020 In the reporting period, all employees of the Internal The internal audit plan is based about material risks, breaches The Internal Audit Service prepares Audit Service underwent train- on an audit model and uses infor- and shortcomings, results and annually updates a three- ing in their core business areas, mation and requests received and effectiveness of internal audi- year plan based on the interrela- including internal audit, coun- from Rosneft’s executive bod- tors’ proposals for eliminating tion of processes, risks, and Group tering corruption and fraud, risk 52% 48% management and internal control, ies and Board of Directors, as well the same, delivery of the inter- Subsidiaries. The plan cov- of audits of audits as its risk evaluation results. It nal audit plan, and assessment ers the highest risk processes IT, and more. includes audits and other activ- of reliability and performance and major Group Subsidiaries. ities and is subject to approval of the Company’s RM&ICS and cor- The Company supported the mas- by Rosneft’s Chief Executive porate governance). In 2020, Rosneft’s Internal Audit ter’s curriculum in Internal Audit Officer and endorsement Service ran a number of initia- Core processes Supporting processes and Control run by the Financial by the Board’s Audit Committee. The internal audit reports tives to improve the control envi- Management Department Exploration and production 42% Industrial automation 23% Details of the plan are pre- for the first six months ronment, including monitoring and IT at Gubkin Russian State University Capital construction 20% sented to the Company’s Board and the full year of 2020 of large investment projects, oil Health, safety 18% of Oil and Gas to train inter- Commerce and logistics 14% and environment of Directors as part of the internal were reviewed by the Chief and petroleum products inven- nal audit specialists for the oil Oil refining 15% Economics and finance 16% audit report for the previous period. Executive Officer, the Board’s tory management, well cost and petrochemicals and gas industry. Procurement 12% Audit Committee and the Board accounting, and implementation Regional sales 9% Energy, localisation, 11% At least twice a year, of Directors of Rosneft. of geological solutions, as well and innovations In the reporting period, the Head of Internal Audit pro- as customer service quality control Corporate services 20% the Internal Audit Service con- cures to prepare and submit The Internal Audit Service com- at the Company’s filling stations / ducted regular in-house self-as- this report to Rosneft’s Board pleted all planned activities oil depots. To boost ICS effi- sessment on its internal audit of Directors and its executive in line with its internal audit plan ciency in procurement, the Internal quality. It was concluded fol- bodies (including information for 2020. Audit Service continued lowing the self-assessment that to implement preventive controls. In 2020, the Internal Audit Service the internal audit function was In the reporting period, it car- updated the Assurance Map rep- generally in line with the require- ried out initiatives to develop resenting a risk and control matrix ments of the Company’s Policy process approach, assess work- across business processes broken on Internal Audit and other ing environment and employee down in three lines of defence. regulations on internal audit, awareness of corporate values the International Standards across the Company’s business The RM&ICS assessment results for the Professional Practice units, and implemented meas- were reviewed by the Board’s of Internal Auditing, and the Code ures to enhance internal audit Audit Committee and the Board of Ethics of the International efficiency. of Directors of Rosneft. Institute of Internal Auditors.

The Internal Audit Service ensures effective communication with the Board’s Audit Committee, Based on results from the risk management and inter- Rosneft’s Chief Executive nal control system efficiency assessment, the Internal Officer (including through per- Audit Service concluded that the RM&ICS ensured sonal reports on material audit overall support of the risk management process results), Rosneft’s management, and efficient ICS, providing reasonable assurance that the Audit Commission, exter- the Company would achieve its goals. nal auditor and the management of the Group Subsidiaries.

282 283 6 INFORMATION FOR SHAREHOLDERS AND INVESTORS ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Share Capital Structure BUYBACK SHARE CAPITAL as at 31 December 2020, % On 6 August 2018, the Board In late March 2020, oil mar- of Directors approved the terms ket volatility prompted Rosneft's of and launched the buy- Board of Directors to amend back of Rosneft shares, includ- the terms of the Programme, The Company’s share capital is divided into 10,598,177,817 ing in the form of GDRs and UBS started to buy back ordinary shares with a par value of RUB 0.01 each. 2020 certifying the rights to such shares and GDRs in the open mar- 6 shares, in the amount of up ket. In 2020, the Company repur- to USD 2 bln. The programme chased over 80 million shares/ runs from the date of approval GDRs worth about USD 370 mln Rosneft shares are traded by the Board of Directors up under the programme, and Rosneft on the Moscow Exchange. Outside JSC ROSNEFTEGAZ, 50.76% to and including 31 December Group carries them on the bal- Russian Federation and of Russia, the shares are listed The Company has Group Subsidiaries 2021. The number of shares ance sheet. Once the programme on the over 190 thousand BP Russian Investments 19.75% and GDRs to be purchased is completed, the Board in the form of Global Depositary individual and cor- Limited (shareholder) under the programme is capped of Directors will make a decision QH Oil Investments LLC 18.53% Receipts (GDRs). porate shareholders (shareholder) at 340,000,000. UBS acts regarding the purchased shares. and about 500 GDR Free float 10.96% as an independent agent mak- As at 31 December 2020, J.P. holders. Total 100% ing open-market transactions Morgan, acting as a depos- on behalf of the Company. itary bank, issued GDRs for 5.4% of ordinary shares in the Company1.

Key shareholders of the Company2 Buyback programme in 2020 (mln shares/GDRs and USD mln) and GDR price (USD) on the London Stock Exchange (LSE)

8

91 7

77 6 2019 2020 69 5

4 36 26 3 21 22 20 31.12.2019 31.12.2020 16 16 12 14 JSC ROSNEFTEGAZ (shareholder) 50.00000001% 40.40% 9 6 2 5 2 4 3 BP Russian Investments Limited (shareholder) 19.75% 19.75% <0.04 0.23 QH Oil Investments LLC (shareholder) 18.93% 18.53% January February March April May June July August September October November December National Settlement Depository (Nominee 10.98% 10.62% Central Depository) LLC RN-NeftKapitalInvest 0% 9.60% mln GDRs USD mln GDR price, USD (RHS) LLC RN-Capital 0% 0.76% The Russian Federation represented < 0.01% < 0.01% by the Federal Agency for State Property Management Other minority shareholders (including 0.34% 0.34% individuals, other legal entities, etc.) Total 100% 100%

1 One Global Depositary Receipt certifies the right to one ordinary registered share. 2 Based on data from Rosneft’s Shareholder Register. Regular updates on shareholders owning over 5% of Rosneft's charter capital are posted on the Company’s official website: INFORMATION for shareholders for and investors https://www.rosneft.ru/Investors/structure/share_capital/

286 287 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

DIVIDEND POLICY SHAREHOLDER RELATIONS, The Dividend Policy approved by the Board of Directors KEY EVENTS IN 2020 formalises the Company’s key principles of, and approaches to, dividend payouts to shareholders and introduces In 2020, the Company made no transparent decision-making processes for paying out changes to its Dividend Policy. The Company has established a multi-level system to protect (declaring) dividends and determining their amount In 2020, the Company paid the rights of its shareholders. and payment procedure. RUB 191.5 bln as dividend for FY2019.

Principles of the Dividend Policy: • paying out dividends as soon Dividend Policy SHAREHOLDER RIGHTS GUARANTEED BY LAW • ensuring compli- as practicable. ance with the require- Pursuant to the Russian laws, • exercise pre-emptive rights upon request and as established ments of the Russian laws, The decision to pay divi- the Company’s shareholders have to buy shares in case issues by the Russian laws; the Company’s Charter dends is made by the General the right to: of new shares or convertible • freely dispose of Rosneft’s and internal regulations when Shareholders Meeting upon rec- • vote at the General Shareholders instruments; shares; paying out (declaring) dividends; ommendation of the Board Meeting on a one-share-one- • receive dividends declared • exercise other rights granted • maximising the transparency of Directors. vote basis; by the Company, in proportion under the Russian law. of the dividend calculation • propose items for the agenda to the number of shares held; process; In 2020, the Company discharged of the General Shareholders • review information and mate- • increasing the Company’s 99.98% of its obligation to pay Meeting and nominate candi- rials provided in preparation investment appeal; out dividends. Dividends were On 22 April 2021, the Board dates to the Board of Directors for the General Shareholders • maintaining the balance paid to all shareholders of record, of Directors recommended (if a shareholder owns at least Meeting; of short- and long-term inter- except for persons who failed that the General Shareholders 2% of voting shares); • obtain information ests of shareholders; to timely notify the issuer’s reg- Meeting approve RUB 6.94 per on the Company’s operations • supporting shareholder istrar of changes in the data share as dividend for FY2020. commitment to improving recorded on their profile. The total amount of dividends the Company’s profitability; recommended for FY2020 ADDITIONAL RIGHTS GUARANTEED BY THE COMPANY’S CHARTER • ensuring that the dividend pay- The Company’s Charter pro- is RUB 73.6 bln. The divi- out pattern comfortably reflects vides for a five-year period when dend payout ratio (dividends / AND INTERNAL REGULATIONS an increase in Rosneft’s net shareholders may claim dividends non-consolidated net profit profit; declared but not paid due to miss- under RAS) for 2020 is 47 %, while The Company offers equal and fair and internal regulations, specifi- • receive necessary information • making dividend payments ing address or banking details, the dividend payout ratio (divi- opportunities for its sharehold- cally the right to: on the Company on a timely in a way most convenient which is longer than required dends / consolidated net profit ers to exercise their legal rights, • receive part of the Company’s and regular basis; for our shareholders; by the applicable laws. under IFRS) is 50 %. e.g. by securing additional rights profit as dividend; • participate in managing and procedures in the Charter the Company’s operations. Rosneft’s dividend history RUB bln % INDEPENDENT AND PROFESSIONAL BOARD OF DIRECTORS 400 60 The composition of the Board by cumulative voting guarantees The Board of Directors consists 50 of Directors and the num- the rights and legitimate interests of four independent directors 300 40 ber of Board members reflect of shareholders. of internationally recognised busi- the Company’s shareholding struc- ness standing. 200 30 ture. Electing Board members

20 100 10

0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2.76 7.53 8.05 12.85 8.21 11.75 5.98 10.48 25.91 33.41 6.94

Total dividends declared, 1H dividends, RUB bln Dividend per share, RUB RUB bln Interim dividends, RUB Dividend payout ratio under IFRS, % Full-year dividends, RUB

288 289 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

OFFICIAL CHANNELS OF COMMUNICATION WITH SHAREHOLDERS PROTECTING SHAREHOLDERS’ TITLE TO SHARES

The Company has established effi- The Company practices reliable and safe methods of recording title to its shares and has Shareholder’s Personal Account cient means of communicating engaged a professional registrar to maintain its Shareholder Register. with its shareholders. With Shareholder’s Personal All users of the Shareholder’s The Company has several commu- Account put into operation in 2019, Personal Account, regardless of where Rosneft's shareholders can now exer- their shares are stored, can now enjoy nication channels in place to facil- cise their rights online: take part a more informative service (with cor- itate the exercise of corporate in the General Shareholders Meeting, porate events added to the news feed rights and promote efficient share- receive updates on their account, mon- and calendar), and an improved inter- holder relations, including: itor dividend payouts, submit requests, face of the shareholder meeting sec- • Shareholder account and request advice. tion (with new notifications, brief voting instructions, and a service that allows on the Company’s website. In 2020, the Shareholder's Personal users to request information on and see • 24 hour shareholder Hotline Account was updated to include new materials related to a particular meeting (a multichannel phone line functions, which allow shareholders agenda item using the electronic voting to receive and handle calls): of record to: ballot). 8 800 500 1100 (toll-free within • use the registrar's services remotely Russia); +7 495 987 3060; and pay for them online; • request and receive 2-NDFL earnings • mailing address for letters: certificate in a convenient way; 26/1 Sofiyskaya Embankment, • exercise their rights in relation Moscow, 117997, Russia; to several Shareholder's Personal • e-mail for requests: sharehold- Accounts within one session (one [email protected]; account). • fax: +7 499 517 8653;

To gain access to their Shareholder's Personal Shareholders can log Answers to frequently into their Shareholder's asked questions Account, shareholders need Personal Account can be found to request login and pass- on the Company’s word from the Moscow Head website. Office or regional branches of the Company’s registrar, LLC Reestr-RN. The registrar is LLC Reestr-RN of 542 thousand personal partner registrars, 5 transfer agent • LLC Reestr-RN call centre Shareholder requests acting under a perpetual licence accounts to record the rights offices at Rosneft’s partner banks, For clients of nominee sharehold- by phone: +7 (495) 411-79-11 (or in 2020, % to register security holders. of their shareholders. Shareholder and a contact and service centre ers, access to the Shareholder’s by email: [email protected]); service offices and transfer agent for Rosneft shareholders. Personal Account is granted • Hotline for Rosneft shareholders LLC Reestr-RN has been oper- offices of LLC Reestr-RN operate by the registrar upon the disclo- at: 8 (800) 500-11-00 (toll-free ating in the registrar services in the regions where the major- The Company, together with LLC sure of information thereon by rel- within Russia) and +7 (495) 987- market for 20 years and ranks ity of Company sharehold- Reestr-RN, regularly notifies evant nominee shareholders. 30-60 (email: shareholders@ among the top ten Russian reg- ers reside and include the Head its shareholders of the need rosneft.ru). istrars. The company keeps Office, 13 branches, 44 trans- to update their personal data The rules governing the proce- registers for more than 1.7 thou- fer agent offices at regional recorded in the Shareholders dure of registering a Shareholder’s In 2020, the Corporate sand issuers, with an inventory branches of LLC Reestr-RN’s Register of Rosneft. Personal Account can be found Governance Department handled on the website of LLC Reestr-RN 4,355 applications, including: Rosneft Regulation or on the Company’s website. • 3,265 phone calls; Resolutions Phone calls 75% of the General on Provision Contact Details • 491 letters; Shareholders of Information of the Registrar and its Letters 11% Service Offices Any questions concerning access • 123 e-mails; Requests on dividend payout 11% Meeting to Rosneft Shareholders to the Shareholder’s Personal • 476 requests claiming unpaid E-mails 3% Account can be addressed to: dividends for prior periods.

290 291 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

INSTITUTIONAL INVESTOR RELATIONS

Rosneft shares are among of Rosneft management's the most attractive invest- speeches at major international ment instruments in the Russian forums. The Company sent rep- Following the dis- stock market. The Company resentatives to five in-person closure of opera- has a free float of 11%, including conferences (in January–March tional and financial 5.4% in the form of GDRs traded 2020), held over 300 group indicators for 2020 on the London Stock Exchange and one-on-one virtual meet- during the trading (LSE). Rosneft enjoys a diversified ings with representatives of more session on 26 March investor base of around 500 insti- than 400 funds, and organ- 2021, the Company's tutional investors. ised about 200 conference calls market cap (including four quarterly disclo- on the Moscow International institutional share- sures) and seven calls dedicated Exchange set a new holders of the Company are based to the Company's activities. record, going above in major business and financial hubs, such as New York, Boston, Feedback from investors Los Angeles, London, Frankfurt, is reported to Rosneft’s manage- RUB 585 per share Stockholm, Hong Kong, Singapore, ment on a regular basis. and Tokyo. For over ten years since its IPO, Rosneft shares have Currently, 20 investment banks been steadily growing in value. provide analytical coverage Between 19 July 2006 (IPO) of the Company, with 18 of them involving heads of econom- and 31 December 2020, Rosneft's recommending to buy or hold ics, finance, and operations share prices on the Moscow Rosneft shares/GDRs. who provide detailed cover- Exchange doubled. age of the Company’s perfor- public statement on its contri- Transparency and openness The Chairman of the Management mance in the reporting period. bution towards achieving the UN of the Company’s ESG disclosure Priorities for 2020 Relations Board of Rosneft and heads Shareholder and investor materi- Sustainable Development Goals have gained international recog- with the Company’s investors, of relevant core functions main- als, such as press releases, pres- approved by the Company’s Board nition. In 2020, Rosneft was once • Improve disclosure standards both existing and potential, tain regular communications entations, Rosneft’s Annual of Directors in December 2018. again included in the FTSE4Good • Focus on investor and shareholder relations more are maintained by the Chairman with the investor community, Report and Sustainability During the reporting year, Rosneft Index of companies demonstrat- closely of the Management Board where investors, analysts, and rep- Report, as well as material facts maintained regular communica- ing strong ESG practices. Rosneft • Promote fast, high- of Rosneft, First Vice resentatives of international rating on resolutions of the Company’s tion with investors supporting became the best Russian oil quality, and skilful financial President, heads of businesses, agencies are updated on stra- Board of Directors are posted the global Climate Action 100+ ini- and gas company in the CHRB, communications and the Investor Relations tegic trends in the Company’s on the Company’s website. tiative. The Company held around Bloomberg and Refinitiv ESG rat- Department. In 2020, despite development, its operations, 50 investor calls on ESG matters ings, and improved its position pandemic-related challenges and financial management directly In 2020, the Company also kept and an ESG-focused roadshow. in TPI и MSCI rankings. and restrictions, the Company by the Company’s top execu- improving its ESG practices Rosneft maintains an ongoing actively engaged with inves- tives. Rosneft holds quarterly and disclosures. In June 2020, dialogue with key ESG analytical tors, including through a number conference calls for investors Rosneft released an updated and rating agencies.

292 293 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

Rosneft share and depositary receipt index weight 2020 IR HIGHLIGHTS Index as at January 2021, %

MSCI Russia 3.25%

January May September FTSE Russia 3.34%

IMOEX 3.33% CEEMEA Opportunities Conference GEMs EEMEA Conference 2020 Russian Corporate Days Conference (London)

Disclosure of the Company’s perfor- 2020 Virtual GEMS Conference mance for Q1 2020 Investor confer- Berenberg Energy Transition ence call involving heads of finance, List of the largest institutional equity and GDR investors as at 31 December Outlook 2020 Conference (London) Free float1 economics, and operations 2020 CEEMEA Global Energy Conference Capital Group 9.45% February June 2020 Global Emerging Markets Forum BlackRock 4.41%

Vanguard 4.06%

th 25 Annual Energy Summit (Vail) The Emerging Markets Debt October and Equity Conference Arrowstreet Capital, LP 3.55%

GEM Corporate Conference (Miami) State Street Corp. 2.38% Annual GEMs EEMEA Conference 2020 Global Emerging Markets Forum

GIC Pte Ltd. 1.94% Russian Corporate Days Conference (Stockholm and Frankfurt) Global Energy Conference Pzena Investment Management LLC 1.82% Russia: The Inside Track Conference Disclosure of the Company’s perfor- mance for 2019 Investor conference SAFE Investment Co. Ltd. 1.80% call involving heads of finance, eco- EMEA Commodities – Well Grounded nomics, and operations Conference November Macquarie Group Ltd. 1.77%

Global Energy Conference UBS Group AG 1.45% March Annual Russia Investor Conference VanEck Associates Corp. 1.36%

CEEMEA Conference European Oil & Gas Conference VTB Capital Investments APG Asset Management NV 1.17% Global Natural Resources Conference online session

Oil Conference Legal & General Group plc 1.05%

August Global Energy Conference 2020 Amundi Pioneer 1.02% Russian Corporate Days Conference

RUSSIA CALLING Forum Роуд-шоу с инвесторами по итогам Disclosure of the Company’s perfor- публикации результатов за 2 кв. 2020 г. April mance for Q3 2020 Investor conference call involving heads of finance, econom- Disclosure of the Company’s perfor- ics, and operations mance for Q2 2020 Investor confer- Energy & Utilities Conference ence call involving heads of finance, economics, and operations December

Moscow Exchange Forum

Global Emerging Markets Virtual Conference

Emerging Europe Conference

1 Excluding strategic investors.

294 295 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

No Bank Recommendation, early 2020 Recommendation, late 2020 Comparative Performance of Rosneft Stocks, Brent prices, MOEX Russia Index, and MICEX Oil and Gas Index in 2020 (base: 100)

1 BCS Buy Buy % 115 2 Renaissance Capital Buy Buy 105 3 ATON Buy Buy 95 85 4 SOVA Capital Buy Buy 75 65 5 Raiffeisen Bank Buy Buy 55 45 6 Buy Buy 35 7 Deutsche Bank Buy Buy 25 January February March April May June July August September October November December

8 Bank of America Merrill Lynch Hold Buy Rosneft Moscow Exchange index Brent MOEX oil and gas index

9 J. P. Morgan Hold Buy

10 Wood & Co Hold Buy

11 Goldman Sachs Hold Buy Rosneft Stock Price and Trading Volumes at LSE and MOEX 12 Sberbank Hold Buy USD mln RUB 13 Veles Capital Buy Buy 3,000 500 450 14 Citi Buy Hold 2,500 400 350 15 HSBC Buy Hold 2,000 300

16 Credit Suisse Buy Hold 1,500 250 200 1,000 17 UBS Buy Hold 150 500 100 18 Morgan Stanley Hold Hold 50

January February March April May June July August September October November December 19 Alfa Bank Under review Under review Trading volumes on the Moscow Exchange Trading volumes on the London Stock Exchange (LSE) 20 VTB Capital Under review Under review Rosneft stock price1 on the Moscow Exchange, RUB (RHS)

1 Monthly average

296 297 ROSNEFT / ANNUAL REPORT 2020 Strategy Operating results Market Overview Sustainable Corporate Information and Competitive Development Governance for Shareholders Environment and Investors

ROSNEFT BONDS AND CREDIT RATINGS Issue Number Par Value, bln Currency Issue Date Maturity Date Coupon4, %

Eurobonds (issued by Rosneft International Finance DAC) In 2012, Rosneft placed two Series 2 2 USD December 2012 March 2022 4.199 Eurobond issues as part of its BBB– Baa3 Eurobond Programme for a total credit rating by S&P Global, credit rating by Moody’s, Bonds of USD 10 bln: USD 1 bln maturing outlook stable outlook stable 1 in 2017 and USD 2 bln maturing 04, 05 20 RUB October 2012 October 2022 7.9 0 in 2022. As at 31 December 2020, 07, 08 30 RUB March 2013 March 20231 7.30 the only outstanding issue was the USD 2 bln maturing in 2022. 065, 095, 105 40 RUB June 2013 May 20231 7.0 0

Exchange-traded bonds Between 2006 and 2010, for- In January 2021, S&P Global reviewed the risk outlook mer subsidiaries of TNK-BP Group BO-05, BO-06 40 RUB December 2013 December 2023 6.65 placed eight Eurobond issues for the oil and gas sector to the downside which neg- for a total of USD 5.5 bln maturing atively affected credit ratings of a number of interna- BO-01, BO-07 35 RUB February 2014 February 2024 8.90 in 2011–2020. As at 31 December tional oil and gas companies. Rosneft’s credit rating BO-02, BO-03, was reconfirmed at the same level. 65 RUB December 2014 November 20241 9.40 2020, all bonds have been BO-04, BO-09 redeemed. BO-08, BO-10, BO-11, Throughout the year, Rosneft’s credit ratings by S&P 160 RUB December 2014 November 20241 9.40 BO-12, BO-13, BO-14 In 2012–2017, Rosneft launched Global and Moody’s international rating agencies were BO-153, BO-163 four Ruble Bond Programmes at an investment grade and on a par with the sover- 400 RUB December 20142 December 20201 7.8 5 BO-173, BO-243 and completed 41 issues of corpo- eign rating of the Russian Federation: BBB-, outlook rate and exchange-traded ruble stable, and Baa3, outlook stable, respectively. On top BO-18, BO-19, BO-20, BO-21, of that, Expert RA, Russian rating agency, maintained 400 RUB January 20152 January 2021 6.30 bonds for a total of RUB 2,261 bln. BO-22, BO-23, Four of the issues worth Rosneft's creditworthiness at the highest level (ruAAA) BO-25, BO-26 RUB 400 bln were redeemed with a stable outlook. 001Р-01 600 RUB December 20162 November 2026 4.35 in December 2020 in line with the offering documents. 001Р-02 30 RUB December 2016 December 2026 9.39

In November 2017, for a total of RUB 795 bln Programme with a total par value 001Р-03 20 RUB December 2016 December 20261 9.50 the Company registered its between December 2017 of RUB 0.8 trln. Under this pro- 001Р-04 40 RUB May 2017 April 2027 8.65 fifth multi-currency Exchange- and December 2020. gramme, Rosneft placed two Traded Bond Programme issues of ruble bonds for a total 001Р-05 15 RUB May 20172 May 20251 8.60 with a total par value of RUB 1.3 trln. In November 2020, the Company of RUB 800 bln in November 2020. Under the programme, Rosneft registered its sixth multi-cur- 001Р-06, 001Р-07 266 RUB July 2017 July 2027 8.50 placed ten issues of ruble bonds rency Exchange-Traded Bond 001Р-08 100 RUB October 2017 September 2027 4.35

002Р-01, 002Р-02 600 RUB December 2017 November 2027 4.35

002Р-03 30 RUB December 2017 December 2027 7.75

002Р-04 50 RUB February 2018 February 2028 7.50

002Р-05 20 RUB March 2018 February 2028 7.30

002Р-06, 002Р-07 30 RUB April 20192 March 2029 8.70

002Р-08 25 RUB July 2019 July 2029 7.9 5

002Р-09 25 RUB October 20192 October 2029 7.1 0

002Р-10 15 RUB June 20202 May 2030 5.80

003Р-01, 003Р-02 800 RUB November 2020 November 2030 4.35

1 No put option available. 2 Coupon payments every three months. 3 Bonds redeemed as at 31 December 2020. 4 For the coupon period applicable as at 31 December 2020. 5 As at 31 December 2020, part of the issue has been redeemed before maturity. 298 299 ROSNEFT / ANNUAL REPORT 2020

INFORMATION DISCLOSURE

INFORMATION POLICY AND TRANSPARENCY

Rosneft is committed to prompt The Company has established and reliable disclosure of infor- a reliable system of preventing The Company mation. The Board of Directors the unlawful use and distribution published and held: has approved Rosneft's of insider information and reg- • 613 press releases and news Information Policy and over- ularly monitors persons having on its official website; sees the Company’s compliance access to it. • 5 media interviews of its top with it to assist sharehold- managers and directors; ers, investors, and stakeholders The Company is committed • 6 press conferences, media briefings in making informed investment to promoting information dis- of the Company’s management and management decisions. closure by its controlled entities and representatives of its major through continuous methodologi- shareholders; The Company relies on various cal support. • 4 regular financial performance presentations. disclosure channels and meth- ods to ensure unrestricted The Company also discloses and easy access to informa- additional information that tion disclosed in accordance is not required by law or stock 2020 Disclosure Items with the applicable laws, rules exchange rules: of the Moscow Exchange, London • data on operating and finan- Stock Exchange, and internal cial performance with notes regulations. of the Company’s top man- agement to annual and interim 526 To ensure that Russian and for- financial statements; disclosures eign shareholders and investors • the Company’s policy on sus- are treated equally, the Company tainable development, health simultaneously discloses all infor- and safety; mation in Russian and English. • the Company’s operational structure. Acquisition of shares/GDRs 204 The Company uses its official web- under Rosneft’s Open Market Share Buyback site and the website of Interfax The Company holds conference Programme Corporate Information Disclosure calls with institutional investors Accrued and paid income on 154 Centre1 to publish the Company’s and its representatives take part bonds and shares Meetings and resolutions of 60 Charter and other internal reg- in major investment conferences Rosneft’s governing bodies ulations, annual and quarterly by means of video-conferencing. Disclosure of the Company’s 27 reports (issuer's reports), sustain- reports Bond issues 27 ability reports, annual and quar- Completed transactions and 18 terly RAS financial statements, Key principles of the Information Policy projects, including stakes IFRS consolidated financial state- are prompt disclosure, accessibility, reliability, held in other entities and relevance of information. Other 36 ments and relevant Management Discussion and Analysis (MD&A), presentations, press releases, Rosneft’s Information Policy information on affiliates, and other data that may have an impact on the performance of Rosneft securities.

1 The documents are available at: http://www.e-disclosure.ru/portal/company.aspx?id=6505

300 Appendix 1 (CONSOLIDATED FINANCIAL STATEMENTS ROSNEFT OIL COMPANY FOR THE YEAR ENDED DECEMBER 31, 2020 WITH INDEPENDENT AUDITOR’S REPORT ROSNEFT OIL COMPANY) ROSNEFT / ANNUAL REPORT 2020 Appendix 1.

CONSOLIDATED BALANCE SHEET (IN BILLIONS OF RUSSIAN RUBLES)

As of December 31 As of December 31

Notes 2020 2019 (restated)1 Notes 2020 2019 (restated)1

Assets Total current liabilities 3,092 2,755

Current assets Non-current liabilities

Cash and cash equivalents 18 806 228 Loans and borrowings and other financial liabilities 30 3,810 3,033

Restricted cash 18 17 10 Deferred tax liabilities 15 1,072 843

Other short-term financial assets 19 817 501 Provisions 32 437 343

Accounts receivable 20 468 620 Prepayment on long-term oil and petroleum products supply agreements 33 1,401 750

Bank loans granted 131 130 Other non-current liabilities 34 51 73

Inventories 21 361 438 Total non-current liabilities 6,771 5,042

Prepayments and other current assets 22 322 469 Equity

Total current assets 2,922 2,396 Share capital 36 1 1

Non-current assets Treasury shares 36 (370) –

Property, plant and equipment 23 10,401 8,706 Additional paid-in capital 1,100 635

Right-of-use assets 24 155 160 Reserve for foreign exchange differences on translation of foreign operations (66) (185) Intangible assets 25 80 66 Other funds and reserves 34 31 Other long-term financial assets 26 275 229 Retained earnings 36 4,007 4,032 Investments in associates and joint ventures 27 846 801 Rosneft shareholders’ equity 4,706 4,514 Bank loans granted 363 291 Non-controlling interests 16 781 635 Deferred tax assets 15 54 33 Total equity 5,487 5,149 Goodwill 25 82 93 Total liabilities and equity 15,350 12,946 Other non-current non-financial assets 28 172 171

Total non-current assets 12,428 10,550

Total assets 15,350 12,946

Liabilities and equity Chief Executive Officer ______I.I. Sechin, February_____, 2021. Current liabilities

Accounts payable and accrued liabilities 29 1,546 1,162

Loans and borrowings and other financial liabilities 30 798 795

Income tax liabilities 14 23

Other tax liabilities 31 301 379

Provisions 32 68 55

Prepayment on long-term oil and petroleum products supply agreements 33 357 332

Other current liabilities 8 9

1 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2019 acquisitions (Note 7).

302 303 ROSNEFT / ANNUAL REPORT 2020 Appendix 1.

ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT OF PROFIT ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT OF OTHER OR LOSS (IN BILLIONS OF RUSSIAN RUBLES, EXCEPT EARNINGS COMPREHENSIVE INCOME (IN BILLIONS OF RUSSIAN RUBLES) PER SHARE DATA, AND SHARE AMOUNTS)

For the years ended December 31 For the years ended December 31 Notes 2020 2019 (restated)2 Notes 2020 2019 (restated)1 Net income 181 802 Revenues and equity share in profits of associates and joint ventures Oil, gas, petroleum products and petrochemicals sales 8 5,628 8,490 Other comprehensive income – to be reclassified to profit or loss in subsequent periods Support services and other revenues 77 86 Foreign exchange differences on translation of foreign operations 119 (88) Equity share in profits of associates and joint ventures 27 52 100

Total revenues and equity share in profits of associates Foreign exchange cash flow hedges 6 (2) 146 5,757 8,676 and joint ventures Income from changes in fair value of debt financial assets at fair value 3 5 Costs and expenses through other comprehensive income

Production and operating expenses 767 715 Increase in loss allowance for expected credit losses on debt financial 1 1 assets at fair value through other comprehensive income Cost of purchased oil, gas, petroleum products, goods 691 1,566 for retail and refining costs Equity share in other comprehensive loss of associates (1) (4) General and administrative expenses 127 200 Income tax related to other comprehensive income – to be reclassified 6 – (29) Transportation costs and other commercial expenses 661 733 to profit or loss in subsequent periods

Total other comprehensive income – to be reclassified to profit Exploration expenses 15 11 120 31 or loss in subsequent periods, net of tax Depreciation, depletion and amortization 23–25 663 687 Other comprehensive income – not to be reclassified to profit Taxes other than income tax 9 2,121 2,666 or loss in subsequent periods Export customs duty 10 334 793 Income from changes in fair value of equity financial assets at fair 3 7 Total costs and expenses 5,379 7,371 value through other comprehensive income

Income tax related to other comprehensive income – not to be Operating income 378 1,305 (1) (1) reclassified to profit or loss in subsequent periods Finance income 11 95 143 Total other comprehensive income – not to be reclassified to profit 2 6 Finance expenses 12 (220) (227) or loss in subsequent periods, net of tax Other income 13 533 11 Total comprehensive income, net of tax 303 839 Other expenses 13 (463) (156)

Foreign exchange differences (163) 64 Total comprehensive income, net of tax, attributable to:

Realized foreign exchange differences on hedge Rosneft shareholders 742 6 2 (146) 269 instruments

Income before income tax 162 994 non-controlling interests 34 97

Income tax benefit/(expense) 15 19 (192)

Net income 181 802

Net income attributable to:

Rosneft shareholders 147 705

non-controlling interests 16 34 97 Net income attributable to Rosneft shareholders per 17 14.88 66.52 common share (in RUB) – basic and diluted Weighted average number of shares outstanding 9,876 10,598 (millions)

1 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2019 acquisitions (Note 7). 2 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2019 acquisitions (Note 7).

304 305 ROSNEFT / ANNUAL REPORT 2020 Appendix 1.

ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (IN BILLIONS OF RUSSIAN RUBLES, EXCEPT SHARE AMOUNTS)

Number Share Treasury shares Additional Reserve for foreign Other funds and reserves1 Retained earnings Rosneft share-holders’ equity Non-controlling Total equity of shares capital paid-in capital exchange differences interests (millions) on translation of foreign operations Balance at January 1, 2019 10,598 1 – 633 (97) (94) 3,610 4,053 624 4,677

Net income (restated) – – – – – – 705 705 97 802

Other comprehensive (loss)/income – – – – (88) 125 – 37 – 37 Total comprehensive (loss)/income – – – – (88) 125 705 742 97 839 (restated)

Dividends declared (Note 36) – – – – – – (283) (283) (99) (382)

Change of interest in subsidiaries – – – 1 – – – 1 3 4

Other movements (Note 16) – – – 1 – – – 1 10 11 Balance at December 31, 2019 10,598 1 – 635 (185) 31 4,032 4,514 635 5,149 (restated)

Net income – – – – – – 147 147 34 181

Other comprehensive income – – – – 119 3 – 122 – 122 Total comprehensive income – – – – 119 3 147 269 34 303

Dividends declared (Note 36) – – – – – – (172) (172) (63) (235)

Acquisition of treasury shares (Note 36) (1,098) – (370) – – – – (370) – (370)

Change of interest in subsidiaries (Note – – – 469 – – – 469 174 643 16)

Disposal of subsidiaries – – – – – – – – 1 1

Other movements (Note 16) – – – (4) – – – (4) – (4)

Balance at December 31, 2020 9,500 1 (370) 1,100 (66) 34 4,007 4,706 781 5,487

1 Other funds and reserves include a reserve for changes in fair value of equity and debt financial assets at fair value through other comprehensive income, a reserve for expected credit losses on such debt financial assets, a reserve for equity share in other comprehensive income of associates and joint ventures, and a reserve for foreign exchange cash flow hedges.

306 307 ROSNEFT / ANNUAL REPORT 2020 Appendix 1.

ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT OF CASH For the years ended December 31 FLOWS (IN BILLIONS OF RUSSIAN RUBLES) Notes 2020 2019 (restated) Net cash provided by operating activities before income tax 1,741 1,185 and interest

For the years ended December 31 Income tax payments (126) (202)

Notes 2020 2019 (restated) Interest received 98 77

Operating activities Dividends received 32 50

Net income 181 802 Net cash provided by operating activities 1,745 1,110

Adjustments to reconcile net income to net cash provided by operating Investing activities activities Capital expenditures (785) (854) Depreciation, depletion and amortization 23–25 663 687 Loss on disposal of non-current assets 13 15 16 Acquisition of licenses and auction fee payments (4) (11)

Dry hole costs 8 3 Acquisition of short-term financial assets (378) (93)

Offset of prepayments received on oil and petroleum products long term Proceeds from sale of short-term financial assets 100 240 33 (300) (344) supply agreements Proceeds from sale of long-term financial assets 13 12 Offset of prepayments made on oil and petroleum products long term supply 9 138 agreements Acquisition of long-term financial assets (51) (18)

Foreign exchange gain on non-operating activities 252 (105) Acquisition of interest and additional capital contribution to the associates (4) (4) and joint ventures Realized foreign exchange differences on hedge instruments 6 (2) 146 Acquisition of interest in subsidiaries, net of cash acquired, and joint 7 (633) (12) Offset of other financial liabilities (160) (172) arrangements

Equity share in profits of associates and joint ventures 27 (52) (100) Proceeds from sale of interest in subsidiaries, net of cash acquired 31 5 Changes in provisions for financial assets (14) 41 Proceeds from sale of property, plant and equipment 17 6 Non-cash income from acquisitions and sales, net (512) – Net cash used in investing activities (1,694) (729) Loss from changes in reserves and impairment of assets 388 108 Financing activities Finance expenses 12 220 227 Proceeds from short-term loans and borrowings 623 401 Finance income 11 (95) (143) Repayment of short-term loans and borrowings (797) (689) Income tax (income)/expense 15 (19) 192

Changes in operating assets and liabilities Proceeds from long-term loans and borrowings 1,218 393

Decrease/(increase) in accounts receivable, gross 46 (139) Repayment of long-term loans and borrowings (588) (540)

Decrease/(increase) in inventories 48 (43) Proceeds from other financial liabilities 54 185

(Increase)/decrease in restricted cash (7) 2 Repayment of other financial liabilities (107) (57)

Decrease/(increase) in prepayments and other current assets 58 (58) Interest paid (256) (280)

Increase in long-term prepayments made on oil and petroleum products supply Repurchase of bonds (29) – (12) (67) agreements including current portion Proceeds from sale of non-controlling share in subsidiary 16 644 – (Decrease)/increase in accounts payable and accrued liabilities (73) 14 Other financing received 3 12 (Decrease)/increase in other tax liabilities (78) 49 Dividends paid to Rosneft shareholders 36 (172) (283)

Decrease in other current liabilities (3) (9) Dividends paid to non-controlling shareholders (63) (99)

Increase in other non-current liabilities – 3 Net cash provided by / (used in) financing activities 530 (957)

(Decrease)/increase in current reserves (3) 2 Net increase/(decrease) in cash and cash equivalents 581 (576)

Proceeds under long-term oil and petroleum products supply agreements 1,004 – Cash and cash equivalents at the beginning of the year 18 228 832

Interest paid on long-term prepayment received on oil and petroleum products Effect of foreign exchange on cash and cash equivalents (28) (14) (8) (3) supply agreements Cash and cash equivalents at the end of the year 18 806 228 Net increase in operating assets of subsidiary banks (34) (61)

Net increase in operating liabilities of subsidiary banks 227 4

308 309 Appendix 2.

No Risk Risk description Risk owner Risk management practices Industry-wide risks

1 Risk of accidents The risk of the break- Vice President down of the facilities for Health, Safety • Programmes supporting the key development and/or equipment used and Environment funds and projects in Oil Refining, Gas Processing at a hazardous indus- and Petrochemicals. trial facility, uncontrolled • Insurance programme for the main production assets explosion and/or pollut- (reparation of damages). ant emissions • Improving the safety culture: staff training, motivation, incentivisation and commitment to safe practices. Efforts to ensure HSE leadership and zero tolerance to violations at all management levels.

2 Risk of occupational The risk is related Vice President • Drafting and implementing remedial actions based on les- injuries to lost-time inju- for Health, Safety sons learnt from incidents at Group Subsidiaries; ries of the Company’s and Environment • holding occupational safety trainings; employees or contractors • exercising control over equipping vehicles of the Group Subsidiaries and contractors with in-vehicle monitoring systems and two-way dashboard cameras.

3 Risk of failure The risk is related First Vice • Cutting production at the least profitable fields taking to achieve oil and gas to the failure to achieve President for Oil, into account the geography, geology and climate condi- condensate produc- oil and gas condensate Gas, and Offshore tions of certain projects, including joint ventures; tion targets production targets Business • ensuring continuous monitoring and timely adjustment Development of the production drilling programme; monitoring well interventions and scheduled initiatives to maintain reser- voir pressure; • regular monitoring of procurement requests, contractor selection and construction and installation contracting.

4 Risk related to ris- The risk is related Vice President • Promoting the need to restrict the price/tariff growth dur- Appendix 2. ing purchase prices to fluctuating purchase for Informatisation, ing the energy price discussions with the federal executive for electric power prices for electric power Innovation bodies, the Market Council and the expert community in the wholesale market and Localisation price zones, indexation of electricity transmis- (KEY RISK FACTORS) sion tariffs, and new sur- charges to the capacity price

5 Risk of failure The risk is related Vice President • Supporting the indexation of regulated gas prices when to achieve natural to potential lack for Commerce discussing pricing matters with government bodies gas price targets of gas price indexa- and Logistics and the expert community tion in the second half of 2021

6 Risk of lower quality Adverse changes Vice President • Making adjustments to the processing units' operation of refinery feedstock in the Company's for Refining mode; adjusting the production programme; financial and oper- • stopping the receipt of a given batch of oil and/or its redi- ating performance rection to storage facilities; filing complaints; as a result of lower qual- • monitoring supplied feedstock quality; benchmarking ity of feedstock supplied the actual feedstock quality against the target. for refining

7 Risk The risk of a decline Vice President • Monitoring contractual delivery timelines; considering of failure to comply in financial and operat- for Refining the purchases of available alternatives; ensuring the mini- with the repair plan ing performance caused mum emergency stock. in Oil Refining by delays in the mainte- • preparing the procurement and maintenance requests, nance works at the Oil including the selection criteria (equipment, the availabil- Refining production ity of qualified personnel, the availability of own repair facilities facilities); • organising inspections at the manufacturer's site during the production of equipment.

8 Risk of failure The risk is related Vice President • On-exchange gas sales / supply contracts with new to achieve natural to the decline in gas for Commerce consumers gas sales targets and gas condensate and Logistics sales below the target

9 Risk of environmen- The risk is related Vice President • Implementing the programme to ensure reliability tal damage (due to environmental pollu- for Health, Safety of reconstructed oilfield pipelines; to pipe ruptures tion as a result of pipe- and Environment • planning and taking actions to remediate oil-contami- on land and accidents line incidents/accidents nated land; on the Russian shelf or well construction • timely emergency response, oil spill containment causing adverse envi- on the shelf and clean-up. ronmental impact)

311 ROSNEFT / ANNUAL REPORT 2020 Appendix 2.

No Risk Risk description Risk owner Risk management practices No Risk Risk description Risk owner Risk management practices

10 Risk of failure The risk is related to fail- First Vice • Support of and monitoring compliance with project net- Legal and country risks to achieve natural ure to achieve natural President for Oil, work models for key facilities; gas and gas con- gas and gas condensate Gas, and Offshore • monitoring counterparties’ financials to identify signs 17 Risk related to inter- The risk is related Vice President • In case of risks arising from unstable economic envi- densate production production targets Business of bankruptcy and timely notify of high relevant risks; national projects to potentially unsta- for Commerce ronment in the regions hosting Rosneft’s international targets Development • overseeing the Group Subsidiaries’ initiatives to prevent in Commerce ble economic environ- and Logistics projects, the Company’s management will take every rea- the COVID-19 spread during the pandemic; and Logistics ment in the regions sonable step to minimise their potential adverse impact. • making arrangements for the Group Subsidiaries to file hosting international • The actual profile of such measures will be decided complaints in case of contractual defaults. projects in Commerce on a case-by-case basis and may include conducting and Logistics negotiations with government bodies and project part- 11 Risk of accumula- The risk Deputy Head • Inventorying the needs in case of any change of project ners, diversifying supply and sales channels, reducing tion of unclaimed is related to an increase of Procurement timelines or adjustments of production programmes; operating costs, optimising the investment programme, liquid and non-liquid in unclaimed liq- • an ongoing inventory categorisation, timely classification and introducing restructuring initiatives. inventories uid and non-liquid of inventories as idle or unclaimed to make them available inventories to other Group Subsidiaries; 18 Risk loss of overseas The risk is related Vice President • In case of political, economic, or social risks arising • streamlining approaches to pricing in case of sell- assets in Commerce to the potential for Commerce in Rosneft’s regions of operation, the Company’s man- ing unclaimed liquid and non-liquid inventories to third and Logistics loss of Commerce and Logistics agement will take every reasonable step to minimise parties; and Logistics’ assets their potential adverse impact. • random checks of inventory categorisation for correctness. in the regions of oper- • The actual profile of such measures will be decided ation due to unsta- on a case-by-case basis and may include conducting Financial risks ble political and social negotiations with government bodies, reducing operating environment costs, optimising the investment programme, introduc- 12 Risk of tax claims Risk of financial losses First Vice • Challenging tax authority claims, if any, in and out ing restructuring initiatives, as well as ensuring the safety and risk of losing tax due to concerns brought President of court; of the Company’s employees. benefits forward by tax authori- • monitoring legal precedents; ties or of the Company • checking primary documents for completeness, accuracy 19 Risk of breach Rosneft has a significant First Vice • Ensuring non-discriminating access of independent mar- being no longer eligible and compliance with applicable tax laws, including con- of competition laws share in Russian whole- President ket participants to direct supplies of Rosneft petro- for tax benefits trol of reports generated for tax authorities. sale markets for petrols, leum products (creating a level playing field for Group diesel and aviation fuel, Subsidiaries and third parties); 13 Market risks Market risks include First Vice Leveraging internal optimisation tools, including: and fuel oil and therefore • Making sure no less than 10% of the output (includ- price, currency and inter- President • non-derivative financial instruments; is subject to additional ing monthly production adjustments) are regularly sold est rate risks • signing long-term contracts with customised terms; competitive require- on the exchange. • searching for alternative sales channels for petroleum ments and risks associ- products and streamlining logistics. ated with amendments to, and potential viola- 14 Credit risk related The risk is related First Vice • Using security interests to cover its credit risks (via bank tions of anti-trust laws to crude oil, petro- to an increase in overdue President guarantees, letters of credit, etc.); leum products, receivables as a result • implementing controls to authorise shipments and ship- 20 Risk of adverse Risk of financial losses Deputy Head • Protecting the Company's interests in court natural gas, petro- of a counterparty’s ping orders and ensure that all sales contracts are backed judgements in legal due to adverse court of Legal Support chemicals and gas full or partial default properly by financial instruments; proceedings to which rulings in proceedings processing products on, or failure to timely • suspending credit risk-related transactions with a default- the Company to which the Company supply contracts fulfil its obligations ing counterparty. is a party is a party owed to the Company under any revenue contract

15 Counterparty risk The risk is related Vice President • Monitoring the coverage of outstanding amounts against related to long-term to losses incurred for Commerce the planned supplies; advance payment as a result of a coun- and Logistics • discussing and monitoring shipment schedules. crude oil and petro- terparty's full or par- leum products supply tial default on or failure contracts to timely fulfil their obli- gations to supply crude oil and petroleum prod- ucts under prepaid contracts

16 Risk of default/ Risk of being unable Financial Director • Regular monitoring of compliance with financial cross-default to timely and/or fully covenants; meet the Company’s • negotiations with lending banks, if necessary. obligations under its debt financing agree- ments or long-term advance payment crude oil and petroleum prod- ucts supply contracts

312 313 Appendix 3.

REPORT ON COMPLIANCE WITH THE PRINCIPLES AND RECOMMENDATIONS OF THE CORPORATE GOVERNANCE CODE

This report on compliance with the principles and recommendations of the Corporate Governance Code (the Report) was reviewed by Rosneft’s Board of Directors at a meeting held on 22 April 2021 (Minutes No. __ dated __ April 2021) as part of the 2020 Annual Report.

The Board of Directors certifies that this Report contains complete and reliable information on Rosneft’s com- pliance with the principles and recommendations of the Corporate Governance Code in 2020.1

Rosneft assesses its compliance with the Corporate Governance Code as per the guidelines recom- Appendix 3. mended by the Bank of Russia in Letter No. IN-06-52/8 on Disclosure of Compliance with the Principles and Recommendations of the Corporate Governance Code in the Annual Report of a Public Joint Stock Company dated 17 February 2016. Key aspects of the Company’s corporate governance model and practice (REPORT ON COMPLIANCE are outlined in Section Corporate Governance of Rosneft’s 2020 Annual Report. WITH THE PRINCIPLES AND RECOMMENDATIONS OF THE CORPORATE GOVERNANCE CODE)

1 Specifies either the reporting year or, if the report on compliance with the principles and recommendations of the Corporate Governance Code contains data related to the post reporting period up to the date of the Report, the date of the Report.

315 ROSNEFT / ANNUAL REPORT 2020 Appendix 3.

Status 1 Status Explanations 2 on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

1.1. The Company shall ensure equitable and fair treatment of all shareholders exercising their right to participate in managing 1.1.4 There are no unjustified diffi- 1. In the reporting period, shareholders Complied with the Company. culties preventing sharehold- had the opportunity to propose items Complied ers from exercising their rights for the agenda of the Annual General with in part 1.1.1 The Company provides 1. The Company’s internal regulation Complied with To maintain effective relations to convene a General Shareholders Meeting during at least Not complied with the best possible con- on conducting General Shareholders Complied with shareholders, Rosneft pro- Shareholders Meeting, nom- 60 days after the end of the respec- ditions for shareholders Meetings approved by the General with in part vides the following communi- inate candidates to the gov- tive calendar year. to participate in General Shareholders Meeting is publicly Not complied with cation channels: a shareholder erning bodies and propose 2. In the reporting period, the Company Shareholders Meetings, available. hotline, mail and email, fax. items for the agenda. rejected no item proposed make informed decisions 2. The Company provides an easily The Company does not con- for the agenda and no candidate on agenda items, coordi- accessible communication chan- sider setting up a dedicated nominated to the Company’s bodies nate their actions and express nel, such as a hotline, email or online online forum, as it has other due to misprints or other minor flaws their opinions on matters forum, for shareholders to express communication channels in shareholders’ proposals. under consideration. their opinions and put questions in place, as well as provides regarding the agenda in preparation for the opportunity to dis- 1.1.5 Each shareholder is able 1. The Company’s internal regula- Complied with for a General Shareholders Meeting. cuss agenda items at General to exercise their voting right tion (corporate policy) authorises Complied The Company provided such com- Shareholders Meetings and, if without hindrance, in the sim- each General Shareholders Meeting with in part munication channels before every relevant, using Rosneft’s social plest and most convenient participant to request a copy Not complied with General Shareholders Meeting held networks, which are mentioned way. of their completed ballot certi- in the reporting period. on Rosneft’s official website. fied by the ballot committee before Rosneft has the Corporate the end of the respective meeting. Governance analytical infor- mation system in place. 1.1.6 The procedure for hold- 1. In the reporting period, sufficient Complied with It enables shareholders ing a General Shareholders time for reporting on and discuss- Complied to vote online and interact Meeting established ing agenda items was provided with in part with the Company and the reg- by the Company pro- at General Shareholders Meetings Not complied with istrar via Shareholder’s Personal vides all persons present held in the form of a meeting (joint Account. at the Meeting with equal presence of shareholders). opportunities to express 2. Candidates nominated 1.1.2 The procedure to notify 1. The notice of a General Shareholders Complied with their opinions and ask to the Company’s governing shareholders of a General Meeting is posted on the Company’s Complied questions. and supervisory bodies were availa- Shareholders Meeting website at least 30 days prior with in part ble for answering shareholders’ ques- and provide them with rele- to the date of the Meeting. Not complied with tions at the Meeting where they were vant materials enables them 2. The notice specifies the venue voted upon. to get well-prepared. of the Meeting and documents 3. When making decisions required for admission to the venue. on the preparation and holding 3. Shareholders are informed of who of General Shareholders Meetings proposed agenda items and nomi- in the reporting period, the Board nated candidates to the Company’s of Directors considered using tele- Board of Directors and Audit communications equipment to pro- Commission. vide shareholders with remote access to participate in the Meetings. 1.1.3 When preparing 1. In the reporting period, shareholders Complied with for and participating had the opportunity to put questions Complied 1.2. Shareholders are provided with an equitable and fair opportunity to receive a share of the Company’s profits in the form in a General Shareholders to the Company’s executive bodies with in part of dividends. Meeting, shareholders have and directors both before and dur- Not complied with unrestricted and timely ing the Annual General Shareholders 1.2.1 The Company has developed 1. The Company’s Dividend Policy Complied with access to any relevant Meeting. and implemented a trans- has been developed, approved Complied information and materials, 2. The Board of Directors’ opin- parent and clear procedure by the Board of Directors with in part and are able to put questions ions (including dissenting opinions to determine the amount and disclosed. Not complied with to the Company’s executive recorded in the minutes) on each of dividends and pay them 2. If, in accordance with the Company’s bodies and directors, as well of the agenda items of the General out. Dividend Policy, the amount as communicate with one Shareholders Meetings held of dividends is determined another. in the reporting period were added based on the Company’s results to the materials for the General recorded in its financial state- Shareholders Meeting. ments, the Dividend Policy shall 3. The lists of persons entitled to par- employ the consolidated financial ticipate in each General Shareholders statements. Meeting in the reporting period were made available to the shareholders 1.2.2 The Company does 1. The Company’s Dividend Policy Complied with eligible to review such lists as soon not resolve to pay out div- clearly stipulates financial/eco- Complied as the Company received those. idends if such resolu- nomic circumstances under which with in part tion, though not in breach the Company should not pay Not complied with of the legislation, is not eco- dividends. nomically viable and may lead to false assumptions about the Company’s operations.

1 The “complied with” status is assigned only if the Company meets all of the criteria for compliance with a corporate governance principle. Otherwise, the “complied with in part” or “not complied with” status is assigned. 2 Explanations are given for each criterion for compliance with a corporate governance principle if the Company meets only some of the criteria or none of them. If the Company indicates the “complied with” status, no explanations are required.

316 317 ROSNEFT / ANNUAL REPORT 2020 Appendix 3.

Status Status Explanations on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

1.2.3 The Company does not allow 1. In the reporting period, the Company Complied with 2.1. The Board of Directors is responsible for the strategic management of the Company, formulating key principles any negative changes did not perform any actions caus- Complied of and approaches to the risk management and internal control system in the Company, supervising the work of the Company’s in the dividend rights of its ing negative changes in the dividend with in part executive bodies and performing other core functions. current shareholders. rights of its current shareholders. Not complied with 2.1.1 The Board of Directors 1. The Board of Directors has the pow- Complied with 1.2.4 The Company makes every 1. In order to prevent sharehold- Complied with is responsible for the appoint- ers stated in the Charter to appoint Complied effort to prevent sharehold- ers from receiving profit (gain) Complied ment of executive bodies and dismiss members of executive with in part ers from receiving profit (gain) from the Company other than with in part and their dismissal, including bodies and to determine the terms Not complied with from the Company other in the form of dividends and liqui- Not complied with as a result of failure to per- and conditions of their contracts. than in the form of dividends dation value, the Company’s inter- form properly. The Board 2. The Board of Directors has and liquidation value. nal regulations provide for controls of Directors also ensures reviewed the report (reports) that ensure timely identifica- that the Company’s exec- of the sole executive body tion and approval of transactions utive bodies act in accord- and members of the collective exec- with affiliates (related parties) of sub- ance with the approved utive body on the implementation stantial shareholders (persons enti- development strategy of the Company’s strategy. tled to exercise votes attached and the Company’s business to voting shares), where the law does profile. not formally recognise such transac- tions as related-party transactions. 2.1.2 The Board of Directors sets 1. In the reporting period, the Board Complied with major long-term targets of Directors addressed mat- Complied 1.3. Corporate governance framework and practices ensure equality of all shareholders owning shares of the same class (type), for the Company, as well ters related to the strategy imple- with in part including minority and foreign shareholders, and their equitable treatment by the Company. as assesses and approves its mentation and revision, approval Not complied with key performance indicators of the Company’s financial and busi- 1.3.1 The Company ensures fair 1. In the reporting period, the proce- Complied with and primary business goals, ness plan (budget), and review treatment of each share- dures to manage potential conflicts Complied along with the Company’s of criteria and indicators (including holder by its governing bod- of interest between substan- with in part strategy and business interim ones) as regards delivering ies and controlling persons, tial shareholders were effective, Not complied with plans with regard to its core on the Company’s strategy and busi- specifically allowing no abuse and the Board of Directors paid due operations. ness plans. of minority shareholders attention to conflicts between share- by major shareholders. holders, if any. 2.1.3 The Board of Directors 1. The Board of Directors has Complied with formulates the princi- formulated the principles Complied 1.3.2 The Company does not per- 1. The Company has no quasi-treas- Complied with Pursuant to the Russian ples of and approaches of and approaches to risk manage- with in part form any actions that will ury shares, or no quasi-treasury Complied Government's decision, to risk management ment and internal control system Not complied with or may result in artificial redis- shares were used in voting during with in part Rosneft signed an agreement and internal control system in the Company. tribution of corporate control. the reporting period. Not complied with with a 100% government-owned in the Company. 2. In the reporting period, the Board company to sell all of Rosneft of Directors assessed the Company’s interest and cease participation risk management and internal con- in all of its projects in Venezuela, trol system. including the joint ventures of Petromonagas, Petroperija, 2.1.4 The Board of Directors deter- 1. The Company has developed Complied with Boqueron, Petromiranda mines the Company’s policy and implemented the policy (policies) Complied and Petrovictoria, as well as oil- on remuneration and/or reim- approved by the Board of Directors with in part field services companies, com- bursement of expenses (com- on remuneration and reimbursement Not complied with mercial and trading operations. pensations) to its directors, of expenses (compensations) to its Based on the agreement, all executive bodies and other directors, executive bodies and other Rosneft assets and trad- key managers. key managers. ing operations in Venezuela 2. In the reporting period, the Board and/or those with connec- of Directors addressed matters tion to Venezuela have been related to the above policy (policies). disposed of, terminated or liquidated. The agreement 2.1.5 The Board of Directors 1. The Board of Directors plays Complied with and the sale of assets resulted plays a key role in prevent- a key role in preventing, identifying Complied in Rosneft's 100% subsidi- ing, identifying and resolv- and resolving internal conflicts. with in part ary receiving a 9.6% stake in its ing internal conflicts between 2. The Company has developed Not complied with parent. the Company’s bodies, share- a framework for identifying transac- In addition, the Company’s holders and employees. tions involving a conflict of interest Open Market Share Buyback and a set of measures for resolving Programme, which also covers such conflicts. GDRs, saw its 100% subsidiary acquire a further 0.76% stake. 2.1.6 The Board of Directors 1. The Board of Directors has approved Complied with None of these shares were used plays a key role in ensuring a regulation on Information Policy. Complied in voting during the reporting the Company’s transparency, 2. The Company has determined per- with in part period. full and timely informa- sons responsible for the implementa- Not complied with tion disclosure, and unhin- tion of the Information Policy. 1.4. Shareholders are provided with reliable and effective methods of registering their ownership of shares and the opportunity dered access of shareholders to dispose of their shares freely and without hindrance. to the Company’s documents.

1.4 Shareholders are provided 1. The quality and reliability of the work Complied with with reliable and effec- performed by the Company’s regis- Complied tive methods of register- trar to keep the register of security with in part ing their ownership of shares holders meet the Company’s and its Not complied with and the opportunity to dis- shareholders’ needs. pose of their shares freely and without hindrance.

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Status Status Explanations on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

2.1.7 The Board of Directors 1. In the reporting period, the Board Complied with 2.3.4 The number of directors 1. As part of the Board Complied with oversees the Company’s of Directors reviewed the Company’s Complied ensures the most effec- of Directors’ assessment carried out Complied corporate governance prac- corporate governance practices. with in part tive arrangement of activi- in the reporting period, the Board with in part tices and plays a key role Not complied with ties of the Company’s Board of Directors reviewed whether Not complied with in the Company’s material of Directors, including by way the number of directors was in line corporate events. of establishing Committees, with the Company’s needs and share- and enables a candidate holders’ interests. 2.2. The Board of Directors is accountable to the Company’s shareholders. voted for by the Company’s substantial minority share- 2.2.1 Information 1. The Company’s Annual Report Complied with holders to be elected on the performance for the reporting period includes Complied to the Board of Directors. of the Board of Directors information on attendance of meet- with in part is disclosed and provided ings of the Board of Directors Not complied with 2.4. The Board of Directors includes a sufficient number of independent directors. to shareholders. and Committees by individual directors. 2.4.1 An independent direc- 1. In the reporting period, all inde- Complied with 2. The Annual Report includes infor- tor is a person with suffi- pendent directors met all Complied mation on key results of the Board cient professional skills, of the independence criteria with in part of Directors’ performance assessment experience and independ- as per Recommendations 102– Not complied with carried out in the reporting period. ence to form their own opin- 107 of the Code or were recog- ions and make objective nised as independent by the Board 2.2.2 The Chairman 3. The Company has a transparent pro- Complied with and fair judgements not influ- of Directors. of the Board of Directors cedure enabling shareholders to sub- Complied enced by the Company’s is available for con- mit their questions and opinions with in part executive bodies, cer- tact with the Company’s thereon to the Chairman of the Board Not complied with tain groups of sharehold- shareholders. of Directors. ers or other stakeholders. Under normal circumstances 2.3. The Board of Directors manages the Company in an effective and competent manner, and is able to make objective a candidate (elected direc- and independent judgements and decisions in the best interests of the Company and its shareholders. tor) may not be consid- ered independent if they 2.3.1 Elected to the Board 1. The Company’s procedure for assess- Complied with are related to the Company, of Directors are only those ing the Board of Directors’ perfor- Complied its substantial share- individuals who have mance includes, among other things, with in part holder, its substantial coun- an impeccable business the assessment of directors’ profes- Not complied with terparty or competitor, and personal reputation, sional expertise. or the government. as well as the knowledge, 2. In the reporting period, the Board skills and experience required of Directors (or its Nomination 2.4.2 Candidates to the Board 1. In the reporting period, the Board Complied with for making decisions within Committee) assessed candidates of Directors are assessed of Directors (or its Nomination Complied the remit of the Board to the Board of Directors in terms for compliance with the inde- Committee) formed an opinion with in part of Directors and performing of their required experience, knowl- pendence criteria, with inde- regarding the independence of each Not complied with its functions effectively. edge, business reputation, lack pendent directors being candidate to the Board of Directors of conflict of interest, etc. regularly checked against and submitted the relevant report these criteria. Such assess- to shareholders. 2.3.2 The Company’s direc- 1. In all cases where the agenda Complied with ments should be in line 2. In the reporting period, the Board tors are elected through of a General Shareholders Meeting Complied with the substance over form of Directors (or its Nomination a transparent procedure held in the reporting period included with in part principle. Committee) at least once reviewed providing shareholders election to the Board of Directors, Not complied with the independence of current directors with sufficient information the Company provided share- specified in the Company’s Annual on candidates to form an opin- holders with biographical details Report as independent directors. ion about their personal of all candidates to the Board 3. The Company has developed pro- and professional qualities. of Directors, results of their assess- cedures determining actions to be ment by the Board of Directors taken by a director if they cease to be (or its Nomination Committee), independent, including their obliga- information on their compliance tion to notify the Board of Directors with the independence criteria accordingly and in a timely manner. as per Recommendations 102–107 of the Code, and their written con- 2.4.3 Independent directors 1. Independent directors make up Complied with sent to be elected to the Board make up at least one third at least one third of the Board Complied of Directors. of the elected directors. of Directors. with in part Not complied with 2.3.3 The composition of the Board 1. As part of the Board of Directors’ Complied with of Directors is balanced, performance assessment Complied 2.4.4 Independent directors play 1. Independent directors (with no con- Complied with including in terms of direc- in the reporting period, the Board with in part a key role in preventing inter- flict of interest) make a preliminary Complied tors’ expertise, experience, of Directors reviewed its own needs Not complied with nal conflicts in the Company assessment of material corporate with in part knowledge and business skills, for professional expertise, experience and taking material corporate actions involving a potential conflict Not complied with and worthy of shareholders’ and business skills. actions by the Company. of interest and submit the results trust. thereof to the Board of Directors.

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Status Status Explanations on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

2.5. The Chairman of the Board of Directors ensures that the Board of Directors performs its functions in the most effective way. 2.6.3 Directors have sufficient time 1. Individual attendance of meet- Complied with to perform their duties. ings of the Board of Directors Complied 2.5.1 The Chairman of the Board 1. The Chairman of the Board Complied with and Committees and the time with in part of Directors has been of Directors is an independent direc- Complied spent to prepare for such meet- Not complied with elected from among tor, or a senior independent direc- with in part ings were taken into account during independent directors, tor has been appointed from among Not complied with the Board of Directors’ assessment 1 or a senior independent independent directors . in the reporting period. director has been appointed 2. The role, rights and responsibili- 2. As per the Company’s internal reg- from among the elected ties of the Chairman of the Board ulations, directors shall notify independent directors of Directors (and, if applicable, the Board of Directors of their inten- to coordinate their work of the senior independent director) tion to join the governing bod- and liaise with the Chairman are duly specified in the Company’s ies of other companies (excluding of the Board of Directors. internal regulations. those controlled by or affiliated with the Company) and of the fact 2.5.2 The Chairman of the Board 1. In the reporting period, the perfor- Complied with of such an appointment. of Directors ensures con- mance of the Chairman of the Board Complied structive atmosphere during of Directors was assessed as part with in part 2.6.4 All directors have equal 1. As per the Company’s internal reg- Complied with meetings, facilitates open of the Board of Directors’ perfor- Not complied with access to the Company’s ulations, directors have the right Complied discussion of agenda items mance assessment. documents and informa- to access documents and make with in part and oversees implementa- tion. Newly elected directors enquiries related to the Company Not complied with tion of the Board of Directors’ are provided with sufficient and its controlled entities, resolutions. information on the Company and the Company’s executive bodies and the Board of Directors’ are obliged to provide the relevant 2.5.3 The Chairman of the Board 1. The responsibility of the Chairman Complied with activities as soon as practi- information and documents. of Directors ensures that of the Board of Directors to ensure Complied cable. 2. The Company has a formalised directors are provided timely provision to directors of mate- with in part induction programme for newly with information required rials on agenda items is specified Not complied with elected directors. to make informed decisions in the Company’s regulations. on agenda items in a timely 2.7. The Board of Directors establishes Committees for preliminary consideration of the most important matters related manner. to the Company’s operations.

2.6. Directors act reasonably and in good faith in the best interests of the Company and its shareholders, based on sufficient 2 .7.1 Meetings of the Board 1. The Board of Directors held at least Complied with awareness and with due diligence and care. of Directors are held as nec- six meetings in the reporting year. Complied essary, given the Company’s with in part 2.6.1 Directors make decisions tak- 1. The Company’s internal regulations Complied with scope of operations Not complied with ing into account all available specify that directors shall notify Complied and objectives at any given information, having no conflict the Board of Directors of any conflict with in part time. of interest, ensuring equitable of interest they might have in relation Not complied with treatment of the Company’s to any agenda item prior to the dis- 2.7.2 The Company’s internal reg- 1. The Company has approved an inter- Complied with shareholders and keeping cussion of that item at a meet- ulations set out a procedure nal regulation setting out the proce- Complied within the limits of common ing of the Board of Directors or its to prepare and hold meetings dure to prepare and hold meetings with in part business risks. Committee. of the Board of Directors ena- of the Board of Directors and spec- Not complied with 2. The Company’s internal regulations bling directors to make proper ifying, among other things, that specify that a director shall abstain preparations. the notice of a meeting shall be from voting on any item where they generally given at least 5 days prior have a conflict of interest. to the date of the meeting. 3. The Company has established a procedure enabling the Board 2.7.3 The format of a meeting 1. The Company’s Charter Complied with of Directors to get professional of the Board of Directors or another internal regulation Complied advice on matters within its remit is determined taking into specifies that the most impor- with in part at the Company’s expense. account the importance tant matters (as per the list set out Not complied with of agenda items. Resolutions in Recommendation 168 of the Code) 2.6.2 Directors’ rights 1. The Company has adopted Complied with on the most important mat- shall be reviewed at in-person meet- and responsibilities and published an internal regulation Complied ters are adopted at in-person ings of the Board of Directors. are clearly stated and set clearly specifying directors’ rights with in part meetings. forth in the Company’s inter- and responsibilities. Not complied with nal regulations.

1 The Company specifies which of the two suggested approaches it uses and why.

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Status Status Explanations on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

2.7.4 Resolutions on the most 1. The Company’s Charter specifies that Complied with Paragraph 10.5.5 of Rosneft’s 2.8.2 For preliminary consider- 1. The board of directors has a standing Complied with The principle is not com- important matters related resolutions on the most important Complied Charter specifies the range ation of matters related remuneration committee comprised Complied plied with inasmuch as the HR to the Company’s opera- matters, as per Recommendation 170 with in part of matters to be resolved to the development entirely of independent directors. with in part and Remuneration Committee tions are adopted at meet- of the Code, shall be adopted Not complied with by the Board of Directors of an effective and transpar- 2. The remuneration committee Not complied with of the Board of Directors ings of the Board of Directors at meetings of the Board by a qualified majority vote. ent remuneration framework, is chaired by an independent director is not exclusively composed by a qualified majority vote of Directors by a qualified majority Given the scope of Rosneft’s a Remuneration Committee who is not the chairman of the board of independent directors. or by a majority vote of all of at least three quarters of the votes operations, the number of mat- composed of independ- of directors. The HR and Remuneration elected directors. or by a majority vote of all elected ters reviewed by the Board ent directors and chaired 3. The Company’s internal regula- Committee of the Board directors. of Directors, the composi- by an independent direc- tions specify the Remuneration of Directors is mostly made tion of the Board of Directors tor not being the Chairman Committee’s objectives, includ- up of independent directors. and the economic sanctions of the Board of Directors has ing, among others, those set out The elected Chairman of the HR the Company is exposed been established. in Recommendation 180 of the Code. and Remuneration Committee to, expanding this range of the Board of Directors to include all matters set is an independent director. out in Recommendation 170 The remit of the HR of the Code may materially and Remuneration Committee impede or prevent the res- of the Board of Directors olution of matters material includes matters reserved to the Company. Therefore, set- for a Nomination Committee ting a higher quorum as rec- and a Remuneration Committee ommended by the Code may by the Corporate Governance result in the Board of Directors Code. not being able to resolve Taking into account: a number of key matters. • the Company’s three At the same time, the num- standing committees ber of directors, the struc- (the Audit Committee, ture of the Board of Directors, HR and Remuneration including four independent Committee, and Strategic directors, the procedure to pre- Planning Committee), pare for meetings, discuss • the recommendations matters at them and disclose and restrictions set out information on them guarantee in the Code (on the minimum the protection of rights of all number of Committee mem- shareholder groups and reflect bers (three), on the maxi- the Company’s sharehold- mum number of Committees ing structure. The Company a director may sit has no intention to change its on, on the minimum num- approach in the medium term. ber of independent direc- tors on an Audit Committee 2.8. The Board of Directors establishes Committees for preliminary consideration of the most important matters related and an HR and Remuneration to the Company’s operations. Committee, and on the com- position of Committees 2.8.1 For preliminary con- 1. The board of directors has a standing Complied with based on directors’ relevant sideration of matters audit committee comprised entirely Complied expertise), related to the monitoring of independent directors. with in part • compliance of the Company’s finan- 2. The Company’s internal regula- Not complied with with the recommenda- cial and business operations, tions specify the Audit Committee’s tion to have all Committees an Audit Committee com- objectives, including those set out chaired by independent direc- posed of independent direc- in Recommendation 172 of the Code. tors is impracticable. tors has been established. 3. At least one member of the audit At the same time, committee, who is an independent the Company’s internal regula- director, has knowledge and expertise tions, including the Regulations in the preparation, analysis, evalua- on the Board of Directors, tion and audit of accounting (finan- specify procedures to pre- cial) statements. vent any conflict of interest 4. The audit committee held at least and eliminate the risk of rec- one meeting per quarter during ommendations by the commit- the reporting period. tee of the Board of Directors being affected by the con- trolling shareholder or execu- tive bodies. The Company has no inten- tion to change its approach in the medium term.

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Status Status Explanations on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

2.8.3 For preliminary consider- 1. The board of directors has a stand- Complied with 2.8.5 The composition 1. Committees of the board of directors Complied with As recommended ation of matters related ing nomination committee (or its Complied of Committees enables com- are chaired by independent directors. Complied by the Code, the Audit to human resources (suc- objectives specified in recommen- with in part prehensive discussion of mat- 2. The company's internal regulations with in part Committee and the HR cession) planning, expertise dation 186 of the Code are imple- Not complied with ters subject to preliminary (policies) contain provisions that pro- Not complied with and Remuneration Committee and performance of the Board mented by a different committee1) consideration with due regard hibit the non-members to attend of the Board of Directors of Directors, a Nomination with the majority of its members to varying opinions. meetings of the audit, nomination are chaired by independ- (Appointment, HR) being independent directors. or remuneration committees, unless ent directors. Taking into Committee mostly composed 2. 2. The Company’s internal regulations they are invited by the chairman account the recommenda- of independent directors has specify the objectives of the nomina- of a respective committee. tions and restrictions set out been established. tion committee (or another relevant in the Code (on the minimum committee with combined function- number of members (at least ality), including, among others, those three), on the maximum num- set out in Recommendation 186 ber of Committees a director of the Code. may sit on, on the minimum number of independent direc- 2.8.4 Given the scope of operations 1. During the reporting period, Complied with tors on an Audit Committee and risk levels, the Company’s the company’s board of direc- Complied and an HR and Remuneration Board of Directors has tors reviewed the relevance of its with in part Committee, and on the com- ensured that the composi- standing committees to the board's Not complied with position of Committees based tion of its Committees is fully functions and the company’s objec- on directors’ relevant expertise), in line with the Company’s tives. Additional committees have compliance with the recommen- objectives. Additional com- been either established or found dation to have all Committees mittees have been either unnecessary. chaired by independ- established or found ent directors is impractica- unnecessary (a Strategy ble. The Strategic Planning Committee, a Corporate Committee is not chaired Governance Committee, by an independent director. an Ethics Committee, At the same time, the Strategic a Risk Management Planning Committee Committee, a Budget arranges independent Committee, a Health, Safety reviews and engages exter- and Environment Committee, nal experts for the Board etc.). of Directors to consider var- ying opinions when dis- cussing the Committee’s recommendations. Together with independ- ent directors’ involvement with the Strategic Planning Committee, these procedural guarantees ensure the diver- sity of opinions it takes into account before issuing recommendations. The Company has no inten- tion to change its approach in the medium term.

2.8.6 Committee Chairmen report 1. In the reporting period, Committee Complied with on their Committees’ per- Chairmen regularly reported Complied formance to the Board to the Board of Directors with in part of Directors and its Chairman on their Committees’ performance. Not complied with on a regular basis.

1 If the functions of the nomination committee are performed by another committee, the company specifies its name.

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2.9. The Board of Directors arranges performance assessment of the Board of Directors, its Committees and directors. 4.1.2 The Company’s remunera- 1. In the reporting period, Complied with tion policy has been devel- the Remuneration Committee Complied 2.9.1 The Board of Directors’ perfor- 1. In the reporting period, self-as- Complied with oped by the Remuneration reviewed the remuneration policy with in part mance assessment is aimed sessment or external assessment Complied Committee and approved (policies) and its (their) implemen- Not complied with at evaluating the effective- of the Board of Directors’ perfor- with in part by the Board of Directors. tation and, where necessary, sub- ness of the Board of Directors, mance included performance assess- Not complied with The Board of Directors, sup- mitted relevant recommendations its Committees and directors, ment of Committees, individual ported by the Remuneration to the Board of Directors. checking their performance directors and the Board of Directors Committee, monitors against the Company’s devel- as a whole. the introduction and imple- opment needs, enhancing 2. Results of the self-assess- mentation of the remunera- their activities and identifying ment or external assessment tion policy in the Company, areas for improvement. of the Board of Directors carried out and revises and amends in the reporting period were reviewed it as necessary. at an in-person meeting of the Board of Directors. 4.1.3 The Company’s remuneration 1. The Company’s remuneration policy Complied with policy provides for transpar- (policies) provides (provide) for trans- Complied 2.9.2 Performance assess- 1. To assess the Board of Directors’ per- Complied with At a meeting held ent mechanisms to determine parent mechanisms to determine with in part ment of the Board formance on an independent basis, Complied on 19 December 2019, the amount of remunera- the amount of remuneration paya- Not complied with of Directors, its Committees the Company engaged an external with in part the Company’s Board tion payable to its directors, ble to its directors, executive bodies and directors is car- organisation (consultant) at least Not complied with of Directors reviewed executive bodies and other and other key managers, and covers ried out on a regular basis once over the last three reporting the results of the Board key managers, and covers all (cover) all types of payments, bene- at least once a year. To assess periods. of Directors’ independent per- types of payments, bene- fits and privileges provided to them. the Board of Directors’ per- formance assessment carried fits and privileges provided formance on an independent out by an external consult- to them. basis, an external organisa- ant, Ernst & Young Valuation tion (consultant) is engaged and Advisory Services LLC. 4.1.4 The Company develops 1. The Company’s remuneration policy Complied with at least once every three a policy on reimbursement (policies) or other internal regulations Complied years. of expenses (compensa- specify procedures to reimburse its with in part tions) specifying reimburs- directors, executive bodies and other 3.1. The Company’s Corporate Secretary ensures effective day-to-day interaction with shareholders, coordinates the Company’s Not complied with able expenses and service key managers for the expenses efforts to protect shareholder rights and interests, and contributes to the Board of Directors’ efficient work. levels that its directors, incurred. executive bodies and other 3.1.1 The Corporate Secretary has 1. The Company has adopted Complied with key managers are entitled sufficient knowledge, experi- and disclosed an internal regulation Complied to. This policy may form part ence and expertise to perform on Corporate Secretary. with in part of the Company’s remunera- their duties, as well as impec- 2. The Company’s website and Annual Not complied with tion policy. cable reputation, and enjoys Report provide biographical details shareholders’ trust. of the Corporate Secretary compara- 4.2. Remuneration system for directors ensures alignment of their financial interests with the long-term financial interests ble to those of the Company’s direc- of shareholders. tors and executives. 4.2.1 The Company pays fixed 1. Fixed annual remuneration was Complied with 3.1.2 The Corporate Secretary 1. The Board of Directors approves Complied with annual remuneration to its the only form of cash remunera- Complied is sufficiently independent the appointment and dis- Complied directors. The Company does tion paid to directors for their work with in part from the Company’s executive missal of the Corporate Secretary with in part not pay remuneration for par- in the reporting period. Not complied with bodies and has the powers and their additional remuneration. Not complied with ticipation in individual meet- and resources required to per- ings of the Board of Directors form their duties. or its Committees. 4.1. Remuneration paid by the Company is sufficient to attract, motivate and retain employees with the required compe- 4.2.2 Long-term ownership 1. If the Company’s internal regulation Complied with tence and expertise. Remuneration is paid to the Company’s directors, executive bodies and other key managers in accordance of the Company’s shares (regulations), namely its remunera- Complied with the remuneration policy adopted by the Company. ensures best alignment tion policy (policies), allows (allow) with in part of directors’ financial interests distribution of the Company’s shares Not complied with 4.1.1 Remuneration paid 1. The Company has adopted Complied with with the long-term interests to directors, clear rules on share own- by the Company to directors, an internal regulation (regulations) Complied of shareholders. At the same ership by directors aimed at encour- executive bodies and other in the form of a remuneration policy with in part time, the Company does aging their long-term ownership shall key managers is sufficient (remuneration policies) for its direc- Not complied with not link the right to sell be introduced and disclosed. to ensure their efficient work tors, executive bodies and other key shares to achieving cer- and enables the Company managers clearly stating approaches tain performance indicators, to attract and retain com- to their remuneration. and directors do not partici- petent and qualified spe- pate in options plans. cialists. At the same time, the Company avoids paying 4.2.3 The Company does not pro- 1. The Company does not provide any Complied with higher-than-required remu- vide any additional payments additional payments or compensa- Complied neration or creating unreason- or compensations to directors tions to directors in the event of early with in part ably wide remuneration gaps in the event of early termina- termination of office due to a transfer Not complied with between any of the above tion of office due to a transfer of control over the Company or any persons and Company of control over the Company other circumstances. employees. or any other circumstances.

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Status Status Explanations on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

4.3. Remuneration system for members of executive bodies and other key managers of the Company links their remuneration 5.1.2 The Company’s executive 1. The Company’s executive bodies Complied with to the Company’s performance and their personal contribution thereto. bodies ensure the estab- have ensured the distribution of risk Complied lishment and maintenance management and internal control with in part 4.3.1 Remuneration paid to mem- 1. In the reporting period, the variable Complied with of an effective risk manage- functions and powers among heads Not complied with bers of executive bod- remuneration for members of execu- Complied ment and internal control sys- of units and divisions accountable ies and other key managers tive bodies and other key managers with in part tem in the Company. to them. of the Company ensures of the Company was linked to annual Not complied with a reasonable and justified performance indicators approved 5.1.3 The Company’s risk man- 1. The Company has approved Complied with balance between the fixed by the Board of Directors. agement and internal an anti-corruption policy. Complied and variable components, 2. During the latest assessment control system provides 2. The Company has established with in part with the latter depending of the remuneration system for mem- an accurate, fair and clear an easily accessible channel to inform Not complied with on the Company’s perfor- bers of executive bodies and other view of the Company’s the Board of Directors or its Audit mance and an employee’s per- key managers of the Company, current situation Committee about violations of law, sonal (individual) contribution the Board of Directors (the and prospects, and ensures internal procedures or the Code thereto. Remuneration Committee) ensured integrity and transparency of Corporate Ethics. that the Company maintained of the Company’s state- an effective balance between ments, as well as a reason- the fixed and variable components able and acceptable level of remuneration. of risk-taking. 3. The Company has a procedure ensur- ing that bonuses wrongfully received 5.1.4 The Company’s Board 1. In the reporting period, the Board Complied with by members of its executive bodies of Directors takes the nec- of Directors or its Audit Committee Complied and other key managers are returned essary steps to ensure that assessed the performance with in part to the Company. the Company’s Risk of the Company’s Risk Management Not complied with Management And Internal and Internal Control System. 4.3.2 The Company has introduced 1. The Company has introduced a long- Complied with As recommended by the HR Control System functions Key results of this assessment a long-term incentive plan term incentive plan for members Complied and Remuneration Committee, effectively and is in line are included in the Company’s Annual for members of its executive of its executive bodies and other with in part the Company continues pilot- with the relevant principles Report. bodies and other key man- key managers involving its shares Not complied with ing a long-term incentive plan and approaches formulated agers involving its shares (financial instruments with its shares in the controlled entities. by the Board of Directors. (options or other derivatives as underlying assets). Rosneft will go back to con- with its shares as underlying 2. The long-term incentive plan sidering the long-term incen- 5.2. The Company conducts internal audits to assess the reliability and effectiveness of its Risk Management, Internal Control assets). for members of executive bod- tive plan for executive bodies System and corporate governance on a regular and independent basis. ies and other key managers as soon as pilot results of con- of the Company specifies that trolled entities have been 5.2.1 For the internal audit pur- 1. For the internal audit purposes, Complied with the right to sell shares and other processed. poses, the Company has the Company has established a ded- Complied financial instruments used in this plan established a dedicated unit icated internal audit unit func- with in part may be exercised no earlier than or engaged an independ- tionally accountable to the Board Not complied with three years after the date of grant- ent external organisation. of Directors or its Audit Committee, ing. Moreover, the right to sell Functional accountability or engaged an independent external them is subject to the achievement and administrative account- organisation with the same account- by the Company of certain perfor- ability of the internal audit ability principle. mance indicators. unit are separated. The inter- nal audit unit is functionally 4.3.3 The amount of severance pay 1. In the reporting period, the amount Complied with accountable to the Board (golden parachute) payable of severance pay (golden parachute) Complied of Directors. by the Company to members paid by the Company to mem- with in part of its executive bodies or key bers of its executive bodies or key Not complied with 5.2.2 The internal audit unit 1. In the reporting period, as part Complied with managers in the event of early managers in the event of early ter- assesses the effectiveness of internal audit, the effectiveness Complied termination of office, pro- mination of office, provided that of the internal control, risk of the internal control and risk man- with in part vided that such termination such termination was initiated management and corpo- agement system was assessed. Not complied with is initiated by the Company by the Company with no miscon- rate governance systems. 2. The Company uses generally with no misconduct duct on the part of the respec- The Company applies gener- accepted approaches to internal con- on the part of the respective tive employee, did not exceed twice ally accepted internal audit trols and risk management. employee, does not exceed the size of the fixed component standards. twice the size of the fixed of their annual remuneration. component of their annual 6.1. The Company and its operations are transparent to shareholders, investors and other stakeholders. remuneration. 6.1.1 The Company has devel- 1. The Company’s Board of Directors Complied with 5.1. The Company has put in place an effective risk management and internal control system to provide reasonable assurance oped and implemented has approved its Information Complied that it will achieve its goals. an Information Policy ensuring Policy developed in accordance with in part effective exchange of informa- with the Code’s recommendations. Not complied with 5.1.1 The Board of Directors 1. Risk management and internal con- Complied with tion between the Company, 2. The Board of Directors (or one has formulated the prin- trol functions of the Company’s Complied its shareholders, investors of its Committees) reviewed matters ciples of and approaches governing bodies and divisions with in part and other stakeholders. related to the Company’s compliance to the risk management are clearly set out in the Company’s Not complied with with its Information Policy at least and internal control system internal regulations / relevant policy once in the reporting period. in the Company. approved by the Board of Directors.

330 331 ROSNEFT / ANNUAL REPORT 2020 Appendix 3.

Status Status Explanations on the failure Explanations on the failure of compliance of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate No. with a corporate principles governance principle with a corporate governance principles governance principle with a corporate governance governance governance principle principle principle principle

6.1.2 The Company discloses infor- 1. The Company discloses information Complied with 6.3. The Company provides shareholders with equal and unhindered access to information and documents as per their request. mation on its corporate gov- on its corporate governance system Complied ernance system and practices, and on the general corporate gov- with in part 6.3.1 The Company provides 1. The Company’s Information Policy Complied with including detailed infor- ernance principles it uses, includ- Not complied with shareholders with equal stipulates procedures ensuring Complied mation on its compliance ing by disclosing such information and unhindered access shareholders’ unhindered access with in part with the principles and recom- on the Company’s website. to information and documents to information, including informa- Not complied with mendations of the Code. 2. The Company discloses infor- as per their request. tion on legal entities controlled mation on the composition by the Company, as per their request. of its executive bodies and Board of Directors, on the independence 6.3.2 When providing information 1. In the reporting period, the Company Complied with of directors and their membership to shareholders, the Company did not refuse to provide share- Complied in the Committees of the Board maintains a reasonable bal- holders with requested information, with in part of Directors (as defined in the Code). ance between the interests or such refusals were justified. Not complied with 3. If there is a person controlling of individual shareholders 2. If and when required the Company, the Company pub- and those of the Company, by the Company’s Information Policy, lishes a memorandum on behalf as it is in the Company’s best shareholders are informed of the sen- of such controlling person detailing interests to keep confiden- sitive nature of the information their plans as regards corporate gov- tial any sensitive commercial provided and undertake to keep ernance in the Company. information that may have it confidential. a material effect on its com- 6.2. The Company discloses complete, up-to-date and accurate information on the Company in a timely manner to ensure that petitive position. its shareholders and investors are able to make informed decisions. 7.1. Actions that have or may have a material effect on the Company’s shareholding structure and financial position and, con- 6.2.1 The Company discloses infor- 1. The Company’s Information Policy Complied with sequently, on the shareholders’ position (material corporate actions) are taken on fair terms ensuring that rights and interests mation on a regular basis specifies approaches and criteria Complied of the shareholders and other stakeholders are respected. and in a consistent and timely used to identify information that may with in part manner, in line with the prin- have a material effect on the valua- Not complied with 7.1.1 Material corporate actions 1. The Company’s Charter sets out Complied with ciples of data accessibil- tion of the Company and its securi- include reorganisation a list of transactions or other actions Complied ity, accuracy, completeness ties, and procedures ensuring timely of the Company, acqui- deemed to be material corporate with in part and comparability. disclosure of such information. sition of 30% or more actions and specifies their relevant Not complied with 2. If the Company’s securities are traded of the Company’s vot- criteria. Decision-making with regard in established foreign markets, dis- ing shares (takeo- to material corporate actions closures of material information ver), major transactions is reserved to the Board of Directors. during a reporting year are made made by the Company, If and when the law expressly in Russia and in such markets increase or reduction reserves such corporate actions on a concurrent and equal basis. in the Company’s charter to the General Shareholders 3. If foreign shareholders own capital, listing and delist- Meeting, the Board of Directors pro- a substantial number of shares ing of the Company’s shares, vides shareholders with relevant in the Company, disclosures dur- and other actions that may recommendations. ing the reporting year were made result in a material change 2. Material corporate actions specified in Russian and in one of the most in the rights of shareholders in the Company’s Charter include, widely used foreign languages. or be against their interests. but are not limited to, the follow- The Company’s Charter sets ing: reorganisation of the Company, 6.2.2 The Company avoids for- 1. In the reporting period, the Company Complied with out a list (criteria) of trans- acquisition of 30% or more mal approach to informa- disclosed its IFRS financial tate-s Complied actions or other actions of the Company’s voting shares tion disclosures and discloses ments for the full year and for the six with in part deemed to be material cor- (takeover), major transactions made material information on its months. The Company’s Annual Not complied with porate actions and reserved by the Company, increase or reduc- operations even if such disclo- Report for the reporting period to the Company’s Board tion in the Company’s charter capital, sures are not required by law. includes its full-year IFRS financial of Directors. listing and delisting of the Company’s statements and auditor’s report. shares. 2. In accordance with Recommendation 290 7.1.2 The Board 1. The Company has established Complied with of the Code, the Company discloses of Directors plays a key role a procedure for independent direc- Complied full information on its capital struc- in making decisions or rec- tors to express their opinions with in part ture in the Annual Report and on its ommendations with regard on material corporate actions before Not complied with website. to material corporate actions their approval. and relies on the opinion 6.2.3 As a key communication 1. The Company’s Annual Report con- Complied with of the Company’s independ- tool to liaise with sharehold- tains information on the key aspects Complied ent directors. ers and other stakeholders, of its operations and its financial with in part the Annual Report provides results. Not complied with information needed to assess 2. The Company’s Annual Report con- the Company’s performance tains information on environmental for the year. and social aspects of its operations.

332 333 ROSNEFT / ANNUAL REPORT 2020

Status Explanations on the failure of compliance Corporate governance Criteria for compliance with a corporate to meet criteria for compliance No. with a corporate principles governance principle with a corporate governance governance principle principle

7.1.3 When taking material cor- 1. Given the specific nature Complied with porate actions affecting of the Company’s operations, its Complied the rights and legitimate Charter sets out lower than statu- with in part interests of shareholders, tory minimum criteria for classifying Not complied with the Company ensures equi- the Company’s transactions as mate- table treatment of all of its rial corporate actions. shareholders, and, where stat- 2. In the reporting period, all material utory mechanisms protecting corporate actions were duly approved shareholder rights are insuf- prior to their implementation. ficient, takes additional steps to protect the rights and legitimate interests of the Company’s sharehold- ers. In doing so, the Company is guided not only by the for- mal regulatory requirements, but also by the corporate gov- ernance principles specified in the Code. 7.2. The Company ensures that material corporate actions are taken in a manner enabling shareholders to receive full infor- mation on such actions in due time and influence them, and guarantees respect and due protection of shareholder rights when such actions are taken.

7.2.1 Information on material cor- 1. In the reporting period, the Company Complied with porate actions is disclosed, disclosed information on its mate- Complied with an explanation of the rel- rial corporate actions in a timely with in part evant reasons, conditions and detailed manner, including Not complied with and consequences. their rationale and implementation timelines.

7.2.2 Rules and procedures for tak- 1. The Company’s internal regulations Complied with The Bank of Russia’s Corporate ing material corporate actions set out a procedure for engaging Complied Governance Code was are set forth in the Company’s an independent appraiser to deter- with in part approved at the time when internal regulations. mine the value of the property to be Not complied with Article 81 of the Federal Law sold or purchased in a major transac- On Joint Stock Companies tion or a related-party transaction. allowed joint stock compa- 2. The Company’s internal regulations nies to include in their charters set out a procedure for engaging additional criteria for direc- an independent appraiser to deter- tors and other persons to be mine the value of the Company’s recognised as related par- shares to be purchased or bought ties in transactions. Article 81 back. of the Federal Law On Joint 3. The Company’s internal regula- Stock Companies effec- tions specify additional criteria tive from 1 January 2017 has for its directors and other persons an exhaustive list of relat- stipulated by law to be recognised ed-party criteria. Therefore, as related parties for the purposes compliance with the Code’s of the Company’s transactions. recommendation to spec- ify additional related-party criteria is impracticable until the Russian legislation is changed accordingly.

334 Appendix 4 (INFORMATION ON COMPLIANCE WITH INSTRUCTIONS ISSUED BY THE PRESIDENT OF THE RUSSIAN FEDERATION AND THE GOVERNMENT OF THE RUSSIAN FEDERATION) ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

INFORMATION ON COMPLIANCE Information about the divestment of non-core assets by Rosneft and Group Subsidiaries in 2020 No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- ing the asset lytics) that ‘000 ‘000 (net actual ence WITH INSTRUCTIONS ISSUED as at the report- show income of VAT) sales price ing date preced- and expense and asset ing its divest- from asset disposal book value, BY THE PRESIDENT OF THE RUSSIAN ment (91.1ххх/91.2ххх) RUB ‘000 1 1,000,000 ordinary 1170 9101100300/ 1,000,000.00 1,000,000.00 0.00 FEDERATION AND THE GOVERNMENT shares in OJSC SEK 9110100203 2 One third 1170 91.01/91.02 3,365.00 11,328.32 7,963.32 Sales price of the charter capi- determined OF THE RUSSIAN FEDERATION tal of DalSatCom during a tender 3 Land plot under fill- Zem10 1210 90.01.1/90.02.1 303.26 359.86 56.60 Sales price ing station No. 25 determined during a tender

4 6 kV power line, INV-0001 1150 9101030100, 407.81 2,244.42 1,836.61 Sales price 6,388 linear metres 9101030600/ determined 1. Non-core asset divestment 9110030200 during a tender

Subparagraph j, paragraph 1 Rosneft is continuously optimising the portfolio of assets owned by the Company and its 5 Land plot R-0003026 1150 91.01/91.02 30.66 5,181.30 5,150.64 Sales price of Instruction of the President subsidiaries. determined of the Russian Federation The Company has developed and is consistently implementing a non-core and non-perform- during a tender No. Pr-3668 dated 6 December 2011 ing asset divestment programme in accordance with the Company Policy on Corporate Property Subparagraph b, paragraph 1 Management and the Company Standard on Non-Core and Inefficient Assets Management devel- 6 Production facil- 9082-5 1150 9103/9104 68.03 1,940.17 1,872.14 Sales price of Instruction of the President oped by the Company and approved by the Board of Directors. ity building, determined of the Russian Federation The programme outlines key principles of non-core and non-performing asset management, relevant Pokhvistnevo urban during a tender No. Pr-1092 dated 27 April 2012 procedures, stages and deadlines for implementation. district, Oktyabrsky Item 4, subparagraph c, para- The Company annually identifies assets conforming to the criteria of non-core and non-performing settlement graph 2 of Decree of the President assets and performs their appraisal, technical audit, and economic and legal expert analysis. of the Russian Federation No. 596 The registers of non-core and non-performing assets of Rosneft and the Group Subsidiaries 7 Auxiliary materials 30000001000084 1150 91.01/91.02 38.42 661.94 623.52 Sales price dated 7 May 2012 On the Long-Term are maintained and updated on a regular basis in compliance with the non-core and non-performing warehouse determined National Economic Policy asset divestment programme. during a tender Instruction of First Deputy Prime In 2020, Rosneft’s Board of Directors approved the updated registers of the non-core and non-per- Minister of the Russian Federation forming assets scheduled to be divested in 2020–2023 (Minutes No. 7 dated 2 October 2020). 8 Apartment 1-13-000179-r3256 1150 91.01.1/91.02.1 333.99 1,900.00 1,566.01 Sales price Igor Shuvalov No. ISh-P13-6768 Information on the implementation of the non-core asset divestment programme is regularly posted determined dated 13 November 2012 on the online interdepartmental portal for state property management (the “Interdepartmental during a tender Directives of the Government Portal”). of the Russian Federation No. 9 Non-residential 1325_00005898 1150 91.01/91.02 20.69 536.75 516.06 Sales price 4863p-P13 dated 7 July 2016 building (garage determined Resolution of the Government for special-purpose during a tender of the Russian Federation No. 894-r machinery) dated 10 May 2017 Directives of the Government 10 Facilities at 4A, U8-URS 11 1150 62.01; 117.26 2,379.50 2,262.24 Sales price of the Russian Federation Voznesenskogo St., 91.01/91.02;01.09 determined No. 6604p-P13 dated Sorochinsk during a tender 18 September 2017 11 Administrative О00055 1150 62.01; 531.00 6,884.13 6,353.13 Sales price building 91.01/91.02;01.09 determined during a tender

12 Facilities at 5, NZDANYuYTT-1393, 1150 62.01; 91.01/ 7,930.06 11,485.21 3,555.15 Sales price Transportnaya St., NZDANYuYTT-1391, 91.02; 01.09 determined Pervomaysky NUDANYuYTT-1503, during a tender settlement 1508_2-8/1, 1508_2- 7/1, 1508_2-6/1

13 Non-residential 106, 2478 1150 91.1/91.2 90.16 1,958.70 1,868.54 Sales price building determined during a tender

14 Building structure 431390 1150 91.1/92.2 9,816.00 19,447.60 9,631.60 Sales price determined during a tender

15 River vessel 77434 1150 91-03/91-04 0.00 3,896.45 3,896.45 Sales price determined during a tender

16 Morshansk indus- 730, 11224, 729 1150 91.01/91.02 918.76 1,425.69 506.93 Sales price trial site determined during a tender

17 3-room apartment 000059830392500 1150 91.1/91.2 436.22 885.00 448.78 Sales price determined during a tender

336 337 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- ing the asset lytics) that ‘000 ‘000 (net actual ence ing the asset lytics) that ‘000 ‘000 (net actual ence as at the report- show income of VAT) sales price as at the report- show income of VAT) sales price ing date preced- and expense and asset ing date preced- and expense and asset ing its divest- from asset disposal book value, ing its divest- from asset disposal book value, ment (91.1ххх/91.2ххх) RUB ‘000 ment (91.1ххх/91.2ххх) RUB ‘000

18 3-room apartment 000057240050805 1150 91.1/91.2 244.06 1,956.00 1,711.94 Sales price 32 Building 902446, 902714 1150 910101010/ 0.00 2,567.58 2,567.58 Sales price determined of store No. 1 910201010 determined during a tender with a warehouse during a tender

19 Warehouse No. 9 110002700894 1153 9110101001/ 0.00 1,573.99 1,573.99 Sales price 33 Central dispatch 564127 1150 910101010/ 146.59 2,038.52 1,891.93 Sales price 0102 determined service room 910201010 determined during a tender during a tender

20 Filling station 30000682, 1210 90.01.1/ 84.88 507.44 422.56 Sales price 34 Facilities at 3, 19912 , 0111_1-2 1150 62.01; 91.01/ 617.39 2,101.65 1,484.26 Sales price No. 105 30003892 90.02.1 determined Transportnaya St., 91.02; 01.09 determined during a tender Pervomaysky during a tender settlement 21 2-room apartment, 153254 1150 9103/9104 224.82 892.35 667.53 Sales price Zhigulevsk urban determined 35 Part U10-URS 1/1 1150 62.01; 91.01/ 53.57 931.34 877.77 Sales price district during a tender of the building occu- 91.02; 01.09 determined pied by a whole- during a tender 22 3-room apartment, 153255 1150 9103/9104 102.16 750.93 648.77 Sales price sale and retail base Zhigulevsk urban determined located on the first district during a tender floor of a five-floor residential building, 23 4-room apartment, 153256 1150 9103/9104 157.28 1,388.00 1,230.72 Sales price with a total area Zhigulevsk urban determined of 209.5 sq. m district during a tender 36 Facilities at 12, NIKSOUTT-888893/1, 1150 62.01; 91.01/ 6,397.14 13,838.33 7,441.19 Sales price 24 Training cen- 153093, 122899 1150 9103/9104 116.37 1,515.08 1,398.72 Sales price Transportnaya St., NIKSOUTT-1558, 91.02; 01.09 determined tre building, 9, determined Sorochinsk nIKSOUTT-888893В, during a tender Privolzhskaya St., during a tender nIKSOUTT-888891, Zhigulevsk urban nIKSOUTT-139 district 37 Industrial site 00034143, 1150 91.01/91.02 13,020.39 50,558.49 37,538.10 Sales price 25 Non-residential 150265 1150 9103/9104 302.01 1,014.61 712.60 Sales price in Balabanovo 00023354, determined facility: materials determined 00000284 during a tender warehouse at pro- during a tender 00000285, cess machinery site 00023357, of Zhigulevskneft 00023364, oil and gas produc- 00023352, tion office, Syzran 00023353

26 Culinary (ready-to- 60100000017221 1150 91.01/91.02 288.85 2,555.00 2,266.15 Sales price 38 Filling station 64 99-277, 99969169, 1150 62.01; 91.01/ 38.61 584.80 546.19 Sales price eat food) store determined 99969170, 02.01; 01.09 determined during a tender 99969171, 99969172, during a tender 99969173, 99969174, 27 Zeleny Mys recrea- 05030100263, 1150 911100005/ 661.25 3,783.22 3,121.97 Sales price 99969175, tion centre 05030100263, 912100005 determined 99973762, 05030100263, during a tender 99973763, 99971031 05030100263, 05030100263 39 Residential 49Up 1150 91.01/91.02 165.71 2,735.00 2,569.29 Sales price property determined 28 Communication 00025 1150 91.0103010101/ 231.53 1,801.97 1,570.44 Sales price during a tender station 91.0203010101 determined during a tender 40 Production facil- 6006, 6007, 6005, 1150 91.01/91.02 25.93 2,970.35 2,944.43 Sales price ity. Motor transport N1r-0337 determined 29 2-room apartment 102828 1150 91.0103010101/ 1,641.93 1,411.82 -230.11 Sales price unit No. 3 during a tender 91.0203010101 determined during a ten- 41 Berezka recreation 00202200321 1150 91.1.1002/ 2,605.40 8,142.74 5,537.34 Sales price der The ten- centre 91.2.1002 determined der resulted during a tender in no bids to purchase 42 Filling station No. 9 731, 718, 722, 723, 1150 91.01/91.02 42.77 2,979.77 2,937.00 Sales price the asset 719, 720, 721, 716, determined at a price 715, 717, 740, 110, 741, during a tender not lower than 739, 3698, 3695, 732, the book value Zem18

30 5-room apartment 402837 1260 910101010/ 228.82 2,740.60 2,511.78 Sales price 43 Filling station 2978, 2973, 2974, 1150 91.01/91.02 131.24 3,372.18 3,240.94 Sales price 910201010 determined No. 72 2975, 2976, 2971, determined during a tender 2972, 2977, 2988, during a tender 2986, 2985, 2987, 31 Building of store 701884 1150 910101010/ 0.00 1,172.63 1,172.63 Sales price 2970, 2979, 2981, No. 18 910201010 determined 2980, Zem4 during a tender

338 339 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- ing the asset lytics) that ‘000 ‘000 (net actual ence ing the asset lytics) that ‘000 ‘000 (net actual ence as at the report- show income of VAT) sales price as at the report- show income of VAT) sales price ing date preced- and expense and asset ing date preced- and expense and asset ing its divest- from asset disposal book value, ing its divest- from asset disposal book value, ment (91.1ххх/91.2ххх) RUB ‘000 ment (91.1ххх/91.2ххх) RUB ‘000

44 Neftyanik store 110002862807 1153 9110101001/ 14,317.97 16,897.72 2,579.75 Sales price 58 Filling station 82 Kam-514, Anp-13887 1150 62.01; 91.01/ 155.58 1,840.32 1,684.74 Sales price 110002700899 9120101001 determined 91.02; 01.09 determined during a tender during a tender

45 Brewery 7500036А, 41004А, 1150 90.01.1/90.02.1 11,853.44 24,856.77 13,003.33 Sales price 59 Filling station 100 Bl00001007, 1150 62.01; 91.01/ 65.16 3,965.73 3,900.57 Sales price 41004V, 7500036G determined Anp-13839 91.02; 01.09 determined during a tender during a tender

46 Filling sta- 8948, 15925 1150 90.01.1/90.02.1 310.52 516.41 205.89 Sales price 60 Filling station 72 Rub-000251, 1150 62.01; 91.01/ 298.69 6,027.55 5,728.86 Sales price tion No. 63 determined Rub-807644 91.02; 01.09 determined (Stavropol Territory, during a tender during a tender Aleksandrovsky district) 61 Filling station 199 Zar-000584, 1150 62.01; 91.01/ 115.71 1,369.79 1,254.08 Sales price Anp-13894 91.02; 01.09 determined 47 Filling sta- 10445, 10453, 15010 1150 90.01.1/90.02.1 327.19 1,042.39 715.19 Sales price during a tender tion No. 173 determined with a service during a tender 62 Store (Strezhevoy, 01010097 1150 91-03 /91-04 95.28 1,001.64 906.36 Sales price centre (Stavropol 80) determined Territory, during a tender Georgievsky dis- trict, Lysogorskaya 63 Apartment 310000000565 1161 9110101001/ 61.21 2,229.00 2,167.79 Sales price village) 9120141001 determined following 48 Apartment KEM00000876 1150 91.01/91.05 3,998.09 4,107.77 109.68 Sales price negotiations determined with the buyer during a tender taking into account mar- 49 Production NGT-2060, NGT- 1150 91.01/91.02.1.1 314.75 4,886.18 4,571.43 Sales price ket valuation facility at 3A, 2062, NGT- determined report Promyshlennaya 2064, NGT-2061, during a tender St., NGT-2063 64 Apartment 310000000567 1161 9110101001/ 372.71 2,548.00 2,175.29 Sales price 9120141001 determined 50 Warehouse build- 34759-5 1150 910101010/ 31.20 432.68 401.48 Sales price following ing, Sukhodol 910201010 determined negotiations settlement during a tender with the buyer taking into 51 Building of store 504324, 693225 1260 910101010/ 77.31 2,274.61 2,197.30 Sales price account mar- No. 6 on the land 910201010 determined ket valuation plot during a tender report

52 Facilities of a die- 2602625, 2602710, 1260 910101010/ 1,512.73 15,831.34 14,318.61 Sales price 65 Apartment 310000000569 1161 9110101001/ 818.20 3,230.00 2,411.80 Sales price sel engine overhaul 2602657, 860323 910201010 determined 9120141001 determined shop in Belebey during a tender following negotiations 53 Carpentry building 847 312 1260 910101010/ 3,685.96 5,345.30 1,659.34 Sales price with the buyer 910201010 determined taking into during a tender account mar- ket valuation 54 Concrete batching 518635 2160 910101010/ 2,611.02 5,344.17 2,733.15 Sales price report facility building 1150 910201010 determined during a tender 66 Apartment 310000000586 1161 9110101001/ 584.07 2,600.00 2,015.93 Sales price 9120141001 determined 55 Apartment 1-13-000184-r3117 1150 91.01.1/91.02.1 518.27 2,165.51 1,647.24 Sales price following determined negotiations during a tender with the buyer taking into 56 Apartment 1-13-000186-r3364 1150 91.01.1/91.02.1 485.99 3,136.91 2,650.92 Sales price account mar- determined ket valuation during a tender report

57 Apartment, Irkutsk 6190703 61907 70606 1,783.00 1,672.65 -110.35 Sales price 67 Apartment 310000000588 1161 9110101001/ 360.41 2,269.00 1,908.59 Sales price Region, Angarsk determined 9120141001 determined during a ten- following der The ten- negotiations der resulted with the buyer in no bids taking into to purchase account mar- the asset ket valuation at a price report not lower than the book value

340 341 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- ing the asset lytics) that ‘000 ‘000 (net actual ence ing the asset lytics) that ‘000 ‘000 (net actual ence as at the report- show income of VAT) sales price as at the report- show income of VAT) sales price ing date preced- and expense and asset ing date preced- and expense and asset ing its divest- from asset disposal book value, ing its divest- from asset disposal book value, ment (91.1ххх/91.2ххх) RUB ‘000 ment (91.1ххх/91.2ххх) RUB ‘000

68 Apartment 310000000593 1161 9110101001/ 479.70 2,691.00 2,211.30 Sales price 75 Apartment 310000000638 1161 9110101001/ 1,285.60 2,199.00 913.40 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

69 Apartment 310000000604 1161 9110101001/ 452.16 3,408.00 2,955.84 Sales price 76 Apartment 310000000644 1161 9110101001/ 82.38 2,101.00 2,018.62 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

70 Apartment 310000000607 1161 9110101001/ 786.90 2,900.00 2,113.10 Sales price 77 Apartment 310000000646 1161 9110101001/ 970.98 1,912.00 941.02 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

71 Apartment 310000000608 1161 9110101001/ 372.71 3,316.00 2,943.29 Sales price 78 Apartment 310000000652 1161 9110101001/ 238.09 1,769.00 1,530.91 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

72 Apartment 310000000633 1161 9110101001/ 219.20 1,961.00 1,741.80 Sales price 79 Apartment 310000000653 1161 9110101001/ 48.32 1,849.00 1,800.68 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

73 Apartment 310000000635 1161 9110101001/ 387.95 2,669.00 2,281.05 Sales price 80 Apartment 310000000661 1161 9110101001/ 48.88 2,048.00 1,999.12 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

74 Apartment 310000000637 1161 9110101001/ 21.72 2,713.00 2,691.28 Sales price 81 Apartment 310000000664 1161 9110101001/ 54.84 2,119.00 2,064.16 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

342 343 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- ing the asset lytics) that ‘000 ‘000 (net actual ence ing the asset lytics) that ‘000 ‘000 (net actual ence as at the report- show income of VAT) sales price as at the report- show income of VAT) sales price ing date preced- and expense and asset ing date preced- and expense and asset ing its divest- from asset disposal book value, ing its divest- from asset disposal book value, ment (91.1ххх/91.2ххх) RUB ‘000 ment (91.1ххх/91.2ххх) RUB ‘000

82 Apartment 310000000666 1161 9110101001/ 85.67 3,079.00 2,993.33 Sales price 89 Apartment 310000000673 1161 9110101001/ 54.14 1,900.00 1,845.86 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

83 Apartment 310000000675 1161 9110101001/ 49.28 1,962.00 1,912.72 Sales price 90 Apartment 310000000682 1161 9110101001/ 84.74 2,760.00 2,675.26 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

84 Apartment 310000000679 1161 9110101001/ 49.28 2,044.00 1,994.72 Sales price 91 Apartment 310000000683 1161 9110101001/ 315.37 2,020.00 1,704.63 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

85 Apartment 310000000690 1161 9110101001/ 1,082.85 2,610.00 1,527.15 Sales price 92 Apartment 310000000731 1161 9110101001/ 357.09 2,840.00 2,482.91 Sales price 9120141001 determined 9120141001 determined following following negotiations negotiations with the buyer with the buyer taking into taking into account mar- account mar- ket valuation ket valuation report report

86 Apartment 310000000713 1161 9110101001/ 1,036.30 3,961.00 2,924.70 Sales price 93 Non-residential 10270 1150 1911111001/ 0.00 1,185.87 1,185.87 Sales price 9120141001 determined building – 2915111000 determined following Brandenburg Office during a tender negotiations with the buyer 94 Wharf on the Vakh 02-9150 1150 1911111001/ 0.00 2,048.54 2,048.54 Sales price taking into River 2915111000 determined account mar- during a tender ket valuation report 95 Non-residential 1580, 1579 1150 91.01/91.02 1,069.77 1,927.59 857.82 Sales price premises determined 87 Apartment 310000000715 1161 9110101001/ 520.89 3,404.00 2,883.11 Sales price during a tender 9120141001 determined following 96 Fuel oil facilities 907, 908, 904, 905, 1150 91.01/91.02 0.00 912.25 912.25 Sales price negotiations of heating plant 906 determined with the buyer No. 1 during a tender taking into account mar- 97 Facilities 1511_2-28611, 1150 62.01; 91.01/ 594.81 660.52 65.71 Sales price ket valuation at Sorochinsko- 1511_2-28610, 91.02; 01.09 determined report Nikolskoye field SOK_BUPT-_276_ during a tender

88 Apartment 310000000647 1161 9110101001/ 644.82 2,450.00 1,805.18 Sales price 98 Filling station 37В, 371, 372, 373, 1150 91.01/91.02 0.00 554.99 554.99 Sales price 9120141001 determined No. 167 374V determined following during a tender negotiations with the buyer 99 Arkadak oil depot 22А, 21А, 24А, 23А, 1150 91.01/91.02 671.72 6,039.47 5,367.75 Sales price taking into 25А, 26А, 27А, 28А determined account mar- during a tender ket valuation report

344 345 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- ing the asset lytics) that ‘000 ‘000 (net actual ence ing the asset lytics) that ‘000 ‘000 (net actual ence as at the report- show income of VAT) sales price as at the report- show income of VAT) sales price ing date preced- and expense and asset ing date preced- and expense and asset ing its divest- from asset disposal book value, ing its divest- from asset disposal book value, ment (91.1ххх/91.2ххх) RUB ‘000 ment (91.1ххх/91.2ххх) RUB ‘000

100 Residential build- 500134 1260 91.01/91.02 150.46 257.16 106.70 Sales price 113 Wooden building 3820-3 1150 90.01.1/90.02.1 424.28 2,184.92 1,760.64 Sales price ing – 1 floor, solid determined of the construc- determined sawn lumber, con- during a tender tion and repair unit, during a tender sists of 4 rooms, 2, Neftyanikov St., with total area Neftegorsk, Samara of 134.87 sq m, Region including residen- tial area of 79.94 sq 114 Filling station 3 00000945, 1150 91.01/91.02 916.67 9,549.22 8,632.54 Sales price m 00002127 determined during a tender 101 Tire fitting shop 500260, 808638 1260 91.01/91.02, 47.81 183.20 135.39 Sales price 91.03 determined 115 Apartment 100003 Page 10 9121209000, 3,985.00 4,527.38 542.38 Sales price during a tender in Peterhof 70601810400- determined 002850101 during a tender 102 1-room apart- 803046 1260 91.01/91.02 324.55 2,452.40 2,127.86 Sales price ment with an area determined 116 Production facil- 20005052, 1150 9103/9104 2,025.03 7,813.67 5,788.64 Sales price of 41.2 sq m during a tender ities of the man- 20005054, determined ufacturing shop 20006029 during a tender 103 Aist motor ship 47702 1150 62.20; 91.01/ 9.24 521.34 512.10 Sales price for plastic/metal 91.10; 01.02 determined pipes, Samara during a tender Region, Otradny, Industrial Zone 3 104 Residential apart- YuG-080259 1150 62.20; 91.01/ 502.80 2,297.23 1,794.43 Sales price ment with total 91.10; 01.02 determined 117 Residential 60100000015323 1150 91.01/91.02 88.85 2,630.00 2,541.15 Sales price area of 56.8 sq m, during a tender premises determined floor: 2 with an area of 50.4 following sq m, floor 6, type negotiations 105 Land plot under fill- 3407, Zem23 1210 90.01.1/90.02.1 317.49 353.85 36.36 Sales price of residential prem- with the buyer ing station No. 13 determined ises: apartment taking into during a tender account mar- ket valuation 106 BST facility 101050, 203819, 1150 90.01.1/90.02.1 724.50 5,339.62 4,615.12 Sales price report 101049 determined during a tender 118 Administrative 28040200305_01, 1260 911100005/ 4,773.91 7,584.00 2,810.09 Sales price buildings 28040200305_02, 912100005 determined 107 Construction 10010010 1210 90.01.1/90.02.1 1,904.30 5,964.66 4,060.36 Sales price 28040200305_03 during a tender and assembling determined unit facilities, during a tender 119 Industrial site 1-98, PT2-480, 005 1150 91.01/91.02 1,762.91 2,900.90 1,137.99 Sales price Sukhodol settle- of Kromskaya determined ment, Industrial oil depot (5, during a tender Zone 4 Elevatornaya St., Vozhovo village, 108 Filling station 30000893 1210 90.01.1/90.02.1 99.89 697.83 597.94 Sales price Bolshekolchevskoye No. 131 determined settlement, during a tender Kromskoy district, Orel Region) 109 Filling sta- 8952, 13163 1210 90.01.1/90.02.1 319.14 369.70 50.56 Sales price tion No. 87 determined 120 Building of a store 118122 1150 910101010/ 0.00 1,760.23 1,760.23 Sales price (Stavropol Territory, during a tender 910201010 determined Aleksandrovskoye during a tender village) 121 Apartment, resi- 11000202 1260 91.01/91.02 706.86 4,809.68 4,102.82 Sales price 110 Filling sta- 9687, 14999 1150 90.01.1/90.02.1 288.27 2,481.70 2,193.43 Sales price dential purpose, determined tion No. 167 determined area of 88.1 sq m, during a tender (Stavropol Territory, during a tender Naryan-Mar Aleksandriyskaya village) 122 Filling station 73 YuOS-000139, 1150 91.01/91.02/91.03 398.62 5,536.70 5,138.08 Sales price YuOS-000137, determined 111 Filling station 9782, 13739 1150 90.01.1/90.02.1 609.39 3,175.73 2,566.34 Sales price YuOS-000144 following No. 195 (Stavropol determined negotiations Territory, Zolskaya during a tender with the buyer village) taking into account mar- 112 Production 91204719, 91204801 1150 90.01.1/90.02.1 1,720.64 3,235.24 1,514.60 Sales price ket valuation facility at 21, determined report Promyshlennosti during a tender St., Neftegorsk 123 Garage 0000241, 0000247 1260 910101010/ 394.23 649.25 255.02 Sales price 910201010 determined during a tender

346 347 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds No. Asset Inventory number Balance sheet Accounts Asset book Actual sales Difference Grounds (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- (where applicable) item show- (including ana- value, RUB price, RUB between for the differ- ing the asset lytics) that ‘000 ‘000 (net actual ence ing the asset lytics) that ‘000 ‘000 (net actual ence as at the report- show income of VAT) sales price as at the report- show income of VAT) sales price ing date preced- and expense and asset ing date preced- and expense and asset ing its divest- from asset disposal book value, ing its divest- from asset disposal book value, ment (91.1ххх/91.2ххх) RUB ‘000 ment (91.1ххх/91.2ххх) RUB ‘000

124 Water sup- 00-000217, 1150 91.01/91.02 370.46 20,906.58 20,536.13 Sales price 138 Motor ship 100225029 1150 62.20; 91.01/ 5,551.95 2,096.76 -3,455.19 Sales price ply networks 000000027, determined 91.10; 01.02 determined (water conduit 000000030, during a tender during a ten- in Mezhdurechye) 000000053, der The ten- 0000000050 der resulted in no bids 125 Facilities at 106, SOK_BUPT-_233_ 1150 62.01; 91.01/ 340.48 3,799.89 3,459.41 Sales price to purchase Gaya St., Buzuluk ‘SOK_BUPT-_217_, 91.02; 01.09 determined the asset SOK_BUPT-_235_ during a tender at a price not lower than 126 Non-residential v04147, 2424 1150 91.1/91.2 307.60 2,951.01 2,643.41 Sales price the book value building determined during a tender 139 Land plot 100000003532- 1150 62.20; 91.01/ 4,060.47 3,713.64 -346.83 Sales price 3533 91.10; 01.02 determined 127 Zalari section 0235, 0237, 0238, 1150 91.1/91.2 965.00 2,408.01 1,443.01 Sales price during a ten- of the Kharik shop 0236 determined der The ten- during a tender der resulted in no bids 128 Car maintenance 99-138, 00000007 1150 62.01; 91.01/ 76.05 236.33 160.28 Sales price to purchase station 91.02; 01.09 determined the asset during a tender at a price not lower than 129 Arch warehouse 30033А 1150 1911111001/ 0.00 768.56 768.56 Sales price the book value 2915111000 determined during a tender 140 Facilities 100236110, 1150 62.20; 91.01/ 5,688.12 27,240.00 21,551.88 Sales price 100119062, 91.10; 01.02 determined 130 Warehouse 10210А 1150 1911111001/ 0.00 1,133.76 1,133.76 Sales price 100119053, during a tender 2915111000 determined 100118896, during a tender 100118831, 100118825, 131 Land plot 00008993 1150 91.1 / 91.2 81.11 1,397.17 1,316.06 Sales price 100120765, determined 100118842, during a tender 100118805, 100167907, 132 Canteen in Klintsy 00000647, 1528 1150 91.01/ 91.02 45.17 1,055.57 1,010.41 Sales price 100173916, determined 100236054, during a tender 100236055, 100119090, 133 Nizhne- 100147, 100150, 1260 91.01/ 91.02 238.80 2,625.70 2,386.90 Sales price 100118968, Maltsevskaya oil 100148, 41100153, determined 100118975, depot 100149, 100151, during a tender 100118878, 100154, 318 100118890, 100118801, 134 Filling station 147, Zem14 1150 91.01/91.02 120.31 3,824.37 3,704.06 Sales price 100118826 No. 47 determined during a tender 141 Apartment 103334318-1 1150 62.20; 91.01/ 2,207.53 3,390.42 1,182.89 Sales price 91.10; 01.02 determined 135 Apartment 310000000582 1161 9110101001/ 255.44 2,010.00 1,754.56 Sales price during a tender 9120141001 determined following 142 Upgrade of the 11000033 1150 62.20; 91.01/ 888.04 1,800.00 911.96 Sales price negotiations Mamontovskaya 91.10; 01.02 determined with the buyer oil depot – opera- following taking into tor station for load- negotiations account mar- ing light petroleum with the buyer ket valuation products taking into report account mar- ket valuation 136 Apartment 310000000707 1161 9110101001/ 50.94 1,820.00 1,769.06 Sales price report 9120101001 determined following TOTAL 1,154,065.35 1,551,442.30 397,376.95 negotiations with the buyer taking into account mar- ket valuation report

137 Neftegaz-70 trans- 84105-R50103940 1150 91.01/91.02 1,566.43 10,983.85 9,417.42 Sales price port and towing determined vessel during a tender

348 349 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

2. Procurement of goods, works and services 2.3. Increasing procurements of Russian-made products

2.1. Approval of the Regulation on Procurement. Procurement transparency improvement Instructions of the President The Company’s Board of Directors developed and approved an action plan (a set of measures) of the Russian Federation follow- aimed at consistent substitution of imported products (including works and services) with equiv- Federal Law No. 223-FZ On 30 November 2018, Rosneft’s Board of Directors resolved to approve version No. 3 of the Company’s ing the meeting of the State Council alent and technically similar products, works and services of Russian origin to be used in invest- 1 On Procurement of Goods, Works Regulations on the Procurement of Goods, Works and Services (the full version of the Regulations Presidium dated 20 February 2009 ment projects and day-to-day operations provided that such substitution is economically feasible and Services by Certain Types is posted on the Company’s official website at http://zakupki.rosneft.com/node/459132 Paragraph 4 of List of Instructions and technologically justified (Minutes No. 35 dated 5 June 2015). of Legal Entities dated 18 July 2011 and in the Integrated Information System at http://zakupki.gov.ru), which: of the President of the Russian The Company’s Regulations on Procurement of Goods, Works and Services are fully compliant Instruction of the Government • sets out the Company’s procurement principles: information openness and transparency, equality, Federation No. Pr-2821 dated with Directives of the Government of the Russian Federation No. 3425p-P13 dated 1 June 2015, of the Russian Federation No. ISh- fairness and non-discrimination, no unwarranted restrictions on bidders, targeted and cost-effi- 5 December 2014 No. 4972p-P13 dated 11 July 2016 and No. 830p-P13 dated 6 February 2017, enable the Company P13-8685 dated 17 December 2012 cient expenditures, prevention of corruption or any abuse in the procurement process; Instructions of the Government to make long-term contracts for the supply of any products and provide for the procurement Paragraph 2 of List of Instructions • describes key elements of the procurement process for goods, works and services, including proce- of the Russian Federation of competitive Russian software for Rosneft’s activities. of the Government of the Russian dures for preparing and carrying out procurements and procedures for signing and performing pro- No. AD-P9-9176 dated The Company’s Regulations on Procurement of Goods, Works and Services contain section 13.1 Federation No. DM-P9-8413 dated curement contracts; 8 December 2014 and No. ISh-P13- Priority of Goods, Works and Services Supplied by Russian Vendors that provides for: 12 December 2015 • sets out certain provisions regulating the participation of small and medium-sized enterprises 1419 dated 5 March 2015 • the priority of goods, works and services supplied by Russian vendors as set out in the applicable Instruction of the Government (SMEs) in procurements; Instruction of the Government laws; of the Russian Federation • provides for the possibility of online procurement. of the Russian Federation No. ISh- • the customer’s discretion to specify certain priorities and conditions for the tendered contract if No. DM-P13-1100 dated In 2016, the Company developed procurement standards for goods, works and services to set price P13-1872 dated 1 April 2016 such conditions are expressly stated in the procurement documents or directly set out in applica- 1 March 2016 (paragraph 89 limits on, and define requirements for the quantity, consumer properties and other specifications Paragraph 4, section II ble laws. of the Government Action Plan of, the said goods, works and services. The list of products regulated by the corporate standards of the Minutes of the Meeting Additionally, the Company developed and implemented the Import Substitution and Equipment for Stable Social and Economic is posted on the Company’s official website (the full version of the document is available at http:// of the Government Commission Localisation Programme for Rosneft’s Needs for 2019–2021 with an outlook for 2028. Development of the Russian zakupki.rosneft.ru). The Company also monitors the compliance with applicable standards and annu- on the Use of Information Pursuant to Resolution of the Government of the Russian Federation No. 925 dated Federation in 2016) ally reviews procurement results for their compliance with the standards. Technologies for the Improvement 16 September 2016 On Priority of Goods, Works and Services Supplied by Russian Vendors Directives of the Government Pursuant to Directives of the Government of the Russian Federation No. 7704p-P13 dated of Welfare and Business Over Goods, Works and Services Supplied by Foreign Vendors (Resolution No. 925), the Company of the Russian Federation No. 11 October 2016, the Company’s Regulations on Procurement of Goods, Works and Services provides Environment No. 1 dated amended its procurement documents accordingly and added Russian origin confirmation forms 2793p-P13 dated 19 April 2016 for the possibility of factoring as a means of financing the procurement of goods, works or services 9 February 2018 for the goods, works and services supplied by Russian vendors. Directives of the Government (paragraph 10.4.7.6). Directives of the Government The Company updated its action plan (a list of measures) for import substitution and localisa- of the Russian Federation No Pursuant to Directives of the Government of the Russian Federation No. 10464p-P13 dated of the Russian Federation tion to comply with Directive of the Government of the Russian Federation No. 830p-P13 dated 7704p-P13 dated 11 October 2016 18 November 2019, the Company updated its standard procurement documents to allow for specific No. 1346p-P13 dated 5 March 2015 6 February 2017 and the Guidelines approved by Order of the Russian Ministry of Economic Directives of the Government means of securing vendor obligations under procurement contracts, including suretyship. Directives of the Government Development No. 219R-AU dated 11 August 2016. Key actions (measures) were included in Rosneft’s of the Russian Federation Pursuant to Directives of the Government of the Russian Federation No. 1519p-P13 dated of the Russian Federation Long-Term Development Programme as updated and approved by resolution of the Company’s No. 1519p-P13 dated 20 February 2019, the Company developed and approved internal documents providing for a contin- No. 3425p-P13 dated 1 June 2015 Board of Directors (Minutes No. 14 dated 21 December 2020). 20 February 2019 uous improvement of procurement management procedures. Directives of the Government Relevant resolutions (Minutes No. 6 dated 24 August 2018) were made by the Company’s Board Directives of the Government The Company’s Regulations on Procurement of Goods, Works and Services is in line with Directives of the Russian Federation of Directors to comply with Directives of the Government of the Russian Federation No. 2602p-P7 of the Russian Federation of the Government of the Russian Federation No. 2850p-P13 dated 3 April 2020, and decision-mak- No. 4972p-P13 dated 11 July 2016 dated 17 April 2017. No. 10464p-P13 dated ing by contract supervisors as to whether apply sanctions for failure to perform or improper perfor- Directives of the Government Pursuant to Directives of the Government of the Russian Federation No. 7923-P13 dated 18 November 2019 mance of contractual obligations will be based on the assessment of implications for the Company of the Russian Federation 26 September 2018, the Board of Directors (Minutes No. 14 dated 25 January 2019) instructed Directives of the Government and actual circumstances of the contract implementation taking into account the COVID-19 No. 6558p-P13 dated the Management Board to inform, annually and in due time, federal executive bodies of the Russian Federation outbreak. 5 September 2016 (Ministry of Industry and Trade, Ministry of Energy and Ministry of Economic Development) No. 2850p-P13 dated 3 April 2020 Relevant information is regularly posted on the Interdepartmental Portal. Directives of the Government and the Government of the Russian Federation of the total value of contracts made by Rosneft 2.2. Improving efficiency of procurements from small and medium-sized enterprises (SMEs), including procurement of innova- of the Russian Federation and the Group Subsidiaries with defence industry companies for the procurement of civilian prod- No. 830p-P13 dated 6 February 2017 ucts (including works and services) for the Fuel Producing Industries, other than those under defence tive and hi-tech products Directives of the Government procurement contracts, no later than 30 days prior to Rosneft’s Annual General Shareholders of the Russian Federation Meeting. Relevant reports were sent to the federal executive bodies on 2 June 2020. Resolution of the Government The Company implemented a set of measures to improve procurement efficiency. These measures include: No. 2602p-P7 dated 17 April 2017 Provisions of Directives of the Government of the Russian Federation No. 584p-P13 dated of the Russian Federation No. 867-r • establishment of the standing Advisory Board; relevant information about the Board is posted Directives of the Government 26 January 2019 and No. 9984p-P13 dated 1 November 2019 were incorporated into the Company’s dated 29 May 2013 on Rosneft’s official website (more details are available at http://zakupki.rosneft.com/consult); of the Russian Federation No. 7923- Regulations on Procurement of Goods, Works and Services, which provides, pursuant to Resolution Instruction of the Government • development and approval of the following internal documents: P13 dated 26 September 2018 No. 925, for the priority of Russian-made products, including (i) those used in the implementa- of the Russian Federation 1. Regulations on Procurement of Goods, Works and Services; Directives of the Government tion of national projects and the trunk pipeline upgrade and expansion plan; and (ii) advanced No. DM-P13-77 dated 2. Regulations on Activity of Advisory Board Carrying Out Public Audit of Efficiency of Purchases of the Russian Federation Russian-made means of protection against radiation, chemical and biological hazards. Additionally, 13 January 2018 to provide infor- From Small and Medium-Sized Business Entities; No. 10068p-P13 dated the Company adopted and regularly updates a list of goods to be stocked by Rosneft and the Group mation under subparagraph 3. Regulations on the Procedure and Rules of the One-Stop-Shop System for the Introduction 6 December 2018 Subsidiaries for the purpose of civil defence and employee protection in case of natural and man- c, paragraph 1 of Instruction of Innovative Products; Directives of the Government made disasters. of the President of the Russian 4. Innovation Classification Principles setting out uniform rules and criteria for classifying the Company’s of the Russian Federation No. 584p- Pursuant to Directives of the Government of the Russian Federation No. 10068p-P13 dated Federation No. Pr-2763 dated goods, works and services as innovations subject to Order of the Ministry of Energy of the Russian P13 dated 26 January 2019 6 December 2018 and No. 9712p-P13 dated 25 October 2019, the Board of Directors (Minutes No. 13 31 December 2017 Federation No. 1026 dated 25 December 2015; Directives of the Government dated 3 February 2020) instructed the Management Board to report, annually and in due time, Directives of the Government 5. Rosneft’s Guidelines for Assessing the Life Cycle of Procured Goods, Works and Services establishing of the Russian Federation to the Ministry of Digital Development, Communications and Mass Media of the Russian Federation of the Russian Federation No. the procedure for applying the ‘product life cycle cost’ assessment criterion; No. 9984p-P13 dated on the priority use of Russian software in a form approved by the Company. 4252p-P13 dated 16 June 2016 • amendments to the corporate procurement regulations specifying the procedure for SMEs to bid 1 November 2019 In line with Directives of the Government of the Russian Federation No. 6781p-P13 dated 31 July Directives of the Government for procurement contracts of the Company; Directives of the Government 2020, the Company adopted the Regulations on the Procurement of Goods, Works and Services of the Russian Federation No. 4111p- • invitation to vendors (including SMEs) to propose innovative solutions through the One-Stop-Shop of the Russian Federation and the Album of Document Forms of Template Procurement Documents providing for special/ P13 dated 8 May 2019 System on Rosneft’s website (more details are available at https://www.rosneft.com/Development/ No. 9712p-P13 dated additional requirements to bidders to be introduced as part of a specific procurement procedure, Scienceandinnovation/Innovation_management/One-Stop-Shop_System/); 25 October 2019 including for automotive products. The Company has a long track record of voluntary compliance • development and approval of the Innovative Product Procurement Plan; Directives of the Government with the measures stipulated by the said directives. • as provided for in applicable procurement laws of the Russian Federation, all procurements from SMEs of the Russian Federation Relevant information is regularly posted on the Interdepartmental Portal. are organised online on the TEK-Torg Electronic Trading Platform (and posted in Rosneft’s section); No. 6781p-P13 dated 31 July 2020 • pursuant to Directives of the Government of the Russian Federation No. 4111p-P13 dated 8 May 2019, the Company’s Regulations on Procurement of Goods, Works and Services was amended to provide for the possibility of factoring as a means of financing the procurement of goods, works or services from SMEs, regardless of how such procurements are organised. Following 2020: • while Rosneft was subject to Federal Law No. 223-FZ (January to May), the total value of con- tracts made between Rosneft and SMEs (including those made by the Group Subsidiaries on behalf of Rosneft), including payments due in 2020, amounted to RUB 14.6 bln, or 74.71%, (attributable to the 20% target) and RUB 9.6 bln, or 49.39% (attributable to the 18% target). • Rosneft signed contracts for the provision of goods, works, services, and innovative products, including from SMEs, for RUB 3 bln, and of that amount, contracts for RUB 0.44 bn were signed with SMEs. Relevant information is regularly posted on the Interdepartmental Portal.

1 By its Order No. 223 dated 3 April 2020, Rosneft amended its Regulations on the Procurement of Goods, Works and Services.

350 351 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

3. Dividend recommendations 5. Strategy development and update, efficiency, and long-term planning

Resolution of the Government According to the Dividend Policy approved by the Company’s Board of Directors on 5 June 2015 5.1. Formulation and approval of the Innovation Development Programme of the Russian Federation (Minutes No. 35 dated 5 June 2015) as amended by Rosneft’s Board of Directors (Meeting Minutes No. 774-r dated 29 June 2006 No. 15 dated 9 December 2016, No. 29 dated 22 June 2017 and No. 5 dated 31 August 2017), Subparagraph b, paragraph 1 of List Pursuant to subparagraph b, paragraph 1 of List of Instructions of the President of the Russian (as amended by Resolution the Board of Directors, when recommending a dividend to the General Shareholders Meeting, of Instructions of the President Federation No. Pr-307 dated 7 February 2011, the Government Commission for Economic of the Government of the Russian is guided by the amount of net profit as per Rosneft's Russian Accounting Standards (RAS) financial of the Russian Federation No. Pr-307 Modernization and Innovation Development (Minutes No. 2 dated 22 October 2018) and Rosneft’s Federation No. 2083-r dated accounts and International Financial Reporting Standards (IFRS) consolidated financial statements. dated 7 February 2011 Board of Directors approved Rosneft’s Innovation Development Programme for 2020–2024 12 November 2012) Rosneft’s Board of Directors recommends a dividend based on Rosneft’s annual financial perfor- Directives of the Government with an outlook for 2030 (Minutes No. 16 dated 25 December 2020). mance. The target dividend is no less than 50% of Rosneft’s net income as per IFRS; the target divi- of the Russian Federation No. 1221p- The Programme is structured to meet the requirements for innovative development programmes dend frequency is no less than twice a year. P13 dated 24 March 2011 of state-owned joint-stock companies, state corporations and federal state unitary enter- The history of dividend payments is available on the Company's official website at https://www.ros- Presidential Address to the Federal prises and the recommendations approved by resolution of the Interdepartmental Commission neft.com/Investors/Dividends/ Assembly dated 12 November 2010 on Technological Development under the Government Commission for Economic Modernization Meeting Minutes of the Government and Innovation Development. 4. Annual Report structure Commission for Advanced Technology Major focus areas, key performance indicators and activities of the Innovation Development and Innovation No. 1 dated Programme are integrated in the updated Long-Term Development Programme approved Resolution of the Government Rosneft’s Annual Report 2020 was prepared in accordance with the annual reporting requirements 30 January 2012 by Rosneft’s Board of Directors (Minutes No. 14 dated 21 December 2020). of the Russian Federation of Regulations of the Bank of Russia No. 454-P dated 30 December 2014 and an annual report tem- Subparagraphs 32, 33 and 34, par- The list of the Long-Term Development Programme KPIs and KPIs for Rosneft’s top managers, No. 1214 dated 31 December 2010 plate for joint-stock companies in federal ownership as approved by Resolution of the Government agraph 1 of List of Instructions including the Chief Executive Officer, were supplemented with an integrated KPI of innovation On Improvement of the Governance of the Russian Federation No. 1214 dated 31 December 2010 On Improvement of the Governance of the President of the Russian efficiency. Procedures at Open Joint-Stock Procedures at Open Joint-Stock Companies in Federal Ownership and Federal State Unitary Federation No. Pr-3086 dated In 2018, the Company benchmarked its technology (innovation) level and relevant KPIs against peers Companies in Federal Ownership Enterprises (Resolution No. 1214) and Directives of the Government of the Russian Federation 27 December 2013 (leading Russian and international companies) as recommended by the cross-department task and Federal State Unitary Enterprises No. 2007p-P13 dated 6 April 2015 and No. 5024-P13 dated 31 July 2015. Summary of the meeting group (Minutes No. 2 dated 19 September 2017). Paragraph 3 of List of Instructions As for specific sections of the annual report template for joint-stock companies in federal ownership of the Government of the Russian The Ministry of Energy and the Ministry of Economic Development of the Russian Federation were of the President of the Russian approved by Resolution No. 1214, it should be noted that: Federation dated 30 January 2014, presented with proposals for the structure and values of the integrated KPI of innovation efficiency Federation No. Pr-3013 dated • Rosneft did not enter into any major transactions in 2020 (paragraph 10 of Resolution No. 1214); Minutes No. 3 for 2020. 27 December 2014 • In compliance with paragraph 70.3 of Regulations of the Bank of Russia No. 454-P dated Subparagraph b, paragraph 2, sec- In 2020, the Board of Directors considered a report on the progress of Rosneft's Innovation Directives of the Government 30 December 2014, the list of related party transactions entered into by Rosneft in 2020 is posted tion 2 of Minutes of the Meeting Development Programme in 2019 (Minutes No. 23 dated 22 April 2020). The Company met its action of the Russian Federation No. 2007p- on Rosneft’s official website at https://www.rosneft.ru/Investors/information/transactions/ (para- of the Presidential Council plan and targets for innovation efficiency KPIs as set out in Rosneft’s Innovation Development P13 dated 6 April 2015 graph 11 of Resolution No. 1214); for Economic Modernization Programme for 2019. Paragraph 2 of Minutes • Rosneft received no subsidies from the federal budget (paragraph 13 of Resolution No. 1214) and Innovation Development No. 2 Relevant information is regularly posted on the Interdepartmental Portal. of the Meeting Convened by First in 2020. dated 17 April 2015 Deputy Prime Minister of the Russian Instruction of the Government Federation Igor Shuvalov No. ISh-P13- of the Russian Federation 47pr dated 2 June 2015 No. DM-P36-7563 dated Directives of the Government 7 November 2015 of the Russian Federation No. 5024p- Directives of the Government P13 dated 31 July 2015 of the Russian Federation No. 1471p- P13 and No. 1472p-P13 dated 3 March 2016 Directives of the Government of the Russian Federation No. 3262p- P13 dated 27 April 2018 5.2. Intellectual property rights management

Instruction of the Government Recommendations as to intellectual property rights management are fully integrated into of the Russian Federation No. ISh- the Company’s Regulations on Intellectual Property Rights (Inventions, Utility Models, Software, P8-5594 dated 25 August 2017 Databases and Know-How) Management (approved and enacted by Order No. 429 dated Directives of the Government 25 July 2017) and Rosneft’s Innovation Development Programme for 2020–2024 (approved of the Russian Federation by the Company’s Board of Directors). No. 9177p-P13 dated These Regulations establish a general procedure and requirements for the following processes: 12 December 2017 • creation and identification of protectable intellectual property; Instruction of the Government • assignment of intellectual property rights in Rosneft’s best interest; of the Russian Federation No. ISh- • patent research, including patent landscaping, to plan and conduct world-class research P13-1925 dated 5 April 2018 and development and to create new and upgrade existing technologies; Directives of the Government • registration of intellectual property rights and keeping records of exploration and development of the Russian Federation rights (patents, utility models, software and know-how). No. 7050p-P13 dated As part of the Innovation Development Programme, Rosneft adopted an intellectual property rights 30 August 2018 management programme. In 2018, Rosneft’s Board of Directors considered matters related to intellectual property rights man- agement as required by Directives of the Government of the Russian Federation No. 9177p-P13 dated 12 December 2017 and No. 7050p-P13 dated 30 August 2018. Relevant information is regularly posted on the Interdepartmental Portal.

352 353 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

5.3. Development and approval of the Company’s strategy and Long-Term Development Programme 5.4. Reduction of operating expenses

Recommendations for Innovation In 2017, Rosneft’s Board of Directors approved the Rosneft–2022 Strategy (Minutes No. 8 dated Subparagraph 5, paragraph 1 Rosneft fully complies with Instructions of the President of the Russian Federation Development Programmes 21 December 2017) aimed at major changes in the Company’s business through advanced manage- of Instructions of the President and the Government of the Russian Federation regarding annual reduction of operating expenses. approved by resolution ment approaches and new technologies while increasing returns on the Company’s existing assets. of the Russian Federation The Company developed an action plan (a list of initiatives) aimed at reaching the expense (cost) of the Government Commission The Rosneft-2022 Strategy responds to all of the current challenges faced by the energy industry. No. Pr-2821 dated 5 December 2014 reduction target and included this plan in Rosneft’s Long-Term Development Programme. for Advanced Technology The Strategy aims to improve business profitability and increase returns through a more intensive Directives of the Government The relevant indicator is integrated in the KPI system for Rosneft’s top managers. and Innovation (Minutes No. 4 development of core assets, concentration on key projects, accelerated roll-out of new technology of the Russian Federation The progress of operating expense reduction initiatives was audited as part of the audit of the Long- dated 3 August 2010) and new management models, and transformations necessitated by digital era challenges. No. 2303p-P13 dated 16 April 2015 Term Development Programme and reviewed at the meeting of the Company’s Board of Directors. Item 2, paragraph 2 of Minutes While developing the Rosneft-2022 Strategy, the Company conducted an in-depth analysis of exter- Item 4, paragraph 2 of Minutes In 2020, annual average operating expenses were reduced by at least 2% year-on-year through cost of the Meeting Convened nal environment and challenges faced by each business segment. The Company formulated strate- of the Meeting Convened optimisation, energy savings, increased operational efficiency, measures to reduce fuel consumption by First Deputy Prime Minister gic initiatives across all business segments enabling development and accomplishment of its growth by Prime Minister of the Russian and losses, reduction in procurement, and optimisation of employee headcount. of the Russian Federation Igor priorities. The key provisions of the Rosneft–2022 Strategy are available on Rosneft’s official web- Federation No. DM-P13-2pr dated Information on compliance with instructions and directives of the President and the Government Shuvalov No. ISh-P13-98pr dated site. For key information and provisions of the Rosneft–2022 Strategy, see section 1 of the Annual 18 January 2016 of the Russian Federation is regularly posted on the Interdepartmental Portal. 3 October 2013 Report. Instruction of the Government Subparagraphs 32 In 2018, Rosneft's Board of Directors approved additional initiatives to support the Rosneft–2022 of the Russian Federation No. ISh- and 34, paragraph 1 of Instructions Strategy in view of the Address of President of the Russian Federation Vladimir Putin to the Federal P13-2047 dated 11 April 2016 of the President of the Russian Assembly (Minutes No. 17 dated 28 April 2018). Progress against the Rosneft–2022 Strategy is annu- Directives of the Government Federation No. Pr-3086 dated ally reviewed by Rosneft’s Board of Directors; in December 2020, the Board of Directors reviewed of the Russian Federation 27 December 2013 the progress for 2020, noting that most of the key indicators of the Rosneft–2022 Strategy for 2020 No. 4750p-P13 dated 4 July 2016 Instruction of the Government were met. of the Russian Federation Rosneft’s Long-Term Development Programme was originally established in 2014 pursu- 5.5. Development of internal regulations No. DM-P13-9589 dated ant to Instruction of the President of the Russian Federation Vladimir Putin No. Pr-3086 dated 30 December 2013 27 December 2013 and Directives of the Government of the Russian Federation No. 4955-P13 dated Paragraph 2 of List of Instructions In accordance with the guidelines approved by the Government of the Russian Federation (No. ISh- Directives of the Government 17 July 2014. On 9 December 2014 (Minutes No. 12), the Board of Directors approved the Long- of the President of the Russian P13-4148 dated 24 June 2015), the Company developed, approved and enacted the following of the Russian Federation Term Development Program, Rosneft’s Standard on the Long-Term Development Programme Federation No. Pr-3013 dated documents: No. 4955p-P13 dated 17 July 2014 Implementation Audit and the Regulations on the Company’s KPI System. 27 December 2014 • Policy on Internal Audit; Directives of the Government In line with Directives of the Government of the Russian Federation No. 6739p-P13 dated 30 July Instructions of the Government • Policy on Operational and Investment Efficiency Improvement; of the Russian Federation 2020, Rosneft’s Standard on the Long-Term Development Programme Implementation Audit was of the Russian Federation No. ISh- • Policy on Risk Management and Internal Control System; No. 3984p-P13 dated 24 June 2015 updated and approved by the Board of Directors (Minutes No. 16 dated 25 December 2020). P13-1818 dated 23 March 2015 • Policy on Onshore Oil Production; Paragraph 6, section 2 of the Action As provided for in the employment contract of Rosneft’s Chief Executive Officer, he is obliged and No. ISh-P13-4148 dated • Policy on Offshore Hydrocarbon Exploration and Production; Plan for Labour Productivity to ensure the implementation of the approved Strategy and Long-Term Development Programme 24 June 2015 • Policy on Gas Business; Improvement approved of the Company. Directives of the Government • Standard on the Corporate-Wide Risk Management System; by Resolution of the Government Starting from 2015, the Company annually prepares a report on the implementation of the Long- of the Russian Federation • Regulations on the Procedure for Developing (Updating) and Implementing Rosneft’s Innovation of the Russian Federation Term Development Programme for the previous period and employs an independent auditor to audit No. 3984p-P13 dated 24 June 2015 Development Programme; No. 1250-r dated 9 July 2014 its implementation. Audit results are annually reviewed by the Company’s Board of Directors Paragraph 2 of Instruction • Regulations on the Procedure and Rules of the One-Stop-Shop System for the Introduction Directives of the Government and presented at the Annual General Shareholders Meeting. of the President of the Russian of Innovative Products; of the Russian Federation The Long-Term Development Programme is updated annually. Federation No. Pr-769 dated • Standard on Innovation Efficiency Management; No. 7389p-P13 dated In 2020, the Long-Term Development Programme was updated to account for: 26 April 2016 • Regulations on the Petroleum Product Quality Management System. 31 October 2014 • the Company's performance in 2019 and an independent auditor's recommendations following Paragraph 6 of Instruction Rosneft complies with the provisions of the Directives in full. Paragraph 2.3, section I a limited audit on the implementation of the Long-Term Development Programme in 2019; of the Government of the Russian Relevant information is regularly posted on the Interdepartmental Portal. of Minutes of the Meeting • changes in the tasks and initiatives for the development of Rosneft’s businesses and corporate Federation No. AD-P36-4292 dated of the Military and Industrial functions under the influence of external factors, including the macro environment in global energy 20 July 2016 Commission with the Government markets and its influence on long-term goals of the Company; Letter of the Federal Agency of the Russian Federation No. 4 • resolutions made by the Board of Directors in respect of the Company’s development plans. for State Property Management dated 25 April 2014 The Long-Term Development Programme contains initiatives developed pursuant to the Directives No. RB-11/9968 dated Directives of the Government of the Government of the Russian Federation (No. 4955p-P13 dated 17 July 2014, No. 7558p- 20 March 2017 of the Russian Federation P13 dated 12 November 2014, No. 1346p-P13 dated 5 March 2015, No. 2303p-P13 dated 16 April No. 3666p-P13 dated 11 June 2015 2015, No. 7389p-P13 dated 31 October 2014, No. 1472p-P13 dated 3 April 2016, No. 4531p-P13 Paragraph 2 of Minutes As resolved by the Company's Board of Directors pursuant to Directives of the Government Subparagraph b, paragraph 2 of List dated 28 June 2016, No. 4750p-P13 dated 4 July 2017, and No. 830p-P13 dated 6 February 2017) of the Meeting Convened of the Russian Federation No. 5024p-P13 dated 31 July 2015 and in accordance with the guide- of Instructions of the President and includes a set of measures to increase labour productivity, information about demand for human by First Deputy Prime Minister lines approved by Resolution of the Ministry of Economic Development No. 400R-AU dated of the Russian Federation resources, and a section dedicated to the development initiatives in the Russian Far East. of the Russian Federation Igor 22 December 2015 pursuant to Instruction of the Government of the Russian Federation No. ISh- No. Pr-1627 dated 1 July 2014 Efficiency improvement indicators aimed at introducing the lean production methodology are inte- Shuvalov No. ISh-P13-47pr dated P13-5231 dated 31 July 2015, the Company's Management Board approved and enacted the following Instructions of the Government grated into the existing KPI system for the Company’s top managers and heads of business units. 2 June 2015 documents: of the Russian Federation No. ISh- Provisions of the Long-Term Development Programme is aligned with key provisions of Russian gov- Directives of the Government • Regulations on the Procedure for Charitable Activities in Rosneft and Group Subsidiaries; P8-6196 dated 15 August 2014 ernment programmes pertaining to the Company’s lines of business. of the Russian Federation • Regulations on Sponsorship in Rosneft and Group Subsidiaries; and No. OG-P8-5496 dated The Company met the requirements of Directives of the Government of the Russian Federation No. 5024p-P13 dated 31 July 2015 Relevant information is regularly posted on the Interdepartmental Portal. 22 July 2014 No. 276p-P13 dated 17 January 2019. Its current Long-Term Development Programme accounts 5.6. Performance optimisation through integration Directives of the Government for key provisions of the Address of President of the Russian Federation Vladimir Putin of the Russian Federation to the Federal Assembly and Decree of the President of the Russian Federation No. 204 Paragraph 4 of Minutes In 2015, treasury functions of Rosneft’s Group Subsidiaries were centralised and merged into No. 7439p-P13 dated of 7 May 2018. Provisions of strategic and national programmes of the Russian Federation are taken of the Meeting Convened by Deputy the Integrated Treasury supported by the Company’s financial department and JSC Russian Regional 5 November 2014 into account in annual updates of the Long-Term Development Programme (Minutes of the Meeting Prime Minister of the Russian Development Bank (RRDB). Directives of the Government of Rosneft's Board of Directors No. 19 dated 1 April 2019). Federation Dmitry Rogozin Business processes pertaining to solvency management, budgeting and acceptance of financial of the Russian Federation For information on the Long-Term Development Programme and audited results of its implementa- No. RD-P13-45pr dated 15 June 2012 transactions in the Group Subsidiaries were formalised and set out in respective policies and internal No. 4531p-P13 dated 28 June 2016 tion in 2020, see section 1 of the Annual Report. Paragraph 1 of List of Instructions regulations of the Company. Directives of the Government In line with Directives of the Government of the Russian Federation No. 12119p-P13 dated of the President of the Russian Relevant information is regularly posted on the Interdepartmental Portal. of the Russian Federation No. 276p- 25 December 2019, in 2020 the Board of Directors considered whether the Company had ongo- Federation No. Pr-1032 dated P13 dated 17 January 2019 ing or planned major investment projects (Minutes No. 16 dated 19 March 2020). For information 7 May 2014, Instruction Directives of the Government on the Company’s major investment projects in 2020, see the Annual Report, of the Government of the Russian of the Russian Federation Relevant information is regularly posted on the Interdepartmental Portal. Federation No. ISh-P13-3464 dated No. 11528p-P13 dated 25 December 13 May 2014 and Paragraph 4 of List 2019 of Instructions of the President Directives of the Government of the Russian Federation of the Russian Federation No. Pr-2821 dated 5 December 2014 No. 11528p-P13 dated 30 July 2020 Directives of the Government of the Russian Federation No. 5110p-P13 dated 8 August 2014 and No. 1796p-P13 dated 26 March 2015

354 355 ROSNEFT / ANNUAL REPORT 2020 Appendix 4.

5.7. Alignment of corporate activities with the Bank of Russia’s Corporate Governance Code 5.10. Fulfilment of Resolution of the Government of the Russian Federation No. 232 dated 6 March 2018 with Regard to the Procedure for Approval of Plans and Programmes by the Ministry for Development of the Russian Far East Instruction of the Government Based on the analysis of Rosneft’s corporate governance standards and provisions of the Bank and Approval of Said Documents by the Ministry of the Russian Federation of Russia’s Corporate Governance Code, the Company developed and approved an action plan No. DM-P36-46pr dated (roadmap) to align its activities with key provisions of the Code. Directives of the Government On 24 December 2018, pursuant to Directives of the Government of the Russian Federation 28 August 2014 The basic principles of Rosneft’s corporate governance framework are set out in Rosneft’s Corporate of the Russian Federation No. 8860p-P13 dated 29 October 2018, Rosneft's Board of Directors considered the fulfil- Instruction of the Government Governance Code and aligned with the best global practices. No. 8860p-P13 dated ment of Resolution of the Government of the Russian Federation No. 232 dated 6 March 2018 of the Russian Federation No. ISh- The roadmap status was reviewed by Rosneft’s Board of Directors on 20 December 2017 ((Minutes 29 October 2018 that requires to introduce a procedure for approval of corporate plans and target programmes P13-5859 dated 31 July 2014 No. 9 dated 25 December 2017), 24 December 2018 (Minutes No. 13 dated 24 December 2018) by the Ministry for Development of the Russian Far East and to have these documents approved Directives of the Government and 13 December 2019 (Minutes No. 10 dated 16 December 2019). by the said Ministry. It was noted, among other things, that the projects initiated by Rosneft of the Russian Federation In 2019, all the initiatives scheduled by the roadmap were implemented in full. in the Russian Far East as instructed by the President and Government of the Russian Federation No. 5667p-P13 dated are coordinated with the Ministry for Development of the Russian Far East. 2 September 2014 Pursuant to the said directive, Rosneft and the Ministry for Development of the Russian Far Directives of the Government East signed an agreement on 26 October 2019 to establish a procedure for confidential informa- of the Russian Federation No. 989p- tion exchange. In addition, Rosneft developed and approved the Regulations on the Provision P13 dated 20 February 2015 of Summary Information about the Company's Plans and Target Programmes to the Ministry for Development of the Russian Far East and enacted them on 1 January 2020. 5.8. New export contracts providing for rouble as a settlement currency Consolidated data based on Rosneft’s plans and target programmes, including information on activ- ities carried out by Rosneft in the Russian Far East in pursuance of the Instructions of the President Subparagraph 1, paragraph 1, sec- On 30 September 2016 (Minutes No. 7 dated 3 October 2016), the Company’s Board of Directors and the Government of the Russian Federation, were provided to the Ministry for Development tion I of Minutes of the Meeting considered that new export contracts should provide for the possibility of using Russian rou- of the Russian Far East (Rosneft’s letter No. DK-8573 dated 31 August 2020). of the National Financial Stability ble as a settlement currency and decided on a reasonable minimum share of export transactions Relevant information is regularly posted on the Interdepartmental Portal. Board No. 7 dated 10 April 2015 denominated in roubles in accordance with Directives of the Government of the Russian Federation Directives of the Government No. 807p-P13 dated 23 July 2015. 5.11. Fulfilment of Directives to reduce crude oil production as part of compliance by the Russian Federation with the OPEC of the Russian Federation The possibility of rouble settlements is provided for in most of petroleum sale contracts signed and non-OPEC ministerial meeting’s decisions to that effect No. 4807p-P13 dated 23 July 2015 by the Group Subsidiaries with buyers from the CIS countries. As for contracts with buyers from other jurisdictions, the possibility of rouble settlements is provided Directives of the Government In 2020, as part of compliance by the Russian Federation with the OPEC and non-OPEC ministe- for with due assessment of customer loss and sales reduction risks (customers refusing to sign con- of the Russian Federation rial meeting’s decisions, Rosneft received Directives of the Government of the Russian Federation tracts due to extra costs associated with currency conversion) and the risk of Russian rouble devalu- No. 4036p-P13 dated 15 May 2020 No. 4036p-P13 dated 15 May 2020 and No. 6883p-P13 dated 4 August 2020 providing for limitations ation that might lead to a reduction in total revenue from petroleum product exports. Directives No. 6883p-P13 dated on crude oil production. 4 August 2020 In pursuance of the Directives, the Company engaged in comprehensive efforts to comply 5.9. Remuneration of the Company’s management and employees and KPI system development with the above limitations taking into account the changing macroeconomic environment and clas- sification of assets by economic efficiency. Instruction of the President The Company introduced a KPI-based incentive system for its management in 2009. Also enacted In 2020, the Company continuously monitored its compliance with the Government’s Directives of the Russian Federation were the Regulations on Annual Bonuses for Rosneft’s Top Managers and Heads of Independent on crude oil production, including where needed targeted adjustments in production at specific No. Pr-825 dated 6 April 2009 Business Units. assets depending on delivery commitments, technical feasibility, and economic efficiency. Instructions of the Government On 9 December 2014 (Minutes No. 12), Rosneft’s Board of Directors approved the Regulations of the Russian Federation on the Company’s KPI System in strict compliance with the Guidelines of the Federal Agency 5.12. International cooperation and exports No. VP-P13-1823 dated for State Property Management on the Application of Key Performance Indicators by State 6 April 2009, No. VP-P13-2099 Corporations, State Companies, State Unitary Enterprises and Business Entities Where Directives of the Government In pursuance of the Directives, Rosneft analysed its export operations and determined that dated 20 April 2009, No. VZ-P13- the Aggregate Share of the Russian Federation or a Constituent Entity of the Russian Federation of the Russian Federation the export structure also includes non-commodity and non-energy products – oil and gas refining 4252 dated 28 July 2009, No. ISh- Exceeds 50%. No. 10357p-P13 dated 14 November products. P13-2232 dated 8 April 2010 Rosneft’s KPI system includes: 2019 The approved business plan for 2020–2021 and the resulting forecast for the period of up to 2024 and No. KA-P13-8297 dated • financial and economic indicators (EBITDA, ROACE, TSR, Net Debt / EBITDA, and cost reduction provided for the export volume in this category to increase by 118% by 2024 as compared to 2017. 4 December 2010 indicators); As the target increase in exports of non-commodity non-energy products by the Company is above Item 3, paragraph 2 of Minutes • industry-wide indicators (hydrocarbon production, reserve replacement, light product yield, the level provided for in the National Project (112.6%), no measures are required to update the tar- of the Meeting Convened an integrated KPI of innovation efficiency, etc.). gets in the Company's business plans, and there is no need to update the Company’s Long-Term by First Deputy Prime Minister Management bodies of the Company (Board of Directors, Management Board and Chief Executive Development Programme or implement the Directives across the subsidiaries. of the Russian Federation Igor Officer) annually revise and approve performance indicators for each category of the Company’s Efficiency metrics reflecting Rosneft’s export activities are already included in the Company’s Shuvalov No. ISh-P13-98pr dated managers. Business Plan metrics. 3 October 2013 Other employees of Rosneft’s Administration receive bonuses based on collective KPIs for Rosneft Rosneft is currently involved in implementing the road map for the development of the petrochem- Paragraph 5 of List of Instructions and its businesses, and personal performance evaluation (an individual performance factor). ical industry in the Russian Federation through 2025 put together by the Ministry of Energy as part of the President of the Russian Target KPIs and personal performance of the top management are reviewed annually and approved of the National Project. The Directives’ requirements regarding the Company's integration into Federation No. Pr-1474 dated 5 July by the Board of Directors based on the recommendations of the HR and Remuneration Committee the National Project have effectively been complied with. 2013 of the Board of Directors. Directives of the Government As provided for in the employment contract of Rosneft’s Chief Executive Officer, he is obliged 6. Sustainable development of the Russian Federation to ensure the implementation of the approved Strategy and Long-Term Development Programme No. 2579p-P13 dated 25 April 2014 of the Company. 6.1. Adoption of professional standards Instruction of the Government Relevant information is regularly posted on the Interdepartmental Portal. of the Russian Federation No. ISh- Paragraph 3, Section I of Minutes In 2020, Rosneft and Group Subsidiaries took measures to adopt professional standards in accord- P13-2043 dated 27 March 2014 of the Meeting of the Government ance with the Action Plan approved by Rosneft’s Board of Directors on 27 December 2019 (Minutes Directives of the Government of the Russian Federation No. 9-dsp No. 12). of the Russian Federation dated 24 March 2016 in accord- Rosneft’s Board of Directors was twice updated (as at 1 May 2020 and 2 November 2020) No. 3984p-P13 dated 24 June 2015 ance with Federal Law No. 122-FZ on the implementation of the Action Plan in Rosneft and the Group Subsidiaries (Minutes No. 3 Subparagraph b, paragraph 1 of List dated 2 May 2015 On Amendments dated 2 July 2020 and Minutes No. 16 dated 25 December 2020). of Instructions of the President to the Labour Code of the Russian By resolution of the Board of Directors, Rosneft approved the Action Plan for Adoption of the Russian Federation Federation and Articles 11 and 73 of Professional Standards at Rosneft and the Group Subsidiaries for 2021 (Minutes No. 16 dated No. Pr-2821 dated 5 December 2014 of the Federal Law on Education 25 December 2020). Instruction of the Government in the Russian Federation Relevant information is regularly posted on the Interdepartmental Portal. of the Russian Federation Directives of the Government No. DM-P13-9024 dated of the Russian Federation 4 December 2014 No. 5119p-P13 dated 14 July 2016 Directives of the Government On the Adoption of Professional of the Russian Federation Standards in Joint-Stock No. 2303p-P13 dated 16 April 2015 Companies Directives of the Government of the Russian Federation No. 9054p-P13 dated 2 October 2019

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6.2. Creation of professional and amateur sports organisations

Subparagraph b, paragraph 2 of List In accordance with paragraph 17.1, Article 65 of the Federal Law on Joint-Stock Companies, matters of Instructions of the President related to the establishment of, participation in, and withdrawal from commercial and non-commer- of the Russian Federation cial organisations fall within the remit of the board of directors or another executive body of a joint- No. Pr-2179 dated 9 November 2016 stock company as is provided for in the company’s charter. Paragraph 1 of Instruction Rosneft places special emphasis on the support and development of sports and considers them one of the Government of the Russian of the top priorities of its social policy. Federation No. ISh-P13-8690 dated In particular, the Company supports sports through charitable activities under social and economic 26 December 2017 cooperation agreements with regional authorities and by delivering individual charity projects. Letter of the Federal Agency For this purpose, the Company traditionally provides finance to support and develop sports organ- for State Property Management isations, develop and promote mass and children’s sports, build and upgrade ice arenas, ice rinks No. RB-11/1520dsp dated and recreation centres, and buy sports equipment for children’s sports schools and other educational 22 January 2018 institutions. As part of its sponsorship agenda, Rosneft also provides financial support to help organise and hold important international sports competitions. Its initiatives are aimed at supporting and developing hockey, football, biathlon, sambo, boxing, motor racing and other sports. 6.3. Advertising contracts between Rosneft and top Russian athletes

Instruction of the President Since Rosneft promotes sports, it provides finance to support and develop sports organisations. of the Russian Federation Rosneft is a title sponsor of the International SAMBO Federation (FIAS) and finances the official No. Pr-223 dated 9 February 2018 schedule of annual sambo competitions. and Instruction of the Government The Company supports motor racing and prioritises national teams and car manufacturers, while of the Russian Federation intending to cover the maximum number of regions with the races organised. No. VM-P12-1271 dated The Company also provides full financial support to the Russian ice hockey club CSKA. 7 March 2018 Since 2017, Rosneft has been a title sponsor of the Arsenal Tula Football Club in the Russian football championship, the Avers Basketball Club, and other sports teams. 6.4. Implementation of measures to prevent the spread of COVID-19

Directives of the Government In pursuance of Directives of the Government of the Russian Federation No. 2150p-P13 dated of the Russian Federation 16 March 2020 on coronavirus, on 23 March 2020, the Company developed and approved the Plan No. 2150p-P13 dated 16 March 2020 of Priority Response Measures to Ensure Business Continuity (Minutes of the Board of Directors No. 18 dated 19 March 2020, P-2212-IS dated 23 March 2020). To ensure business continuity amid the spread of virus infections, the Group subsidiaries were pro- vided with a recommended template of the basic action plan to develop their own plans (letter AA-3527 dated 25 March 2020). Information about compliance with the Directives was posted on the Interdepartmental Portal. Rosneft’s Plan of Priority Response Measures to Ensure Business Continuity was not posted on the portal due to the confidential information that it contains. Level of net foreign exchange assets

Directives In 2020, the Company carried out monthly calculations of its net foreign exchange assets based of the Government of the Russian on its consolidated IFRS data and also of its foreign currency revenue and submitted reports Federation No. 8036p-P13 dated to the Central Bank of the Russian Federation using the form for the calculation of the maximum 1 September 2020 permissible limit of net foreign exchange assets. Transition to tax monitoring

Directives of the Government In pursuance of the said Directives of the Government of the Russian Federation, on 16 March of the Russian Federation 2020 Rosneft’s Board of Directors (Minutes No. 16 dated 19 March 2020) approved and coordi- No. 11528p-P13 dated 13 December nated with the Federal Tax Service (No. SD-4-23/9031 dated 1 June 2020) a road map through 2022 2019 to enable the transition of Rosneft and the largest Group Subsidiaries to tax monitoring. Information on compliance with Directives of the Government of the Russian Federation No. 11528p- P13 dated 13 December 2019 was posted on the Interdepartmental Portal.

358 Appendix 5 (INFORMATION ON CORE INTERNAL REGULATIONS THAT SERVE AS A BASIS FOR THE PREPARATION OF THIS ANNUAL REPORT, INCLUDING KEY INTERNAL DOCUMENTS REGULATING THE INTERNAL AUDIT FUNCTION AND THE FUNCTIONING OF THE IC&RMS) ROSNEFT / ANNUAL REPORT 2020

THIS ANNUAL REPORT HAS BEEN PREPARED BASED ON THE FOLLOWING LOCAL (INTERNAL) REGULATIONS OF ROSNEFT:

CHARTER;

Rosneft's Corporate Governance Code;

Code of Business and Corporate Ethics of Rosneft;

Regulations on the General Shareholders Meeting of Rosneft;

Regulations on the Board of Directors of Rosneft;

Rosneft Regulation on the Rosneft Board of Directors Audit Committee;

Rosneft Regulations on Human Resources and Remuneration Committee of Rosneft Board of Directors;

Rosneft Regulation on the Rosneft Board of Directors Strategic Planning Committee;

Rosneft Regulation on Payment of Remuneration and Compensation of Expenses of the Members of Rosneft Board of Directors;

Rosneft Regulation Procedure for Formation and Work of Rosneft Board of Directors Committees;

Regulations on the Collective Executive Body (Management Board) of Rosneft;

Regulations on the Sole Executive Body (Chief Executive Officer) of Rosneft;

Company Standard on Payments and Сompensations to Top-managers;

Regulations on the Audit Commission of Rosneft;

Rosneft Regulation on Remuneration and Compensation to Rosneft Audit Commission Members;

Rosneft Regulation on Rosneft Corporate Secretary;

Company Information Policy;

Rosneft Regulation on Provision of Information to Rosneft Shareholders;

Rosneft Regulations on Insider Information;

Rosneft Dividend Policy;

Company Policy on Combating Corporate Fraud and Involvement in Corruption Activities;

Company Policy on Internal Audit;

Company Policy on Risk Management and Internal Control System;

Company Policy on Health, Safety and Environmental Protection.

360 Appendix 6 (FINANCIAL STATEMENTS AND AUDITOR’S REPORT) ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Key audit matter How our audit addressed the key audit matter INDEPENDENT AUDITOR’S REPORT Contributions to the charter capital of subsidiaries related to restructuring

In 2020, the Company made a number of new investments of shares/ We engaged our business valuation experts to review the models units of entities that the Company owns and holds on its balance prepared to determine the value of the assets transferred To the Shareholders and Board of Directors of PJSC Rosneft Oil Company sheet, to the charter capital of its other subsidiaries in order to create to the charter capital. We analyzed assumptions used in the models and spin-off management sub-holdings. As a result of these to verify the value of the assets. We compared discount rates transactions, the cost of financial investments should be determined and projected long-term growth rates with general market based on the fair value of assets transferred as a contribution indicators and other available data. We verified arithmetic accuracy to the charter capital. of the models and sensitivity analysis of models to changes in key OPINION This matter is one of the most significant in our audit assumptions. In addition, we compared the amounts in accounting as the respective transactions are significant for financial statements postings to the respective value calculations and analyzed We have audited the financial statements of PJSC Rosneft Oil Company (the “Company”), which comprise and the calculation of the value of the transferable financial the approach to fair value measurement of financial investments. investments requires management to make significant judgments. the balance sheet as of 31 December 2020, the income statement for 2020 and appendices thereto. Information on the above-mentioned transactions is provided in Note 11 to the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of 31 December 2020 and its financial performance and its cash flows for 2020 in accordance with the rules on preparation of financial statements established in the Russian Federation. OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT

BASIS FOR OPINION Other information consists of the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. Management is responsible for the other information. The Annual We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities Report is expected to be provided to us after the date of this auditor’s report. under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the International Our opinion on the financial statements does not cover the other information and we do not express any form Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (including International of assurance conclusion thereon. Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in the Russian Federation, and we have fulfilled our other ethical responsibilities In connection with our audit of the financial statements, our responsibility is to read other information in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have when it is provided to us and, in doing so, consider whether the other information is materially inconsistent obtained is sufficient and appropriate to provide a basis for our opinion. with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit RESPONSIBILITIES OF MANAGEMENT AND THE AUDIT COMMITTEE of the financial statements of the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a OF THE BOARD OF DIRECTORS FOR THE FINANCIAL STATEMENTS separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context. Management is responsible for the preparation and fair presentation of these financial statements in accordance with the rules on preparation of financial statements established in the Russian Federation, We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial and for such internal control as management determines is necessary to enable the preparation of financial statements section of our report, including in relation to this matter. Accordingly, our audit included statements that are free from material misstatements, whether due to fraud or error. the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address In preparing the financial statements, management is responsible for assessing the Company’s ability the matter below, provide the basis for our audit opinion on the accompanying financial statements. to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease its operations, or has no realistic alternative but to do so.

The Audit Committee of the Board of Directors is responsible for overseeing the Company’s financial reporting process.

362 363 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL From the matters communicated with the Audit Committee of the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are STATEMENTS therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free matter should not be communicated in our report because the adverse consequences of doing so would from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes reasonably be expected to outweigh the public interest benefits of such communication. our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise The partner in charge of the audit resulting in this independent auditor’s report is D. E. Lobachev. from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. D. E. Lobachev As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional Partner skepticism throughout the audit. We also: Ernst & Young LLC 12 February 2021 • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material DETAILS OF THE AUDITED ENTITY misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or override of internal control. Name: PJSC Rosneft Oil Company • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness Record made in the State Register of Legal Entities on 12 August 2002, State Registration of the Company’s internal control. Number 1027700043502. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management and related disclosures. Address: Russia 115035, Moscow, Sofiyskaya nab., 26/1. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions DETAILS OF THE AUDITOR that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related Name: Ernst & Young LLC disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future Record made in the State Register of Legal Entities on 5 December 2002, State Registration events or conditions may cause the Company to cease to continue as a going concern Number 1027739707203. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a Address: Russia 115035, Moscow, Sadovnicheskaya nab., 77, building 1. manner that achieves fair presentation. Ernst & Young LLC is a member of Self-regulated organization of auditors Association “Sodruzhestvo” We communicate with the Audit Committee of the Board of Directors regarding, among other matters, (“SRO AAS”). Ernst & Young LLC is included in the controlled copy of the register of auditors and audit the planned scope and timing of the audit and significant audit findings, including any significant deficiencies organizations, main registration number 12006020327. in internal control that we identify during our audit.

We also provide the Audit Committee of the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and have communicated with it all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, threat mitigation actions or related safeguards.

364 365 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Explanatory Item Line code 31 December 31 December 31 December BALANCE SHEET note 2020 2019 2018 Entity PJSC Rosneft Oil Company 1.19 Charter capital (pooled capital, charter fund, 1310 105,982 105,982 105,982 AT 31 DECEMBER 2020 Monetary unit: kRUB partners' contributions) 19 Treasury shares 1320 – – –

Explanatory Item Line code 31 December 31 December 31 December 19 Revaluation of non-current assets 1340 3 3 5 note 2020 2019 2018 19 Additional capital (without revaluation) 1350 118,170,353 118,168,244 113,279,890 Assets 19 Reserve capital 1360 5,299 5,299 5,299 I. Non-current assets 13 Other funds and reserves 1365 (130,578) 1,389,427 (115,062,581)

6 Intangible assets 1110 42,463,967 44,331,957 44,599,532 20 Retained earnings (uncovered loss) 1370 2,106,458,991 2,142,102,123 2,028,141,822

8 Research and development results 1120 10,511,685 8,950,122 6,728,123 Total for Section III 1300 2,224,610,050 2,261,771,078 2,026,470,417

7 Intangible exploration assets 1130 103,846,837 107,173,666 99,214,115 IV. Long-term liabilities 7 Tangible exploration assets 1140 32,202,676 31,140,877 20,222,627 16 Loans and borrowings 1410 6,420,308,876 5,397,760,107 5,792,741,747 5 Fixed assets 1150 1,402,928,888 1,325,676,684 1,269,210,761 21 Deferred tax liabilities 1420 120,809,294 106,176,347 91,808,512 Income-bearing investments in tangible 1160 – – – assets 24 Provisions 1430 92,409,353 76,836,351 56,345,080

11 Financial investments 1170 5,764,322,744 5,833,160,665 6,159,574,705 12 Long-term derivative financial instruments 1440 – – – at fair value through profit or loss 3.21 Deferred tax assets 1180 201,922,448 118,633,694 94,841,893 16 Other liabilities 1450 1,440,610,117 799,125,852 1,134,390,419 9 Other non-current assets 1190 39,003,899 33,452,714 31,951,119 Total for section IV 1400 8,074,137,640 6,379,898,657 7,075,285,758 Total for section I 1100 7,597,203,144 7,502,520,379 7,726,342,875 V. Short-term liabilities II. Current assets 16 Loans and borrowings 1510 787,352,521 946,067,618 817,935,056 10 Inventories 1210 113,901,023 138,889,747 151,426,199 15.18 Accounts payable 1520 2,525,807,379 2,699,900,722 2,333,146,921 10 Value added tax on purchased assets 1220 35,670,961 48,808,809 72,718,694 Deferred income 1530 2,894,043 2,865,382 2,740,157 15.18 Accounts receivable 1230 4,002,964,504 3,543,076,666 2,653,803,215 24 Provisions 1540 46,832,545 32,444,291 19,582,179 Including: 12 Short-term derivative financial instruments 1545 12,491,608 – 33,058,044 at fair value through profit or loss Accounts receivable expected to be settled 1231 940,655,282 1,411,354,476 1,005,017,767 within 12 months after the reporting date Other liabilities 1550 617,344 549,995 499,287 Accounts receivable expected to be settled 1232 3,062,309,222 2,131,722,190 1,648,785,448 Total for section V 1500 3,375,995,440 3,681,828,008 3,206,961,644 in over 12 months after the reporting date

11 Financial investments (other than cash 1240 1,423,661,785 985,762,573 1,100,833,573 Balance 1700 13,674,743,130 12,323,497,743 12,308,717,819 equivalents)

12 Short-term derivative financial instruments 1241 – 2,243,018 – at fair value through profit or loss

12 Long-term derivative financial instruments 1242 – – – Chief Executive Officer of Rosneft Oil Company I.I. Sechin at fair value through profit or loss

14 Cash and cash equivalents 1250 496,199,797 97,398,766 598,541,224 Chief Accountant of PJSC Rosneft Oil Company D.B. Torba Other current assets 1260 5,141,916 4,797,785 5,052,039 12 February 2021 Including:

Unbilled accrued revenue under construction 1261 – – – contracts

Total for Section II 1200 6,077,539,986 4,820,977,364 4,582,374,944

Balance 1600 13,674,743,130 12,323,497,743 12,308,717,819

Liabilities

III. Capital and liabilities

366 367 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Explanatory Item Line January- January- STATEMENT OF INCOME note code December December Entity PJSC Rosneft Oil Company 2020 2019 AT 31 DECEMBER 2020 Monetary unit: kRUB 13.21 Income tax on operations whose result 2530 379,474 (29,113,002) is not included in net income (loss) for the period

Cumulative financial result for the period 2500 154,293,270 512,976,571 Explanatory Item Line January- January- note code December December For reference 2020 2019 22 Basic earnings (loss) per share, RUB per share 2900 14.70 37.41 2020 Revenue 2110 4,835,091,105 6,827,526,407

2019 Cost of sales 2120 (3,641,355,413) (4,782,222,071)

20 Oil and gas reserves exploration and estimation 2130 (7,543,407) (6,559,819) expenses Chief Executive Officer of Rosneft Oil Company I.I. Sechin Gross income (loss) 2100 1,186,192,285 2,038,744,517 Chief Accountant of PJSC Rosneft Oil Company D.B. Torba 20 Selling expenses 2210 (772,860,114) (1,196,815,437)

20 General and administrative expenses 2220 (90,988,304) (83,302,902) 12 February 2021

Income (loss) from sales 2200 322,343,867 758,626,178 20 Interest receivable 2320 148,757,678 176,844,160

16.20 Interest payable 2330 (360,174,908) (445,059,171)

20 Gains from changes in the fair value of derivative 2333 – 35,301,062 financial instruments

20 Losses from changes in the fair value 2334 (14,734,626) – of derivative financial instruments

13.17.20 Other income 2340 190,992,361 124,722,952

13.17.20 Other expenses 2350 (217,629,746) (302,893,537)

Income (loss) before tax 2300 69,554,626 347,541,644 21 Income tax 2410 83,547,847 48,185,409

Including

21 Current income tax 2411 15,271,514 9,648,441

21 Deferred income tax 2412 68,276,333 38,536,968

Other 2460 2,708,693 799,156

Including

Tax on prior year income 2461 (6,805) 703,325

Imputed income tax 2464 – –

Income tax re-distribution within consolidated 2465 2,715,498 95,831 taxpayer

22 Net income (loss) 2400 155,811,166 396,526,209 Result of revaluation of non-current assets 2510 – – not included in net income (loss) for the period

13.17 Result from other operations not included in net 2520 (1,897,370) 145,563,364 income (loss) for the period

368 369 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

STATEMENT OF CHANGES IN EQUITY Entity PJSC Rosneft Oil Company AT 31 DECEMBER 2020 Monetary unit: kRUB

1. CHANGES IN EQUITY

Item Line code Charter capital Treasury shares Additional capital Reserve capital Other funds Retained earnings (uncovered loss) Total and reserves

Equity at 31 December 2018 3100 105,982 – 113,279,895 5,299 (115,062,581) 2,028,141,822 2,026,470,417 For 2019

Total increase in equity: 3210 – – 4,891,328 – 116,452,008 396,613,701 517,957,037

Including:

Net income 3211 х х х х х 396,526,209 396,526,209

Revaluation of property 3212 х x – х – х –

Earnings directly increasing equity 3213 х x 4,891,328 х 116,452,008 87,492 121,430,828

Additional issue of shares 3214 – – – х – х –

Increase in the par value of shares 3215 – x – х – – x

Legal entity reorganization 3216 – – – – – – –

Total decrease in equity: 3220 – – (2,974) – – (282,653,402) (282,656,376)

Including:

Loss 3221 х х х х х – –

Revaluation of property 3222 х x – х – х –

Expenses directly decreasing equity 3223 х x (2,974) х – – (2,974)

Decrease in the par value of shares 3224 – – – х – – –

Decrease in the number of shares 3225 – – x х – х –

Legal entity reorganization 3226 – – – – – – –

Dividends 3227 х х х х х (282,653,402) (282,653,402)

Changes in additional capital 3230 х х (2) х – 2 х

Changes in reserve capital 3240 х х х – х – х

Equity at 31 December 2019 3200 105,982 – 118,168,247 5,299 1,389,427 2,142,102,123 2,261,771,078

370 371 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Item Line code Charter capital Treasury shares Additional capital Reserve capital Other funds Retained earnings (uncovered loss) Total and reserves For 2020

Total increase in equity: 3310 – – 7,532 – – 155,865,941 155,873,473

Including:

Net income 3311 х х х х х 155,811,166 155,811,166

Revaluation of property 3312 х х – х – х –

Earnings directly increasing equity 3313 х х 7,532 х – 54,775 62,307

Additional issue of shares 3314 – – – х – х –

Increase in the par value of shares 3315 – x – х – – x

Legal entity reorganization 3316 – – – – – – –

Total decrease in equity: 3320 – – (5,423) – (1,520,005) (191,509,073) (193,034,501)

Including:

Loss 3321 х х х х х – –

Revaluation of property 3322 х х – х – х –

Expenses directly decreasing equity 3323 х х (5,423) х (1,520,005) – (1,525,428)

Decrease in the par value of shares 3324 – – – х – – –

Decrease in the number of shares 3325 – – х х – х –

Legal entity reorganization 3326 – – – – – – –

Dividends 3327 х х х х х (191,509,073) (191,509,073)

Changes in additional capital 3330 х х – х – – х

Changes in reserve capital 3340 х х х – х – х

Equity at 31 December 2020 3300 105,982 – 118,170,356 5,299 (130,578) 2,106,458,991 2,224,610,050

372 373 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

2. ADJUSTMENTS DUE TO CHANGES IN THE ACCOUNTING POLICY STATEMENT OF CASH FLOWS AND CORRECTION OF ERRORS Entity PJSC Rosneft Oil Company Item Line code 31 December Change in equity for 2019 31 December Monetary unit: kRUB 2018 2019 AT 31 DECEMBER 2020 Through net income Due to other factors (loss) Total equity Item Line code For 2020 For 2019 Cash flows from operating activities Before adjustments 3400 2,026,470,417 396,526,209 (161,225,548) 2,261,771,078 Total proceeds 4110 5,206,284,343 6,179,070,239 Adjustment due to: Including: Changes in the accounting policy 3410 – – – – From sale of products, goods, work and services 4111 4,847,679,688 5,498,167,192 Correction of errors 3420 – – – – Lease payments, license payments, royalties, commissions and other similar 4112 137,354,641 150,978,981 After adjustments 3500 2,026,470,417 396,526,209 (161,225,548) 2,261,771,078 payments

Including: From resale of financial investments 4113 – –

Retained earnings (loss): Other proceeds 4119 221,250,014 529,924,066

Before adjustments 3401 2,028,141,822 396,526,209 (282,565,908) 2,142,102,123 Total cash disbursements 4120 (5,743,175,260) (6,771,972,637)

Adjustment due to: Including:

Changes in the accounting policy 3411 – – – – Payments to suppliers (contractors) for raw materials, work and services 4121 (3,785,193,585) (4,708,441,513)

Correction of errors 3421 – – – – Payroll-related payments 4122 (39,125,160) (41,823,850)

After adjustments 3501 2,028,141,822 396,526,209 (282,565,908) 2,142,102,123 Interest on debt obligations 4123 (313,392,981) (372,122,046)

Other equity items that have been Income tax 4124 (13,070,756) (10,184,117) adjusted: (By item) Other taxes and levies 4125 (679,649,562) (895,868,770) Before adjustments 3402 (1,671,405) – 121,340,360 119,668,955 Exploration costs 4128 (5,206,029) (6,582,553) Adjustment due to: Other payments 4129 (907,537,187) (736,949,788) Changes in the accounting policy 3412 – – – – Net cash flows from operating activities 4100 (536,890,917) (592,902,398) Correction of errors 3422 – – – – Cash flows from investing activities After adjustments 3502 (1,671,405) – 121,340,360 119,668,955 Total proceeds 4210 2,743,100,312 1,304,175,862

Including: 3. NET ASSETS From sale of non-current assets (except for financial investments) 4211 14,951,874 10,762,256 From sale of shares (interests) in other entities 4212 12,512,096 23,371 Item Line code At 31 December 2020 At 31 December 2019 At 31 December 2018 From repayment of loans issued and sale of debt securities (receivables from other 4213 1,778,643,916 886,376,455 Net assets 3600 2,224,610,050 2,261,771,078 2,026,470,417 parties)

Dividends, interest on debt financial instruments and similar proceeds from equity 4214 930,871,922 368,230,520 participation in other entities

Other proceeds 4219 6,120,504 38,783,260

Chief Executive Officer of Rosneft Oil Company I.I. Sechin Total payments 4220 (2,124,602,634) (831,287,612)

Including: Chief Accountant of PJSC Rosneft Oil Company D.B. Torba Purchase, creation, upgrading, reconstruction and preparation for use of non- 4221 (195,984,120) (188,557,971) current assets 12 February 2021

374 375 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Item Line code For 2020 For 2019 EXPLANATORY NOTES Purchase of shares (interests) in other entities 4222 (184,586,241) (374,023,314)

Purchase of debt securities (receivables from other parties), issue of loans to other 4223 (1,676,290,753) (207,069,417) parties TO THE BALANCE SHEET Interest on debt obligations included in the value of the investment asset 4224 – – AND THE INCOME STATEMENT OF PJSC Exploration assets 4228 (28,357,906) (23,773,804) Other payments 4229 (39,383,614) (37,863,106) ROSNEFT OIL COMPANY FOR 2020 Net cash flows from investing activities 4200 618,497,678 472,888,250 Cash flows from financing activities These Explanatory Notes year prepared in accordance Total proceeds 4310 9,062,370,952 3,502,514,309 to the balance sheet with the applicable legislation Including: and the income statement of the Russian Federation. constitute an integral part Loans and borrowings received 4311 8,213,620,911 3,417,634,273 of the financial statements The reporting date of these financial Cash contributions of shareholders (participants) 4312 – 4,890,000 of PJSC Rosneft Oil Company statements, as of which they

Issue of shares, increase of interest 4313 – – for the 2020 reporting are prepared, is 31 December 2020.

Issue of bonds, promissory notes and other debt securities, etc. 4314 848,750,041 79,990,036

Other proceeds 4319 – – 1. ENTITY AND TYPES OF ACTIVITY

Total payments 4320 (8,753,746,773) (3,832,591,338) 1.1 COMPANY DESCRIPTION Address of the Company specified The address of the place Including: in the Unified State Register for holding the General

Payments to shareholders (participants) due to the buyback of shares (interest) 4321 – – Public joint-stock company of Legal Entities: Shareholders’ Meeting in the entity or due to their withdrawal Rosneft Oil Company is determined by the Company’s

Dividends and other distributions of income among shareholders (participants) 4322 (191,493,418) (282,632,588) (the “Company,” “Rosneft Oil 26/1 Sofiyskaya nab., Moscow, Board of Directors. Company”) was established Russian Federation, 115035. Repayment (redemption) of promissory notes and other debt securities, repayment 4323 (8,562,253,355) (3,549,958,750) in accordance with Decree No. 327 The annual General Shareholders’ of loans and borrowings of the President of the Russian 1.2 EXECUTIVE Meeting is held not earlier Other payments 4329 – – Federation, On Priority Measures AND SUPERVISORY BODIES than two months and not later Net cash flows from financing activities 4300 308,624,179 (330,077,029) for Improving the Activities of Oil OF THE COMPANY than six months after the end Companies, dated 1 April 1995 of the financial year. Net cash flows for the reporting period 4400 390,230,940 (450,091,177) and pursuant to Resolution No. 971 General Shareholders’ Meeting Balance of cash and cash equivalents at the beginning of the reporting period 4450 97,398,766 598,541,224 of the Government of the Russian of the Company The General Shareholders’ Meeting Federation, On the Transformation The General Shareholders’ is chaired by the Chairman Balance of cash and cash equivalents at the end of the reporting period 4500 496,199,797 97,398,766 of State Enterprise Rosneft Meeting is the supreme of the Company’s Board Effect of changes in the exchange rate of foreign currency to ruble 4490 8,570,091 (51,051,281) into Open Joint-Stock Company governing body of the Company. of Directors or, in his absence, Rosneft Oil Company, dated 29 The scope of authority a member of the Board September 1995. On 8 July 2016, of the General Shareholders’ of Directors selected the Company was transformed Meeting of the Company, by the decision of the Board into public joint-stock company. the procedure for convening of Directors. Chief Executive Officer of Rosneft Oil Company I.I. Sechin and holding it and its The Company is a legal entity proceedings are determined Board of Directors Chief Accountant of PJSC Rosneft Oil Company D.B. Torba that operates on the basis in accordance with federal laws, of the Company of its Charter and the laws the Charter of the Company The Company’s Board of Directors 12 February 2021 of the Russian Federation. and the Regulation on the General is responsible for the general Shareholders’ Meeting management of the Company’s Location of the Company: Moscow, of the Company. activities, except for the matters Russian Federation.

376 377 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

that fall within the authority Meeting to serve until the next of the annual General Company, namely Andrey their duties as members Collegial executive body of the General Shareholders’ annual General Shareholders’ Shareholders’ Meeting Removich Belousov1 and Aleksandr of the Board of Directors of Rosneft of the Company Meeting according to federal laws Meeting. of the Company held Valentinovich Novak, government Oil Company. Pursuant to the Charter, and the Charter of the Company. on 2 June 2020. officials at the date of the adoption the Management Board The Board of Directors of PJSC of the decision to pay remuneration Sole executive body is the collegial executive body The members of the Company’s Rosneft Oil Company that As of 31 December 2020, by the Board of Directors, of the Company of the Company. Board of Directors are elected served as of 31 December 2020 the Board of Directors of PJSC and Igor Ivanovich Sechin, Chief Executive Director of Rosneft by the General Shareholders’ was formed by the decision Rosneft Oil Company comprised: Chairman of the Management Oil Company is its sole executive As of 31 December 2020, members Board of Rosneft Oil body. of the Management Board Company, for performing of the Company included: Table 1. Composition of the Board of Directors

1. Faisal Alsuwaidi Member of the Board of Directors of Rosneft Oil Company, representative of Qatar Investments Authority Table 2. Composition of the Management Board 2. Hamad Rashid Al-Mohannadi Member of the Board of Directors of Rosneft Oil Company, member of the Board of Trustees at The Abdullah Bin Hamad Al-Attiyah International Foundation for Energy & 1. Igor Ivanovich Sechin Chief Executive Officer, Chairman of the Management Board, Deputy Chairman of the Board Sustainable Development of Qatar, Chairman of the Board of Trustees at the Community of Directors of Rosneft Oil Company College of Qatar, representative of the Qatar Investment Authority 2. Zeljko Runje Deputy Chairman of the Management Board, First Vice President for Oil, Gas, and Offshore Business 3. Matthias Arthur Warnig Deputy Chairman of the Board of Directors of Rosneft Oil Company, Independent Development at Rosneft Oil Company Director, Director of Interatis AG (Switzerland), Executive Director of Nord Stream 2 AG (Switzerland) 3. Didier Casimiro First Vice President of Rosneft Oil Company 4. Oleg Vyacheslavovich Viyugin Member of the Board of Directors of Rosneft Oil Company, Independent Director, 4. Andrey Aleksandrovich Vice President – Chief Geologist at Rosneft Oil Company professor at the National Research University Higher School of Economics Polyakov 5. Robert Warren Dudley Member of the Board of Directors of Rosneft Oil Company, BP RIL Consultant 5. Ilgam Gaffarovich Kuchukov CEO Consultant in the rank of vice-president, General Director of Suzun JSC 6. Bernard Looney Member of the Board of Directors of Rosneft Oil Company, Chief Executive Officer and member of the Board of Directors of BP p.l.c. 6. Dina Rinatovna Malikova CEO Consultant in the rank of vice-president, President, Chairman of the Management Board of RRDB (JSC) 7. Alexander Valentinovich Novak Member of the Board of Directors of Rosneft Oil Company, Deputy Prime Minister of the Russian Federation 7. Igor Borisovich Tabachnikov CEO Consultant in the rank of vice-president, General Director of RN-Yuganskneftegaz LLC

8. Maxim Stanislavovich Oreshkin Member of the Board of Directors of Rosneft Oil Company, Assistant to the President 8. Khasan Kureishevich Tatriev CEO Consultant in the rank of vice-president, General Director of Bashneft PJSC JSOC of the Russian Federation 9. Vladimir Nikolaevich Chernov CEO Consultant in the rank of vice-president, General Director of RN-Vankor LLC 9. Hans-Georg Rudloff Member of the Board of Directors of Rosneft Oil Company, Independent Director, Chairman of the Management Board of Marcuard Holding, Executive Director of ABD Capital S.A., President of ABD Capital Eastern Europe S.A.

10. Igor Ivanovich Sechin Chief Executive Officer, Chairman of the Management Board, Deputy Chairman The Board of Directors of Rosneft Bukaev, Elena Vladimirovna Board of RRDB (JSC); Igor of the Board of Directors of Rosneft Oil Company Oil Company made the following Zavaleeva, Yury Igorevich Borisovich Tabachnikov, General 11. Gerhard Schroeder Chairman of the Board of Directors of Rosneft Oil Company, Independent Director decisions with respect Kurilin, Petr Ivanovich Lazarev, Director of RN-Yuganskneftegaz to the Management Board Ural Alfretovich Latypov, Eric LLC; Khasan Kureishevich Tatriev, of the Company: Maurice Liron, and Andrey General Director of Bashneft • On appointment of Yury Nikolaevich Shishkin OJSC JSOC; Vladimir In accordance with clause 2 2020) approved remuneration Meeting (Minutes w/n dated Igorevich Kurilin, Vice from 29 September 2020 Nikolaevich Chernov, General of Article 64 of the Federal to the following members 5 June 2020) approved President – Chief of Staff (Minutes No. 7 dated Director of RN-Vankor LLC, Law, On Joint-stock of the Board of Directors compensation for all expenses of the Company, as a member 2 October 2020) as members of the Management Companies, and the Regulation of the Company for the period and costs incurred by members of the Management • On appointment of Didier Board of Rosneft Oil On Payment of Remuneration during which they performed of the Board of Directors of Rosneft Board of Rosneft Oil Casimiro, First Vice President; Company for three (3) years and Compensation for Expenses their duties: Oil Company when performing Company for three (3) years Zeljko Runje, First Vice President from 30 September 2020 to the Members of the Board • Gerhard their duties. from 5 April 2020 (Minutes for Oil, Gas, and Offshore (Minutes No. 7 dated 2 October of Directors of PJSC Rosneft Schroeder – USD600,000 No. 19 dated 3 April 2020) Business Development; Ilgam 2020). Oil Company, remuneration • Hamad Rashid As of 31 December 2020, • On termination of powers Gaffarovich Kuchukov, General to the members of the Board Al-Mohannadi – USD530,000 the Company fulfilled its as members of the Management Director of Suzun JSC; Dina of Directors during the period • Faisal Alsuwaidi – USD 530,000 obligation and paid remuneration Board of Rosneft Oil Company Rinatovna Malikova, President, when they perform their duties • Matthias Warnig – USD580,000 to the above members of the Board of Gennady Ivanovich Chairman of the Management is paid on the basis of a decision • Oleg Vyacheslavovich of Directors of Rosneft Oil of the General Shareholders’ Viyugin – USD560,000 Company for the period during Meeting. • Hans-Georg which they performed their duties. Rudloff – USD580,000 On 2 June 2020, the annual In 2020, no remuneration was paid

General Shareholders’ Meeting In addition, on 2 June 2020, to the members of the Board 1 Resigned from the Board of Directors of Rosneft Oil Company pursuant to the decision of the annual General Shareholders’ Meeting dated (Minutes w/n dated 5 June the annual General Shareholders’ of Directors of Rosneft Oil 2 June 2020 (Minutes w/n dated 5 June 2020).

378 379 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Control of the Company’s on the Audit Commission by the General Shareholders’ 1.3 STRUCTURE OF THE COMPANY’S CHARTER CAPITAL* financial and business operations of the Company, as approved Meeting to serve until the next Control of the Company’s by the General Shareholders’ annual General Shareholders’ Information about the shareholders of Rosneft Oil Company as of 31 December 2020 is presented below: financial and business operations Meeting of the Company. Meeting. is exercised by the Audit Commission. The Audit The Audit Commission As of 31 December 2020, the Audit Table 4. Shareholders Commission’s operating procedure of the Company comprises Commission of the Company No. Name of legal entity or individual Number of common (voting) shares and interest in the charter capital is specified in the Regulation five (5) members who are elected comprised: 1 JSC ROSNEFTEGAZ 4,281,663,840 common shares representing 40.40 % of the total number of common shares and the charter capital of the Company

2 BP Russian Investments Limited 2,092,900,097 common shares representing 19.75 % of the total number of common shares Table 3. Composition of the Audit Commission and the charter capital of the Company Chairman of the Audit Commission: 3 QH Oil Investments LLC 1,963,898,178 common shares representing 18.53 % of the total number of common shares 1. Zakhar Borisovich Sabantsev Head of Finance Sector Monitoring, Consolidated and Analytical Work Section, Financial Policy and the charter capital of the Company Department, Ministry of Finance of the Russian Federation 4 Non-banking Credit Organization 1,125,403,844 common shares representing 10.62 % of the total number of common shares Audit Commission members: Joint Stock Company National and the charter capital of the Company Settlement Depository (nominal 2. Olga Anatolyevna Andrianova Chief Accountant – Head of Finance and Economics Service of JSC ROSNEFTEGAZ, General holder central depository) Director of LLC Vostokgazinvest 5 RN-NeftKapitalInvest LLC 1,017,425,070 common shares representing 9.60 % of the total number of common shares 3. Tatiana Valentinovna Zobkova Deputy Director of the Department of the Ministry of Energy of the Russian Federation and the charter capital of the Company 6 RN-Capital LLC 80,975,983 common shares representing 0.76 % of the total number of common shares 4. Sergey Ivanovich Poma Vice-President of the National Association of Securities Market Participants (NAUFOR) and the charter capital of the Company

5. Pavel Gennadyevich Shumov Acting Deputy Director of the Department for State Regulation of Tariffs and Infrastructure 7 Russian Federation acting through 1 common share representing 0.000000009 % of the total number of common shares Reforms, Ministry of Economic Development of the Russian Federation the Federal Agency for State and the charter capital of the Company Property Management

8 Other minority investors (incl. 35,910,804 common shares representing 0.34 % of the total number of common shares individuals, other legal entities, etc.) and the charter capital of the Company On 2 June 2020, the annual for the period during which they As of 31 December 2020, General Shareholders’ Meeting performed their duties: the Company fulfilled * Information is based on the data of Rosneft shareholders’ register. (Minutes w/n dated 5 June • Olga Anatolyevna its obligation to pay 2020) approved remuneration Andrianova – RUB220,000 the remuneration. 1.4 DESCRIPTION any related activities, and works • Investing, including transactions to the members of the Audit • Sergey Ivanovich OF THE COMPANY’S ACTIVITIES with precious metals and precious with securities Commission of the Company Poma – RUB220,000 stones. The Company is engaged, • Managing the fulfillment In accordance with clause 3.4 in particular, in the following principal of orders placed by the federal of Article 3 of Rosneft Oil Company’s activities: government and regional Charter (revised version) approved • Geological prospecting consumers of the products by the annual General Shareholders’ and exploration to find made by the Company and its Meeting of the Company the deposits of oil, gas, coal subsidiaries, including deliveries on 27 June 2014 (Minutes w/n) and other minerals; extraction, of oil, gas and oil products with the amendments approved transportation and processing • Investment management, by the General Shareholders’ of oil, gas, coal and other construction, engineering, Meeting of the Company minerals, and timber; production technological and other services on 15 June 2016 (Minutes of oil products, petrochemicals for upstream and downstream w/n), amendments approved and other products, including projects, and research by the General Shareholders’ liquefied natural gas, gas products and development, procurement Meeting of the Company and gas chemicals, electric and distribution, economic, on 22 June 2017 (Minutes power, wood products, consumer foreign economic and legal w/n), amendments approved goods, and provision of services support for the Company, by the General Shareholders’ to the public; storage and sale its subsidiaries and third- Meeting of the Company on 29 (including domestic and export party customers. Surveying September 2017 (Minutes w/n), sales) of oil, liquefied and gaseous the commodity and services the Company prospects, explores, gas, oil products, gas products markets, and the securities extracts and processes oil, gas and gas chemicals, coal, electric market, conducting sociological and gas condensate, sells oil, gas, power, wood products, and other and other research. Regulating gas condensate, and oil and gas products from hydrocarbons and coordinating the activities products to customers in and outside and other raw materials of subsidiaries the Russian Federation, conducts

380 381 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

• Leasing out immovable and other • Intermediary, consulting, in technological processes Table 5.1. Changes in the amounts of the income statement, (kRUB) property, using leased property marketing and other activities, as elements of equipment Item Line Amounts for 2019 Changes Reason • Assisting in securing the interests including foreign economic and materials of the Russian Federation when activities (including export/ • Arranging and holding As currently As previously reported reported it prepares and implements import operations), performing mobilization training and civil production-sharing agreements work and providing services defense events, working with state Profit (loss) before tax 2300 347,541,644 347,541,644 − To implement from 1 January 2020: • Changes in Accounting Statement for subsurface areas on a contractual basis secrets and protecting them Current income tax 2410 − 9,648,441 (9,648,441) 18/02, Accounting for Income Tax and hydrocarbon deposits • Ensuring the protection of Organizations, introduced by Order • Managing advertising of the Company’s employees At the end of 2020, the average including permanent tax 2421 − 89,179,905 (89,179,905) No. 236n of the Russian Ministry assets (liabilities) of Finance dated 20 November 2018 and publishing activities, and property headcount of the Company • Order No. 61n of the Russian Ministry conducting exhibitions, fairs, • Using precious metals was 4,434 employees. Income tax 2410 48,185,409 − 48,185,409 of Finance dated 19 April 2019, On Introduction of Amendments auctions, etc. and precious stones including current income tax 2411 9,648,441 − 9,648,441 to Order No.66n of the Russian Ministry of Finance dated 2 July 2010 Deferred income tax 2412 38,536,968 − 38,536,968 “On the Forms of Financial Statements” • The lines of the income statement 2. BASIS OF PREPARATION Change in deferred tax 2430 − (14,367,835) 14,367,835 in the comparative information for 2019 liabilities were adjusted.

The accounting records in the Russian Federation, as well as applicable Accounting Change in deferred tax 2450 − 23,791,801 (23,791,801) are maintained in accordance approved by Order No. 34n Statements. The Company’s financial assets with Federal Law No. 402- of the Russian Ministry of Finance statements for the 2020 reporting Other 2460 799,156 29,912,158 (29,113,002) FZ, On Accounting, dated 6 dated 29 July 1998 (including year were prepared in accordance Tax effect of the results 2466 − 29,113,002 (29,113,002) December 2011 and the Statute, Information No. PZ-10/2012 with the Law, the Statute of other operations On Accounting and Reporting of the Russian Ministry of Finance), and the Accounting Statements. not included in net profit (loss) for the period

Net profit (loss) 2400 396,526,209 396,526,209 −

3. CHANGES IN OPENING BALANCES IN THE FINANCIAL Result from other operations 2520 145,563,364 116,450,362 29,113,002 not included in net profit STATEMENTS FOR THE 2020 REPORTING YEAR (loss) for the period

Income tax on operations 2530 (29,113,002) − (29,113,002) In accordance with changes not included in net profit (loss) whose result is not included in Accounting Statement 18/02, for the period.” in net profit (loss) for the period Accounting for Income Tax • Line 2530 “Income tax of Organizations, introduced on operations whose result Comprehensive financial result for the period 2500 512,976,571 512,976,571 − by Order No. 236n of the Russian is not included in net profit Ministry of Finance dated 20 (loss) for the period” includes November 2018 and Order No. 61n the amount of the tax effect Corrections were made In 2020, the approach the comparability of the financial of the Russian Ministry of Finance of the results of other operations to the Explanatory Notes to the presentation of information statements (paragraph 10 dated 19 April 2019, On Introduction not included in net profit to the balance sheet in the statement of cash flows of Accounting Statement 4/99), of Amendments to Order No. 66n (loss) for the period recorded and the income statement was changed: dividend payments the data in the 2019 statement of the Russian Ministry of Finance in line 2520 “Result from other for the 2020 reporting year (other distribution of earnings of cash flows were adjusted dated 2 July 2010 “On the Forms operations not included in net in line with the above information to owners (participants)) as follows. of Financial Statements,” profit (loss) for the period” to ensure data comparability. are recorded including tax the compatibility of amounts in the 2019 income statement. in the “Cash flows from financing in the 2019 financial statements • Line 2421 “Including permanent activities” section. To ensure was ensured as follows: tax assets (liabilities)” is excluded • The sum of lines 2411 “Current from the income statement. income tax” and 2412 “Deferred income tax” is presented in line 2410 “Income tax.” • Line 2412 “Deferred income tax” is defined as the cumulative change of deferred tax liabilities and deferred tax assets for the period (lines 2430 and 2450 of the 2019 income statement, respectively) and also includes line 2466 “Tax effect of the results of other operations

382 383 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 5.2. Changes in the opening balances of the statement of cash flows, (kRUB) the asset it ready for operation. • Assets put into operation at the depreciation rates Using the substance-over- before 1 January 2002: calculated based on the useful Item Line Amounts for 2019 Changes Reason form principle, the completed at the depreciation rates lives set by Resolution As currently As previously capital construction projects set by Resolution No. 1072 No. 1 of the Government reported reported and purchased real estate items of the Council of Ministers of the Russian Federation, Cash flows from operating activities that are actually in operation of the USSR dated 22 October dated 1 January 2002 Cash outflow − total 4120 (6,771,972,637) (6,780,339,685) 8,367,048 The presentation are also included in fixed 1990 as well as based on useful of information assets, regardless of whether • Assets put into operation lives indicated in the technical Including settlements of other taxes 4125 (895,868,770) (904,235,818) 8,367,048 in the statement of cash and levies flows was changed: dividend the documents for their state after 1 January 2002: documentation, manufacturers’ payments (other distribution registration have actually at the depreciation rates recommendations, or based Net cash flows from operating 4100 (592,902,398) (601,269,446) 8,367,048 of earnings to owners activities (participants)) are recorded been submitted. Such items calculated based on the useful on other relevant information including tax in the “Cash are depreciated in accordance lives set by Resolution that determines the period, Cash flows from financing activities flows from financing with the established procedure. No. 1 of the Government during, which an item of fixed activities” section Payments – total 4320 (3,832,591,338) (3,824,224,290) (8,367,048) of the Russian Federation dated assets is expected to generate including dividends or other 4322 (282,632,588) (274,265,540) (8,367,048) For accounting purposes, fixed 1 January 2002 economic benefits. distribution of earnings to owners assets are depreciated using • Assets put into operation (participants) the straight-line method: after 1 January 2018: Net cash flows from financing 4300 (330,077,029) (321,709,981) (8,367,048) activities The main groups of fixed assets have the following useful lives:

Buildings 30 to 100 years 4. INFORMATION ABOUT THE ACCOUNTING POLICY Structures 7 to 30 years Machinery, equipment and vehicles 5 to 20 years The Company developed its and liabilities of other legal the adopted accounting policy accounting policy in accordance entities and individuals in its activities Other types of fixed assets 3 to 30 years with the principles established • Going concern assumption • Time period assumption by Accounting Statement according to which the Company Assets that meet the fixed assets • Land plots Fixed assets are not revalued 1/2008, Accounting Policies will continue its business Material accounting methods recognition criteria and have • Buildings following the completion of an Organization, approved in the foreseeable future provided for by the Company’s a value of not more than kRUB40 • Structures of the mandatory revaluation by Oder No. 106n of the Russian and it neither intends nor has accounting policy in 2020 per unit are recognized in financial • Transfer devices of fixed assets in accordance Ministry of Finance dated 6 to liquidate or significantly are reflected below statements of the company • Downhole equipment with the Resolutions October 2008: curtail its activities, in the respective Explanatory as inventories. To ensure the safety • Vehicles of the Russian Government. • Economic entity assumption and, therefore, its liabilities will Notes to the balance sheet of the assets during production • Assets held as joint shared according to which be duly discharged and the income statement or operation, the Company property or joint property the Company’s assets • Consistency assumption for the 2020 reporting year. makes arrangements to control and liabilities are accounted according to which the Company their movements. Fixed assets are reported for separately from the assets will consistently apply in the balance sheet at their net Fixed assets include the following book value. assets (irrespective of their value): 5. FIXED ASSETS AND CAPITAL CONSTRUCTION IN PROGRESS • Assets held for leasing

Assets intended for use Assets approved by Order Items intended solely to be leased in the manufacturing of products, No. 2018-st of the Federal out are recorded in line 1150, Fixed performance of work and provision Agency on Technical Regulation assets. The net book value of such of services, or for administrative and Metrology (Rosstandart) items was kRUB 543,060,545, needs over their useful lives dated 12 December 2014 is used kRUB 597,600,420 of more than 12 months to determine the structure and kRUB 566,447,177 are accounted for as fixed assets. and grouping of fixed assets. as of 31 December 2020, 2019 and 2018, respectively. Fixed assets include buildings, Fixed assets are recognized structures, machinery, equipment, at historical cost. The historical An asset is recognized measuring and control cost of fixed assets acquired as a fixed asset on the date instruments and devices, for consideration is the total it is ready for operation. Fixed computers, vehicles, tools, cost of acquisition, construction assets the rights to which fixtures and fittings, etc. or production, net of value added are subject to state registration Fixed assets also include land tax and other recoverable taxes are included in the fixed plots and natural resources. (except in instances stipulated assets at the date of delivery The Russian Classifier of Fixed by Russian law). to their final destination, if

384 385 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 6. Information on fixed assets, (kRUB) In 2020, the value of work Advances issued for construction, as of the reporting date, advances performed under capital acquisition and manufacturing for acquisition are recognized Group of fixed Period At the beginning of the period Changes for the period At the end of the period assets construction projects amounted of fixed assets include the share within capital expenditures. Historical Accumulated Additions Disposals Depreciation Historical Accumulated to kRUB 214,842,579 (net of advances paid to purchase cost depreciation charge cost depreciation Historical Accumulated of VAT). Investments fixed assets with a value of up cost depreciation in the purchase of equipment, to kRUB40 per unit included

2020 1,737,043,489 (1,063,726,269) 120,709,733 (19,130,491) 10,852,377 (128,647,168) 1,838,622,731 (1,181,521,060) both requiring and not requiring in inventories. It is impossible Total fixed installation, fixed assets to determine the final value assets 2019 1,569,277,962 (931,460,440) 172,208,186 (4,442,659) 3,329,206 (135,595,035) 1,737,043,489 (1,063,726,269) and land plots, and in appraisal of assets before the completion Buildings 2020 1,544,007,775 (922,772,908) 110,823,903 (11,938,058) 5,222,234 (118,668,381) 1,642,893,620 (1,036,219,055) and exploration drilling amounted of the work performed to render and structures to kRUB 9,548,019 (net of VAT). them fit for use. Therefore, 2019 1,380,721,200 (801,688,141) 167,139,699 (3,853,124) 2,772,680 (123,857,447) 1,544,007,775 (922,772,908)

Machinery, 2020 187,880,481 (139,197,999) 9,842,393 (7,110,563) 5,567,348 (9,910,629) 190,612,311 (143,541,280) equipment and vehicles 2019 183,346,891 (128,016,586) 5,037,447 (503,857) 470,965 (11,652,378) 187,880,481 (139,197,999) 6. INTANGIBLE ASSETS Other fixed 2020 5,155,233 (1,755,362) 43,437 (81,870) 62,795 (68,158) 5,116,800 (1,760,725) assets 2019 5,209,871 (1,755,713) 31,040 (85,678) 85,561 (85,210) 5,155,233 (1,755,362) Intangible assets include: • Geological exploration

Including fixed 2020 3,209,846 х − (10,179) х х 3,199,667 х • Exclusive right of a patent and production licenses abandoned due to technological assets that are holder to an invention, industrial (combined licenses), provided reasons at commercially not depreciated 3,209,893 х 13 (60) х х 3,209,846 х design or utility model that the production of mineral recoverable fields • Exclusive right to computer resources in the license • Digital and electronic maps, Table 7. Information on fixed assets requiring state registration, (kRUB) software and databases area is commercially viable; as well as other spatial data • Exclusive right to integrated such licenses are accounted • Complex items comprising At 31 December At 31 December At 31 December 2020 2019 2018 circuit topologies for in the same way several protected intellectual • Exclusive right to a trademark, as costs arising in connection properties (including those Real estate whose title has not yet been registered 203,526,157 212,947,138 216,700,282 service mark, or appellation with the exploration combining exclusive and non- Including real estate whose registration documents have not yet been 200,527,191 210,138,389 208,464,386 of origin and appraisal of fields until exclusive rights): accepted by the state authorities • Exclusive right to selection it is confirmed that production – Multimedia product achievements is commercially viable – Audiovisual works (cinematic Table 8. Information on the use of fixed assets, (kRUB) • Exclusive right to trade secrets • Other mineral licenses works or works involving (know-how) (for the construction media similar to those used Group of fixed assets At 31 December At 31 December At 31 December 2020 2019 2018 • Licenses for exploration of underground gas storage in cinema (TV movies, videos, and production of mineral facilities, the production etc.)) Total assets leased out (historical cost), including 1,530,960,456 1,557,316,383 1,425,671,402 resources of commonly occurring mineral – Website, etc. Buildings Buildings 48,462,125 46,838,617 • Exclusive subsoil use resources and the abstraction

Structures Structures 1,332,392,306 1,207,948,158 rights when entering of underground water) • Other intangible assets. into international agreements • Deliverables of 3D and 4D Mothballed fixed assets (historical cost) 63,030,567 60,412,857 52,526,131 that give the right to implement seismic surveys (including Total fixed assets leased (contract or cadastral value), including 126,778,668 100,963,500 84,246,854 the mineral resources designing, field works, exploration and production supervising, processing, Land plots Land plots 69,523,734 74,304,769 projects in a foreign interpretation, lease Other fixed assets Other fixed assets 31,439,766 9,942,085 jurisdiction or in the Russian of forest plot) in support

Change in the value of fixed assets as a result of supplementary 18,180,882 21,277,842 22,425,172 Federation (licenses, of the development construction, retrofitting, refurbishment, modernization or partial liquidation concession agreements, at commercially recoverable oil subsoil use contracts, and gas fields Table 9. Information on capital investments in progress, (kRUB) agreements on the provision • Information received as a result of a participating interest, etc.) of drilling successful onshore Capital investments in progress by type of asset At 31 December At 31 December At 31 December 2020 2019 2018 appraisal/exploration wells

Equipment for installation 15,177,920 15,897,385 15,431,560

Construction in progress, including 728,065,887 634,303,095 613,815,168

Advances issued for construction, acquisition, manufacturing of fixed assets 49,078,543 50,198,285 45,491,528 (net of VAT)

Other assets 2,583,410 2,158,984 2,146,511

Total 745,827,217 652,359,464 631,393,239

386 387 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Geological exploration The Company created • Exclusive subsoil use rights The Company determines and the period of control in order to determine whether and production licenses the following intangible assets when entering into international the useful life of an intangible over the asset or not it should be revised. (combined licenses) in the reporting period: agreements that give the right asset upon its recognition. • The period during which In the event of a significant are accounted for in the same • Exclusive right to computer to implement oil and gas the Company is expected to use change in the period, during which way as costs arising in connection software and databases exploration and production The useful life of an intangible the asset and receive economic the company expects to use with the exploration and appraisal with a historical cost projects in a foreign asset is determined on the basis of: benefits the asset, the asset’s useful life of fields until it is confirmed that of kRUB497,816 jurisdiction or in the Russian • The term of the Company’s should be revised. The resulting production is commercially viable. • Exclusive rights to an invention Federation (licenses, rights to intellectual property The Company annually adjustments are recorded with a historical cost concession agreements, or means of individualization, reviews the useful life and reported as changes Intangible assets are recognized of kRUB559,298 subsoil use contracts, of an intangible asset in estimates. at their actual (historical) cost agreements on the provision determined in accordance The actual (historical) of a participating interest, etc.): The main groups of intangible assets have the following useful lives: with Accounting Statement cost of an intangible asset unit-of-production method Trademarks 5 to 10 years 14/2007, Intangible Assets, acquired under a contract • Geological exploration approved by Order No. 153n providing for non-monetary and production licenses Exclusive rights to an invention, utility model or industrial design 5 to 25 years of the Russian Ministry of Finance compensation (settlement) (combined licenses), provided Exclusive rights to computer software and databases 1.1 to 10 years dated 27 December 2007. is determined on the basis that the production of mineral 1 of the cost of assets transferred resources in the license area Exploration and mining licenses 5 to 163 years When an intangible asset or transferable by the Company. is commercially viable: unit-of- Survey, exploration and mining licenses (combined license)1 10 to 166 years is created in-house, the related The cost of assets transferred production method. Proved oil Other mineral licenses (for the abstraction of underground water, 7 to 29 years costs are to be capitalized or transferable by the Company and gas reserves are defined construction of subsurface gas storage facilities, etc.) beginning from the development is determined on the basis in accordance with Petroleum stage, i.e. when the Company can of the price it would normally use Resources Management System demonstrate: to determine the cost of similar (PRMS). For the purposes Intangible assets If the timing for receiving future The Company has determined • The technical feasibility assets under comparable of evaluation of the reserves are not amortized if their useful economic benefits is not reliably useful lives for all intangible of creating the intangible asset circumstances. as of 31 December 2020, lives cannot be determined. estimated during inventory assets. • Its intention and ability to create the Company used proved oil counts, no changes are made the intangible asset and use it Where it is impossible and gas reserves data prepared The Company annually reviews to the amortization method. Intangible assets are reported • How the intangible asset will to determine the cost of assets by DeGolyer and MacNaughton, the amortization method in the balance sheet at their net generate probable economic transferred or transferable independent reservoir engineers. for an intangible asset during Intangible assets are not revalued book value. benefits by the Company under such • Other mineral licenses inventory counts in order and are not tested for impairment • The availability of sufficient contracts, the cost of an intangible (for the construction to determine if it should be revised. by the Company. technical, financial and other asset received by the Company of underground gas storage If the calculation of the expected resources to complete is determined on the basis facilities, the production flow of future economic The Company determined that development and use of the price at which similar of commonly occurring mineral benefits from an intangible there was no need to revise the intangible asset intangible assets are purchased resources and the abstraction asset has changed significantly, the amortization method • Ability to reliably estimate costs under comparable circumstances. of underground water): straight- the amortization method and the useful lives of intangible related to the intangible asset line method for that asset is also changed. assets in the reporting period. during its development Intangible assets are amortized • Deliverables of 3D and 4D The resulting adjustments using the straight-line method seismic surveys in support are recorded and reported Costs incurred at the research or the unit-of-production method: of the development as changes in estimates. stage are not capitalized and are • Exclusive right of a patent at commercially recoverable treated as either expenses holder to an invention, industrial oil and gas fields: unit-of- related to ordinary activities design or utility model: straight- production method or other expenses, depending line method • Information received as a result on the purpose of research. • Exclusive right to computer of drilling successful appraisal/ • Intangible assets created software and databases: exploration wells abandoned in-house mean: straight-line method due to technological reasons • Intangible assets created • Exclusive right to integrated at commercially recoverable by the Company’s employees circuit topologies: straight-line oil and gas fields: unit-of- when performing their job duties method production method • Exclusive right to a trademark, • Digital and electronic maps, Intangible assets resulting service mark, or appellation as well as other spatial data: from the work performed of origin: straight-line method straight-line method by contractors under contracts • Oil and gas production licenses: • Other intangible assets: in which the risks of negative unit-of-production method straight-line method results are borne by the Company. 1 Provided that the production of mineral resources in the license area is commercially viable.

388 389 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 10. Information on intangible assets, (kRUB)

Group of intangible assets Period At the beginning of the period Changes for the period At the end of the period

Historical cost Accumulated Additions Disposals Amortization Historical cost Accumulated amortization charge amortization Historical cost Accumulated amortization

2020 49,636,646 (9,047,370) 2,128,810 (2,267,711) 188,354 (3,523,994) 49,497,745 (12,383,010)

Total intangible assets: 2019 47,940,031 (7,471,211) 1,704,071 (7,456) 7,332 (1,583,491) 49,636,646 (9,047,370)

Trademarks 2020 23,967 (13,123) − − − (1,842) 23,967 (14,965)

2019 21,306 (11,374) 2,661 − − (1,749) 23,967 (13,123)

Exclusive rights to an invention, utility model or industrial design 2020 757,730 (498,713) 559,298 − − (184,737) 1,317,028 (683,450)

2019 750,705 (352,283) 7,025 − − (146,430) 757,730 (498,713)

Exclusive rights to computer software and databases 2020 2,566,396 (1,560,236) 497,816 (2,733) 2,733 (375,508) 3,061,479 (1,933,011)

2019 2,277,299 (1,281,842) 296,046 (6,949) 6,949 (285,343) 2,566,396 (1,560,236)

Mineral licenses (including combined exploration and production licenses 2020 42,838,732 (6,583,337) 90,522 (2,264,864) 185,525 (2,845,091) 40,664,390 (9,242,903) issued after commercial viability is confirmed) 2019 42,772,552 (5,527,300) 66,180 − − (1,056,037) 42,838,732 (6,583,337)

Other licenses 2020 307 (205) − (114) 96 (18) 193 (127)

2019 814 (563) − (507) 383 (25) 307 (205)

Information received as a result of drilling successful onshore appraisal/ 2020 555,770 (21,623) 981,174 − − (13,620) 1,536,944 (35,243) exploration wells abandoned due to technological reasons 2019 555,770 (6,663) − − − (14,960) 555,770 (21,623)

Results of 3D and 4D seismic surveys at sites after commercial viability 2020 2,669,011 (170,033) − − − (94,285) 2,669,011 (264,318) is confirmed 2019 1,347,653 (99,032) 1,321,358 − − (71,001) 2,669,011 (170,033)

Other intangible assets 2020 224,733 (200,100) − − − (8,893) 224,733 (208,993)

2019 213,932 (192,154) 10,801 − − (7,946) 224,733 (200,100)

390 391 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 11. Information on intangible assets created by the Company, (kRUB) 7. OIL AND GAS RESERVES EXPLORATION AND ESTIMATION COSTS

At 31 December At 31 December At 31 December Historical cost by group of intangible assets 2020 2019 2018 Oil and gas reserves exploration the discovery of hydrocarbon • Appraisal/exploration wells and estimation costs are recognized reserves is confirmed and there become fixed assets (development Total, including 4,596,848 3,542,467 3,235,544 using the successful efforts method is a possibility that these reserves wells construction in progress) Exclusive rights to computer software and databases 3,061,479 2,566,396 2,277,299 of accounting, according to which will be approved by the State

Exclusive rights to an invention, utility model or industrial design 1,310,636 751,338 744,313 only those costs are capitalized that Committee on Reserves If production proves are directly incurred in the discovery both with regard to the well to be impractical, exploration assets Other 224,733 224,733 213,932 of new fields that will result in future (current reserves estimation) are subject to impairment and are economic benefits, while exploration and the subsurface area (reserves subsequently written off to other Table 12. Information on investments in progress made to create intangible assets, (kRUB) costs (both direct and indirect), estimation based on geological expenses of the Company. including geological and geophysical results of the well) At 31 December At 31 December At 31 December Investments in progress 2020 2019 2018 costs, are charged to expenses • Until the decision Exploration assets as incurred. on commercial viability has are not depreciated. Total investments in creation of individual intangible assets, including by type: 5,349,232 3,742,681 4,130,712 been reached, expenses related The following oil and gas reserves to the construction of successful The following costs Exclusive rights to computer software and databases 4,934,246 3,709,159 2,808,226 exploration and estimation costs abandoned appraisal/exploration are not capitalized in the value 3D and 4D seismic surveys 410,526 17,522 1,304,261 should be capitalized: wells are recognized as intangible of assets and are taken to current- exploration assets in the form Exclusive rights to an invention, utility model or industrial design 872 872 897 • Costs related to acquiring period expenses as oil and gas of subsoil use rights for oil of information received exploration and estimation costs: Trademarks 3,415 2,947 5,103 and gas reserves (geological as the result of drilling the offshore • Costs incurred at the regional Other intangible assets 173 12,181 12,225 prospecting and exploration appraisal/exploration wells stage licenses, geological exploration • Exploration costs not related Intangible assets received for use are recorded off the balance sheet and are measured on the basis and production licenses) As of the reporting date, to drilling of appraisal/exploration of the amount of remuneration specified in the contract. • Costs related to the construction the Company annually tests wells or 3D and 4D seismic of appraisal/exploration wells exploration assets for any indication surveys at commercially • Information on the results of impairment when making recoverable oil and gas fields, Table 13. Information on intangible assets received by the Company for use, (kRUB) of drilling successful abandoned the decision on the commercial including costs for the follow-up appraisal/exploration wells viability of oil and gas production exploration of fields which At 31 December At 31 December At 31 December Cost by group of intangible assets 2020 2019 2018 in a licensed area. Impairment testing have been put on stream Capitalized exploration is performed by field (licensed and considered commercially Total, including 11,879,018 9,201,500 8,870,210 and estimation costs lead area). Where there is evidence developed Non-exclusive rights to software programs, rights of access to information 11,879,018 9,201,500 8,870,210 to the creation of exploration assets: of impairment, the Company • Costs related to the maintenance resources • Appraisal/exploration wells – writes down the exploration assets of subsurface areas where tangible exploration assets by the amount of the carrying exploration is being carried Table 14. Information on fully amortized intangible assets, (kRUB) • Licenses, information amount of the licenses, wells out and of fields which on the results of drilling successful and 3D seismic surveys during are not commercially operated At 31 December At 31 December At 31 December Intangible assets 2020 2019 2018 abandoned appraisal/exploration the stage of exploration • Costs related to the preparation wells – intangible exploration and prospecting at a field of project technical Total, including 1,689,678 1,327,933 1,266,602 assets (licensed area) or, in the event documentation for developing Exclusive rights to computer software and databases 1,152,914 1,064,121 1,071,022 of the recoverability of exploration fields which are not commercially

Exclusive rights to an invention, utility model or industrial design 332,765 79,003 13,715 Expenses related to the construction assets, to the realizable value. operated of successful abandoned appraisal/ Oil and gas production licenses 5,409 5,483 5,373 exploration wells in the license areas Once the commercial viability The Company derecognizes Trademarks 9,058 7,808 6,361 that didn’t prove to be commercially of the subsurface area has exploration assets viable to recover oil and gas been established, exploration at the respective subsurface area Other licenses 21 21 61 are capitalized as follows: assets in this area are subject if it proves to be commercially Other 189,511 171,497 170,070 • Expenses related to reclassification: viable or if production is considered to the construction of appraisal/ • Exploration and production impractical. exploration wells are initially licenses, as well as information recognized as tangible exploration on the results of drilling successful assets and then transferred abandoned appraisal/exploration to intangible exploration wells become intangible assets assets in the event that

392 393 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 15. Information on exploration assets, (kRUB) • It is assumed that the positive • R&D projects developed the straight-line method completion of R&D activities will by Company employees in the amount of 1/12 of the annual Group of licenses Period At the beginning Changes for the period At the end of the period of the period make it possible to demonstrate in the course of performing amount. the use of its results their job duties Historical Accumulated Additions Disposals Historical Accumulated cost impairment cost impairment in production for management • R&D projects resulting In the event that the use losses At historical Accumulated losses requirements from contractor work of an R&D project is suspended, cost impairment losses • The amount of expenses can under contracts in respect the related costs in the form be defined and confirmed of which the Company bears of a monthly write-off amount Tangible 2020 29,230,855 – 24,466,718 (23,121,826) – 30,575,747 – the risk of negative results are to be recognized as other exploration assets 2019 20,170,757 – 9,604,440 (544,342) – 29,230,855 – When R&D projects expenses during the period are developed in-house, R&D costs incurred at the research for which the use of the R&D Intangible 2020 107,173,674 (8) 20,976,896 (24,303,733) 8 103,846,837 – exploration assets, the related costs are capitalized stage are not capitalized project has been suspended. including 2019 99,214,265 (150) 8,975,984 (1,016,575) 142 107,173,674 (8) from the beginning of the project and are recognized as expenses License to use 2020 63,057,243 – 1,364,659 (22,912,979) – 41,508,923 – stage if the Company is able relating to ordinary activities Where the Company early subsurface to demonstrate: or other expenses depending terminates using the results resources 2019 56,623,639 – 7,437,552 (1,003,948) – 63,057,243 – with the right • The technical feasibility on the purpose of the research. of R&D activities in accordance of extraction of developing such R&D projects with the Order, On Writing Off • Its intention and ability R&D costs are written off R&D Expenses, R&D expenses License to use 2020 86,768 (8) 2,631 (53) 8 89,346 subsurface to develop and use an R&D to expenses relating to ordinary are taken to other expenses. resources project activities on the first day without the right 2019 2,421 (150) 84,520 (173) 142 86,768 (8) of extraction • How the R&D project is likely of the month following the month The write-off period for R&D costs to generate economic benefits in which the actual use is determined by the Company Information 2020 43,021,612 – 19,120,460 – – 62,142,072 – on the results • The availability of sufficient of the obtained results began. based on the expected period of drilling 2019 42,548,639 – 472,973 – – 43,021,612 – technical, financial and other of use of the results from these successful resources to complete Upon the completion of R&D activities. This period may abandoned appraisal/ the development of and use activities, in the event of a positive not exceed 5 years. exploration wells the R&D projects result, the costs related to R&D Costs related 2020 1,008,051 – 489,146 (1,390,701) – 106,496 – • The ability to reliably in progress form the value of R&D This period for most significant to acquiring measure costs related project. In the event of a negative R&D results ranges from two of subsoil use 2019 39,566 – 980,939 (12,454) – 1,008,051 – rights for oil to the development of the R&D result, R&D costs are written off to five years. and gas reserves project to other expenses. . Information on tangible exploration drilling in 2020 amounting of extraction in connection R&D projects developed in-house The R&D project value is written assets as of 31 December 2020 to kRUB24,466,718, reclassification with the reissue of licenses include: off on a monthly basis using is disclosed in line 1140, Tangible of information on the results to use subsurface resources exploration assets, including of drilling successful abandoned in the amount of kRUB22,912,979; advances issued of kRUB811,632 appraisal/exploration wells reclassification of information Table 16. R&D results profile, (kRUB) and materials of kRUB815,297 in the amount of kRUB19,120,460 on the results of drilling appraisal/ R&D Period At the beginning of the period Change for the reporting period At the end of the period intended for creating tangible to intangible exploration assets. exploration wells in the amount type exploration assets in the balance of kRUB19,120,460 to intangible Historical cost Part Additions Disposals Part Historical Part of the value of the value cost of the value sheet. In 2020, the change exploration assets; and acquisition written off written off written off in intangible exploration of 2 subsurface use licenses to expenses to expenses to expenses Change in tangible exploration assets was primarily due permitting geological survey R&D 2020 1,079,758 (538,192) 455,732 (368,792) (150,562) 1,166,698 (688,754) assets was mainly due to the disposal of 17 geological and exploration in the amount to the completion of exploratory survey licenses with the right of kRUB1,364,659. 2019 550,847 (360,890) 535,911 (7,000) (177,302) 1,079,758 (538,192)

Changes in the R&D value reclassifying to intangible assets 8. RESEARCH AND DEVELOPMENT RESULTS in the amount of kRUB368,792 at cost upon receipt of protection in 2020 and kRUB7,000 in 2019 documents. Research and development The Company’s costs (information, which is unknown, were made in the course of R&D results include costs incurred are recognized in the accounts given the current level during the stage of development as R&D in progress if all of technology) of R&D work in progress (recorded of the following conditions are met: • It is assumed that the positive as investments in non-current • R&D contracts indicate that result of R&D activities will assets) and completed (recognized in the course of work new create an opportunity for future as intangible assets/R&D). scientific knowledge is expected economic benefits to be produced and/or used

394 395 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 17. R&D in progress and pending registration, (kRUB) 10. INVENTORIES, VALUE ADDED TAX, EXCISE DUTIES R&D type Period At the beginning Change for the reporting period At the end ON SELF-PRODUCED OIL PRODUCTS of the period of the period Recognized Costs Costs expensed as intangible for the period as unsuccessful assets, R&D Inventories are accounted Work in progress and finished In accordance or fixed assets for at their actual cost calculated products are recorded at their with the requirement of prudence, Costs of R&D 2020 8,408,556 2,816,700 (1,781) (1,189,734) 10,033,741 based on the amount of actual actual cost; goods are recorded the Company accounts in progress acquisition/production costs, at their acquisition cost. for the impairment of inventories 2019 6,538,166 2,406,301 − (535,911) 8,408,556 net of value added tax and other using the method of provisioning. recoverable taxes (except Shipped finished products 9. OTHER NON-CURRENT ASSETS in instances stipulated by Russian and shipped goods, the title Allowances for impairment law). to which is not yet transferred of inventories are made for similar Other non-current assets include The amount of the ARO assets (with of the reserves as of 31 December to the buyer, are recorded within or related inventory items, assets which are assumed regard to sites or facilities which, 2020, the Company used proved Upon disposal, inventories inventories. in respect of which there was one to produce economic benefits when abandoned, require disposal oil and gas reserves data prepared are depreciated using the following of the following circumstances over a period exceeding 12 months. of materials and/or remediation by DeGolyer and MacNaughton, methods: Inventories also comprise in the reporting year that caused This line includes prepaid expenses, of a land plot) is determined independent reservoir engineers. • Oil, construction materials, transportation and procurement the decrease of their current fixed assets and tangible exploration based on the estimated costs equipment, spare parts, fuel, costs attributable to the balance (market) value: assets retirement obligations at the reporting date, which The rate is applied to the book value packaging, fixtures and fittings, of goods at the warehouse • Drop in market prices (discounted) (hereinafter, the “ARO the Company is expected to incur at the beginning of the reporting instruments and tools, other and shipped but unsold goods. for the respective inventories asset”), and other assets. when dismantling fixed assets month and reserves in denominator inventories – by the cost of every • Inventories becoming obsolete and remediating natural resources are adjusted to the production inventory unit (inventory unit Costs to sell (transportation • Inventories becoming partially Other non-current assets are valued on occupied land plots. volume from the beginning is a consignment) costs, storage costs, intermediary or fully damaged based on actual costs, except of the year to the beginning • Oil products – by the average service costs, customs duties etc.) for ARO assets that are subject The ARO asset is depreciated of the reporting month. cost of production broken down are recorded within inventories The amount of the impairment to accounting estimates. on a monthly basis using the unit by refinery where it is possible to relate allowance is calculated of production method. Proved The ARO asset related • In-house semi-finished them to certain consignments as the difference between current Prepaid expenses relating to several developed oil and gas reserves to the retirement of tangible products – by the average cost of finished products and goods market value and actual cost periods are written off using are defined in accordance exploration assets at the fields of production broken down recognized in accounting records of inventories. the straight-line method. with Petroleum Resources where it is not confirmed that by refinery before the sale of consignments Management System (PRMS). the production is commercially • In-house oil and gas – to which they relate. The cost of inventories at the end For the purposes of evaluation viable is not depreciated. by the average cost of production of the reporting year is recognized broken down by operator The amounts of VAT related in the balance sheet less total to the acquired goods, work, allowances for impairment Table 18. Information on other non-current assets, (kRUB) Special protective clothes handed services and property rights of inventories accrued. over for use are accounted for as to be deducted and not included Other non-current assets by type At 31 December At 31 December At 31 December 2020 2019 2018 materials. The value of special in the cost of the assets acquired, The information on allowances protective clothes with the service or in expenses, are recorded in line for impairment of inventories Total other non-current assets 39,003,899 33,452,714 31,951,119 life of more than 12 months 1220 of the balance sheet. accrued and reversed Prepaid expenses with the write-off period exceeding 12 months 19,440,293 12,157,493 9,812,024 is depreciated using the straight- in the reporting year is recorded

including by type: software 19,440,293 12,157,493 9,812,024 line method over the specified This line also includes the excise net in line 2340, Other income, period of its use. The value duty assessed by the Company or line 2350, Other expenses, ARO asset 19,128,439 20,962,554 21,814,156 of special protective clothes upon accounting for straight- of the income statement. Other non-current assets 435,167 332,667 324,939 with the service life of less run gasoline, benzene, than 12 months is written off medium distillate, orthoxylene, when the clothes are handed paraxylene subject to appropriate over for use. certificate and deductible during their refining/disposal. Materials, fuel, spare parts and other material resources If there is any indication are recorded at their actual of impairment, the Company acquisition cost. recognizes the decrease in value of inventories in the financial statements.

396 397 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 19. Information on VAT and excise duties, (kRUB) the procedure provided for financial Debt securities and loans issued to maturity under the agreement investments, for which the current are not measured at present value. remains 365 days or less after Tax At 31 December At 31 December At 31 December 2020 2019 2018 market value is not determined. the reporting date. It is due to the fact that quotes At disposal of assets recognized Input value added tax charged 29,515,326 43,878,882 66,860,529 in the securities market do as financial investments, The value of all financial Excise duty assessed upon accounting for straight-run gasoline, benzene, 6,155,635 4,929,927 5,858,165 not represent a market price for which the current market value investments previously orthoxylene, paraxylene (control premium). The volume is determined, the value of such remeasured at market value of shares available for free assets is based on their most is recorded at the current market Table 20. Information on inventories, (kRUB) circulation in the market recent valuation. value as of the reporting date. is insignificant and their The Company did not record Inventories by type At 31 December 2020 At 31 December 2019 At 31 December 2018 sales are not representative Financial investments whose any financial investments Cost Allowance Cost Allowance Cost Allowance for appraising the value current market value cannot measured at market value for impairment for impairment for impairment of the majority shareholding be determined are measured with undetermined market value Total inventories 113,986,622 (85,599) 138,946,748 (57,001) 151,463,844 (37,645) since they are easily manipulated at historical cost of each unit at the reporting date.

Raw and other 14,610,458 (83,414) 15,838,148 (57,001) 18,883,705 (37,426) by stock players. disposed. materials The Company did not record The historical cost of debt Deposits with the maturity financial investments pledged Costs related to work 9,955,929 х 11,722,717 х 11,326,184 х in progress securities whose current market period not exceeding 91 days or transferred to third parties value cannot be determined are not considered to be financial (except for sale). Finished products 89,420,235 (2,185) 111,385,883 х 121,253,955 (219) and goods is not adjusted for the difference investments and are recorded between the historical cost within cash in the financial Contributions to assets and nominal value. statements. and other investments Change in the cost of inventories to the change in tax rates included was affected by the change to improve the financial position is related to the change in the cost of products. In addition, in production volumes. In 2018–20, Where it is impossible Short-term debt related of the Group’s entities (financial in oil prices and, therefore, the carrying amount of inventories inventories were not pledged. to determine the cost of assets to financial investments aid, free of charge transfer transferred or transferable is reclassified to long-term debt of assets, etc.) are subject Table 21. Information on the movements in allowances for impairment of inventories, (kRUB) by the Company, the value in cases when the payment terms to capitalization in the cost of financial investments received envisaged by the agreement of the financial investments Item Period Allowance Change in the allowance over the reporting Allowance at the beginning period at the end by the Company under contracts are revised and increased in the entities, in which additional of the period of the period providing for non-monetary to exceed 365 days after investments are made. Accrued, + Reversed (adjusted), - compensation (settlement) the reporting date. Total allowance 2020 57,001 38,039 (9,441) 85,599 is based on the price at which

2019 37,645 20,330 (974) 57,001 the Company normally purchases Long-term debt related to financial similar financial investments investments is reclassified under comparable circumstances. to short-term debt when the term

11. FINANCIAL INVESTMENTS Table 22. Information on financial investments, (kRUB)

Financial investments by type At 31 December At 31 December At 31 December Financial investments are initially The valuation of financial was taken to the financial result 2020 2019 2018 recognized at their actual investments whose market value and recorded as other income. Total 7,187,984,529 6,818,923,238 7,260,408,278 acquisition cost. Subsequently, can be determined is adjusted financial investments whose to the current market value In general, the current market Total long-term investments 5,764,322,744 5,833,160,665 6,159,574,705 market value can be determined on a quarterly basis. Long-term value may be determined Units and shares (interests), including: 4,630,135,324 4,409,568,942 3,946,983,553 are remeasured at market shares and short-term bonds if the relevant quotations value; and financial investments include investments whose are available in the securities Shares (interests) in subsidiaries and associates 4,625,149,142 4,403,720,303 3,942,196,509 whose market value cannot market value can be determined. market. In this case, the current Long-term loans issued 1,008,162,802 1,220,410,862 1,954,261,188 be determined are not remeasured, The difference between current market value of financial Other long-term financial investments 126,024,618 203,180,861 258,329,964 but tested for impairment. market value as of the reporting investments is their market When a sustained material date, 31 December 2020, value determined as appropriate Total short-term investments 1,423,661,785 985,762,573 1,100,833,573 decline in the value of financial and previous valuation of long- by an organizer of the trade Short-term loans issued 646,307,340 712,067,647 655,165,832 investments is supported term financial investments in the securities market. by impairment tests, the Company whose market value can Deposits 436,110,717 55,642,502 216,368,210 creates (adjusts) an allowance be determined as of 31 December Financial investments Promissory notes and bonds received 124,115,954 119,019,389 130,282,140 for impairment of such financial 2019 is kRUB239,016 (income); in the form of shares of PJSOC Accounts receivable acquired under assignment agreements − − 456 investments as of the last for the previous 2019: Bashneft (“Bashneft”) quoted day of the quarter (last day kRUB1,078,147 (income). in the securities market Other short-term financial investments 217,127,774 99,033,035 99,016,935 of the reporting year). The amount of adjustment are accounted for following

398 399 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 23. Information on movements in allowance for impairment of financial investments, (kRUB) system is the key source between the fair value As of the reporting date, short-term of information for making at the beginning of the reporting liabilities on derivative financial Item Period Allowance Movements in allowance over the reporting period Allowance at the beginning at the end projections. period (or at the date instruments include liabilities arising of the period Accrued, + Recognized Used (upon Revaluation of the period of acquisition, whichever from the cross currency and interest in other income disposal (reversed) of the financial Profit or losses arising during is more recent) and at the end rate swap and the deliverable cross- investment) the period asц adjustments of the reporting period. currency swap.

Allowance 2020 44,802,708 6,710,881 (4,027,380) (12) 2,727,971 50,214,168 upon change in the fair value for impairment are recognized in the income Derivative financial instruments Transactions with derivative of financial 2019 48,629,313 3,188,614 (2,326,606) (3,102,763) (1,585,850) 44,802,708 investments (not statement. at fair value through profit or loss financial instruments are presented having a market are recorded as assets (liabilities) below: value) The change in the fair value in the balance sheet in similar lines of the derivative financial depending on their maturity. In 2020, change in the value in interests and investments In 2020, change instrument means the difference of long-term financial investments in charter capitals of affiliates in the value of short- from kRUB5,833,160,665 in the amount of kRUB34,314,296. term financial investments Table 24. Information on transactions with derivative financial instruments to kRUB5,764,322,744 from kRUB985,762,573 Financial Period Nominal amount at 31 December Interest rate Fair value of asset (liability) at 31 was primarily due In 2020, changes mainly occurred to kRUB1,423,661,785 was primarily instrument 2020 type December (kRUB) to the decrease in loans issued in the following interests due to the placement Issue Repayment kEUR / kUSD kRUB* 2020 2019 2018 of kRUB212,248,060, including and investments: the value and reclassification of short- due to the repayment, revaluation of investments in RN-NKI LLC term deposits, increase in other Swaps 2014 2019 − − Floating − − (33,058,044) and reclassification of debt; increased by kRUB110,000,000; short-term investments Swap 2019 2021 985,718 € 89,387,274 Floating (11,745,463) 2,243,018 − decrease in other financial in RN-Razvedka i dobycha due to the reclassification investments of kRUB77,156,243, LLC – by kRUB66,038,078; and revaluation of credit notes, Swap 2020 2021 1,000,000€ 90,682,400 Fixed (746,145) − − including due to reclassification in RN-Kommerciya repayment and reclassification and revaluation of credit notes, LLC – by kRUB30,970,550; of short-term loans, acquisition In 2019, the Company completed into in 2014 in the nominal amount placement and revaluation in RN-Vankor LLC – and revaluation of short-term transactions with derivative of kUSD1,009,518. of long-term deposits; increase by kRUB30,000,000; in RN-Aktiv bonds, repayment and revaluation financial instruments entered in interests and investments LLC – by kRUB18,992,833. of short-term promissory notes. in charter capitals of subsidiaries of kRUB255,743,135; decrease 13. INFORMATION ON HEDGING TRANSACTIONS

MANAGING CURRENCY of the currency of the Russian and reserves in accordance RISK RELATED TO CHANGES Federation, or another indicator with the Company’s accounting 12. DERIVATIVE FINANCIAL INSTRUMENTS AT FAIR VALUE IN CASH FLOWS FROM FUTURE (set of indicators) of a hedged item policy; subsequently these effects THROUGH PROFIT OR LOSS PROCEEDS IN FOREIGN (items). should be transferred into profit CURRENCY or loss for the period, in which The Company designated the hedged revenue is recognized. Derivatives are financial to market factor changes; entered into a series of options Hedging transactions part of its USD-denominated instruments that simultaneously and other types of contracts that that helped to reduce the interest are operations (set of operations) borrowings as a hedging According to the strategy meet the following criteria: are expected to have a similar rates for the debt financing raised. with term transaction financial instrument for export revenue for managing foreign currency risk • The value of a financial response to market factor instruments (including those which is likely to be received. related to cash flows from future instrument is changed in line changes Derivative financial instruments of different types), performed proceeds in foreign currency, with the changes in the applied • Financial instrument calculations are measured at fair value. to minimize (compensate for) A portion of the future export revenue should be hedged interest rate, security rate, are performed subsequently adverse effects, fully or partially, monthly export revenue in the amount of net monetary price of goods, foreign currency The method for determining caused by the loss incurred, expected to be received position denominated in US dollars. exchange rate, price or interest In managing foreign currency the fair value of transactions income deficiency, decrease in US dollars was designated The Company regularly aligns rate index, credit rating or credit and interest rate risks, is based on the assessment in revenue, decrease in market as a hedged item. The nominal the nominal amount of hedging index or other “basic” variables the Company entered into a cross of the present discounted value of the property, including amounts of the hedged item and net monetary position in US • The acquisition of a financial currency and interest rate value of future cash flows using property rights (rights of claim), and the hedging instrument dollars. As of 31 December 2020 instrument does not require swap and a deliverable cross- the consensus projections increase in the Company’s are equal. To the extent that and 31 December 2019, there any investments or requires currency swap to sell US of foreign exchange rates liabilities due to change a change in the foreign currency were no designated hedging initial net investments dollars and euro that help and interest rates. The consensus in price, interest rate, currency rate impacts the hedging instruments. but in amounts lower than match the currency of revenue projections comprise forecasts exchange rate, including the rate instrument, the effects for other instruments, the price and the currency of liabilities, of key international banks of a foreign currency to the rate were recorded in other funds of which has a similar response and in 2020, the Company also and agencies. The Bloomberg

* Equivalent of the nominal amount at the CBR official exchange rate as of 31 December 2020.

400 401 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 25. Information on amounts recognized in other funds and reserves on hedging transactions, (kRUB) 15. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE, OTHER Item 2020 2019 2018 CURRENT ASSETS Recognized in other funds and reserves 1,389,427 (115,062,581) (231,748,689) at the beginning of the year Accounts receivable and payable Accounts receivable include Short-term accounts receivable Foreign exchange differences on cash flow hedges – – 333,196 are accounted for and recorded non-income-bearing financial and payable are reclassified before tax in financial statements investments within Rosneft Oil into long-term in cases Reclassified to profit or loss (1,900,007) 145,565,010 145,524,439 in accordance with the respective Company Group. where payment periods existing agreements. Net result under existing contracts Difference between the accounting profit (loss) 380,002 (29,113,002) (29,171,527) and the taxable profit (loss) of the reporting period is recognized in the financial The Company receives no are revised and increased resulting from recognition of hedging transactions* statements if there are advances government financing. to exceed 365 days.

Recognized in other funds and reserves at the end (130,578) 1,389,427 (115,062,581) issued/received and accrued of the year accounts receivable/payable Allowance for impairment Long-term accounts receivable under the same agreement. of accounts receivable is made and payable are reclassified The forecast of reclassification of hedges accumulated in other or loss as of 31 December 2020 on the basis of settlements into short-term where the term of amounts from the revaluation funds and reserves into profit is presented below: Accounts receivable with other organizations to maturity under existing from suppliers and contractors and individuals for products, contracts becomes 365 days include advances issued that goods, work and services, or less. Table 26. Forecast of revaluations reclassified to profit or loss, (kRUB) are recorded in the balance advances issued and other sheet less VAT deductible accounts receivable, and is Similarly, part of long-term Item 2021 or deducted at the reporting recorded in the income statement accounts receivable and payable Reclassifications (163,222) date in accordance with the Tax as other expenses. is reclassified into short-term if Income tax 32,644 Code of the Russian Federation. the debt under existing contracts VAT on advances (deductible From 2018, allowances are created is repaid by installments Total net of income tax (130,578) but not claimed for deduction for trade accounts receivable in different periods. at the reporting date) is recorded in accordance with the expected in the balance sheet within other credit losses concept pursuant 14. CASH AND CASH EQUIVALENTS current assets. to IFRS 9, Financial Instruments. Allowance for impairment Cash and cash equivalents specified in clauses 9–11 Federation at the date of payment Accounts payable to suppliers of doubtful accounts receivable include the Company’s amounts of Accounting Statement 23/2011. or receipt. The average and contractors include advances is created for accounts receivable with banks and credit institutions, exchange rate is not applied received that are recorded not covered by IFRS 9, Financial in operational and other cash Cash flows that cannot be reliably to translate cash flows. There in the balance sheet less VAT Instruments. No allowance offices, as well as deposits classified are recognized as cash is no cash unavailable for use on advances received. is created for accounts receivable and other cash equivalents flows from operating activities. by the Company. of Rosneft Oil Company Group. with the maturity period not exceeding 91 days. Foreign currency cash flows are translated into Russian rubles Table 28. Information on accounts receivable, (kRUB) For the purposes of the statement at the official rate of the foreign Accounts receivable by type At 31 December At 31 December At 31 December of cash flows, cash flows currency to set 2020 2019 2018 are classified based on the criteria by the Central Bank of the Russian Total accounts receivable 4,002,964,504 3,543,076,666 2,653,803,215

Long-term accounts receivable 3,062,309,222 2,131,722,190 1,648,785,448

Table 27. Information on cash and cash equivalents, (kRUB) Including: trade accounts receivable 46,474 63,543 53,330

At 31 December At 31 December At 31 December Cash Advances paid 832,457 571,607 592,718 2020 2019 2018 Other debtors, including 3,061,430,291 2,131,087,040 1,648,139,400 Cash 419,331,940 46,481,256 504,118,733 Loans issued to the companies within Rosneft Oil Company Group 2,788,145,043 1,869,506,975 1,330,769,489 including restricted cash** 1,310,173 2,333,436 3,366,005 Interest on long-term loans, promissory notes 270,705,745 234,673,280 288,968,440 Deposits with the maturity period not exceeding 91 days and other cash 76,867,857 50,917,510 94,422,491 equivalents Short-term accounts receivable 940,655,282 1,411,354,476 1,005,017,767

Including: trade accounts receivable 360,332,405 453,183,557 490,499,629

Advances paid 107,665,207 42,524,293 37,565,998

* Recognized in line 2412, Deferred income tax. Other debtors, including 472,657,670 915,646,626 476,952,140 ** Information on cash at the exchange and on accounts open with the territorial bodies of the Federal Treasury.

402 403 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Receivables from the budget and state non-budgetary funds 88,722,094 110,217,319 96,014,921 16. LOANS AND BORROWINGS, OTHER LIABILITIES Loans and promissory notes issued to the companies within Rosneft Oil 68,396,541 197,716,914 109,168,244 AND COLLATERAL PLEDGED Company Group

Interest (discount) on deposits, loans, promissory notes 189,806,746 240,049,474 126,541,234 Loans and borrowings payable The commissions on loans Loans payable recorded Settlements under commission agreements, other debtors 57,628,725 90,050,833 80,463,919 are accounted for and recorded (borrowings) that are not written off in the financial statements in financial statements in accordance as of the reporting date are shown as of the reporting date include Table 29. Information on movements in allowance for impairment of accounts receivable, (kRUB) with the respective existing on the balance sheet as other non- the accrued interest. agreements. current assets or other current Item Period Allowance Movements in allowance over the reporting period Allowance at the beginning at the end assets depending on their remaining Borrowing costs included in other of the period Accrued, + Recognized Used (upon Translation of the period The Company reclassifies short- period of recognition as expenses expenses amounted to kRUB165,913. in other income disposal differences (reversed) of accounts term loans and borrowings (more than 12 months or less than 12 receivable) payable into long-term payables months, respectively). Total interest accrued Allowance 2020 54,377,152 12,296,667 (14,820,737) (788,324) 7,460,870 58,525,628 if the repayment period on the Company’s loans for impairment under the existing agreement For the purposes of capitalizing for the reporting period amounted of accounts 2019 30,518,051 28,611,345 (1,824,700) (1,021,299) (1,906,245) 54,377,152 receivable is revised and increased to exceed interest on loans and borrowings to kRUB76,799,677. 365 days. The Company reclassifies into the cost of acquired assets, As of 31 December 2020, of accounts receivable. In 2020, in amounts due from companies long-term payables into short-term such investment assets shall Interest payable decreased the Company’s accounts accounts receivable increased within Rosneft Oil Company Group payables where the outstanding comprise those assets that take by kRUB5,025,780 year-on-year. receivable amounted by kRUB459,887,838. The increase on interest-free long-term loans period to maturity becomes 365 a substantial period of time (over 12 to kRUB4,002,964,504, including in accounts receivable was primarily to finance operating activities. days or less. months) and significant expenses Interest capitalized in the cost the allowance for impairment attributed to the increase on acquisition, construction of investment assets created The interest amounts payable or production to get ready for their (acquired) was kRUB15,086,851, under loans and borrowings received intended use. including the capitalized interest Table 30. Information on accounts payable, (kRUB) are accrued on a straight-line basis on loans received for purposes other regardless of the conditions of loans Investment assets consist of items than acquisition, construction and/or Accounts payable by type At 31 December At 31 December At 31 December 2020 2019 2018 (borrowings). Additional expenses of non-current assets, work-in- production of the investment asset for loans (borrowings), other than progress and construction-in- in the amount of kRUB15,077,508. Accounts payable 2,525,807,379 2,699,900,722 2,333,146,921 commissions on loans (borrowings) progress which will subsequently Trade accounts payable 1,738,450,553 1,867,264,817 1,526,096,089 raised, such as bank commissions be accounted for by the borrower

Payables to the Company’s employees 12,507 34,712 35,661 for using loan funds, originating and/or customer (investor, buyer) a loan, obtaining and maintaining as fixed assets (including land), Payables to the budget and non-budgetary funds 80,441,063 100,730,066 72,371,917 a line of credit, and other bank intangible assets, exploration Advances received 428,474,708 384,794,432 394,999,901 commissions (fees) related to raising and evaluation costs or other non- loans (borrowings) are recorded current assets. Settlements under commission agreements, other payables 278,428,548 347,076,695 339,643,353 as a lump sum in other expenses. In 2020, the Company raised loans In 2020, accounts payable with the companies within Rosneft Where commissions on loans from Russian banks at floating decreased by kRUB174,093,343 Oil Company Group for purchased (borrowings) are material, they and fixed rates to replenish year-on-year, and as of 31 products and operator are included in other expenses working capital. Loans were repaid December 2020, amounted services relating to production on a straight-line basis over the loan under relevant agreements to kRUB2,525,807,379. The decrease and processing. (borrowing) maturity period. both early and in accordance in accounts payable was primary with the schedule. attributed to settlements

404 405 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 31. Information on long-term and short-term loans and borrowings, (kRUB) Table 32. Information on RUB-denominated interest-bearing non-convertible bearer bonds, (kRUB)

Loans and borrowings by type Balance at 31 Change for the reporting period Balance at 31 Type of bonds Series number Issue date Total nominal Coupon 31 December December December 2020 value rate* 2019 Received Repaid (paid) Reclassified 2020 2019 2018 (accrued) Bonds 04, 05 October 2012 20,000,000 7.90 % 20,000,000 20,000,000 20,000,000 Long-term loans and borrowings 5,397,760,107 5,944,249,540 (4,354,949,170) (566,751,601) 6,420,308,876 Bonds 07, 08 March 2013 30,000,000 7.30 % 30,000,000 30,000,000 30,000,000 including Bonds 06**, 09**, 10** June 2013 40,000,000 7.00 % 4,610,968 610,968 610,968 • Long-term loans 905,750,857 832,629,783 (30,000,000) (132,003,244) 1,576,377,396 Exchange-traded BO-05, BO-06 December 40,000,000 6.65 % 40,000,000 10,236,819 10,236,819 • Long-term borrowings 1,745,174,492 4,236,099,114 (4,311,878,697) 15,270,039 1,684,664,948 bonds 2013

• Long-term interest accrued 171,780,471 26,638,165 (13,070,473) 6,878,818 192,226,981 Exchange-traded BO-01, BO-07 February 2014 35,000,000 8.90 % 35,000,000 35,000,000 35,000,000 under loan and borrowing agreements bonds

• Long-term promissory notes issued 1,920,814 − − (1,097,608) 823,206 Exchange-traded BO-02, BO-03, December 225,000,000 9.40 % 225,000,000 225,000,000 225,000,000 bonds BO-04, BO-08, 2014 • Long-term interest accrued 1,285,686 119,297 − (779,886) 625,097 BO-09, BO-10, on promissory notes BO-11, BO-12, BO-13, BO-14 • Long-term bonds issued 2,571,847,787 848,763,181 − (455,019,720) 2,965,591,248 Exchange-traded BО-15, BО-16, December 400,000,000 7.85 % − 400,000,000 400,000,000 *** Short-term loans and borrowings 946,067,618 3,797,654,293 (4,523,120,991) 566,751,601 787,352,521 bonds BО-17, BО-24 2014

including Exchange-traded BO-18, BO-19, January 2015 400,000,000 6.30 % 400,000,000 400,000,000 400,000,000 bonds BO-20, BO-21, BO-22, BO-23, • Short-term loans 80,000,000 841,770,250 (831,770,250) − 90,000,000 BO-25, BO-26

• Short-term borrowings 197,271,659 2,644,550,917 (2,755,858,333) (15,270,039) 70,694,204 Exchange-traded 001R-01 December 600,000,000 4.35 % 600,000,000 600,000,000 600,000,000 bonds 2016 • Current portion of long-term loans 219,291,370 13,089,827 (231,991,981) 132,003,244 132,392,460 and borrowings Exchange-traded 001R-02 December 30,000,000 9.39 % 30,000,000 30,000,000 30,000,000 bonds 2016 • Current portion of long-term interest 1,262,729 68,631,786 (68,537,287) − 1,357,228 accrued under loan and borrowing Exchange-traded 001R-03 December 20,000,000 9.50 % 20,000,000 20,000,000 20,000,000 agreements bonds 2016

• Short-term interest accrued 11,160,682 20,102,313 (21,389,574) (6,878,818) 2,994,603 Exchange-traded 001R-04 May 2017 40,000,000 8.65 % 40,000,000 40,000,000 40,000,000 under loan and borrowing agreements bonds

• Current portion of long-term bonds 400,000,000 − (400,000,000) 455,019,720 455,019,720 Exchange-traded 001R-05 May 2017 15,000,000 8.60 % 15,000,000 15,000,000 15,000,000 issued bonds

• Short-term interest accrued on bonds 35,248,893 209,412,102 (211,697,758) − 32,963,237 Exchange-traded 001R-06 July 2017 90,000,000 8.50 % 90,000,000 90,000,000 90,000,000 (coupon income) bonds

• Short-term promissory notes issued 1,097,608 − (1,097,608) 1,097,608 1,097,608 Exchange-traded 001P-07 July 2017 176,000,000 8.50 % 176,000,000 176,000,000 176,000,000 bonds • Short-term interest accrued 734,677 97,098 (778,200) 779,886 833,461 on promissory notes Exchange-traded 001P-08 October 2017 100,000,000 4.35 % 100,000,000 100,000,000 100,000,000 bonds

Exchange-traded 002P-01 December 300,000,000 4.35 % 300,000,000 300,000,000 300,000,000 Information on RUB-denominated bonds 2017 interest-bearing non-convertible Exchange-traded 002P-02 December 300,000,000 4.35 % 300,000,000 300,000,000 300,000,000 bearer bonds issued as of 31 bonds 2017 December is provided below: Exchange-traded 002P-03 December 30,000,000 7.75 % 30,000,000 30,000,000 30,000,000 bonds 2017

Exchange-traded 002P-04 February 2018 50,000,000 7.50 % 50,000,000 50,000,000 50,000,000 bonds

Exchange-traded 002P-05 March 2018 20,000,000 7.30 % 20,000,000 20,000,000 20,000,000 bonds

Exchange-traded 002P-06 April 2019 10,000,000 8.70 % 10,000,000 10,000,000 − bonds

Exchange-traded 002P-07 April 2019 20,000,000 8.70 % 20,000,000 20,000,000 − bonds

406 407 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Type of bonds Series number Issue date Total nominal Coupon 31 December Table 35. Information on items pledged as collateral by type of pledge value rate* 2020 2019 2018 Share in the total Items pledged as collateral collateral amount, % Exchange-traded 002P-08 July 2019 25,000,000 7.95 % 25,000,000 25,000,000 − bonds Revenue from sales of oil and oil products 31.89

Exchange-traded 002P-09 October 2019 25,000,000 7.10 % 25,000,000 25,000,000 − Sureties 68.11 bonds

Exchange-traded 002P-10 June 2020 15,000,000 5.80 % 15,000,000 − − bonds In the course of operating is an imperative requirement The cooperation between Exchange-traded 003P-01 November 400,000,000 4.35 % 400,000,000 − − activities, the Company follows of Norwegian legislation and is the Company and Equinor (before bonds 2020 the unconditional, unlimited a prerequisite for RN Nordic Oil AS July 2018 – Statoil ASA) to develop Exchange-traded 003P-02 November 400,000,000 4.35 % 400,000,000 − − and indefinite guarantee (surety) to be granted a license for operating and gas reserves is governed bonds 2020 provided to the government on the Norwegian continental shelf by mutual liability guarantees

Total long-term RUB-denominated bonds 3,420,610,968 2,971,847,787 2,891,847,787 of Norway and Norwegian jointly with Equinor (before July provided by affiliates of the parties government authorities in 2013, 2018 – Statoil ASA). in 2015. The guarantees * For the coupon period valid as of 31 December 2020. which fully covers the contingent are unlimited, unconditional ** Part of the issue was repurchased by the issuer as of 31 December 2020. obligations of RN Nordic Oil AS The cooperation between and indefinite. *** Issues of bonds are repaid as of 31 December 2020. that this company may incur the Company, Eni S.p.A and Equinor as a result of its operations (before July 2018 – Statoil on the Norwegian continental ASA) related to the projects Upon placement, all these bond On 24 July 2012, the Company and bear an interest rate of 9% p.a. shelf. Provision by the parent on the Russian continental shelf series have maturity of six, eight issued and sold 40 promissory These promissory notes were partly company of a guarantee to cover is governed by mutual unlimited, or ten years. notes with a par value kRUB paid in 2012 to 2020. RN Nordic Oil’s obligations unconditional and indefinite 274,401.98 each and a total amount arising from environmental risks guarantees provided in 2013. Early purchase/buyback of kRUB 10,976,079.12, which have The repayment schedule of the bonds does not mean consecutive (quarterly) maturity of long-term loans and borrowings their early repayment. dates over a ten-year period, as of 31 December 2020 is as follows: Table 36. Information on other long-term liabilities, (kRUB)

Other long-term liabilities by type Period Balance Received Repaid, reclassified Balance at the end at the beginning (accrued) (to short-term of the year Table 33. The repayment schedule of long-term loans and borrowings as of 31 December 2020 of the year debt/loans and borrowings)

Year Amount Other long-term liabilities, 2020 799,125,852 1,005,299,311 (363,815,046) 1,440,610,117 including: 2021 587,412,180 2019 1,134,390,419 − (335,264,567) 799,125,852

2022 570,412,420 Long-term prepayments under crude 2020 744,374,508 1,003,888,125 (351,743,844) 1,396,518,789 oil and oil product supply contracts 2023 1,112,580,741 2019 1,058,520,678 3,267,967 (317,414,137) 744,374,508

2024 617,072,904

2025 and after 3,927,390,733 In 2013 and 2014, the Company From 1 January 2015, of construction work to be paid

Total long-term loans and borrowings 6,814,868,978 signed a number of long-term oil scheduled oil supplies started to the contractor after acceptance and oil product supply contracts that under the long-term contracts of completed facility. As of 31 provide for receipt of a prepayment. that provide for prepayments. December 2020, liabilities totaling Table 34. Information on other long-term liabilities The total minimum amount of future In 2020, offset of prepayments RUB3 billion are reclassified supplies under these contracts under these contracts amounted to long-term accounts payable Amounts of loan facilities provided to and not used Restrictions on use of loan facilities (including required minimum balances) is around 400 million tons. to RUB291 billion (USD6 billion under the agreements, the terms

At 31 December At 31 December At 31 December and EUR31 million at the exchange of which provide for repayment 2020 2019 2018 The contracts include the following rate at the dates of prepayments, of the reserved amounts in one year

− − 10,000,000 − main terms: not subject to revaluation and later. • Prepayment shall not exceed 30 % at the current exchange rate). of the cost of the total contracted Loans are partially secured provided in foreign currency amount of crude oil In the course of performing by crude oil export contracts. in the amount of kUSD 331,522 • The oil price shall be based functions under the technical at the CBR exchange rate ruling on current market quotes customer agreements, construction As of 31 December 2020, at the transaction date. • Prepayment is settled through agreements are concluded, one guarantees and sureties issued physical deliveries of crude oil of the terms of which is provisioning by the Company totaled kRUB Items pledged as collateral by a customer of a part of the cost 68,747,667 and included collateral for 2020 were as follows:

408 409 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

17. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN Table 39. Settlements with the budget and state non-budgetary funds, (kRUB) CURRENCIES At 31 December At 31 December At 31 December 2020 2019 2018

Total receivables from the budget and state non-budgetary funds 88,722,094 110,217,319 96,014,921 Changes in foreign exchange on the Company’s financial rates, particularly in US dollar and business performance. Value-added tax (VAT) 84,730,799 95,094,406 91,483,038 rates, have a significant effect Excise duty 3,540,687 15,043,880 11,611

Income tax 331,330 − 4,433,051

Table 37. Information on changes in RUB/USD and RUB/EUR exchange rates Other taxes and levies receivable 79,632 62,225 66,945

31 December Exchange rate Receivables from state non-budgetary funds 39,646 16,808 20,276

US dollar Euro Total payables to the budget and state non-budgetary funds 80,441,063 100,730,066 72,371,917

2020 73.88 90.68 Mineral extraction tax (MET) 55,963,140 70,443,836 65,315,239

2019 61.91 69.34 Tax on additional income from extraction of hydrocarbons (additional income 16,639,568 21,752,473 − tax, AIT) 2018 69.47 79.46 Income tax 151,866 952,179 −

For financial reporting purposes, Foreign exchange differences and liabilities as of the reporting Excise duty 4,126,697 3,141,026 4,115,943 foreign exchange differences from the Company’s operations date, were taken to the other Property tax 3,130,165 3,273,315 2,826,990 are all operations to translate outside the Russian Federation income and expense account, the value of assets and liabilities taken to additional capital except for liabilities designated Other taxes and levies payable 112,964 122,613 112,463 denominated in foreign currency in the reporting period as hedging instruments (refer Payables to state non-budgetary funds 316,663 1,044,624 1,282 to be recorded as other income included: foreign exchange to Note 13). or other expenses. In the reporting gains of kRUB9,414 and foreign period, total (net) amount exchange losses of kRUB6,779. Currency conversion transactions Taxes and levies receivable primarily due to the decrease According to provisions of all operations to translate are recorded separately on a net decreased by kRUB21,495,225 in MET by kRUB14,480,696 of the Russian Tax Code, desk- the value of assets and liabilities Foreign exchange differences basis in the income statement; from 31 December 2019 and the decrease in AIT top and field tax audits may cover denominated in foreign arising in the reporting period the financial result is recorded primarily due to the decrease by kRUB5,112,905. The decrease three calendar years preceding currency was kRUB61,121,561 from operations involving assets either in other income or in other in the amount of VAT recoverable in MET and AIT results the year in which a decision and was recorded as other income and liabilities denominated expenses depending on the net from the budget as of the end from the decline in world prices to hold the tax audit is taken. of the Company. in foreign currency, and from amount of income (expense) of the fourth quarter of 2020 year of and drop in production The Company’s management translation of such assets for each such transaction. on year and due to the decrease volumes due to the compliance believes that the results of tax in the excise duty applied to its with restrictions pursuant audits will not have a material Table 38. Income and expenses from dealing in foreign currency, (kRUB) refined crude oil (reverse excise to the OPEC+ agreement. impact on the Company’s financial duty) in relation to the change position because tax liabilities Income and expenses For 2020 For 2019 in macroeconomic indicators. As of 31 December 2020, 2019 are determined in accordance Income 14,604,422 7,650,755 and 2018, the Company did with requirements of the tax Expenses (6,954,949) (34,464,085) Taxes and levies payable not have any overdue taxes legislation. decreased by kRUB20,289,003 and levies payable. from 31 December 2019 18. TAXES AND LEVIES, CUSTOMS DUTIES

The Company’s tax liabilities was appointed responsible and services sold amounted 19. EQUITY are recorded in accounting using participant of the consolidated to kRUB512,441,314 in 2020 (2019: the periodicity convention. taxpayer group. kRUB851,463,520). CHARTER CAPITAL RESERVE AND ADDITIONAL of the charter capital. As of 31 CAPITAL December 2020, the reserve capital In 2020, statutory rates Currently, in accordance In 2020, the accrued export duty As of 31 December 2020, is fully formed and amounts of the main taxes were as follows: with the provisions amounted to kRUB302,490,410 the Company’s charter capital The Company’s equity also includes to kRUB5,299. There were no • Income tax – 20 % of the agreement, the number (2019: kRUB702,733,622). amounts to RUB105,981,778.17 and is reserve and additional capital. changes in the reserve • Value added tax – 20 % of participants of the consolidated divided into 10,598,177,817 common and additional capital as compared taxpayer group increased to 64 Information on settlements shares with a par value of RUB0.01 The Company’s reserve capital to 31 December 2019 and 2018. Since 1 January 2012, Rosneft entities. with the budget and non- each. There were no changes represents reserve capital formed Oil Company and its 21 budgetary funds is presented in the charter capital as compared in accordance with constituent subsidiaries were combined The mineral extraction tax in the table below. to 31 December 2019 and 2018. documents and is equal to 5 % into the consolidated taxpayer to be included in the cost group. Rosneft Oil Company of products, goods, work

410 411 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

TREASURY SHARES be implemented from the date NET ASSETS Table 40. The Company’s income and expenses, (kRUB) of approval by the Board of Directors Item For 2020 For 2019 In August 2018, the Board of Rosneft Oil Company through 31 As of 31 December 2020, 2019 of Directors of Rosneft Oil December 2021. and 2018, the Company’s net assets Revenue (net) from the sale of goods, work, services (net of value added tax) 4,835,091,105 6,827,526,407 Company approved the features amounted to kRUB2,224,610,050, Including: sales related to principal activities 3,103,513,772 4,351,246,655 and commenced the implementation The maximum number of shares kRUB2,261,771,078, Trading and procurement 1,199,726,357 1,954,897,814 of the program for purchasing and global depositary receipts that and kRUB2,026,470,417, respectively. shares of Rosneft Oil Company may be purchased under the Program The net assets decreased Gains from shareholding in other entities 528,570,288 516,331,673 in the open market, including is 340,000,000 units. by kRUB37,161,028 or 1.6 % compared Intermediation 3,280,688 5,050,265 in the form of global depositary with the prior reporting date. As of 31 receipts which certify rights to such Shares and GDRs purchased December 2020, the Company’s net Cost of goods, products, work and services sold (3,641,355,413) (4,782,222,071) shares, in the maximum amount under the Program will be recorded assets exceed its charter capital Including: related to principal activities (2,579,599,446) (3,230,653,508) of USD2 billion (hereinafter, on the balance sheet of Rosneft Oil by kRUB2,224,504,068. Trading and procurement (1,061,755,967) (1,551,568,563) the “Program”). The Program will Company Group. Oil and gas reserves exploration and estimation expenses (7,543,407) (6,559,819) 20. INCOME AND EXPENSES, RETAINED EARNINGS Gross profit 1,186,192,285 2,038,744,517 Selling expenses (772,860,114) (1,196,815,437)

Revenue from sales of goods, excise duty). This excise duty General and administrative expenses (90,988,304) (83,302,902) work and services is recognized is recorded in the line, Cost of sales, of Rospotrebnadzor and other Profit (loss) from the sale of goods, work and services 322,343,867 758,626,178 as and when the goods are shipped, in the income statement, increasing executive bodies of the Russian work is performed and services and decreasing the line amount Federation, are classified Profit (loss) from other income and expenses (252,789,241) (411,084,534) depending on the macroeconomic as other expenses arising as a result are rendered, and settlement Including: interest receivable 148,757,678 176,844,160 documents are presented indicators. In 2020, the excise duty of extraordinary economic to customers (clients). applied to crude oil amounted circumstances (pandemic). Interest payable (360,174,908) (445,059,171) to kRUB64,794,749 and was paid Including: expenses on unwinding of the ARO asset discount (5,003,226) (4,193,305) To ensure timely reflection of business to budget thus increasing the cost The use of profit is recognized Gains from change in the fair value of derivative financial instruments − 35,301,062 events, if necessary, the Company of sales in the reporting period; in accounting records and financial uses the accrual method in 2019, the excise duty amounted statements in the year following Losses from changes in the fair value of derivative financial instruments (14,734,626) − in accordance with Accounting to kRUB145,899,744 and the Company the reporting years pursuant Gains from the sale and other disposal of other property 33,828,628 5,807,645 Statement 9/99, Revenues paid this excise duty out of budget to the decision of the shareholders’ of an Organization, provided that thus reducing the cost of sales. meeting. A portion of the profit Including: gains from the sale of fixed assets and capital construction in progress 21,715,347 2,317,813 the criteria for revenue recognition that was not paid out as dividends Gains from the sale of long-term securities 9,826,624 2,255 are met. In this case, revenue From 1 January 2019, tax on additional pursuant to the decision Losses from the sale and other disposal of other property (77,831,190) (5,956,251) is recognized based on updates income from the extraction of the shareholders, is recognized provided by Company’s business of hydrocarbons was introduced in the financial statements Including: losses from the sale of long-term securities (35,784,160) (3,246) units. with respect to certain license areas in retained earnings (uncovered Losses from write-off of exploration assets (22,962,194) (1,006,321) of the Company and is subject loss). If this profit is used for capital The Company applies a method to recognition within costs included investments, the total balance Losses from the sale of fixed assets and capital construction in progress (14,897,519) (1,985,202) that involves calculating in the cost of sales, without inclusion of the retained earnings (uncovered Other expenses 157,163,733 118,915,307 incomplete cost of goods (direct to the unit cost of finished goods. loss) is not decreased. Including difference between the carrying amount, transferred financial investments of shares 63,942,359 88,083,562 costing), and therefore general (interests) as a contribution to the charter capital and their market value and administrative expenses Selling expenses are allocated As of 31 December 2020, 2019, 2018, are fully debited to the “Sales” between sold goods and goods that retained earnings of prior years Refund of the excise duty 6,882,665 6,484,435 account, i.e. are fully recognized were shipped but not sold, including amounted to kRUB1,950,647,825, Recognition of the deferred effect of hedging within other income 1,900,007 − in the reporting period without finished goods at the warehouse. kRUB2,142,102,123 Other expenses (139,798,556) (296,937,286) allocating them to balances of work and kRUB2,028,141,822, respectively. in progress and finished goods The Company’s total advertising Including recognition of the deferred effect of hedging within other expenses − (145,565,010) (except for general expenses directly expenses (not broken down by type Changes in the profit of prior Translation differences (61,121,561) (41,638,090) related to acquisition, construction of goods) are recognized in selling years resulted mainly and production of assets, which expenses. from accrued dividends Dividend income tax (3,621,931) (370,537) are included in the cost of assets). in the amount of kRUB191,509,073. Other expenses directly related to the pandemic (224,038) − The Company’s additional personnel From 1 January 2019, the Company expenses related to measures The following income and expenses realizes its right to refund imposed to contain the spread affected the retained earnings the excise duty applied to its of the coronavirus infection for the reporting year: locally refined crude oil (reverse in line with the requirements

412 413 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 41. Allocation of the Company’s expenses recognized in the income statement by type, (kRUB) Table 43. Deferred taxes and permanent tax expenses and income, (kRUB)

Item For 2020 For 2019 Item 2020 2019

Material costs 3,640,216,495 5,062,926,686 Accrued Repaid (written Accrued Repaid (written (charged) off) (charged) off) Payroll 41,753,510 37,053,917 DTA (deferred tax asset) 120,968,319 (37,679,565) 57,591,738 (33,799,937) Social charges 7,299,228 6,832,450 DTL (deferred tax liability) (34,678,165) 20,045,218 (27,880,942) 13,513,107 Depreciation and amortization* 132,707,266 149,353,651 PTE (permanent tax expenses) (10,093,259) х (47,208,166) х Other costs**, including reverse excise duty, AIT, MET and oil and gas reserves exploration 690,770,739 812,733,525 and estimation expenses PTI (permanent tax income) 120,368,751 х 136,388,071 х

Total for types of expenses 4,512,747,238 6,068,900,229

Change (increase [-], decrease [+]) in balances of work in progress, finished goods, etc. (21,993,776) (12,599,481) Deferred income tax updated tax returns, deferred tax for taxation purposes

Total expenses related to ordinary activities** 4,512,747,238 6,068,900,229 for 2020 and 2019 amounted liabilities and assets written off, in subsequent reporting (tax) to kRUB68,276,333 which will never be reversed. periods.

* Recalculation of the effect of the revised estimates: and kRUB38,536,968, respectively. • For the ARO asset (fixed assets retirement obligation) the total amount is included in depreciation and amortization, for the ARO asset The deferred tax asset The relation between the theoretical (tangible exploration assets retirement obligation) – in other costs (oil and gas reserves exploration and estimation expenses). Movement in deferred taxes includes the Company’s income tax expense calculated • For the HSE that due to their nature were recognized: for the reporting period recorded losses carried forward, which as the accounting profit before – In expenses related to ordinary activities – the total amount is included in the expenses for the period in other costs (cost of sales); in line 2412, Deferred income tax, are not used to reduce income tax multiplied by the 20 % tax in exploration costs – in other costs (oil and gas reserves exploration and estimation expenses) includes deferred taxes written tax in the reporting (tax) period, rate and the income tax expense – In the cost of finished products (sand) – the total amount is included in the expenses for the period in material costs (cost of sales) off and/or accrued due to filing but which will be recognized is provided in the table below. – In fixed assets and tangible exploration assets – the total amount is included in expenses for the period in depreciation and amortization or in other costs (oil and gas reserves exploration and estimation expenses) respectively ** Including general and administrative expenses, selling expenses and oil and gas reserves exploration and estimation expenses Table 44. Indicators affecting the income tax expense, (kRUB)

21. INCOME TAX Indicator For 2020 For 2019

Permanent and temporary • Permanent tax expense Permanent and temporary Profit (loss) before tax 69,554,626 347,541,644 differences between the accounting • Deferred tax asset differences, deferred tax assets Current income tax (line 2411)*, including: 15,271,514 9,648,441 profit and the taxable profit • Deferred tax liability and deferred tax liabilities related Nominal income tax expense (income) 13,910,925 69,508,329 for the reporting period to them, and permanent tax Change in deferred tax assets 85,424,958 25,637,662 are recognized in the accounting The Company prepares indicators income and expenses resulting records. Temporary and permanent representing the accounting in an adjustment to the theoretical Change in deferred tax liabilities (3,952,431) (15,633,038) differences, which are calculated for income tax settlements income tax expense are provided Permanent tax expense 10,093,259 47,208,166 by comparing financial and tax on a monthly basis. in the tables below. Permanent tax income (120,368,751) (136,388,071) accounting data on income and expenses, result in permanent The Company recognizes deferred Tax effect of the results of other operations not included in net profit (loss) for the period (379,474) − tax income and expenses income tax assets and deferred Tax on income in the form of profits of controlled foreign companies − 18,511 and deferred tax liabilities income tax liabilities on a gross basis Deferred income tax (line 2412) 68,276,333 38,536,968 and assets. as non-current assets and long-term liabilities, respectively. Income tax (line 2410) = line 2411 + line 2412 83,547,847 48,185,409 Current income tax is determined in the accounting records through A 20 % income tax rate is used recognizing the following indicators: to calculate deferred tax assets The difference between of the consolidated group of taxpayers is disclosed • Nominal expense (income) and liabilities, and permanent tax the amount of the current income of taxpayers and the amount in the income statement • Permanent tax income income and expenses. tax calculated by a participant of cash owed by a participant separately and is referred to as (including the responsible (due to a participant) income tax re-distribution Table 42. Permanent and temporary differences that gave rise to income tax, (kRUB) participant) of the consolidated under the agreement within the consolidated group group of taxpayers to be included on the establishment of taxpayers. Item 2020 2019 in the consolidated tax base of a consolidated group Accrued Repaid (written Accrued Repaid (written (charged) off) (charged) off)

Deductible temporary differences 604,841,595 (188,397,825) 287,958,690 (168,999,685)

Taxable temporary differences (173,390,825) 100,226,090 (139,404,710) 67,565,535

Positive permanent differences (50,466,295) х (236,040,830) х

* Negative permanent differences 601,843,755 х 681,940,355 х Current income tax on the tax loss is a positive amount (it is recorded without parentheses in the income statement).

414 415 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

22. DIVIDENDS DISTRIBUTION • The Company has an obligation Provisions, contingencies The amount of the environmental resulting from its past business and commitments are not absolute provision is determined based NUMBER OF SHARES AND THEIR and basic earnings per share that dividends should be paid operations that cannot legal obligations of Rosneft Oil on the estimated expenditures PAR VALUE amounted to RUB14.70. In 2019, on Rosneft Oil Company’s be avoided. In case of doubt Company. (planned expenditures) it was kRUB396,526,209 common shares in the amount concerning such liability, of the Company that are expected According to constituent and RUB37.41 per share, respectively. of kRUB191,509,073 or RUB18.07 the Company shall recognize Pursuant to Accounting Statement to be incurred for settling documents, charter capital Diluted earnings per share were not per share. As of 31 December an estimated liability if, based 8/2010, Provisions, Contingent the provision during restoration represents the Company’s capital. calculated. 2020, the Company paid on the results of analysis of all Liabilities and Contingent Assets of the impacted lands and water The holders of common shares dividends in the amount circumstances and conditions, (effective from the date of issue bodies as of the reporting date. are entitled to one vote per share In the first half of 2021, of kRUB191,466,412. Dividends including expert opinions, of the financial statements in 2011), The estimation is performed at shareholders’ meetings. the Board of Directors will were paid to all of the issuer’s it is more likely than not that the Company has environmental based on the Company’s internal provide recommendations registered shareholders except a liability exists provisions. (management) reports that form The Company issued 10,598,177,817 to the General Shareholders’ for shareholders who did • It is likely that settling the system of environmental common shares with a par value Meeting on the amount of dividends not promptly notify the issuer’s the provision will result An environmental provision arises information. of RUB0.01 each for the total on the Company’s shares for 2020. registrar of changes in relevant in an outflow of the Company’s from the environmental impact amount of RUB105,981,778.17. data. economic benefits (the likelihood resulting from the Company’s The information Based on the Company’s results is > 50 %) operations. about the Company’s provisions AMOUNT OF DIVIDENDS for 2019, the annual General • The amount of the provision can is presented in the table below. Shareholders’ Meeting that be reliably estimated In 2020, the Company’s net income was held on 2 June 2020 (Minutes amounted to kRUB155,811,166 w/n dated 5 June 2020) decided Table 45. Provisions, (kRUB)

Provision Description Period Balance Recognized Written off Increase (+)/ Balance at the (accrued) decrease (–) at the 23. SUBSEQUENT EVENTS beginning for the (repaid) as excessive or if of provision, end of the of the reporting against recognition criteria when expense/ period period period costs are no longer met income There were no economic events on the financial position, cash or accounts is recognized/ payable reversed upon after 31 December 2020 that flows or operating results recognized the change have had or may have an effect of the Company. in provisions Total provisions created from expenses on ordinary activities, including by type of provisions: 24. PROVISIONS. CONTINGENCIES Total 2020 32,874,094 27,371,495 (12,174,693) (2,868,361) 3,087,255 48,289,790 2019 22,176,271 29,837,142 (17,677,979) (719,991) (741,349) 32,874,094

The Company is involved of PJSC Transneft in compliance and legally supported claims Provision Planned 2020 11,108,332 13,443,422 (8,273,062) − − 16,278,692 in litigations, which arise with the requirements of technical from all counterparties and their for annual amount year-end of annual year- 2019 10,594,452 14,437,851 (13,923,971) − − 11,108,332 from time to time in the course of its regulations and standards. re-submission to PJSC Transneft bonuses end bonuses business activities. Management for compensation. to employees, with insurance of the Company believes that In addition, the Company received contributions the ultimate result of those claims from customers that did A provision is an obligation at the effective litigations will not materially not receive the contracted amounts of the Company with an indefinite interest rate affect the performance or financial of oil due to the oil pumping amount and/or time of settlement. Provision The Company’s 2020 2,450,521 5,519,871 (2,822,494) − − 5,147,898 position of the Company. interruption in the “Druzhba” trunk oil A provision may arise: for future obligation vacation for vacation 2,821,660 2,914,341 (3,285,480) − − 2,450,521 pipeline resulting from the pollution. • From laws and other regulations, payments payments Due to the pollution of oil court rulings or agreements based on the number in the “Druzhba” trunk oil Currently, the Company • As a result of the Company’s of unused pipeline in April 2019, a number is in the process of settling claims activities which indicate, based vacation days of claims from the customers with foreign customers and PJSC on the existing practices at the end of the reporting were submitted to the Company, Transneft. The calculation of losses or statements of the Company, period, stating that the supplied incurred by the Company can that the Company undertakes with insurance contributions oil substantially exceeded be finalized after completing certain obligations at the effective maximum permitted levels the comprehensive assessment and, consequently, is reasonably interest rate of organochlorine compounds of the impact of the incident expected to settle these Environmental Formed on all 2020 7,451,071 687,558 (201,025) − 382,931 8,320,535 (compared to the levels determined on the Company’s activities obligations. provisions environmental by the relevant technical (including the forced reduction obligations. 2019 8,185,110 639,784 (398,469) (234,005) (741,349) 7,451,071 The estimation regulations and standards). in oil production due to the reduced A provision is recognized is made by place However, the Company delivered oil oil intake into the system of PJSC in accounting records when all of occurrence. Recognized to the system of oil trunk pipelines Transneft), obtaining complete of the following criteria are met: at present value

416 417 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Provision Description Period Balance Recognized Written off Increase (+)/ Balance of the voting shares, or having of related parties (more than at the (accrued) decrease (–) at the significant impact based on other 10 % of any item of the cash flow beginning for the (repaid) as excessive or if of provision, end of the of the reporting against recognition criteria when expense/ period reasons) and state-controlled statement). period period costs are no longer met income entities or accounts is recognized/ payable reversed upon • Joint venture participants 25.1 SUBSIDIARIES recognized the change in provisions (that are not a legal entity and proportionately This section discloses information Provisions Provisions 2020 11,864,170 7,720,644 (878,112) (2,868,361) 2,704,324 18,542,665 consolidated) concerning transactions with those for legal are recognized claims separately 2019 575,049 11,845,166 (70,059) (485,986) − 11,864,170 • Other related parties subsidiaries in which the Company for each legal holds, directly or through other entities, claim The Cash flows section of the Table more than 50 % of the common voting Provisions created by increasing the value of assets: discloses information in the event shares, or which are controlled by other Total 2020 76,406,548 7,187,946 (3,920,397) (33,625) 11,311,636 90,952,108 of significant cash flows by group means.

2019 53,750,988 8,482,687 (2,376,729) (221,413) 16,771,015 76,406,548

Provision Formed on all 2020 73,535,311 6,049,838 (2,273,926) (33,625) 11,648,833 88,926,431 Table 46. Information on transactions with subsidiaries, (kRUB) for fixed asset immovable oil liquidation and gas assets. 2019 52,094,640 6,042,093 (1,548,844) − 16,947,422 73,535,311 Transactions For 2020 For 2019 The estimation is made by field. Sales revenue and other income 2,001,748,939 3,223,100,840 Recognized at present value Oil and gas sales 378,849,970 1,036,105,402

Environmental Obligations 2020 2,871,237 1,138,108 (1,646,471) − (337,197) 2,025,677 Petroleum products and petrochemicals sales 884,048,605 1,420,121,766 provisions to be included in the value 2019 1,656,348 2,440,594 (827,885) (221,413) (176,407) 2,871,237 Income from leasing out property 136,007,310 149,161,243 of assets (08*) Income from shareholding in other entities 526,843,795 514,872,917 The provision for fixed period in the accounting records when expense/income (reversal asset liquidation presented and financial statements. of expense) is recognized Other income 75,999,259 102,839,512 in the column Recognized (accrued) The effects from changes upon recognition of provisions Costs and expenses 2,234,499,902 3,090,283,729 for the reporting period includes in the provision for liquidation, includes effects from the revised Oil and gas purchases 1,530,744,141 2,357,618,751 the provision and expenses the rate and the discount period estimations of value and the extent on discount amortization are presented in the column to which an obligation is settled, Petroleum products and petrochemicals purchases 4,946,680 5,516,359 (interest) recognized as a result Increase (+)/decrease (–) effects of discount rate change, Logistics and transportation 134,960,618 146,469,209 of nearing the settlement date of provision, when expense/income reclassification between of the provision. The increase (reversal of expense) is recognized types of provisions created Oil and gas production services 340,127,544 346,374,644 in the provision for the reporting upon recognition of provisions. from expenses on ordinary Cost of processing 157,832,109 166,537,773 period (interest) as a result activities and by increasing asset Leases of assets 464,482 655,035 of nearing the provision settlement The environmental provision value. date should be recognized presented in the column Increase Other expenses 65,424,328 67,111,958 as expenses for the reporting (+)/decrease (–) of provision, Other transactions

Purchase of fixed assets 58,223 111,252

25. TRANSACTIONS WITH RELATED PARTIES Loans and borrowings issued 3,126,819,253 1,285,097,529

Repayment of loans and borrowings issued 2,801,714,337 1,209,323,653 In the normal course of its The Company’s related parties parties that have different business, the Company enters also include entities that relationships with the Company: Short-term loans and borrowings received 2,310,349,737 1,576,442,009 into transactions with entities are not affiliates according • Subsidiaries (entities Repayment of short-term loans and borrowings 2,503,321,828 1,580,578,845 which are related parties to Russian law, but meet consolidated by the Company in accordance with Russian law. the definition of an affiliate as subsidiaries) Long-term loans and borrowings received 4,119,923,382 1,476,368,478 in accordance with IFRS 24, • Associates (legal entities Repayment of long-term loans and borrowings 4,311,336,168 1,289,364,023 The list of related parties Related Parties Disclosures. consolidated by the Company Deposits placed 3,146,609,058 541,381,292 was developed based using the equity method on the relationships between The total amounts of transactions and proportionate consolidation Deposits repaid 3,071,319,316 561,700,338 the entities, taking into account and balances with related method) Interest receivable 116,551,250 136,096,049 the substance over form parties are disclosed separately • Principal owners (shareholders requirement. for the following groups of related holding more than 10 % Interest payable 29,103,981 58,806,165

418 419 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Transactions For 2020 For 2019 Assets and liabilities Balance at 31 December

Cash flows 2020 2019 2018

Cash flows from operating activities Accounts payable 1,799,655,565 1,927,536,974 1,560,159,472

Proceeds: Short-term and long-term loans and borrowings (including interest), 1,739,876,146 1,951,309,008 1,869,749,149

Including long-term 1,652,642,642 1,732,886,115 979,725 From sale of products, goods, work and services 1,322,217,389 2,424,042,134

From lease payments, license payments, royalties, commissions and other similar payments 136,365,889 150,188,103 25.2 ASSOCIATES the Company holds, directly reasons), and which the Company Other proceeds 42,891,731 36,553,233 or through other entities, more holds significant influence over. Payments: This section discloses information than 20 % but less than 50 % concerning transactions of the common voting shares (or To suppliers (contractors) for raw materials, other materials, work and services (2,486,501,802) (3,003,608,814) with those associates in which no control is provided for other Exploration costs (4,998,154) (6,061,861)

Other payments (809,380,724) (633,340,385) Table 48. Information on transactions with associates, (kRUB) Cash flows from investing activities Transactions For 2020 For 2019 Proceeds: Sales revenue and other income 254,888,210 213,758,393

From sale of non-current assets (other than financial investments) 4,823,994 10,580,966 Oil and gas sales 8,008,936 9,824,798

From repayment of loans issued, receivables from other parties, etc. 1,710,390,109 714,872,671 Petroleum products and petrochemicals sales 225,771,549 200,590,043

From dividends, interest on debt financial investments and similar proceeds from equity 901,079,171 355,362,963 Income from leasing out property 578,151 339,993 participation in other entities Gains from shareholding in other entities 1,544,033 1,247,139 Payments: Other income 18,985,541 1,756,420 To purchase, create, upgrade, reconstruct and prepare non-current assets for use (179,692,790) (169,023,407) Costs and expenses 255,658,783 420,043,491 To purchase shares (interests) in other entities (184,353,841) (374,023,314) Oil and gas purchases 206,718,509 370,590,472 To issue loans to other parties (1,322,552,799) (164,513,879) Logistics and transportation 32,762,210 32,394,201 Exploration assets (13,330,314) (12,968,542) Leases of assets 241,743 239,032 Cash flows from financing activities Cost of processing 14,509,633 15,352,240 Proceeds: Other expenses 1,426,688 1,467,546 From loans and borrowings received 6,430,174,832 3,052,860,148 Other transactions Payments: Loans and borrowings issued 5,163,637 4,615,969 Repayment of loans and borrowings, repayment (redemption) of promissory notes, etc. (6,815,736,935) (2,870,276,820) Repayment of loans and borrowings issued 1,914,619 2,197,300

Table 47. Assets and liabilities under transactions with subsidiaries, (kRUB) Short-term loans and borrowings received 160,661,178 26,351,823

Assets and liabilities Balance at 31 December Repayment of short-term loans and borrowings 161,235,770 25,235,622

2020 2019 2018 Long-term loans and borrowings received 7,881,048 33,577,913

Assets 9,800,230,062 9,261,689,608 8,634,149,778 Repayment of long-term loans and borrowings 318,755 671,596

Cash and cash equivalents 38,044,521 23,903,215 59,038,002 Interest receivable 1,500,229 2,399,869

Accounts receivable, including 3,432,469,680 2,970,447,681 2,085,545,419 Interest payable 7,524,678 5,577,670

• Long-term accounts receivable 3,051,182,593 2,098,170,151 1,610,680,068 Cash flows

• Advances issued for capital construction and equipment for installation 13,784,619 14,467,016 14,910,443 Cash flows from operating activities

• Short-term advances issued 9,326,746 7,303,321 7,568,489 Proceeds:

• Allowance for impairment of accounts receivable 1,600,959 1,679,073 2,999,318 Other proceeds 62,979,522 94,455,926

Short-term and long-term financial investments, 6,329,715,861 6,267,338,712 6,489,566,357 Cash flows from investing activities

Including long-term 5,615,119,187 5,571,861,514 5,836,049,136 Receipts:

Liabilities 3,539,531,711 3,878,845,982 3,429,908,621 Sale of non-current assets (except for financial investments) 10,056,393 64,335

420 421 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

Table 49. Assets and liabilities under transactions with associates, (kRUB) Transactions For 2020 For 2019

Assets and liabilities Balance at 31 December Costs and expenses 731,414,250 1,250,529,709

2020 2019 2018 Oil and gas purchases 55,309,919 124,248,816

Assets 52,029,378 85,562,815 82,847,765 Oil products purchases 3,103,540 1,386,417

Cash and cash equivalents 490 − − Logistics and transportation 333,765,072 362,053,540

Accounts receivable, including 45,603,262 34,347,960 33,863,180 Customs duties 334,977,590 728,078,630

- Long-term accounts receivable 2,053,515 1,190,904 4,148,305 Leases of assets 147,444 112,808

- Advances issued for capital construction and equipment for installation 573 153 4,979 Expenses from transactions involving term transaction financial instruments 92,154 31,832,282

- Short-term advances issued 2,756,341 1,900,177 1,470,657 Other expenses 4,018,531 2,817,216

- Allowance for impairment of accounts receivable 10,519,909 9,390,197 9,473,083 Other transactions

Short-term and long-term financial investments, 6,425,626 51,214,855 48,984,585 Purchase of fixed assets 7,090 165,254

Including long-term 6,406,135 40,217,926 47,338,161 Loans and borrowings issued 2,082,408 4,572,586

Liabilities 294,699,357 381,242,196 332,672,518 Repayment of loans and borrowings issued 2,209,915 −

Accounts payable 234,752,591 330,970,899 317,267,080 Short-term loans and borrowings received 433,744,950 105,000,000

Short-term and long-term loans and borrowings (including interest), 59,946,766 50,271,297 15,405,438 Repayment of short-term loans and borrowings 543,275,300 252,000,000

Including long-term 43,074,750 33,414,515 15,394,669 Long-term loans and borrowings received 546,246,360 −

Repayment of long-term loans and borrowings − 112,500,000

25.3 INFORMATION and considering personal income 25.4 PRINCIPAL OWNERS Deposits placed 1,581,044,163 3,046,277,335

ON COMPENSATION PAID tax, amounted to kRUB3,531,264 AND ENTITIES CONTROLLED Deposits repaid 1,460,771,305 3,114,766,129 TO KEY MANAGEMENT and kRUB3,570,285, respectively BY PRINCIPAL OWNERS PERSONNEL (social insurance contributions Interest payable 32,876,541 34,313,321 paid to the budget of the Russian This section discloses Interest receivable 6,446,437 9,756,564 For information disclosure Federation under the law, which the information about transactions Cash flows purposes, key management are not income of the members with principal owners (legal personnel include members of the Management Board, entities and individuals) that Cash flows from operating activities of the Management Board amounted to kRUB519,885 hold more than 10 % of the total Payments: and members of the Board and kRUB513,128, respectively). number of votes that relate of Directors of Rosneft Oil The amount of short-term to voting shares, and entities To suppliers (contractors) for raw materials, other materials, work and services (536,109,764) (415,334,855) Company. compensation to members controlled by principal owners, Interest on debt obligations (32,478,763) (35,602,786) of the Management Board including state-controlled entities. In 2020 and 2019, short-term and members of the Board Cash flows from financing activities compensation to the members of Directors for 2020 is disclosed Proceeds: of the Management Board in accordance with the Russian taking in account the rotation legal requirements for disclosure From loans and borrowings 979,991,310 105,000,000 of the management staff, of information by issuers Payments: including salary and bonuses of securities. Dividends or other distribution of earnings to owners (participants) (151,437,611) (242,388,808)

Table 50. Information on transactions with principal owners and entities controlled Table 51. Assets and liabilities under transactions with principal owners and entities controlled by principal by principal owners, (kRUB) owners, (kRUB)

Transactions For 2020 For 2019 Assets and liabilities Balance at 31 December

Sales revenue and other income 372,038,417 399,684,893 2020 2019 2018

Oil and gas sales 182,560,483 264,219,112 Assets 699,998,366 252,970,839 738,888,392

Petroleum products and petrochemicals sales 184,331,141 134,202,571 Cash and cash equivalents 391,294,769 33,562,166 475,694,965

Income from transactions involving term transaction financial instruments 815,304 729,800 Accounts receivable, including 111,378,331 126,154,406 97,499,791

Income from shareholding in other entities 182,459 211,618 • Long-term accounts receivable 5,913,837 4,936,200 5,132,184

Other income 4,149,030 321,792 • Advances issued for capital construction and equipment for installation 33,809,648 32,809,682 28,237,506

422 423 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

• Short-term advances issued 24,985,217 35,002,026 29,803,656 Company Group as a whole. performance, the amount Information on revenue broken Given the fact that the business of assets and liabilities down by segment is presented • Allowance for impairment of accounts receivable 49,983 10,345 9,136 of the Company as a legal entity by segment, which refer only in the explanatory notes Short-term and long-term financial investments, 197,325,266 93,254,267 165,693,636 is an integral part of the Group to the Company’s operations below, as this data is provided Including long-term 101,333,698 87,663,843 96,324,663 management, management and are not related to the Group to the Company’s authorized decision-making and resource in general, are not prepared representatives on a regular Liabilities 831,035,023 367,274,279 615,323,703 allocation is performed by the duly for business lines. Therefore, basis. Segment information Accounts payable 16,389,599 6,755,387 10,170,206 authorized persons at the level segment information is fully was prepared taking into account of Rosneft Oil Company disclosed in the consolidated the economic, foreign currency, Short-term and long-term loans and borrowings (including interest) 814,645,424 360,518,892 605,153,497 Group; certain management financial statements of Rosneft Oil credit and price risks the Company Including long-term 737,508,223 180,477,410 408,917,660 reports reflecting financial Company Group. may be exposed to.

25.5 JOINT VENTURE 25.6 OTHER RELATED Table 54. Information on sales revenue by segment, (kRUB) PARTICIPANTS PARTIES Net revenue for the reporting year Segment There are no transactions Other related parties include Total External market Domestic market with companies involved in joint a non-state pension fund Oil 2,014,057,411 1,636,908,853 377,148,558 activities with the Company operating in the interests for the period of 2019–20. of the Company’s employees. Gas 165,231,269 − 165,231,269 Oil products and petrochemicals 1,982,814,798 869,127,488 1,113,687,310 Table 52. Information on transactions with other related parties, (kRUB) Other sales 672,987,627 − 672,987,627 Transactions For 2020 For 2019 Total 4,835,091,105 2,506,036,341 2,329,054,764 Sales revenue and other income 1,435 182

Other income 1,435 182 Oil includes sales of oil and gas Oil products and petrochemicals Other sales include the sales condensate. include sales of oil and gas refinery of other goods, public catering Costs and expenses 3,561,345 1,100,112 products. products, rendering of services, Other expenses 3,561,345 1,100,112 Gas includes sales of natural gas, dividends, lease of fixed assets, etc. APG and DSG.

Table 53. Assets and liabilities under transactions with other related parties, (kRUB)

Assets and liabilities Balance at 31 December 27. RELATED INFORMATION

2020 2019 2018 27.1 ENVIRONMENTAL MATTERS except for those already disclosed 27.3 ENERGY RESOURCES Assets 176 3 − and recorded in these financial The activities of oil and gas statements. Information on the total costs Accounts receivable 176 3 − companies are always subject related to energy resources used Liabilities − 1 3,804,684 to environmental risks. 27.2 INSURANCE is given below1. The Company’s management Accounts payable − 1 3,804,684 believes that its activities comply The Company continues to insure with legislative requirements its property, motor vehicles, In the reporting period, regarding environmental cargoes, shipments, construction the Company mainly used protection, and, therefore, works and the liability of its the monetary form of settlements the Company has no risk officials. with related parties. of significant liabilities in this area,

Table 55. Information on resources used, (kRUB)

26. SEGMENT INFORMATION № Energy resource For 2020 For 2019

The Company, its subsidiaries development, production analyzed by those persons 1 Electric energy 35,345 36,475 and associates (hereinafter, and sales of oil and gas, as well with the power to make 2 Heat energy 4,345 4,508 the “Rosneft Oil Company as the production, transportation decisions on resource allocation Group”) operate as a vertically and sales of petroleum products in the Company and further integrated business. Rosneft Oil in the Russian Federation performance evaluation, 1 Company Group is principally and abroad. Management is prepared for the business Тhe requirement of Article 22 of Federal Law No. 261-FZ, On Saving Energy and Increasing Energy Efficiency, and on Amendments to Certain Legislative Acts of the Russian Federation, dated 23 November 2009. engaged in the exploration, information, which is regularly purposes of Rosneft Oil In accordance with Article 2 of Federal Law No. 261-FZ, an energy resource is an energy carrier that is used or can be used for both economic and other activities, as well as a type of energy (atomic, heat, electrical, electromagnetic or other type).

424 425 ROSNEFT / ANNUAL REPORT 2020 Appendix 6.

27.4 RISK MANAGEMENT Other risks in technologies, market risks, GENERAL INFORMATION ABOUT ROSNEFT Environment reputational risks, etc.). In addition, Country risks The Company periodically the risks and opportunities Date of state registration Constituent entity of the Russian Pursuant to Decree Russia continues economic evaluates its environmental associated with climate change and registration number of Oil Federation in whose territory of the Government of the Russian reforms and development liabilities pursuant and the transition to low- Company Rosneft: the Company is registered: Federation dated August 20, of its legal, tax and regulatory to environmental regulations. carbon energy are considered • Date of state registration Moscow. 2009, No. 1226-r, Rosneft has frameworks as required Such liabilities are recognized in the Company’s strategic of the Company as a legal entity: been included into the list by a market economy. The future in the financial statements management and business December 7, 1995; Main types of operations of strategic enterprises charged stability of the Russian economy as identified. Potential liabilities, planning processes (especially • Number of State Registration of the Company: geological with implementation of uniform is largely dependent upon these which might arise as a result for projects located in climate- Certificate of the Company: prospecting and geological public policy in those branches reforms and developments of changes in the applicable sensitive regions: marine 024.537; exploration work aimed at oil, of economy where such entities and the effectiveness of economic, legislation or settlement of civil projects, Arctic projects, • Date of entry in the Uniform gas, coal and other minerals operate. financial and monetary measures disputes or changes in regulations, etc.) as well as in preparing State Register of Legal Entities search; extraction, transportation undertaken by the Russian cannot be reliably measured various development scenarios about a legal entity established and processing of oil, gas, coal Pursuant to Decree government. and are recognized as contingent for the world energy industry. prior to July 1, 2002: August 12, and other minerals and timber; of the President of the Russian environmental provisions. 2002; production of oil products, Federation dated May 21, 2012, The Russian economy has been With the existing control, • Series and number of Certificate petrochemicals and other No. 688, Rosneft has been negatively affected by sanctions the Company’s management of Entry in the Uniform State products, including electric included into the list of strategic imposed on Russia by a number believes that currently there Register of Legal Entities power, woodworking products, enterprises and strategic joint of countries. are no significant liabilities related about a legal entity established fast moving consumer goods stock companies. to the environmental damage, prior to July 1, 2002: Series 77 and provision of services Starting early March 2020, other than those disclosed No. 004856711; to the public; storage and sale the COVID-19 pandemic, among in these financial statements • Primary State Registration (including sale in the domestic other factors, caused a significant (Note 24).. Number under which entry market and export sale) of oil, gas, fall in oil demand and oil prices about establishment oil products, coal, electric power, in global markets, as well as a drop Risks and opportunities of the Company is made in the woodworking products, and other in the ruble exchange rate against associated with climate change Uniform State Register of Legal hydrocarbon and other derivatives. the world’s major currencies. Within the framework of its Entities: 1027700043502. Provided current trends persist corporate risk management in the long term, these factors system, the Company on an annual may continue to significantly basis identifies and evaluates risks affect the Company’s financial and opportunities relevant to its position, cash flows and financial business activities, including those performance. related to climate change.

Management is taking In the process of investment appropriate measures to support decision making, the risks the sustainability associated with health, safety of the Company’s business and environment (HSE), in the current circumstances. ecology, and climate change are analyzed. For large projects, Financial risks the analysis of the alignment The Company receives USD- with the Company’s strategic denominated export revenue. goals, environmental standards The Company enters into hedge and requirements of the Russian transactions to mitigate legislation and international the foreign exchange risk. A part organizations is performed, as well of USD-denominated loans as the analysis and assessment and borrowings is designated of external risks related as a hedging instrument for export to the impact on the environment revenue (Note 13). (changes in legislation, changes

426 427 ROSNEFT / ANNUAL REPORT 2020

CONTACT DETAILS

FULL NAME: RAS AUDITOR OF THE COMPANY:

Public Joint-Stock Company LLC Ernst & Young Rosneft Oil Company 77 Sadovnicheskaya Embankment, Bldg. 1, Moscow, 115035, Russia ABBREVIATED NAME: Telephone: +7 (495) 705-97-00; +7 (495) 755-97-00 PJSC Rosneft Oil Company Facsimile: +7 (495) 755-97-01

LOCATION OF THE COMPANY: REGISTRAR OF THE COMPANY:

26/1 Sofiyskaya Embankment, LLC Reestr-RN Moscow, 117997, Russia 2/6, Podkopaevsky sidest., Bldg. 3-4, Moscow 109028, Russia POST ADDRESS: Telephone: +7 (495) 411-79-11 Facsimile: +7 (495) 411-83-12 26/1 Sofiyskaya Embankment, E-mail: [email protected] Moscow, 117997, Russia Website: www.reestrrn.ru

INFORMATION SERVICE: GDR DEPOSITARY:

Telephone: +7 (499) 517-88-99 J. P. Morgan Facsimile: +7 (499) 517-72-35 Telex: 114405 DISVO.RU MOSCOW OFFICE: E-mail: [email protected] 10, Butyrskiy Val, Bldg. A, FOR SHAREHOLDERS: 13th Floor, Moscow, 125047, Russia Shareholder Relations Division, Telephone: +7 495 967-71-13 Corporate Governance Department, Rosneft Telephone: +7 (495) 987-30-60; LONDON OFFICE: 8-800-500-11-00 (calls from Russia toll-free) 25 Bank Street, Canary Wharf, 17th Floor, London E14 Facsimile: +7 (499) 517-86-53 5JP, UK Telephone: +44 207 134-55-18 E-mail: [email protected] Website of the Company: Russian Version: www.rosneft.ru FOR INSTITUTIONAL INVESTORS: English Version: www.rosneft.com

Investor Relations Department, Rosneft Telephone: +7 (495) 411-05-04 E-mail: [email protected]

IFRS AUDITOR OF THE COMPANY:

LLC Ernst & Young 77 Sadovnicheskaya Embankment, Bldg. 1, Moscow, 115035, Russia Telephone: +7 (495) 705-97-00; +7 (495) 755-97-00 Facsimile: +7 (495) 755-97-01

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