HIGH ACHIEVEMENTS HIGH RESPONSIBILITY SUSTAINABILITY REPORT 2014 4 SUSTAINABILITY REPORT 2014 KEY RESULTS OF THE YEAR million 38 hours 22% over 800 roubles AVERAGE NUMBER REDUCTION IN THE LOST EXPENDITURE ON OF TRAINING HOURS PER TIME INJURY FREQUENCY OCCUPATIONAL SAFETY EMPLOYEE RATE (LTIFR) HIGHLIGHTS OF THE YEAR Р. 69 Р. 72 Р. 81 Р. 86 Р. 111 Implementation of a set Implementation Reduction of harmful Start of construction Outcome of implementa- of measures to prevent of a Programme to Attract atmospheric emissions of an integrated complex tion of social programmes cardiovascular diseases Young Professionals due to refinery upgrades of biological treatment under agreements with facilities at the Group’s our operating regions refineries HEADCOUNT, AVERAGE SALARY, TOTAL AMOUNT OF TAX THOUSAND EMPLOYEES THOUSAND ROUBLES PAYMENTS, BILLION ROUBLES 35.0 80 320 33.3 67 Average salary 297 level in the 56 Republic of 290 Bashkortostan 30.0 40 Average salary 27.9 25 256 level across 22 260 Bashneft Group 25.0 0 230 2013 2014 2013 2014 2013 2014 In 2014 the number of Bashneft’s We maintain a high salary level, We paid 297 billion roubles in tax to employees increased by 20% as petro- which is higher than the average level budgets of all levels. chemical assets were included in the across the Republic of Bashkortostan, scope of the Group again. in order to attract and retain the best professionals. HIGH ACHIEVEMENTS HIGH RESPONSIBILITY 5 OUR STRATEGIC PRIORITY IN THE SPHERE OF HEALTH, SAFETY AND ENVIRONMENT IS TO BECOME A LEADER AMONG RUSSIAN OIL 85.6 % +20 % COMPANIES IN THE SPHERE OF SHARE OF EURO 5 INCREASE IN OIL HSE AND TO MEET INTERNATIONAL GASOLINE IN THE TOTAL SLUDGE PROCESSING STANDARDS. OUTPUT WE ARE COMMITTED TO AN OPEN DIALOGUE AND RESPONSIBLE COOPERATION WITH ALL STAKEHOLDERS: SHAREHOLDERS AND INVESTORS, EMPLOYEES, CONSUMERS, SUPPLIERS, LOCAL COMMUNITIES AND REGULATORY BODIES Bashneft’s activities in the sphere of Compact Blueprint for Corporate Sus- sustainable development are based tainability Leadership. on the ISO 26000:2010 International Standard (Guidance on Social Respon- Bashneft is a member of the Interna- sibility), the GOST R ISO 26000-2012 tional Petroleum Industry Environmen- standard (Guidance on Social. Respon- tal Conservation Association (IPIECA) sibility) and guidelines on human rights, employment relations, environ- Bashneft is a member of the Interna- mental protection and anti-corruption tional Association of Oil & Gas Produc- measures set out in the UN Global ers (OGP). RENOVATION AND MAJOR REPAIRS OIL SLUDGE PROCESSING, EXPENDITURE ON OF FLOWLINES, KILOMETRES THOUSAND TONNES ENVIRONMENTAL PROTECTION BY AREA 78.4 80 405 10% 400 65.1 58% 60 296 32% 300 40 Water bodies 200 BILLION 9.3 ROUBLES 20 Land 100 Atmosphere 0 0 2013 2014 2013 2014 In 2014 we expanded the scope of our In 2014 the volume of oil sludge pro- In 2014 expenditure on environmental programme of renovation and major cessing grew by 20%. protection measures totalled repairs of flowlines. 9.3 billion roubles. 6 SUSTAINABILITY REPORT 2014 CONTENTS KEY RESULTS AND HIGHLIGHTS OF THE YEAR 4 STAKEHOLDERS 48 ADDRESS BY THE CHAIRMAN OF THE Stakeholder map 50 BOARD OF DIRECTORS AND THE PRESIDENT OF JSOC BASHNEFT 8 Shareholder and investor engagement 51 ABOUT THE REPORT 10 Employees 53 General provisions 10 Consumers 54 Definition of material aspects and Suppliers and business partners 55 their boundaries 11 Regulatory bodies 57 Differences from the Sustainability Report for 2013 11 Local communities and non-profit organizations 58 SUSTAINABLE DEVELOPMENT 12 Key areas of stakeholder engagement 59 Aims and values in the sphere of sustainable PERSONNEL AND SOCIAL POLICY 60 development and the Group’s mission 14 Principles and key areas of our HR policy 61 Goals and tasks in the sphere of sustainable development 15 Our employees 64 Charters and membership of associations 17 Incentives and remuneration 66 The Group’s key events in the sphere The Group’s social policy 68 of sustainable development 18 ENVIRONMENTAL PROTECTION 78 Achievements in the sphere of sustainable development in 2014 20 Protection of the atmosphere 81 ABOUT THE GROUP 22 Protection of water resources 84 History of our Group 23 Land conservation 87 Structure of the Group and share Biodiversity 90 capital structure 25 Energy efficiency 91 Business model and geographical footprint 27 OCCUPATIONAL HEALTH AND SAFETY 94 Position in the industry 31 Occupational safety 97 Strategy and operating results 32 Protecting employees in emergency situations 103 Corporate governance 38 Industrial safety 104 7 CHARITABLE PROGRAMMES AND DISCLAIMER PARTICIPATION IN THE DEVELOPMENT OF OPERATING REGIONS 106 Information provided in the Sustainability Report Principles of sustainable development includes projections or other forward-looking state- of operating regions and charity work 108 ments concerning future events within the Group or its future financial performance. These statements Economic impacts on operating regions 109 are only forecasts, and actual events or performance may differ from those stated. Forward-looking Target programmes and charity work 110 information is disclosed before the beginning of the reporting period. The actual performance may differ Improvement of the Group’s system materially from what is declared in our assumptions for charitable funding 115 and forecasts due to a large number of factors. Such factors may include general economic conditions; APPENDICES 116 competitive environment; risks related to operat- ing in Russia and abroad; technological and market Appendix 1. GRI Content Index 117 changes in the oil and gas sector, as well as other factors related to the Group’s operations. Appendix 2. Material aspects of Bashneft’s business 126 The Report may include certain interim results and projections about future periods. Statements Appendix 3. Certificate of public endorsement 128 concerning processes beyond the reporting period cannot be considered assertions, and the relevant Appendix 4. Glossary 129 data should be considered only interim but not final results. CONTACT DETAILS 130 The total amount presented in tables and diagrams in the Report may differ from the sum of component parts due to rounding. Further up-to-date information on the Group’s operations is available on the website at http://www.bashneft.com 8 SUSTAINABILITY REPORT 2014 ADDRESS BY THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE PRESIDENT OF JSOC BASHNEFT G4-1 DEAR COLLEAGUES of retail sales in the total volume AND PARTNERS, of domestic sales of engine fuel increased to 24%, while Bashneft’s We are glad to present the Sustain- retail network was expanded to 582 ability Report of JSOC Bashneft for own filling stations and 220 partner 2014. The Report examines our efforts filling stations. in the sphere of cooperation with all parties involved in the Group’s opera- We consistently improve the corpo- tions, charity work, health, safety and rate governance system: in 2014 we environment. enhanced the role of the Company’s Board of Directors in making key In 2014 the global energy market decisions and completed a large-scale was highly volatile: as supply exceed- reorganization of the Group: we con- ed demand, the end of the year saw siderably simplified its organizational a sharp fall in crude oil prices. and shareholder structures and elimi- ALEXEY TEKSLER nated cross-holdings. Chairman of the Board of Directors Despite unfavourable external con- of JSOC Bashneft ditions, Bashneft proceeded with its We expect that further development strategic plans. We continued to focus of the Group in the coming years on improving business efficiency while will involve a number of measures maintaining a high level of corporate to achieve our strategic priorities. social responsibility. We managed We plan to continue to boost produc- to achieve impressive results both tion at brownfields and develop new in terms of financial and operational oil-producing regions, and at the performance and in the sphere of sus- same time to implement a large-scale tainable development. geological exploration programme. We will continue the refinery upgrade We considerably expanded our programme aimed at increasing the resource base (by the end of the year share of light products, improving the reserve replacement ratio totalled energy efficiency and ceasing produc- 179%) and achieved the strongest oil tion of heavy petroleum products. In production growth among Russian the sphere of sales and marketing, we companies once again: +10.8% year aim to achieve a further increase in on year. sales of high-margin petroleum prod- ucts through integrated development Completion of major refinery upgrades of guaranteed marketing channels, in 2014 made it technically feasible expansion of direct access to con- to ensure that 100% of engine fuels sumers and development of sales of produced by Bashneft are environ- niche products. In addition, we aim mentally friendly and meet the Euro to continue to improve our corporate ALEXANDER KORSIK 5 standard, while the Group’s Nelson governance system. President of JSOC Bashneft Index reached 8.93, which is the best result in the industry. Work in the sphere of sustainable development remains our priority We successfully continue our work and one of our strategic objectives. aimed at expanding channels provid- We created an efficient HSE manage- ing access to consumers. The share ment system. The British Standards ADDRESS BY THE CHAIRMAN OF THE BOARD OF DIRECTORS AND 9 THE PRESIDENT OF JSOC BASHNEFT Institution (BSI) acknowledged that budgets of all levels reached 297 bil- Bashneft’s integrated HSE Man- lion roubles. agement System complies with the thousand OHSAS 18001 standard and that its In the medium term, our tasks in the Environmental Management System sphere of sustainable development 33 employees complies with the ISO 14001 standard. include further improvement of HSE HEADCOUNT management and HSE performance: We seek to create a safe and favour- protecting the life and health of our able working environment for our employees, ensuring industrial safety employees.