‘09

JSC NEFT ANNUAL REPORT 2009

ENERGY FOR LIFE ENERGY FOR PEOPLE

JSC ANNUAL REPORT 2009

Contents

2 1. MESSAGE TO SHAREHOLDERS 110 11. ENVIRONMENT, ENERGY SAVING, INNOVATION

8 2. KEY PERFORMANCE INDICATORS 122 12. SOCIAL POLICY 124 PERSONNEL, OCCUPATIONAL SAFETY AND 10 3. 2009 HIGHLIGHTS HEALTH

16 4. COMPANY’S PROFILE 128 13. To SHAREHOLDERS AND INVESTORS 18 COMPANY’S HISTORY 130 AUTHORIZED CAPITAL, SHAREHOLDER CAPITAL 19 COMPANY’S STRUCTURE STRUCTURE 20 GEOGRAPHY OF OPERATIONS 130 STOCK MARKET AND CAPITALIZATION 30 HIGHLIGHTS OF THE YEAR 132 PARTICIPATION IN THE DEPOSITARY RECEIPT 32 COMPETITIVE STATE OF THE COMPANY PROGRAM 134 DIVIDEND HISTORY 36 5. KEY PERFORMANCE INDICATORS OF THE COM- 135 OBSERVING THE CORPORATE CODE OF CON- PANY IN 2009 BY TYPE OF OPERATION DUCT 38 OIL AND GAS EXPLORATION AND PRODUCTION 40 RESOURCE BASE 138 14. MAJOR TRANSACTIONS AND RELATED PARTY 40 EXPLORATION TRANSACTIONS 41 LICENSING 42 PRODUCTION 144 15. ASSET MANAGEMENT AND IMPROVEMENT OF 44 REFINERIES & MARKETING REGIONS CORPORATE STRUCTURE 46 REFINING 48 PRODUCTION OF PRODUCTS 148 16. CREDIT RATINGS AND DEBT PORTFOLIO MAN- 52 PREMIUM BUSINESS SEGMENTS AGEMENT

54 6. COMPANY’S GROWTH PROSPECTS 154 17. GLOSSARY OF KEY TERMS AND DEFINITIONS

60 7. INVESTMENT: TECHNICAL REEQUIPMENT AND 156 18. ADDRESSES AND CONTACTS DEVELOPMENT OF THE COMPANY

64 8. PERFORMANCE AND FINANCIAL INDICATORS 66 PERFORMANCE AND FINANCIAL INDICATORS 70 Management’s Discussion and Analysis of Financial Condition and Results of Operations for 2009, 2008 and 2007

86 9. MAJOR RISK FACTORS

94 10. Corporate Governance 102 BOARD OF DIRECTORS’ ACTIVITIES IN 2009 104 MEMBERSHIP OF THE MANAGEMENT BOARD 108 TOTAL AMOUNT OF REMUNERATION TO MEM- BERS OF THE BOARD OF DIRECTORS AND MANAGEMENT BOARD

1

JSC GAZPROM NEFT ANNUAL REPORT 2009

Dear Shareholders

The oil business of Gazprom Group has successfully overcome the 2009 crisis. Despite the complicated external financial and economic environment, in terms of operating efficiency JSC Gazprom Neft has secured the position as one of the leaders of the Russian oil sector. The Company showed high results of operating revenue per barrel produced and a high level of return on capital invested. This has resulted in the stockholders of Gazprom Neft receiving one of the highest returns in the sector.

In 2009 the Company increased the volume of both oil production and refining, effectively managing its key enterprises. The geographic expansion of oil production due to new projects in the Near East, Africa, and Latin America, integration of ’s NIS, purchase of lubricants facility in Italy, consolidation of the controlling interest in Sibir Energy, launch of large-scale rebranding program of the chain of filling stations – these events of 2009 determined the development direction of Gazprom Neft and therefore of the total business of the global energy company “Gazprom”.

Alexey Miller

Chairman of the Management Board, JSC Gazprom, Chairman of the Board of Directors, JSC Gazprom Neft

3

JSC GAZPROM NEFT ANNUAL REPORT 2009

Dear Shareholders

All over the world the previous year was affected by the economic crisis. However, despite the negative global economic trends Gazprom Neft showed stable operations throughout the year and good year-end financial and operating results.

First of all, we are satisfied with the operational perfomance of The Company. Gazprom Neft’s hydrocarbon reserves of ABC1 category increased to 1.782 bn tons of oil equivalent, and oil and gas production increased up to 50.2 mln tons of oil equivalent. The refining throughput grew by 17.6% and amounted to 33.4 mln tons.

The year 2009 was a period of active development of our marketing business units. The Company achieved a leading position in ’s jet fuel and bunker market. Further in the development of the lubricants business there was a serious breakthrough plus the initiation of a large-scale rebranding program of the chain of filling stations. In summary 40% more petroleum products were sold through premium segments in 2009 than in 2008.

These operational achievements are reflected in the year end financial results. In spite of the fact that in absolute terms the revenue and net income of Gazprom Neft decreased, in estimates of comparable market environments the operating income went up. Besides the year end results show that Gazprom Neft became one of the leaders of the sector in terms of total return for stockholders.

The ambitious tasks that we now face will lead to further growth in the size of the business in tandem with international geographic expansion while keeping the leading position in the sector in terms of operational efficiency. I am sure that implementation of the strategy aimed at transforming Gazprom Neft into a visible player on the global oil market will enable the company to show high operating results in future and to fully utilize its unique business potential.

Alexander Dyukov

Chairman of the Management Board, CEO JSC Gazprom Neft

5 ENERGYENERGY FOR FOR LIFE LIFE ENERGYENERGY FORFOR PEOPLE PEOPLE 2 KEY PERFORMANCE INDICATORS OF THE COMPANY KEY PERFORMANCE INDICATORS Energy for life 2 OF THE COMPANY ENERGY FOR PEOPLE KEY PERFORMANCE INDICATORS OF THE COMPANY

Key Financial Indicators 2009 2008 2007 2009 / 2008, %

Sales revenue, mln USD 24 166 33 870 22 768 (28,7) EBITDA, mln USD 5 977 8 610 6 601 (30,6) Operating income, mln USD 3 429 6 249 4 899 (45,1) Income before tax, mln USD 3 897 6 161 5 458 (36,7) Net income, mln USD 3 013 4 658 4 143 (35,3) Net cash from operating activities, mln USD 3 474 5 483 5 316 (36,6) Investments, mln USD 4 899 3 399 5 959 44,13 Dividend paid, mln USD 937 792 2 071 18,31 Net financial debt, mln USD 5 014 1 312 2 641 282,16 Average capital employed, mln USD 18 586 14 357 11 700 29,5 Average shareholders’ equity, mln USD 15 056 12 197 10 182 23,4 Price per share at year-end, USD RTS 5,55 2,05 6,35 170,7 Price per share at year-end, rub. MICEX 163,64 62,67 151,74 161,1

Key Financial Ratios 2009 2008 2007 2009 / 2008

Basic and Diluted Earnings per Common Share, USD per share 0,64 0,98 0,87 (35,1) Dividend per share*, rub. - 5,40 5,40 Return on average capital employed, % 13,87 33,45 31,86 (19,6) EBITDA margin, % 24,73 25,42 28,99 (0,7) EBITDA per barrel, USD per barrel 17,12 25,12 20,67 (32,7) Net income margin, % 12,47 13,75 18,02 (1,3) Net income per barrel, USD per barrel 13,40 20,38 17,04 (32,7) Return on equity, % 20,01 38,19 40,69 (18,2) Gearing, % 25,20 10,39 20,56 14,8 Net financial debt / EBITDA 0,99 0,17 0,45 472,41

* — on the signature date of this Report the dividend for 2009 had yet to be announced

8 JSC GAZPROM NEFT ANNUAL REPORT 2009

Key Production Indicators 2009 2008 2007 2009 / 2008, %

Proven oil reserves, mln bbl 6 924 6 303 6 709 9,9 Proven gas reserves, bn ft3 3 200 3 033 1 232 6,5 Hydrocarbon reserves, mln BOE 7 462 6 808 6 914 9,7 Crude production by consolidated subsidiaries, mln bbl 224,9 228,6 243,2 (1,6) Crude production including share in equity investees, mln bbl 349,2 342,8 320,5 1,9 Marketable gas production by consolidated subsidiaries, bn m3 2,0 1,9 1,5 5,3 Marketable gas production including share in equity investees (Slavneft and Tomskneft), bn m3 3,2 3,1 1,9 3,2 Marketable hydrocarbon production, thousand BOE per day 1 008 987 909 2,1 Refining at own refineries, mln t 26,6 18,4 16,5 44,5 Refining at equity , mln t 6,8 10,0 9,7 (32,7) Exports, mln t Non-CIS 15,6 16,3 15,1 (3,7) Exports, mln t CIS 3,3 3,3 2,5 0,0 Sales, mln t Russian Federation 0,3 0,9 1,6 (66,7) Gas sales, bn m3 3,7 3,7 2,2 - exports Non-CIS, mln t 13,2 10,9 11,4 21,1 Petroleum product exports CIS, mln t 2,3 1,9 1,9 21,1 Petroleum product sales Russian Federation, mln t 18,3 16,2 13,4 13,0 Number of filling stations (own, leased and franchise) 1 562 865 783 80,6

9 ENERGY FOR LIFE ENERGY FOR PEOPLE 3 2009 HIGHLIGHTS 2009 HIGHLIGHTS Energy for life 3 ENERGY FOR PEOPLE 2009 HIGHLIGHTS

FEBRUARY AA JSC Gazprom Neft completed the consolidation process for the controlling interest in NIS (51%); the Company’s representatives became members of NIS’ Board of Directors AA JSC Gazprom Neft-Aero started fuelling aircraft of the Transaero Company at Domodedovo airport AA JSC Gazprom Neft and the Government of the Leningrad Region signed a general agreement for cooperation for 2009–2011 AA JSC Gazprom Neft and signed a loan agreement for USD 724 mln for 1.5 years

MARCH AA An ‘Information Stand’ for JSC Gazprom Neft was opened in Gubkin Russian State University of Oil and Gas AA KRS-Service LLC, an affiliate of Gazprom Neft-Nefteservice LLC received an ISO 9001:2008 certificate

APRIL AA JSC Gazprom Neft started selling petroleum products on the Saint Petersburg International Mercantile Exchange AA JSC Gazprom Neft closed the deal purchasing the Chevron Italia S.p.A. oils and lubricants production plant in the city of Bari (Italy) from Chevron Global Energy AA A branch of Gazprom Neft-Lubricants LLC, Omsk Plant of Lubricants, was established at Omsk Refinery; AA JSC Gazprom exercised its option for the purchase of 20% of shares in JSC Gazprom Neft from the Italian company , thus raising its own share in the stock capital of JSC Gazprom Neft to 95.68%. AA The center of space visualization, using advanced technologies in geologic and hydrodynamic simulation, opened in the science and technology center of JSC Gazprom Neft in Saint Petersburg AA JSC Gazprom Neft successfully placed a debut issue of ten-year bonds of 04 category with the total notional value of 10 billion rubles

MAY AA JSC Gazprom Neft and JSC SIBUR Holding signed an agreement of intent for gas treatment and processing in Eastern and in the Far East AA CJSC Gazprom Neft-Severo-Zapad won the auction for the right of a three-year lease of 12 plots of land for construction of filling stations in Saint Petersburg AA JSC Gazprom Neft was declared the best taxpayer of Saint Petersburg and the top company in the list of twenty that made the greatest contribution to the income of the city budget in 2009 AA Corporate clients started using new fuel cards for getting service at JSC Gazprom Neft’s filling stations

JUNE AA Gazprom Neft’s Annual General Shareholders’ Meeting was held AA JSC Gazprom Neft produced and dispatched the fist consignment of eurobitumen manufactured at OJSC Slavneft-Yaroslavnefteorgsintez AA NIS () and OJSC Srbijagas signed a set of agreements according to which NIS will take part in the construction of underground storage (Serbia) AA JSC Gazprom Neft concluded a General agreement for cooperation with the Government of the Murmansk Region for 2009-2011 AA Gazprom Neft-Lubricants LLC started industrial production of hydraulic and gear oils at the Omsk Refinery AA JSC Gazprom Neft consolidated the controlling stake in Sibir Energy (54.71%)

12 JSC GAZPROM NEFT ANNUAL REPORT 2009

JULY AA A new of Gazprom Neft-Aero (JV of CJSC Gazprom Neft-Aero and Tomsk Airport LLC) commenced operation in Tomsk airport AA JSC Gazprom Neft repaid in advance the loan of 375 million USD to The Bank for Development and Foreign Economic Affairs (Vnesheconombank) AA JSC Gazprom Neft concluded an agreement with the Ministry of Transport of the Russian Federation on cooperation in the sphere of production and use in Russia of a new-generation petroleum based road bitumen AA Production of the first product under the brand name “Gazprom Neft” — semisynthetic engine oil Gazprom Neft Super Oil ESX 10W-40 — started at Gazprom Neft Lubricants Italia S.p.A. plant in the city of Bari (Italy) AA Renovation of a diesel hydrotreater was completed at Omsk Refinery resulting in the plant now being able to produce hydrotreated diesel oil to the Euro 5 ecological standard AA The Board of Directors of NIS elected Deputy Chairman of Gazprom Neft’s Management Board and Deputy Director General for Economics and Finance Vadim Yakovlev as the Chairman of the Company’s Board of Directors.

AUGUST AA JSC Gazprom Neft bought a chain of filling stations (including 40 stations and two tank farms) in the Chelyabinsk Region AA The level of daily oil production of Gazprom Neft-Khantos LLC in August reached a record of 25 thousand tons AA The first stage of reconstruction of a fuel service complex of Gazprom Neft-Aero Novosibirsk was completed in Tolmachevo airport enabling the new jet fuel discharge pumping system to be commissioned AA JSC Gazprom Neft and the Administration of the Yamal-Nenets Autonomous District (YNAD) concluded a general agreement for cooperation for 2009-2011

SEPTEMBER AA Gazprom Neft’s Board of Directors approved the Exploration and Production Strategy of the Company until 2020 AA The 30-millionth ton of oil was produced on the deposits of Gazprom Neft-Khantos AA JSC Gazprom Neft signed a general agreement for cooperation with the Government of the Omsk Region for 2009-2011 AA The Chairman of the Management Board of JSC Gazprom Neft Alexander Dukov held the field laying ceremony at Muravlenkovskoye field AA The federal rebranding campaign of Gazprom Neft chain of filling stations started with the official ceremony of opening of the first filling station under the new brand being held in Omsk

OCTOBER AA SibiMotor Extra Synthetic engine oil passed Volkswagen’s specification tests AA Gazprom Neft-Lubricants LLC and Nippon Oil Corporation signed a Memorandum of Understanding according to which the affiliate of JSC Gazprom Neft will start production of lubricants for Nippon Oil Corporation on the territory of Russia

13 2009 HIGHLIGHTS Energy for life ENERGY FOR PEOPLE

November AA JSC Gazprom Neft launched a large-scale federal advertising campaign for the new retail brand of filling stations “Gazprom Neft” AA JSC Gazprom Neft and the National Iranian Oil Company (NIOC) signed a Memorandum of Understanding reflecting the intentions of the sides in oil field development of the Azar and Shangule fields in Iran AA The annual report 2008 of JSC Gazprom Neft was declared the best product of nonfinancial sector in the XI Annual Reports Contest held by Expert RA Rating Agency AA An affiliate of Gazprom Neft-Nefteservice LLC OJSC Noyabrskneftegazgeophysica won the OFS- AWARDS-2009 Prize in the nomination for “Strategy of the Year”

DECEMBER AA As part of an international consortium JSC Gazprom Neft won the tender in for the Badra oil field development (reserves of 2 bn barrels) AA JSC Gazprom Neft and Sweden’s Malka Oil signed a binding protocol on the terms and procedure of selling a production unit of Malka Oil — STS Service LLC — to Gazprom Neft. AA JSC Gazprom Neft brought into operation Phase 1 of the gas turbine power plant at Yuzhno- (KMAD) AA JSC Gazprom Neft sold sold its share of the authorized capital of JSC Sibneft-Chukotka to the Administration of Chukotka. Operations of the Company in the Chukotka District have been ceased.

SUBSEQUENT EVENTS

JANUARY AA JSC Gazprom Neft signed a contract for the development of the Badra field in Iraq AA JSC Gazprom Neft started deliveries of oil from Kozmino port within the ESPO pipeline project AA JSC Gazprom Neft’s Board of Directors approved the Regulations for the the Company’s Dividend Policy on January 25, 2010

FEBRUARY AA JSC Gazprom Neft and Sweden’s Malka Oil closed the deal for the purchase of STS Service AA Russian President paid a working visit to Gazprom Neft-Omsk Refinery AA JSC Gazprom Neft won the case in the court of appeal canceling the FAS fine AA JSC Gazprom Neft approved its Development Strategy through to the year 2020

MARCH AA JSC Gazprom Neft reported its financial results of 2009 according to US GAAP standards AA Construction of a fuel hydroforming complex started at the Omsk Refinery

14

ENERGY FOR LIFE ENERGY FOR PEOPLE 4 COMPANY’S PROFILE COMPANY’S PROFILE Energy for life 4 ENERGY FOR PEOPLE COMPANY’S PROFILE*

* In this report such terms as “Gazprom Neft”, “the Company”, and “Group” in different variants refer to JSC Gazprom Neft, its consolidated subsidiaries and affiliates.

COMPANY’S HISTORY

Every year Gazprom Neft significantly 1998–2004 and Kazakhstan. The same year the increases its size and strengthens its Company for the first time joined, positions in the oil and gas sector both Good resource potential, effective as a shareholder, an international in Russia and abroad. raw material processing capacity and pipeline project of state significance; professional management ensured specifically the construction of the a high rate of Company development. Burgas-Alexandroupolis Transbalkan Oil The management of Sibneft did Pipeline jointly with JSC OC and a great deal to modernize production, JSC . 1995 introduce the latest technology and optimize business processes. Thanks 2008 Open Joint Stock Company Siberian to the implementation of a proactive Oil Company was established under policy aimed at increasing assets the JSC Gazprom Neft completed the a Decree of The President of the geography of production expanded ownership structure of Joint Stock Russian Federation № 872 «On significantly (Tomsk Region, Omsk Company Moscow Refinery. The project Establishment of Open Joint Stock Region, and Chukotka Autonomous partners — JSC Gazprom Neft and Company Siberian Oil Company,» District) and the sales network in JSC Moscow Oil and Gas Company dated August 24, 1995, and Russia’s regions was also expanded established on a parity basis a company Resolution of the Government of (Sverdlovsk Region, Tyumen Region, called Moscow NPZ Holdings B.V. the Russian Federation № 972 «On the Krasnoyarsk Krai, Saint Petersburg, contributing to its authorized capital Organization of Open Joint Stock Moscow). One of the major purchases 90.01% of voting shares or 77.25% of Company Siberian Oil Company,» of the Company during this period was the authorized capital of the Moscow dated September 29, 1995. Acting the purchase of 49.9% of shares of JSC Refinery. Gazprom Neft and MNGK as the Company's founder, the State NGK Slavneft that produces oil and gas came to an agreement to jointly passed on the government stake in in Western Siberia and the Krasnoyarsk manage the Moscow Refinery and the biggest oil industry enterprises Krai. make all decisions on a parity basis. of Russia: OJSC Noyabrskneftegaz, OJSC Noyabrskneftegazgeophysica, 2005 2009 OJSC Omsk Refinery, and OJSC Omsknefteproduct, to the authorized A controlling interest in the JSC Sibneft Gazprom Neft expanded its presence capital of the holding. The Company (75.68%) was bought by Gazprom in the global market — some of the was registered on October 6, 1995. Group and subsequently on May 13, highlights of the year are summarized 2006 the Company's name has been below: 1996–1997 changed to the Joint Stock Company AAAcquiring 51% of shares of Naftna Gazprom Neft. The strategic objectives Industrija Srbije (NIS); Plan of privatization of Sibneft of the Company were to ensure the AAConsolidation of its controlling stake was implemented by the Russian position of a global company that has in Sibir Energy that ensured increase Government with the purpose of regionally diversified assets along the in oil production and growth of developing the market economy. entire revenue chain. effective ownership ratio of the At auctions in 1996 private investors Moscow Refinery up to 59.75%; bought some 49% of Sibneft’s shares. 2006 AAAcquiring 100% of the Chevron Italia In 1997 under the governmental S.p.A. oils and lubricants producing program “Shares for Loans” the Gazprom Neft entered the retail plant in the city of Bari (Italy) from Financial Oil Company won the auction market of Central Asia by setting Chevron Global Energy; to purchase the State-owned share up an affiliate Gazprom Neft Asia AASigning a Memorandum of in Sibneft. to sell petroleum products of the Understanding with the National Company in Kyrgyzstan, Tajikistan, Iranian Oil Company (NIOC) that

18 JSC GAZPROM NEFT ANNUAL REPORT 2009

envisages cooperation in the Malka Oil that develops sites that are Every year Gazprom Neft significantly development of oil fields in Iran; geographically close to the fields of increases its size and strengthens its AALaunch of a large-scale rebranding Gazprom Neft-Vostok in the Tomsk positions in the oil and gas sector both program for the filling stations of the Region; in Russia and abroad. Company. The new brand of the AAIn December the Company acted as chain of filling stations was named the major member of the consortium “Gazprom Neft”; for the development of the Badra field AAAcquiring STS Service company — in Iran with the reserves of 2 billion a production affiliate of Sweden’s barrels of oil.

COMPANY’S STRUCTURE

Gazprom NEFT

Production Oil Service and Exploration MARKETING

OJSC Gazprom Neft-Noyabrskneftegas Gazprom Neft-Nefteservice LLC OJSC Gazprom Neft-Omsk Gazprom Neft-Khantos LLC OJSC Gazprom Neft NNGF CJSC Gazprom Neft-Kuzbass Gazprom Neft-Vostok LLC Kapitalny Remont Skvazhin – Service LLC OJSC Gazprom Neft-Altai Archinskoye LLC Spetstransservice LLC Gazprom Neft-Tsentr LLC OJSC Meretoyakhaneftegaz Noyabrskneftegazsvyaz LLC CJSC Munai-Myrza Sibneft-Yugra LLC Noyabrskteploneft LLC Gazprom Neft Marine Bunker LLC Severnaya Taiga – Neftegaz LLC RMZ Gazprom Neft – Omsk Refinery LLC Gazprom Neft Asia LLC Zapolyarneft LLC Noyabrskneftespetsstroy LLC OJSC Gazprom Neft-Tyumen Gazprom Neft-Yamal LLC Noyabrskenergoneft LLC Gazprom Neft-Tsentr LLC Gazprom Neft-Angara LLC NoyabrskEPUService LLC Gazprom Neft-Chelyabinsk LLC Gazprom Neft- LLC Service Drilling Company LLC Gazprom Neft-Krasnoyarsk LLC Neftekhimremont LLC OJSC Gazprom Neft-Ural Refining OOO YamalServiceTsentr (LLC) CJSC Gazprom Neft-Aero OJSC Gazprom Neft-Omsk Refinery Muravlenkovskaya Transportnaya CJSC Gazprom Neft-Aero Gazprom Neft-Lubricants LLC Kompaniya LLC CJSC Gazprom Neft-Severo-Zapad Gazprom Neft Lubricants Italia S.p.A. Noyabrskneftegazproekt LLC Gazprom Neft-Kaluga LLC OJSC Moscow Refinery Yamalenergoremont LLC OJSC Sibneft-Yaroslavnefteproduct Noyabrskneftegazavtomatika LLC OJSC Gazprom Neft-Novosibirsk Crude Exports Avtomatika Service LLC CJSC Gazprom Neft- Gazprom Neft Trading Gmbh Servisnaya Transportnaya Kompaniya LLC Gazprom Neft-Aero Murmansk LLC Gazprom Neft-Tajikistan LLC Joint Ventures: Noyabrskaya Tsentralnaya Trubnaya Slavneft Baza LLC Gazprom Neft-Kazakhstan LLP Tomskneft Alliance Oil Asia LLC Other Operations Gazprom Neft-Shipping LLC Multibusiness Companies: «Naftna Industrija Srbije» (NIS) Gazprom Neftfinance LLC Gazprom Neft-Resurs LLC Sibir Energy Plc. Gazprom Neftenergo LLC Gazprom Neft-Nizhniy Novgorod LLC Gazprom Neft – ZS LLC Gazprom Neft-Belnefteprodukt LLC Gazprom Neft – NTTS LLC CJSC Gazprom Neft-Mobilnaya Karta Gazprom Neft – Invest LLC OJSC Gazprom Neft-Yaroslavl Gazprom Neft Business Service LLC CJSC Social and Business Center Okhta Complex Galernaya 5 LLC

19 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

GEOGRAPHY OF OPERATIONS

Geography of Production

1 Khanty-Mansi Autonomous Okrug 2 Tyumen Region 3 Omsk Region 4 Yamalo- 5 Tomsk Region 6 Krasnoyarsk Krai Serbia Angola

4 6 1

Serbia

2 5 3

Angola

20 JSC GAZPROM NEFT ANNUAL REPORT 2009

4 6 1

2 5 3

21 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

GEOGRAPHY OF OPERATIONS

Geography of Subsoil Use

1 2 Khanty-Mansi Autonomous Okrug 3 Nenets Autonomous Okrug 4 Tyumen Region 5 Omsk Region 6 Tomsk Region 7 Yamalo-Nenets Autonomous Okrug 8 Krasnoyarsk Krai 9 Irkutsk Region

3

10

7 8 2

1

4 6 5

9

22 JSC GAZPROM NEFT ANNUAL REPORT 2009

3

10

7 8 2

1

4 6 5

9

23 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

GEOGRAPHY OF OPERATIONS

Refining

REFINING 1 Moscow & Moscow Region 2 Yaroslavl Region 3 Omsk Region 4 Belarus 5 Serbia

LUBRICANTS 2 Yaroslavl Region 3 Omsk Region 5 Serbia 6 Italy

4

2 1

3

6 5

24 JSC GAZPROM NEFT ANNUAL REPORT 2009

4

2 1

3

25 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

GEOGRAPHY OF OPERATIONS

Geography of Sales

RETAIL sales LARGE 1 Tver Region wholesales 2 Kaluga Region 17 Pskov Region 3 Moscow and 18 Smolensk Region Moscow Region 19 Bryansk Region 4 Leningrad Region 20 Kursk Region 5 Yaroslavl Region 21 Oryol Region 6 Ivanovo Region 22 Belgorod Region 7 Nizhny Novgorod 23 Rostov Region Region 24 Stavropol Krai 8 Sverdlovsk Region 25 Tambov Region 32 9 Chelyabinsk Region 26 Novgorod Region 49 27 Vladimir Region 10 Tyumen Region 31 11 Omsk Region 28 Republic of 12 Novosibirsk Region Mordovia 13 Tomsk Region 29 Vologda Region 17 4 14 Kemerovo Region 30 Republic of 26 Tatarstan 15 Altai Republic 33 16 Krasnoyarsk Krai 31 Republic of Karelia 1 29 32 Murmansk Region 18 50 Kazakhstan 33 Archangelsk Region 5 51 Tadzhikistan 34 Komi Republic 19 2 3 35 Perm Region 34 36 Kurgan Region 21 6 37 Khanty-Mansi 20 27 Autonomous Okrug 7 38 Altai Krai 22 43 39 Republic of 25 28 Khakassia 37 40 Irkutsk Region 35 41 Republic of Buryatia 30 42 Chita Region 16 23 8 43 Republic of Sakha (Yakutia) 44 Amur Region 45 Khabarovsk Krai 24 10 46 Jewish Autonomous 9 36 Region 13 47 Primorsky Krai 11 48 Sakhalin Region 49 Kaliningrad Region 48 12 45 52 Kyrgyzstan 40 44 50 14 41 38 39 42 46 Serbia 47 15

52

51

26 JSC GAZPROM NEFT ANNUAL REPORT 2009

32 49 31

17 4 26 33 1 29 18 5 19 2 3 34 21 6 20 27

22 7 43 25 28

37 30 35 16 23 8

24 10 9 36 13 11

48

12 40 44 45 50 14 41 38 39 42 46

47 15

52

51

27 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

GEOGRAPHY OF OPERATIONS

Regions of Operations of JSC Gazprom Neft

1 Pskov Region 47 Republic of Sakha 2 Smolensk Region (Yakutia) 3 Bryansk Region 48 Amur Region 4 Kursk Region 49 Jewish Autonomous 5 Oryol Region Region 6 Belgorod Region 50 Primorsky Krai 7 Kaluga Region 51 Khabarovsk Krai 8 Rostov Region 52 Sakhalin Region 9 Krasnodar Krai 53 Kaliningrad Region 10 Stavropol Krai 24 11 Tver Region GAZPROM neft 12 Moscow and Mos- marine bunker 53 cow Region Belarus 23 13 Novgorod Region St.Petersburg 14 Leningrad Region Murmansk Region 15 Yaroslavl Region Moscow 1 14 16 Vladimir Region Yaroslavl Region 13 17 Ivanovo Region Belarus 27 Krasnodar Krai 25 18 Nizhny Novgorod Far East 11 22 Region 2 19 Republic of Mor- gazprom neft 15 dovia aero 3 7 12 28 20 Tambov Region Belarus 21 21 Kostroma Region St.Petersburg 5 17 4 16 22 Vologda Region Murmansk Region 23 Republic of Karelia Moscow 18 24 Murmansk Region 6 Tomsk Region 35 47 25 Archangelsk Region Novosibirsk Region 20 19 26 Republic of Ta- Krasnoyarsk Krai tarstan 34 Bryansk Region 26 29 27 Nenets Autonomous Kemerovo Region Okrug 43 8 30 28 Komi Republic 9 29 Perm Region 30 Sverdlovsk Region 31 Chalyabinsk Region 10 33 32 Kurgan Region 31 32 33 Tyumen Region 37 34 Khanty-Mansi Au- 36 tonomous Okrug 35 Yamalo-Nenets Au- 52 tonomous Okrug 38 51 36 Omsk Region 44 48 37 Tomsk Region 38 Novosibirsk Region Kazakhstan 41 39 Altai Krai 45 40 Altai Republic 39 42 49 41 Kemerovo Region 46 42 Republic of Khakas- sia 50 43 Krasnoyarsk Krai 40 44 Irkutsk Region 45 Republic of Buryatia Kyrgyzstan 46 Chita Region Tadzhikistan

28 JSC GAZPROM NEFT ANNUAL REPORT 2009

24

53 23

1 14 13 Belarus 27 25 11 2 22

15 3 7 12 28 21 5 17 4 16

6 18 47 20 19 35

34 26 29 43 8 30 9

10 33 31 32 37 36 52

38 44 48 51

Kazakhstan 41 45 39 42 46 49

50 40

Kyrgyzstan

Tadzhikistan

29 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

HIGHLIGHTS OF THE YEAR

The year 2009 was very productive for In 2009 9.8 mln tons of petroleum to fruition. Implementation of the Gazprom Neft both in terms of business products were sold through premium development project of Senomanskaya expansion and in terms of adjusting segments 40% more than in 2008. gas deposit at Muravlenkovskoye field operations according to external was launched, and the development factors. The major trend and achievement of project of Senomanskaya gas deposit Gazprom Neft in 2009 was the growth in of Novogodneye field was approved. The global economic crisis significantly the level of daily production. Specifically The start of gas deliveries from these affected the current financial results by the end of the third quarter the deposits to the unified gas supply of the Company. Although the Ruble average daily production in all 100% systems is planned for the fourth devaluation at the beginning of the year, affiliates had reached 83.2 thousand quarter of 2010. In 2009 Phase 1of the delay in export duty rate, tax breaks tons which equates to an output of 2.5% gas turbine power plant at Yuzhno- and additional privileges to the sector more than at the beginning of the year. Priobskoye field was launched, and did have a certain positive economic Giving consideration to the depleted gas deliveries from Ety-Purovskoye effect. These factors however did not state of many fields, the myriad of field to SiburTyumenGaz along a new compensate for the negative effect difficulties of oil production in Russia pipeline started. Furthermore activities caused by, compared to 2008, the added to the fact that the main trend aimed at raising the efficient use of drop of oil prices, the introduction of for oil companies was to decrease associated petroleum gas (AG) are also technical regulations for engine fuels production volumes; this is without in progress. (residual fuel oil and ), the doubt a significant achievement. drop of petroleum products due to; the In principal improving efficiency in reduction of consumption in Russia plus Serious attention was paid to raising the tandem with the reduction of expenses various other factors. As a result, again effectiveness of geological modeling were among the primary objectives compared to 2008, EBITDA and the with the result that by the end of 2009 of the Company in 2009. In light of net income of the Company decreased most of the major fields of the Company the unfavorable external economic by more than 30% and the revenue by had been provided with detailed environment the need to achieve 28%. hydrodynamic models these two goals was absolutely critical. With this in mind strictly adhered to Despite these financial results the A center of space visualization was expense reduction initiatives were operating performance of the Company opened in the science and technology implemented in all business units of the in 2009 exceeded the figures of 2008 in center of JSC Gazprom Neft in Company. Significant organisational and all business spheres. Saint Petersburg. This center uses management changes were made to modern technologies of geologic the production facilities of the company ABC 1 hydrocarbon reserves increased and hydrodynamic modeling that in the YNAD which ensured, through from 1.605 bn up to 1.782 bn tons of significantly raise the effectiveness of an increase in the level of management oil equivalent. Oil and gas production production enterprises and thus lead to responsibility, greater control over the grew by 3.1%: from 48.7 mln tons of increased activity of servicing branches. net results of all enterprises. As a result oil equivalent to 50.2 mln tons. The the year-end production indicators of increase in refining amounts was 17.6% In 2009 a new important operation — the enterprise’s equity assets exceeded (from 28.4 mln tons to 33.4 mln tons). gas production — started to come the predictions by about 1 million

30 JSC GAZPROM NEFT ANNUAL REPORT 2009

tons. The growth of the production Sales units of the Company — In November Gazprom Neft signed volumes was also registered in ‘year- petroleum product supply enterprises: a Memorandum of Understanding to-year’ comparison, however this was Gazprom Neft-Aero, Gazprom Neft with the National Iranian Oil Company not a direct result of natural growth Marine Bunker, Gazprom Neft- on exploration and development of but due to the Company’s increased Lubricants — successfully conquered Azar and Shangule oil fields. While in M&A activities. the market and increased both their December the Company acted as the production and economic indicators. major member of the consortium for the In essence the Company’s strategy The level of sales for these companies development of the Badra field in Iran was to grow oil production through in the premium segments grew by 40% which has oil reserves of more than 2 the purchase of new assets. In 2009 and by the end of 2009 had reached billion barrels. a deal for the acquisition of Serbia’s 9.8 mln tons of petroleum products. The NIS was closed, and consolidation of amounts sold through the chain of tank Judging by the results of 2009, the controlling stake in Sibir Energy farms and filling stations on the territory Gazprom Neft retains its positions of took place. Sibir Energy holds a 50% of Russia grew by 3% as compared to one of the leaders in the sector in terms share in the development project of 2008. of effectiveness. Salymskiye fields, develops Yuzhnoye and Orekhovskoye fields in the KhMAD, In 2009 activities related to the The results of 2009 encourage and carries out geologic exploration handover started for Gazprom’s fields Gazprom Neft to look into the future of the Koltogorskiye fields in Western (Novoportovskoye, Tazovskoye, and with optimism. The Company managed Siberia. a part of Orenburgskoye field) to not only to keep stability and expand Gazprom Neft. Active production at the business but also to set up a secure Mainly due to this consolidation of Novoportovskoye field, the largest of the platform for the development in 2010 Sibir Energy’s controlling stake (Sibir assets handed over, with reserves of and make significant steps on the way Energy is one of the shareholders of more than 400 mln tons of oil equivalent, of achieving its strategic goals that have the Moscow Refinery) and the increase is scheduled for 2013. A significant been planned through to 2020. of the effective share of the plant to share of consolidated production of the 59.75% the overall growth of oil refining Company will be the development of was registered in the Company’s Slavneft’s Messoyakhskiye fields. report. At the end of 2009 another important In relation to increasing sales there purchase took place that of STS Service were also strategic purchases. In the Company, a production affiliate of Chelyabinsk Region a chain of 39 filling Sweden’s Malka Oil that develops fields stations was bought, and in Tajikistan — geographically adjacent to the fields 19 filling stations. Additionally the of Gazprom Neft-Vostok in the Tomsk consolidation of NIS’s and Sibir Energy’s Region. assets added a further 478 and 134 more filling stations to the Company’s At the end of 2009 two important events assets. also took place in the Near East market.

31 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

COMPETITIVE STATE OF THE COMPANY

OIL AND GAS PRODUCTION

JSC Gazprom Neft and its affiliates According to the results of 2009 holdings plus the start of all year round are a vertically integrated oil company Gazprom Neft is the fifth largest oil use of the Sakhalin-2 offshore project. that operates mainly in the Russian company in Russia in terms of oil Federation. Operations of the Company production. The largest growth in equity production include exploration, development of oil in Russia in 2009,2.4% on average, was and gas fields, oil and gas production, After the decrease in oil production in registered by Rosneft, and TNK- production of petroleum products and 2008 (for the first time in many years) BP: All three companies launched new their retail sales. Proven hydrocarbon the year 2009 showed recovery in large production projects that added reserves of the Company as per SPE production growth – in fact during up to the growth, while the greatest (PRMS) classification exceed 1 billion the year the level of daily production decrease in equity production in Russia tons of oil equivalent, and due to this reached a record point for the post- was registered in Surgutneftegaz the Company is not only one of the Soviet period. Compared to 2008, daily (-3.1%) and Slavneft (-3.2%). top twenty largest oil companies of production of oil grew by 1.5% to 9.9 the world but currently also Gazprom mln barrels a day while the total amount The total consolidated oil production of Neft is one of the fastest growing oil of production in Russia increased by Gazprom Neft in 2009 grew by 2.8% to companies of Russia. 1.2% up to 494 mln tons. 47.6 mln tons. This was primarily due to the purchase of Sibir Energy in the The growth in production in 2009 middle of 2009, and the inclusion of resulted from the simultaneous launch Serbia’s NIC in consolidation starting of several fields of large Russian oil from February (the volume of its

Production of Oil and Gas in Russia by Oil and Gas Companies, thousand tons of oil equivalent

Company Production Share Production Share Increase 2009 in 2009, % 2008 in 2008, % in 2009 to 2008, % Rosneft* 120 858 21 117 924 21 2,5 Lukoil 102 141 18 101 675 18 0,5 TNK-BP** 88 960 16 87 080 16 2,2 Surgutneftegaz 70 547 12 73 024 13 -3,4 Gazprom Neft*** 49 295 9 48 724 9 1,2 26 718 5 26 670 5 0,2 Other 106 330 19 100 140 18 6,2

* 2009 production was adjusted to include Tomskneft’s share ** Including share of Slavneft’s production *** Including share of Slavneft’s, Tomskneft’s, Salym Petroleum’s production, excl. production abroad (NIS) Source: INFOTEK

32 JSC GAZPROM NEFT ANNUAL REPORT 2009

Production of Oil and Gas production within Gazprom Neft in 2009 Gazprom Neft’s gas production on the in the Russian Federation in amounted to 0.7 mln tons). territory of Russia in 2009 decreased 2009 by Oil and Gas Companies to a small extent: from 3.1 in 2008 to (excl. Production of Gas by Gas production in Russia in 2009 shrank 2.9 billion cubic meters in 2009. Gas Gazprom and ) by a significant extent. This was mainly production of Serbia’s NIS that is a part caused by the decrease in Gazprom’s of Gazprom Neft’s structure amounted production due to the falling level of gas to 0.2 billion cubic meters. 19 consumption in Europe and escalating competition with other gas producers Total hydrocarbon production of on external markets. As compared to Gazprom Neft on the territory of Russia

5 SOURCE: 2008 Gazprom’s production reduced grew from 48.7 mln tons of oil equivalent INFOTEK 21 by 16% to 462 billion cubic meters in 2008 to 49.3 mln tons in 2009. Taking 9 while total gas production in Russia into account NIS’s production, the total decreased by 10% to 596 billion cubic consolidated hydrocarbon production of meters. Gazprom Neft in 2009 amounted to 50.2 mln tons of oil equivalent. 12 2009, % The dynamics of gas production (natural and associated) by the major 18 Russian oil and gas companies is 16 changing in various ways.

Rosneft LUKOIL TNK-BP Gazprom Neft SurgutNeftegaz Tatneft Other

33 COMPANY’S PROFILE Energy for life ENERGY FOR PEOPLE

REFINING

Oil Refining in Russia in 2009 Prior to 2009 oil refining in the Russian The results of 2009 Gazprom Neft show Federation had shown stable growth an increase in its share of the total over the period of several years. refining amount in Russia: from 12% 14 However in 2009 the amount of refining to 13.2%, and that it took third place in Russia hardly changed at all as among Russia’s oil companies. This compared to 2008 and amounted to was primarily a result of the growth 3 SOURCE: 236 mln tons. The growth of refining of its effective share in the Moscow 9 INFOTEK 21 amounts before 2009 could be Refinery that started in mid 2009 after explained by the fiscal policy of the the consolidation of the operations of Russian Federation that set out to Sibir Energy that was purchased in 9 stimulate this business sector and to June 2009. Outside Russia in February 2009, % make it more attractive for Russia’s 2009 the refining amounts of Serbia’s vertically integrated oil companies and NIS were amalgamated into the figures 12 19 to ensure, in case of a slump in oil of Gazprom Neft consequentially. The prices (as in the second half of 2008), it total consolidated refining amount of the 13 would remain profitable. Company for the year of 2009 in Russia and abroad amounted to 33.4 mln tons. Zero growth of refining volumes in Rosneft Russia in 2009 was caused by the LUKOIL fact that in the first half of 2009 the Gazprom Neft netbacks∗ of most of Russian refineries OIL REFINING IN THE RF, TNK-BP was lower than the netbacks of raw millions tons SurgutNeftegaz oil exports, thus this led to a certain Ufa plats decrease in refining amounts over this TAIF period SOURCE: Other INFOTEK The amount of diesel fuel produced in 2009 was 67.3 mln tons (-2.2%), of 300 residual fuel oil– 64.4 mln tons (+0.8%), 250 of motor petrol – 35.8 mln tons (+0.5%). Additionally the total refining capacity 200 150 utilization in Russia amounted to 88%, thus an increase of 1.3% compared with 100 2008. 50 0 2005 2006 2007 2008 2009

Oil Refining in the Russian Federation in 2009, thousand tons

Company Oil Refining Oil Refining Share Share Increase in 2009 2008 2009, % 2008, % 2009 to 2008, % Rosneft 50 222 49 544 21,3 21,0 1,3 Lukoil 44 147 44 126 18,7 18,7 0,0 Gazprom Neft * 31 026 28 390 13,2 12,0 9,3 TNK-BP ** 28 303 29 765 12,0 12,6 -4,9 Surgutneftegaz 20 484 20 563 8,7 8,7 -0,4 Ufa refineries 20 746 20 362 8,8 8,6 1,9 TAIF-NK 7 791 7 669 3,3 3,2 1,6 Other 33 009 35 928 14,0 15,2 -8,7 Total 235 728 236 301 100 100 -0,2 *Including share of Slavneft’s and Moscow Refinery's refining (share holding in 2008 and the first half of 2009, joining consolidation starting from the second half of 2009), excl. refining abroad (NIS) **Including share of Slavneft’s refining Source: INFOTEK.

34 JSC GAZPROM NEFT ANNUAL REPORT 2009

EXPORTS

Russian oil exports to non-CIS countries Actual volume of oil exports in 2009 Crude Exports by Russian in 2009 totaled 211.9 mln tons (4.3 increased by 7.1%, including: the Companies via the Transneft mln bpd) which is 0.9% more than in volume of — by 8%, of diesel System in 2009 2008. 185.6 mln tons were exported fuel — by 9.7%, and of jet fuel — by to non-CIS countries via the Transneft 96%. system and around 26.3 mln tons — by 22 other routes. In 2009 via the Transneft According to the Customs, in the export system 44.4 mln tons (including transit pattern to non-CIS the share of fuel

volumes) were shipped through the and energy goods last year amounted SOURCE: , 4.2 mln tons — to 69.5% of the entire export to these INFOTEK 22 through Tuapse, 2.3 mln tons — through countries (in 2008 it was 72.6%). Odessa, 74.8 mln tons — Primorsk, 8 9.4 mln tons — Yuzhny Marine Oil. Rosneft oil company in 2009 supplied Enterprises not affiliated with vertically 48.4 mln tons to non-CIS countries via 7 2009, % integrated oil companies in 2009 the Transneft system, LUKOIL — 24.9 12 supplied 8.8 mln tons of oil to non-CIS mln tons, Surgutneftegaz — 27.1 mln countries via the Transneft system. tons, TNK-BP– 33.8 mln tons, Tatneft — 13 15.9 mln tons, Gazprom Neft — 14.7 16 In 2009 Russia reduced exports to CIS mln tons. countries by 1% — to 34.1 mln tons. The volume of supplies to the Ukraine The share of Gazprom Neft’s oil exports Rosneft was up by 5.2%, compared to 2008, in the total amount of Russian oil LUKOIL totaling 6.3 mln tons. Deliveries of exports to non-CIS in 2009 changed TNK-BP Russian raw materials to Kazakhstan slightly as compared to 2008 (+3.4%) — SurgutNeftegaz decreased to 6.3 mln tons (–11.4%). mainly due to the proportional increase Gazprom Neft Exports of oil to Belorussia in 2009 grew in production and refining inside Russia Tatneft by 0.7% as compared to 2008 and caused by the purchase of Sibir Energy. Other reached 21.4 mln tons.

Crude Exports by Russian Companies via the Transneft System in 2008, TH. tons

Company Oil Exports Oil Exports Share Share Increase 2009* 2008* 2009, % 2008, % 2009 to 2008, % Rosneft 48 375 45 758 22,9% 21,9% 5,7% TNK-BP 33 774 31 272 16,0% 15,0% 8,0% Surgutneftegaz 27 145 32 081 12,9% 15,3% -15,4% Lukoil 24 862 28 103 11,8% 13,4% -11,5% Tatneft 15 911 14 797 7,5% 7,1% 7,5% Gazprom Neft 14 738 14 256 7,0% 6,8% 3,4% Other 46 229 42 885 21,9% 20,5% 7,8% Total 211 035 209 152 0,9%

* oil exports via the Transneft system Source: INFOTEK

35 ENERGY FOR LIFE ENERGY FOR PEOPLE 5 KEY PERFORMANCE INDICATORS OF THE COMPANY IN 2009 BY TYPE OF OPERATION KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE 5 OF OPERATION KEY PERFORMANCE INDICATORS OF THE COMPANY IN 2009 BY TYPE OF OPERATION

OIL AND GAS EXPLORATION AND PRODUCTION

PRODUCTIONS & RESERVES 1 Nenets Autonomous Okrug 2 Khanty-Mansi Autonomous Okrug 3 Omsk Region 4 Tomsk Region 5 Khanty-Mansi Autonomous Okrug 6 Yamalo-Nenets Autonomous Okrug 7 Krasnoyarsk Krai 8 Serbia 12 9 Angola

RESERVES 10 Irkutsk Region 11 Republic of Sakha (Yakutia) 12 The Sea of Okhotsk aquatory (Lopukhovsky Block) 13 Sakhalin Region

1

4 11 7 2

Serbia

5 3 13

6 10

Angola

38 JSC GAZPROM NEFT ANNUAL REPORT 2009

12

1

4 11 7 2

5 3 13

6 10

39 KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE OF OPERATION

RESOURCE BASE

Gazprom Neft Group’s For more than 10 years the Company’s SPE standards of 1 568 mln t of Hydrocarbon Reserves’ reserves have been audited by SPE (11 531 mln bbl). Growth by SPE (PRMS) (Society of Petroleum Engineers) standards and more conservative SEC The current reserves-to-production ratio (US Securities and Exchange of Gazprom Neft’s SPE proven Commission) standards. The audit has hydrocarbons is 20 years. been conducted for all fields based on the estimates of a representative In 2009 additions to Gazprom Neft’s SOURCE: COMPANY sample of JSC Gazprom Neft’s fields SPE proven hydrocarbon reserves (not DATA 20 accounting for 95–98% of Russian taking into account the new 19,5 ABC1 category. acquisitions) totaled 97 mln TOE. By the 19 18,5 results of 2009, the replacement of 18 According to independent reservoir Gazprom Neft’s proven hydrocarbon 17,5 17 engineers, DeGolyer and MacNaughton reserves amounted to 265%. 16,5 (Miller and Lents in 2007 and 2006), as 16 15,5 of December 31, 2009 JSC Gazprom Additions to Gazprom Neft’s SPE 15 Neft had total reserves of “proven” and proven hydrocarbon reserves entailed 14,5 “probable” categories (including the by the new acquisitions amounted to 41 2005 2006 2007 2008 2009 Company’s share in equity investees) by mln TOE in 2009.

EXPLORATION

In the reporting period 11 exploration- Overall in 2009 additions to the In the reporting period on the license and-appraisal wells were completed in Company's reserves of commercial plots OJSC NGK Slavneft conducted the license plots of JSC Gazprom Neft category totaled 105.6 mln tons, exploration costing 2.4 bn rub (excl. and its subsidiaries, of which 10 yielded resulting mostly from additional VAT), including exploration drilling of 13 commercial hydrocarbon inflows. Total exploration in the fields under 960 meters costing 1.9 bn rub, 3D and exploration meters drilled in 2009 — development (65.9 mln tons) as well 2D seismic data processing for 0.05 17 037 line m, which is 26% compared as from re-estimation of reserves bn rub; research and other types of to 2008. This decrease in exploration due to the revision of the geological activities for 0.5 bn rub. drilling metreage in 2009 as compared models of the fields and oil recovery to 2008 was connected with the factors, primarily for the Priobskoye and In the reporting period on the license program on reducing capital expenses Sutorminskoye fields (39.7 mln tons). plots OJSC Tomskneft VNK conducted and with less investment in exploration exploration costing 0.4 bn rub (excl. activities in particular. In the reporting period 3D and 2D VAT). Exploration drilling metreage in seismic surveys of 2 200 sq km and 2009 totaled 2 800 meters, the amount The exploration drilling success rate 1 234 line km, respectively, were of 3D seismic exploration work was was 90.9% with efficiency of 561 tons conducted in the license plots of JSC 233 sq km, the amount of 2D seismic of hydrocarbons per meter drilled and Gazprom Neft and its subsidiaries. exploration work — 414 line km. 121.6 rub/TOE. In 2009 of the 60 tested zones 35 In 2009 Gazprom Neft bought The conducted exploration work yielded commercial oil inflows, recoverable reserves of crude resulted in the discovery of condensate and gas, 6 — non- hydrocarbons of OJSC OC Magma and Nizhnevyngapurovskoye oil and commercial oil and gas inflows, 9 NIS-Naftagas (Serbia) totaling 25.7 mln gas condensate deposit in the yielded no inflow, the remaining 10 tons (C1+C2 taken together), including Vyngapurovskoye license plot and 3 zones yielded either reservoir water 9.5 mln tons of NIS-Naftagas. new oil reservoirs in the existing fields inflows or those slightly admixed with oil. with total recoverable C1 and C2 oil reserves of 4.070 mln tons and 4.145 The financing of exploration by JSC mln tons, respectively. Gazprom Neft and its subsidiaries in 2009 totaled 3.6 bn rub, which is 65% of the financing provided in 2008.

40 JSC GAZPROM NEFT ANNUAL REPORT 2009

LICENSING

As of 31.12.2009 JSC Gazprom Neft five plots – the geological survey period on the territory of Western Siberia and and its subsidiaries held sub¬soil was extended, for seven plots license the Krasnoyarsk Krai. licenses for 66 license plots located in agreement terms were actualized, the 9 regions of the Russian Federation. term of geological exploration was OJSC Tomskneft holds 31 licenses extended for the Srednetaimurinsky for the development of more than 30 By type of operation, 12 licenses entitle plot, for the Sugmutsky plot the right for oil and gas deposits on the territory the Company to a five year period of injection of bottom water, wastewater, of the Tomsk Region and the Khanty- geological survey and 54 licenses grant surface water and underground Mansi Autonomous District. Additionally the right to saltwater for pressure maintaining a subsidiary of Tomskneft, Tomsk and production for a period of 20 to 50 was registered, for the Shinginsky Petroleum und Gaz, holds licenses for years. plot belonging of a part of subsoil was exploration and development of 2 more specified, and a new survey layout was plots in the Tomsk Region. Subsoil licenses are held by 10 approved for the Vorgensky plot. subsidiaries; however these licenses Sibir Energy’s subsidiaries, OJSC are managed by three operators: OJSC In 2009 the license on discovery of the OC Magma and Siberian Geological Gazprom Neft - Noyabrskneftegaz, Vorgenskoye oil field was issued. Company LLC, hold 10 licenses Gazprom Neft-Khantos LLC and for exploration and development of Gazprom Neft-Vostok LLC. OJSC Outside Russia, in Serbia, NIS Company license plots located on the territory Gazprom Neft – Noyabrskneftegaz has 65 resolutions (the same as of the Khanty-Mansi Autonomous carries out a full cycle of hydrocarbon Russia’s licenses). District (Yuzhnoye, Orekhovskoye and operations in 46 license plots owned by Koltogorskiye fields). Moreover, Sibir 4 subsoil users. Licenses of equity investees as of Energy has a 50% share in Salym 31.12.2009 Petroleum Development JV that holds 3 In 2009 the Licensing Committee of licenses for additional exploration and the Federal Agency for Subsoil Use OJSC NGK Slavneft and its subsidiaries development of the Salym group of oil reviewed and approved additions to 16 hold oil and gas exploration and fields, also located in the Khanty-Mansi subsoil licenses of the Company: for production licenses on 38 license plots Autonomous District.

41 KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE OF OPERATION

HYDROCARBON PRODUCTION

Gazprom Neft is engaged in oil and gas The Priobskoye field is one of the 2009 due to active development exploration and production primarily largest and most promising oil deposits of the Priobskoye field, renovation in the fields located in the Yamal- of the Company and is the leader in and restructuring of Gazprom Neft- Nenets and Khanty-Mansi Autonomous terms of rate of production growth. Noyabrskneftegaz the daily production Districts, Omsk, Tomsk and Irkutsk Active development of this field of Gazprom Neft started to increase with Regions. began in 2004 and as early as 2008 the figures for August showing a 2.5% it already accounted for 23% of total growth compared on January. On the The Company’s oil production is oil produced by the Company, and in whole judging by year-end results, one carried out predominantly by three 2009 it accounted for 27.3% of total can see that total production exceeded of its subsidiary operators: OJSC oil produced by the Company. The the business plan by more than 1 mln Gazprom Neft-Noyabrskneftegaz, Priobskoye field is therefore a key asset tons. OJSC Gazprom Neft-Khantos, and which is strategically important for the Gazprom Neft — Vostok LLC. In 2007 Company’s future development. In addition to its own production the Company set up two new operators: Gazprom Neft holds shares in Gazprom Neft-Yamal LLC engaged in production of OJSC Slavneft, OJSC the exploration and development of Production at Priobskoye Tomskneft and Salym Petroleum JSC Gazprom’s oil fields and Gazprom Field, mln tons Development (SPD), and therefore Neft-Angara LLC engaged in the Gazprom Neft consolidates their exploration and development of the production output on a pro rata basis of Company’s new oil deposits in Eastern the equity participation. SOURCE: Siberia. COMPANY DATA OJSC Tomskneft that is managed by The largest hydrocarbon reserves in the 10 Gazprom Neft and Rosneft on a parity 9 Yamal-Nenets Autonomous District are 8 basis holds licenses for development found in: Sugmutskoye, Sutorminskoye, 7 of fields in the Tomsk Region and 6 Vyngapurovskoye, Sporyshevskoye 5 Khanty-Mansi Autonomous District. and Muravlenkovskoye fields. In 2009 4 Another joint venture of Gazprom Neft these fields accounted for 39.2% of 3 and TNK BP, OJSC Slavneft, develops 2 total oil production by the Company. 1 reserves in the Urals Federal District Production in these fields is carried out 2005 2006 2007 2008 2009 2010 and conducts exploration in the Siberian by oil and gas producing enterprises: (forecast) Federal District. OJSC Gazprom Neft-Noyabrskneftegaz, its subsidiary Zapolyarneft LLC The share in oil production by OJSC holding a license for the development Slavneft and OJSC Tomskneft in 2009 of Vyngapurovskoye, Yarainerskoye A regional group of fields in the Omsk decreased by 4% and amounted to and Novogodneye deposits, and and Tomsk Regions will become 15 750 th. TOE, out of those: OJSC a Muravlenkovsky branch of OJSC a second “new” center. Gazprom Neft- Slavneft — 9 748.0 th. TOE and OJSC Gazprom Neft-Noyabrskneftegaz. Vostok is the oil production operator Tomskneft — 6 002 th. TOE. of the Krapivinskoye field located in In the Khanty-Mansi Autonomous the Omsk Region, and of Archinskoye, As a result of acquiring Sibir Energy District the most prospective deposit Shinginskoye, and Urmanskoye fields in in 2009, the Company at the same of JSC Gazprom Neft is the Priobskoye the Tomsk Region. All these fields are time obtained 50.0% of the asset of field, a development license for which building up a new production center Salym Petroleum Development, a joint is held by a subsidiary of the Company, adding up to the annual growth of oil venture of Sibir Energy and Royal Dutch Sibneft-Yugra LLC, with Gazprom Neft- production. Shell. In 2009 Gazprom Neft’s share Khantos LLC acting as the operator. in the production of Salym Petroleum Located in the same region is the Own production by JSC Gazprom Neft Development amounted to 1 984 th. northeastern part of the Palyanovskaya in 2009 was 32 441 th. TOE, which is TOE. Area of Krasnoleninskoye field and 122 th. TOE more than in 2008 (+0.4%). a group of license plots acquired by the It is explained by the acquisition of NIS The total production of Gazprom Neft in Company in early 2005 (Salymsky-2, and Sibir Energy (OJSC Magma). 2009 went up by 3.0% and amounted Salymsky-3, Salymsky-5) and the to 50 174 th. TOE. As a result of the Zimneye field in the Tyumen Region. The main achievement of 2009 is Company’s development strategy the In 2008 Gazprom Neft-Khantos won probably that the Company managed amounts of oil production grew due to the bidding for a part of the Zimneye to find additional oil recovery reserves the purchase of new assets, NIS and field located in the Khanty-Mansi at existing assets with decreasing Sibir Energy., The total additions to the Autonomous District. production. In the second half of Company’s production caused by this

42 JSC GAZPROM NEFT ANNUAL REPORT 2009

newly acquired assets amounted to 3.0 the equity investees), which is 45 (excluding equity investees) had risen mln TOE. wells more than in 2008. This increase by 205 wells to a total of 5 729 wells. was possible due to an expansion In 2009 Gazprom Neft retained its of the development drilling program In 2010, as per the preliminary positions as one of the leaders of the and secondly as a result of increased conservative plans, Gazprom Neft sector among Russia’s oil companies commercial drilling speed and average intends to raise hydrocarbon production in terms of the amount of oil and gas metreage drilled per crew. Specifically on the territory of Russia by 2.2% more: production. the meters drilled reached 2 158.1 th. up to 51.3 mln TOE. m, which is 125 th. m. more than in In 2009 some 656 new development 2008. By the end of 2009 the number wells of Gazprom Neft were put on of operating oil wells of the Company production (not taking into account

HYDROCARBONS Production PRODUCTION Well STOCK PRODUCTION Drilling, in 2007-2009, mln TOE th. m.

SOURCE: SOURCE: SOURCE: COMPANY COMPANY COMPANY DATA DATA DATA

60 14000 4000 50 12000 3500 10000 3000 40 2500 8000 30 2000 6000 20 1500 4000 1000 10 2000 500 0 0 0 2007 2008 2009 2007 2008 2009 2007 2008 2009

Sibir Energy Gazprom Neft Gazprom Neft Tomskneft Magma Magma Slavneft NIS NIS Gazprom Neft Slavneft Slavneft Tomskneft Tomskneft SPD SPD

43 KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE OF OPERATION

REFINERIES & MARKETING REGIONS (INCL. SUBSIDIARIES & AFFILIATES)

REGIONS WITH RETAIL SALES 1 Moscow and Moscow Region 2 Saint-Petersburg & Leningrad Region 3 Kaluga Region 4 Samara Region 5 Yaroslavl Region 6 Ivanovo Region 7 Chelyabinsk Region 8 Sverdlovsk Region 9 Tyumen Region 10 Krasnoyarsk Krai 11 Omsk Region 23 12 Novosibirsk Region 21 13 Tomsk Region 14 Kemerovo Region 15 Republic of Altai 16 Kazakhstan 2 17 Kyrgyzstan Belarus 18 Tadzhikistan 22

REGIONS WITH LARGE WHOLESALES ONLY 19 Tula Region 5 3 20 Chelyabinsk Region 1 21 Republic of Karelia 19 6 22 Arkhangelsk Region 23 Murmansk Region 4 24 Irkutsk Region 25 Primorsky Krai 26 Khabarovsk Krai 10 27 Belarus

20 8

21 9 13

11

12 26 24 14 Kazakhstan

15 25

Kyrgyzstan

Tadzhikistan

44 JSC GAZPROM NEFT ANNUAL REPORT 2009

23

21

2 Belarus 22

5 3 1 19 6

4

10

20 8

21 9 13

11

12 26 24 14 Kazakhstan

15 25

Kyrgyzstan

Tadzhikistan

45 KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE OF OPERATION

REFINING

In 2009 the Company retained its The Omsk Refinery is one of the most The output of light petroleum products positions, in terms of the additions advanced refineries in Russia and one is 70%. rate of oil refining amounts, as one of the largest in the world with the of the leaders among Russia’s oil installed capacity of the Omsk Refinery Moscow Refinery. OJSC Moscow companies. Over the reported period being 19.5 mln tons of crude oil a year. Refinery is a fuel producing plant with the Company managed to increase In 2009 the Refinery maintained its a deep oil refining scheme (the installed refining by 17.6%: from 28.4 to 33.4 leadership in Russia in light capacity is 12.15 mln tons a year). The mln tons of oil. hydrocarbon and aromatic hydrocarbon amount of primary refining at the production. In terms of oil refining Moscow Refinery in 2009 was 10.0 mln The increase in oil refining amounts volumes -18.4 mln tons (7.8% of total oil tons which is 2.03% higher than in 2008. was mainly caused by the acquisition refined in Russia), in 2009 the Omsk The oil processing depth was 74.32%. of new assets: Serbia’s NIS and Refinery finished second among a share in Sibir Energy which is one Russian refineries (next to PO Gazprom Neft’ share in 2009 (taking into of the shareholders of the Moscow Kirishinefteorgsintez LLC (20.4 mln tons) account the consolidated controlling Refinery. that belongs OJSC Surgutneftegaz). In stake in Sibir Energy) amounted to 5.8 2009 the utilization rate of primary mln tons. The main refining asset of the refining capacities at the Omsk Refinery Company is the Omsk Refinery (its was 94.5% of the total capacity with The output products comprise more share in refining is 100%). processing depth being 86.7% against than 15 titles and 40 brands, including the Russian industry average of 71.8%. AI-92 and AI-95 unleaded motor gasoline with ecology class 3; TS-1 jet The staple products of the refinery are: fuel of highest quality with antioxidant motor , diesel oil, fuel oil, jet and wear-proof additives; summertime oil, as well as a variety of aromatic and wintertime diesel fuels with hydrocarbons, liquefied hydrocarbon improved features of brands C, E, F and gases, different types of lubricants, DEKp3-0.035, Euro 3 class; DTL 0.1 additives, catalysts and other products. diesel fuel; 100 fuel oil with sulfur content

Structure of Output Structure of Output Products of the Omsk Products of the Moscow Refinery in 2009 Refinery in 2009

11 5 1 9 2 12 25 SOURCE: SOURCE: COMPANY COMPANY DATA DATA

27 35 31 2009, % 2009, % 6

8 28

Gasoline Gasoline Jet fuel Jet fuel Diesel fuel Diesel fuel Fuel oil Fuel oil Bitumens Bitumens Oils Other products Other products

46 JSC GAZPROM NEFT ANNUAL REPORT 2009

of up to 2.5%; road and construction NGK Slavneft totaled 13.6 mln tons, of total oil refined in 2009 at the NIS bitumen; liquefied gases; technical sulfur which the share of Gazprom Neft was Refinery was 2.872 mln tons. (liquid and solid). The output of light 6.83 mln tons petroleum products is 59%. Naftna Industrija Srbije (NIS). NIS The main sales markets for the refinery’s refining complex consists of two products are the city of Moscow and the refineries located in the towns of Moscow Region. Pancevo and and produces an entire range of petroleum products: Slavneft-YANOS. OJSC Slavneft- from motor gasoline and diesel fuel to YANOS is a fuel and oil producing plant machine oil and raw materials for the with a deep oil refining facility, with an industry. installed capacity of 15.2 mln tons a year for the production of light and The maximum annual crude oil capacity dark petroleum products for various of the production lines of the two technological and household uses. The enterprises is 7.5 mln tons with depth of oil refining in 2009 amounted Pancevo — up to 5.0 mln tons and Novi to 65.6%, and the output of light Sad — up to 2.5 mln tons. The average petroleum products was 57%. annual refining volume is more than 4 mln tons of crude oil. Gazprom Neft has access to the refining capacities of OJSC Slavneft- Since joining Gazprom Neft Group Yaroslavnefteorgsintez in proportion to (February 2009), NIS Refinery has, its equity interest in the authorized excluding raw material processing, capital of JSC Slavneft. In 2009 the refined 2.396 mln tons of oil while the volume of primary oil refining at OJSC

Development of Primary Structure of the Output Structure of the Output Refining in 2005–2009 products of YANOS in 2009 products of NIS in 2009 (mln tons)

2 2 2 5 4 35 SOURCE: 22 COMPANY DATA

SOURCE: SOURCE: 40 COMPANY COMPANY DATA 23 DATA 35 30 27 25 6 20 2 15 2009, % 2009, % 10 39 5 0 2005 2006 2007 2008 2009 30

Gasoline Gasoline Omsk Refinery Jet fuel Jet fuel Moscow Refinery Diesel fuel Diesel fuel YANOS Fuel oil Fuel oil NIS Bitumens Bitumens Oils Other products Other products

47 KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE OF OPERATION

PRODUCTION OF PETROLEUM PRODUCTS

Production BY Main TypeS In 2009 Gazprom Neft increased the domestic market at its own Omsk of Petroleum Products, % the volume of petroleum products’ Refinery and at the Moscow and YANOS production by 18% up to 31.6 mln tons Refineries. As a result of acquiring Sibir from 26.7 mln tons in 2008. Energy, the Company obtained control of the Moscow Refinery thus raising the The increase took place due to the effective share in the Moscow Refinery SOURCE: COMPANY expansion of the Company’s retail from 38.6% to 59.75%. In addition the DATA network, reduction of the turnaround Company owns a share in refining of 100% 90% time at the Omsk Refinery, and the NIS company (Serbia) located in the 80% consolidation of the Moscow and towns of Pancevo and Novi Cad which 70% 60% NIS Refineries. The Company mainly have a total capacity of 7.5 mln tons 50% refines oil produced or purchased on a year. 40% 30% 20% Gasolines Both the oil supplied to these refineries 10% Jet fuel and refined petroleum products are 0% Diesel fuel owned by Gazprom Neft, which pays 2008 2009 Fuel oil the cost of refining services to each Bitumens refinery. Other products

DISTRIBUTION OF PETROLEUM PRODUCTS

In 2009 Gazprom Neft, having one of The Company mainly sells petroleum In 2009 petroleum product sales in the the most extensive distribution networks products in Russia and CIS countries domestic market went up by 13.0%, in Russia, consolidated its position in the through 25 subsidiaries. Fourteen of compared to 2008 and reached 18.3 retail petroleum product market. them are retail distribution companies mln tons. engaged in both wholesale distribution and in retail sales of petroleum products Over 2009 small wholesales, compared through filling stations. to 2008, were up by 28% and reached 3 808 th. tons. Wholesale (transit) distribution dropped by 6% to 2 935 SHARE OF RETAIL SALES IN TOTAL AMOUNT OF SALES th. tons due to moving of the rest to OF PETROLEUM PRODUCTS the more premium segment of ‘small wholesales’

The total number of filling stations SOURCE: PFC Energy calculations operated by the Company's distribution and estimates Retail sales (thou tons) enter¬prises increased from 865 to 8 000 950. Additionally the acquisition of Sibir 7 000 Energy and NIS added a further 612 6 000 2020 retail stations. 5 000 Rosneft Lukoil 4 000 3 000 Gazpromneft During 2009 11 filling stations were 2 000 TNKBP built, 58 renovated and 61 were SurgutNG 1 000 Tatneft bought. 0 0 10 20 30 40 50% Share of retail sales in total amount of sales of petroleum products As part of the retail network optimization, the Company decommissioned 25 filling stations and

The circle size shows the retail network size

48 JSC GAZPROM NEFT ANNUAL REPORT 2009

reduced the number of leased filling until 2010, the principal objective of markets of the Yaroslavl, Ivanovo and stations by one. which is to enhance the efficiency of Chelyabinsk Regions through OJSC Gazprom Neft’s distribution network. Gazprom Neft-Yaroslavl and Gazprom Active implementation of the project of Neft-Chelyabinsk LLC. A project to creating a single brand name “Gazprom In 2009 the Company implemented enter the market of Belarus started Neft” to all filling stations. In 2009 unification projects of accounting through a new subsidiary Gazprom 387 filling stations were rebranded, policies for distribution companies Neft-Belnefteprodukt FLLC including partial rebranding of 179 filling concerning accounting procedures and stations where stelae were installed and budget planning. Gazprom Neft-Belnefteprodukt FLLC temporary banners erected. was founded as a result of the property The Company has four foreign distribution procedure of CJSC Slavneft- In 2009 sales through the filling stations distribution enterprises in the customs’ Start JV with TNK-BP. Operating in (excluding Sibir Energy) located on the union countries: Gazprom Neft- Belarus after handover of the property territory of Russia grew by 3% to reach Kazakhstan LLP, Gazprom Neft- is completed in 2010, the Company 2 860 th. tons of petroleum products. Tajikistan LLC, Gazprom Neft Asia will have 38 filling stations and 5 tank Gasoline sales increased by 9% up to 2 LLC in Kyrgyzia and Gazprom Neft- farms in the region with the total amount 186 th. Tons while diesel sales dropped Belnefteprodukt FLLC in Belorussia. of sales of about 150 th. tons a year. by 12% to 619 th. tons. During 2009 they sold 1 071 th. tons of According to the 2009 long-term petroleum products. development strategy of petroleum In 2009 the Company continued product supply enterprises, the amount working under the program for Gazprom Neft continued with the active of sales by 2020 should grow to 17.7 unification of its distribution enterprises development of projects to enter the mln tons.

REBRANDING OF THE FILLING STATION NETWORK

At present Gazprom Neft manages Comprehensive preparation activities Individuals can use discount cards with filling station network under different were carried out before the launch fixed discount rates at Gazprom Neft’s brands. In autumn 2009 a large-scale of the project, including unification filling stations. In the near future under rebranding project of the Company’s of management principals and the rebranding project the Company network of filling stations started. The organization of all regional Gazprom plans to introduce a loyalty program first filling station under the new brand Neft’s distribution companies. Gazprom for individuals. The new system will was opened in Omsk on September 4, Neft filling stations are of several format allow customers to accrue discounts 2009. This grand project of establishing standards depending on their size and for fuel and related goods bought: a single network of filling stations with functions. The distinctive feature of they accumulate at the clients’ cards one brand name “Gazprom Neft” the stations will be the extended set of as a bonus. The bonus can be used envisages the renovation of more additional services rendered and the for paying for a service or a product than 1000 filling stations in 17 regions national customer loyalty programs. that are available at Gazprom Neft’s of Russia within 2009-2011. The filling stations or at the trading units investments in implementation of the Through the use of Gazprom Neft of the program’s partners. Wherever program are expected to total some fuel cards a corporate system of non- it is practically possible a wide range 7 bn rubles over the period of three cash transactions operates at the of additional services will be on offer: years. To date experience has shown filling stations for rendering services to change of oil and lubricants, technical that, after the rebranding activities, businesses. This system also helps the servicing, tyre fitting, watering, car the sales at the filling stations grew by customer calculate the money spent wash, additional services: from shops 15–20%. and the amount of petroleum products and cafes to ATM’s, Internet access and bought, set fuel consumption limits and so on. register the time and place the vehicle is refilled. Thus services rendered to In November 2009 Gazprom Neft corporate clients via this system are started a federal advertising campaign a convenient and effective way of for the “Gazprom Neft” retail brand of buying fuel. its filling station network. The creative concept of the campaign was called

49 KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE OF OPERATION

“A Reliable Landmark/Reference Point”. power, and is associated with positive AAintegration of the updated payment The renovation of the filling stations energy, dynamics, and development. system; envisages turning them into a kind of AAfederal advertising campaign; a landmark/reference point for drivers Together with the integration of new AAlaunch of national loyalty program; on the road, a place where they can standards for the stations’ interior and find not only gasoline of high quality, but exterior Gazprom Neft conducts the The development of the petroleum impeccable service, reliable support, following activities within the rebranding product retail distribution segment is that will make their journey easier. That program: one of the operational priorities of the is why the structural concept includes AArenovation of filling stations; Company. The launch on the market a special ‘lighthouse’ stela. The visual AAimprovement of the quality of of a national brand with a high brand graphics of the new brand unites the servicing (training and educational awareness related to ‘trust in quality’ main Gazprom’s brand identity elements programs for the staff; control over (product and service) will serve the (the logo, ‘lighter’ symbol, typical the quality of servicing); strategic goal of the Company: to colours) and the dynamic graphics. AAdevelopment of unique product offer; become one of the leaders in petroleum Active diagonal graphical shape AAextended offer of related goods and products’ sales in Russia. symbolizes movement, leadership, and services;

ELECTRONIC TRADING FLOOR AND EXCHANGE TRADE

Gazprom Neft is interested in end consumers taking part in trading. Since April 2009 JSC Gazprom Neft development of exchange trading and Products are traded on the ETF from has been selling petroleum products support of other projects for compiling four bases – the Omsk Refinery, at Saint Petersburg International objective market indicators. Since Moscow Refinery, YANOS (plants of the Mercantile Exchange. JSC Gazprom 2008 the Company has been actively company) and Sokur station. The sales Neft is a cofounder of CJSC Saint developing the mechanism of sales algorithm has been updated taking into Petersburg International Mercantile through electronic trading floor (ETF), account the experience accumulated Exchange and since November 2009 it allowing buyers themselves to form and the requirements of the state has been submitting products for tender market prices for Company products bodies. on a regular basis. The Company sells with open competition. about 20 th. tons of petroleum products 286 th. tons of petroleum products per month at the exchange. Since its launch more than 240 costing more than 4.7 bn rubles have companies have registered at the floor. been sold via ETF since it started Large and small traders as well as operations.

50 JSC GAZPROM NEFT ANNUAL REPORT 2009

EXPORTS OF Crude AND PETROLEUM PRODUCTS

Over 2009 the Company exported CRUDE EXPORT, 2005–2009 (MLN TONS) oil and petroleum products through its exclusive trading subsidiary — Gazprom Neft Trading GmbH, which was registered in Vienna (Austria) in SOURCE: 2005. The main routes of oil export COMPANY shipments were the ports of DATA Novorossiysk and Tuapse, the Baltic 20 Sea port of Primorsk, as well as Czech 18 16 Republic and Germany — via the 14 . 12 10 8 In 2009 Gazprom Neft Group supplied 6 4 to the world market, in absolute terms, 2 15.6 mln tons of oil, a 3.7% decrease 0 compared to 2008. Of this amount 11.3 2005 2006 2007 2008 2009 mln. tons were exported by sea, 3.6 mln tons — via the Druzhba Oil Pipeline and 0.7 mln tons via the Atasu-Alashankou Crude exports to non-CIS Pipeline to China (transited through Crude exports to CIS Kazakhstan). Crude sales in RF 3.3 mln tons of oil were exported to the CIS markets, which is the same amount as in 2008. PETROLEUM PRODUCTS EXPORT, 2005–2009 (MLN TONS) Currently Gazprom Neft does not make any significant oil sales in Russia.

In 2009 petroleum product exports by SOURCE: COMPANY Gazprom Neft to non-CIS countries DATA went up by 21% as compared to 2008, and totaled 13.2 mln tons. Exports to the 20 18 CIS and Baltic countries also went up by 16 21% and totaled 2.3 mln tons. 14 12 10 8 6 4 2 0 2005 2006 2007 2008 2009

Petroleum products exports to non-CIS Petroleum products exports to CIS Petroleum products sales in RF

51 KEY PERFORMANCE INDICATORS Energy for life OF THE COMPANY IN 2009 BY TYPE ENERGY FOR PEOPLE OF OPERATION

PREMIUM BUSINESS SEGMENTS

SHIP BUNKERING AIRCRAFT FUELING counterparties of the company are JSC — Russian Airlines, FGUP Gazprom Neft Marine Bunker LLC is Sale of jet fuel produced at JSC State Customs Committee of Russia, a subsidiary of JSC Gazprom Neft Gazprom Neft’s refineries and operation JSC Transaero, JSC Sibir Airlines, CJSC that supplies bunker fuel for sea- and of fuel service complexes at the airports Sky Express, CJSC Nordavia -Regional river-going vessels. The company was within the Russian Federation are the Airlines, OJSC Donavia and others. established in October 2007. Since key operational priorities of CJSC February 2008 Gazprom Neft Marine Gazprom Neft-Aero. The enterprise provides aircraft fueling Bunker has been a member of Russian services at the following airports: Association of Marine and River Bunker As per the results of 2009, Gazprom Sheremetyevo (Moscow), Domodedovo Suppliers and by the results of 2009 the Neft-Aero became one of the leaders (Moscow), Pulkovo (Saint-Petersburg), company is one of the leaders among in retail sales of aircraft fuel (aircraft and at the airports of Novosibirsk, Russian bunker companies. fueling) at airports in the Russian Krasnoyarsk, Murmansk, Tomsk, Federation. Kemerovo, Bryansk and Chita. Bunkering is a premium sales market for fuel oils and diesel fuel. The ambitious The business development objective objectives of Gazprom Neft is by 2020 of CJSC Gazprom Neft-Aero is further to take up one third of the bunker market growth of retail sales and expansion PRODUCTION AND SALE with its own port infrastructure, enter of a distribution network of fuel service OF MOTOR FUELS international markets and sell 77% fuel complexes both affiliated (own) and oil and 5% of diesel fuel produced by on a partnership basis, growth of the Company at a premium compared presence in airports on the basis of Gazprom Neft-Lubricants LLC to traditional exports. In order to achieve storage agreements, and expansion of (Gazprom Neft-SM) is a subsidiary its strategic objectives the Company geography of aircraft fueling abroad. of Gazprom Neft established in intends to ensure the production of not 2007. Currently, the enterprise holds less than 2.7 mln tons of marine fuel that The Development Strategy of CJSC production assets in Western Siberia will comply with international standards; Gazprom Neft-Aero until 2020 provides (Omsk), the European part of Russia to create its own port infrastructure of for establishing a corporate network (Yaroslavl), and in Western Europe five terminals and to have a bunker fleet of 15 modern fuel service complexes (Bari, Italy). In 2009 Gazprom Neft-SM of 28 bunker tankers. at Russian airports and for phased increased, as compared to 2008, the regional development currently from volume of standard goods’ segment Gazprom Neft Marine Bunker ensures Russian airports to CIS airports in sales 2.7-fold, and of premium guaranteed all-year-round supplies the near term and to airports in other goods — 3.4-fold. of petroleum products (fuel oil, oils, regions of the world by 2020. and marine fuel) to ship owners and In 2009 Gazprom Neft-SM actively charterers. The enterprise operates In 2009 the amount of jet fuel sold by developed sales of lubricants of the in Saint Petersburg, Novorossiysk, Gazprom Neft-Aero reached 1 mln tons Company’s existing brands. The range Murmansk, and Russia’s Far Eastern and from this figure it can be confidently of products contains some 90 titles ports. stated that Gazprom Neft’s subsidiary of oils sold under Gazprom Neft and is a leader in the aircraft fuel market in SibiMotor brand names. During the Marine fuel is mostly supplied by the Russia. By 2010 the Company intends past two years the Company has built Omsk Refinery while deliveries also to occupy a significant share of the an effective distribution structure which come from the Moscow and Yaroslavl market with the volume of retail sales enabled it to take 3% of the Russian Refineries. estimated to amount to about 1.5 mln consumer oils market (SibiMotor brand), tons of aircraft fuel a year. 12% of the market of oils for commercial In 2009 Gazprom Neft Marine Bunker transport, and 18% of industrial oils was operating in more than 22 ports, Availability of own capacities at the market (Gazprom Neft brand). In including all major sea ports. The airports will allow the company to 2009 the Company also started active Company established two subsidiaries: ensure good competitive positions in development of export sales: in Europe Gazprom Neft-Shipping LLC for the distribution markets and get a retail and CIS. managing its own fleet (9 ships were margin on jet fuel sales. bought in 2008) and Gazprom Neft In April 2009 Gazprom Neft-SM closed Terminal SPb LLC for using the Currently CJSC Gazprom Neft-Aero the deal with Chevron Global Energy Company’s own and leased terminals operates under direct contracts to purchase an oil and lubricants (currently the operator of the Kirovsky with airlines selling jet fuel without production plant in Italy. The Italian plant’s terminal in Saint Petersburg). intermediaries. Among the principal company that joined Gazprom Neft has

52 JSC GAZPROM NEFT ANNUAL REPORT 2009

an office in Rome and an oil producing Reductor, Gazprom Neft Compressor, commercial and industrial oils grew plant in the town of Bari with a capacity Gazprom Neft Slide Way, and Gazprom by 2%. of 30 thousand tons of oils and 6 Neft Paper Machine, approved by the thousand tons of lubricants a year. world’s leading equipment producers. Two large-scale advertising campaigns The range of goods produced at the In July 2009 the first products under the were conducted in 2009, and as plant — oils for cars and commercial Gazprom Neft brand were made at the a result, the brand exposure in Russia transport and industrial oils — are sold Gazprom Neft Lubricants Italia S.p.A. has now increased from 250 to 1000 under 150 brand names. Additionally plant. Currently, 20 titles of products are retail outlets with regional distributors thanks to its specific capacities the under production including synthetic, having the main responsibility for the plant produces 25 kinds of high-tech polysynthetic, and mineral oils for promotion of new products. . In 2009 lubricants that are used for many cars (Gazprom Neft Motor Oil product the regional distribution network grew purposes, including drilling. Therefore line), polysynthetic and mineral oils for from 27 to 51 companies. by this acquisition the Company commercial transport (Gazprom Neft obtained ownership not only of Super Oil product line), industrial oils According to the development strategy a modern European production facility (Gazprom Neft Hydraulic, Reductor, of JSC Gazprom Neft-Lubricants, by but also access to new distribution and Circulating Oils) and lubricants 2015 the enterprise plans to take up markets. (Grease L, Grease L Moly, Metal a significant share of Russia’s market Grease product lines). of packaged oils and become one of In 2009 Gazprom Neft-SM launched the leading players on the market with the manufacture of more than 37 new Despite the overall 20% decrease in focus on the high tech packaged oils for products primarily within the premium demand for lubricants as compared to cars and commercial transport market industrial range: lines of oils of Gazprom 2008, the sales of Gazprom Neft-SM’s segment. Neft Hydraulics, Gazprom Neft

53 ENERGY FOR LIFE ENERGY FOR PEOPLE 6 COMPANY’S GROWTH PROSPECTS COMPANY’S GROWTH Energy for life 6 PROSPECTS ENERGY FOR PEOPLE COMPANY’S GROWTH PROSPECTS

The strategic objective of JSC Gazprom consolidate competitive positions both In 2009 the Company’s Board of Neft is to become a major international on the Russian and global markets. Directors approved the Development player of Russian origin, proud of its Strategy for exploration and production, regionally diversified package of assets The Company’s philosophy is to build of oil refining and the Strategy for sales along the entire revenue chain, actively maximum return for shareholders in of petroleum products until 2020. In participating in the development of tandem with actively participating in the 2010 the Company will continue regions and having high social and development of regions and having applying a systematic approach to the environmental responsibility. high social and environmental concept of continuous strategic responsibility. development. In order to coordinate the JSC Gazprom Neft is a subsidiary of management’s actions at all levels and OJSC Gazprom whose operations are The development strategy of JSC in all directions a gradual transition to aimed at providing a reliable supply of Gazprom Neft until 2020 will determine the integrated system of long-term oil and petroleum products to national the major principles, objectives, strategy development and defense of and international consumers, integrating directions and expected results of the medium-term business plans are also high technologies of production and operations of JSC Gazprom Neft, being planned. refining which help to raise the including that of subsidiaries and equity effectiveness of operations and investees.

Strategy until 2020: increasing the size and expanding geographical coverage while retaining a leading position in terms of efficiency

GROWTH IN SCALE GEOGRAPHIC BUSINESS MAINTAINING AND RAISING EXPANSION BUSINESS EFFICIENCY

Proven oil reserves — Production – RF (YNAD, KhMAD, Ensure the highest total 2 200 mln t Eastern Siberia, the shelf), shareholder return (TSR) Central Asia, Near East, among Russia’s oil companies Oil and gas production — Africa Latin America Be one of the three leaders in 90–100 mln TOE per year Refining – RF, Europe efficiency among Russia’s Refining — vertically integrated oil Sales of petroleum 70—80 mln t per year companies products — European part Sales through premium OF Russian Federation, segments Western Siberia, Europe, 40 mln t per year Central Asia, CIS

56 JSC GAZPROM NEFT ANNUAL REPORT 2009

EXPLORATION AND PRODUCTION

AABy 2020 the Company, including should be achieved thanks to the acquiring plots of open acreage and its subsidiaries and associated phased launch of Gazprom Neft’s purchasing assets on the Russian companies, intends to increase explored oil fields and Slavneft’s and market. oil production to 100 mln TOE per Tomskneft’s fields where Gazprom AAThe share of foreign projects should year. Reserves-to-production ratio Neft controls 50% of the equity and account for 10% of the total Gazprom should be maintained on the same also of Gazprom’s oil assets. The Neft Group’s production. level for not less than 20 years, and target level will be reached with AAAn important task in raising the the share of projects at an initial the help of the existing assets and efficiency of the operations is rational development stage should account Gazprom Neft’s equity projects. use of gas resources, including for not less than 50% of production Furthermore the Company also plans raising the level of recovery of by the year 2020. These indicators to expand the asset portfolio by associated gas up to 95%.

REFINING

AAThe amount of oil refining of JSC that are under review by the Russian and will increase the competitive Gazprom Neft will reach 70 mln Government and additionally though performance of the Company on the tons a year by 2020. This will be taking into account the anticipated domestic market. achieved as a result of the increase changes in the market environment. AAThe growth of refining in Russia in the Company’s own oil refining AAThe implementation of the quality will be reached by completing capacities in Russia of up to 40 mln program meets the requirements consolidation and increasing tons plus an increase in capacities of the technical regulations that by capacity of the Moscow Refinery. abroad of up to 25-30 mln tons. 2015, will forbid the circulation of The level of refining in Russia, some Therefore, the target ratio of motor fuels lower than class 5 on the 40 mln tons a year, is an optimum for allocation of oil resources will be the territory of the Russian Federation. the Company in terms diversifying following: 40% — refining in Russia, The program of raising oil processing the risks of deliveries of oil, and the 25-30% — refining abroad, 20-25% depth will allow an increase to the production volume planned to meet direct sales of oil. cost of the basket of petroleum Russia’s domestic and external AAThe priorities of JSC Gazprom Neft products made from one ton of oil to markets. is to implement programs focused a significant extent due to raising the AAThe basis of growth of refining on raising the quality of motor technology level of the Company’s oil and sales business outside Russia fuels, oil processing depth, and refineries to the European level. is the task of reducing risks and operational improvements at all of AAWith due regard to key efficiency raising effectiveness of allocation of the Company’s Russian refineries. indicators (level of the operational crude oil. It should be achieved not The task of raising the revenue availability, dead weight losses, only through equity participation in capacity of the existing refineries will etc) the operational improvements refining capacities, but also through be achieved by making changes to programs will help reach the level long-term contracts, including the regulatory and legal framework of the leading European refineries processing agreements.

57 COMPANY’S GROWTH Energy for life PROSPECTS ENERGY FOR PEOPLE

MARKETING AND SALES

As far as marketing of petroleum AAdeveloping dedicated businesses for Priorities of the sales products is concerned, the strategic the promotion of jet fuel, lubricants, strategy development: objectives of the Company until 2020 bitumens, and are: selling 40 mln tons of petroleum bunkering raising total sales up to products through marginal distribution more than 11 mln tons a year. extension of the value chain; channels in Russia and abroad, creating a strong retail brand, increasing Each product sphere has its own retail development under the average circulation at filling stations by separate strategic development plan. new brand; 20% and doubling the share of related goods and services within the revenue The increase of oil refining outside search, estimation, acquisition stream. Russia will form the basis for and integration of filling development of the respective retailing stations of independent Within the Russian and CIS markets business and will help reach the networks and tank farms; sources of retail network growth will mentioned level of 40 mln tons of total come from the following: retail sales. effective major construction AAExpansion of the retail network until work. the quantity of motor fuels sold totals 8.1 mln tons a year — through the Company’s own network of filling stations, together with wholesale to smaller outlets — 13 mln tons a year;

58 JSC GAZPROM NEFT ANNUAL REPORT 2009

STRATEGY IMPLEMENTATION

The investment program of 80 bn edge technologies and the partner’s management of business processes; USD (including investments of 100% experience in implementation of large- increasing effectiveness of operations of subsidiaries and equity investees scale projects. for depleted resource potential. For in proportion to the share of JSC 2010 it is also planned to continue Gazprom Neft) has been drawn up Increasing business scale will provide implementing large-scale projects to for implementation of the investment Gazprom Neft with the largest total prepare for the development of the projects aimed at achieving the shareholder return amongst Russia’s Messoyakhskiye and Novoportovskoye strategic objectives by 2020. oil companies and maintain the fields in the North of the YNAD, and Company as one of the three leaders in for the development of the Company In addition to this, the Company needs effectiveness among Russia’s vertically abroad. Some of the tasks that the to carry out joint work with state bodies integrated oil companies. Company started to address in the to reform the existing fiscal system second half of 2009 will remain which currently provides no stimulus Implementation of these plans enables of importance in 2010. The most to long-term development either of the JSC Gazprom Neft to become an significant of them are optimization sector as a whole, or JSC Gazprom international oil and gas company with of business processes and cost Neft in particular. a regionally diversified package of reduction. assets along the entire value chain and Setting up joint ventures by pooling to be a worthy competitor on the global In downstreaming the year 2010 will assets with international oil companies energy markets. be the year of active implementation of is another key tool for successful projects for raising the quality level and development. In addition to solving Among the main tasks for 2010 there oil processing depth at the company’s the tasks of financing and unbundling are: strategy updates for particular plants, and continued renovation and of risks, it enables the use of leading- business areas, improvement in the rebranding of the filling stations.

59 ENERGY FOR LIFE ENERGY FOR PEOPLE 7 INVESTMENT: TECHNICAL RE- EQUIPMENT AND DEVELOPMENT OF THE COMPANY INVESTMENT: TECHNICAL RE- Energy for life EQUIPMENT AND DEVELOPMENT ENERGY FOR PEOPLE 7 OF THE COMPANY INVESTMENT: TECHNICAL RE- EQUIPMENT AND DEVELOPMENT OF THE COMPANY

The large-scale business development plans Due to the price recovery of oil and petroleum products JSC Gazprom Neft has in all spheres entail considerable investment. already in 2009 increased the Investment program by 35% compared to the initial The total amount of investments to maintain Business plan (excluding the acquisition of Sibir Energy). The total amount of the current activities and for further investments in 2009 was 5.5 bn USD. Capital investments of JSC Gazprom Neft in development, including buying assets on the “organic growth” and traditional asset maintenance in 2009 was 2.6 bn USD which market, before 2020 will rise to 80 bn USD. is 22.5% less than the capital investments of 2008: AAcapital investment in oil production decreased by 32.2% and totaled 2.0 bn USD; AAoil refining in 2009 received 334 mln USD which is almost 2-fold more (+76.7%) than the money allocated in 2008; AAmore investments than the previous year were allocated for sales of petroleum products: 188 mln USD (+ 18%); AAother investments amounted to 64 mln USD.

1.7 bn USD was allocated in 2009 for the purchase of Sibir Energy; and 0.5 bn USD — for the purchase of NIS. Total investments in ‘non-organic’ growth amounted to 2.8 bn USD.

In 2010 the Company plans to increase the amount of investments in “organic growth” to a significant extent: up to 4.0 bn USD, including investments in exploration and production — by 32%, in oil refining — 137%, in sales of petroleum products — by 63%. Acquisition of new major assets in 2010 is not planned.

Implementation of the large-scale Investment program in 2010 should solve the following major tasks: AAMaintaining the current production level at traditional assets, with a production drop rate of not more than 3%; AAActivation of exploration activities and the start of development of new deposits: Ravninny, Severo-Romanovsky, Vorgensky, Ort’yagunsky plots, Messoyakhskiye and Kuyumbinskiye groups of deposits, Novoportovskoye fields; and foreign projects: Venezuela, Libya, that will allow the production level to reach 100 mln TOE by 2020; AARenovation of oil refineries to meet technical regulations: transition to Euro-4 starting from 2012, and to Euro-5 — from 2015, and increasing production of high octane gasolines; AARenovation of the NIS refinery as per the terms of the acquisition deal; AARenovation and rebranding of filling stations, and entry into premium segments of oils markets; AAIn oil related services a large-scale program to replace drilling machines with new equipment to be purchased is planned.

Meanwhile, the Company’s operating results in 2010-2012 will be mainly determined by traditional assets whose efficiency cannot be improved to a significant extent, taking into account the drop in production and the growth rates of natural monopolies. Stable results are planned to be achieved in oil refining, and the renovation program will start affecting revenues in 2012. In sales the major growth is planned to be achieved after the year 2011.

62 JSC GAZPROM NEFT ANNUAL REPORT 2009

To minimize the negative effect of reducing production on traditional assets and the CAPITAL EXPENDITURES growth of rates of natural monopolies the Company’s management has planned BY BUSINESS SEGMENTS, activities aimed at raising operating efficiency in all of its business spheres with MLN USD a total effect in 2010 of more than 14 bn rubles. With the help of these activities it is planned to maintain EBITDA at the level of 2009 in comparable market conditions even on traditional assets in 2010. SOURCE: COMPANY DATA At the same time, the investment program has huge growth potential: both due to “reserve” projects and programs that were not included, and potential possibilities, 4000 3500 mainly in the unallocated stock of fields. 3000 2500 2000 1500 1000 500 0 2008 2009 2010 (forecast)

Exploration and Production Marketing & Sales Refining Other

63 ENERGY FOR LIFE ENERGY FOR PEOPLE 8 PERFORMANCE AND FINANCIAL INDICATORS PERFORMANCE AND Energy for life 8 FINANCIAL INDICATORS ENERGY FOR PEOPLE PERFORMANCE AND FINANCIAL INDICATORS

KEY PERFORMANCE INDICATORS

proven hydrocarbon hydrocarbon Production, Refining (mln tons) reserves (mln TOE)

SOURCE: SOURCE: SOURCE: COMPANY COMPANY COMPANY DATA DATA DATA

50,2 2,2 48,7 0,9 41 1108 6,3 6,0 33,4 97 2,4 10,1 9,7 28,4 932 52 +3% 3,3 5,8 32,3 31,4 6,7 6,8 +17% 18,4 18,4

01.01.2009 01.01.2010 2008 2009 2008 2009

Production Gazprom Neft Omsk Exploration and Reestimation Slavneft Yaroslavl of prev. estimates Tomskneft Moscow Sibir Energy NIS NIS SE

Exports to Non-CIS (mln tons) Exports to CIS (mln tons) Petroleum Product Sales in Russian Federation (mln tons)

SOURCE: SOURCE: SOURCE: COMPANY COMPANY COMPANY DATA DATA DATA

16,3 18,3

15,6 16,2 3,3 3,3

2008 2009 2008 2009 2008 2009

66 JSC GAZPROM NEFT ANNUAL REPORT 2009

Petroleum Product Exports CRUDE BALANCE, % REFINING CAPACITIES (mln tons) UTILIZATION (2009), %

SOURCE: SOURCE: SOURCE: COMPANY COMPANY COMPANY DATA DATA DATA

Omsk 15,5 95 Refinery 12,8 2,3 +21,1% 53% 60% 61% 70% 1,9 YANOS 90

Moscow 47% 40% 82 39% 30% Refinery

2008 2009 2006 2007 2008 2009

Export Oil Sales CIS Refining and Marketing

PETROLEUM PRODUCT EXPORTS

9 1 3 19 SOURCE: COMPANY DATA

Diesel 2009, % 32 Gasoline 7 Jet fuel Fuel oil 29 Oils Bitumens Other

67 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

KEY FINANCIAL RESULTS

REVENUES (mln US$) EBITDA* (mln US$) NET INCOME (mln US$)

SOURCE: SOURCE: SOURCE: COMPANY COMPANY COMPANY DATA DATA DATA

33 870

24 166 8 610 4 658 3 013 5 977

2008 2009 2008 2009 2008 2009

* — including share in equity investees

REVENUE STRUCTURE 2009

0,4 29,9 2,1

SOURCE: COMPANY DATA Oil export 27,6 Oil export to CIS Oil domestic market 4,1 2009, % Petroleum products export 4,4 1,2 Petroleum products CIS 30,2 Petroleum products domestic market Gas sales Other

68 * — including share in equity investees PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

Management’s Discussion and Analysis of Financial Condition and Results of Operations for 2009, 2008 and 2007

Forward-Looking Statements

This discussion contains forward-looking statements concerning the financial condition, results of operations and businesses of Gazprom Neft and its consolidated subsidiaries. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements.

Forward-looking statements include, conditions in various countries and Such terms as “Gazprom Neft”, among other things, statements regions; (j) political risks, project delay “Company” and “Group” in their concerning the potential exposure or advancement, approvals and cost different forms in this report represent of Gazprom Neft to market risks estimates; and (k) changes in trading JSC Gazprom Neft and its consolidated and statements expressing conditions. subsidiaries and affiliated companies. management’s expectations, beliefs, This report represents JSC Gazprom estimates, forecasts, projections All forward-looking statements Neft’s financial condition and results of and assumptions. These forward- contained in this discussion are operations on a consolidated basis. looking statements are identified by expressly qualified in their entirety by their use of terms and phrases such the cautionary statements contained Tonnes of crude oil produced are as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, or referred to in this section. Readers translated into barrels using conversion ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, should not place undue reliance on rates reflecting oil density from each ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, these forward-looking statements. Each of our oil fields. Crude oil purchased ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, forward-looking statement speaks only as well as other operational indicators ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and as of the date of this discussion. Neither expressed in barrels are translated from similar terms and phrases. There are Gazprom Neft nor any of its subsidiaries tonnes using a conversion rate of 7.33 a number of factors that could affect undertake any obligation to publicly barrels per tonne. Translations of cubic the future operations of Gazprom Neft update or revise any forward-looking meters to cubic feet were made at the and could cause those results to differ statement as a result of new information, rate of 35.31 cubic feet per cubic meter. materially from those expressed in the future events or other information. Translations of barrels of crude oil into forward-looking statements included barrels of oil equivalent (“BOE”) were in this Report, inclusively (without The following discussion is intended made at the rate of 1 barrel per BOE limitation): (a) price fluctuations in to assist you in understanding of JSC and of cubic feet into BOE at the rate of crude oil and gas; (b) changes in Gazprom Neft’s financial position as 6 thousand cubic feet per BOE. demand for the Company’s products; of December 31, 2009 and results (c) currency fluctuations; (d) drilling of operations for the years ended and production results; (e) reserve December 31, 2009, 2008 and 2007 estimates; (f) loss of market and and should be read in conjunction with industry competition; (g) environmental the Consolidated Financial Statements and physical risks; (h) risks associated and notes thereto, which were prepared with the identification of suitable in accordance with accounting potential acquisition properties and principles generally accepted in the targets, and successful negotiation United States of America. and completion of such transactions; (i) economic and financial market

70 JSC GAZPROM NEFT ANNUAL REPORT 2009

Key Financial and Operational Results

Change, %

2009 2008 2007 2009–2008 2008–2007 Revenues (US$ million) 24 166 33 870 22 768 (28,7) 48,8 EBITDA (US$ million) 5 977 8 610 6 601 (30,6) 30,4 Hydrocarbon production including our share of equity investees (millions of boe) 367.8 360.9 331.7 1.9 8.8 Refining throughput at own and equity investee refineries (millions of tonnes) 33.4 28.4 26.2 17.6 8.4

Operating Segments Accordingly, the results of operations plc (“Sibir ”), until June 23, 2009, the of these segments on a stand-alone Company invested £1,057 million The Company’s activities are divided basis do not necessarily represent (approximately US$ 1,659 million) into two main operating segments: each segment’s underlying financial to acquire 54.71% of the ordinary AAExploration and production position and results of operations. shares of Sibir. This acquisition of segment – which includes exploration, For this reason, we do not analyze shares of Sibir provided the Company development and production of crude our segments separately. Refer to with effective control over Sibir and oil and gas. Note 20 to the Consolidated Financial indirect control over Moscow Refinery, AARefining, Marketing and Distribution – Statements for operating segments having increased its effective interest which includes refining of crude oil, financial data. in Moscow Refinery from 38.63% to purchases, sales and transportation 59.75%. of crude oil and refined petroleum Changes in the products. Company’s Structure Sibir Energy plc is a vertically integrated energy company with exploration The Company primarily conducts and production operations in Western its operations in Russia. It also has 2009/2010 Siberia and refining and marketing in assets located in Serbia, Angola, Italy, the City of Moscow and the Moscow Kazakhstan, Kyrgyzstan, Tajikistan and MALKA OIL region. Sibir’s primary upstream assets Belarus. include JSC Magma Oil Company (95% On February 18, 2010 the Company Sibir owned) and a 50% interest in The Company’s operating segments completed the acquisition of 100% of Salym Petroleum Development (a joint are interdependent; a portion of the the share capital of OOO STS-Service, venture with ). Sibir’s revenues of one segment forms a part a company previously owned by Malka total current production is over 80,000 of the costs of the other segment. Oil AB, for a cash consideration of 820 barrels of oil per day. Sibir also holds In particular, JSC Gazprom Neft, as million Swedish Kroner (approximately a 38.63% stake in the Moscow Oil a holding company, buys crude oil US$ 113 million). Refinery (“Moscow Refinery”), which is from its production subsidiaries, part of jointly managed with Gazprom Neft, and which is processed at the Company’s STS-Service owns Block 87 in the a network of 134 retail stations in the and other downstream facilities; the Tomsk Region comprising Zapadno- City of Moscow and the Moscow region remaining portion of crude output is Luginetskoye field (currently under through JSC Moscow Fueling Company primarily exported through a wholly development), Nizhneluginetskoye and and JSC Mosnefteproduct. owned export trading company. a part of Shinginskoye field. C1+C2 The refined petroleum products category reserves comprise 11.5 mln Naftna Industrija Srbije (NIS) are distributed in the international tonnes, and there are 11 prospective and domestic markets through the structures within the area. Along with the In February 2009 JSC Gazprom Neft Company’s own marketing subsidiaries. prospective structures, these fields are completed the acquisition of 51% In most cases it is difficult to assess located in the immediate neighborhood interest in the Serbian oil company market prices for crude oil in the of Shinginskoye field developed by the NIS for the total consideration of € domestic market due to the significant Company’s subsidiary, Gazpromneft- 400 million. Separately, under the intragroup turnover within the vertically Vostok LLC, which will integrate OOO purchase agreement Gazprom Neft is integrated oil companies. The prices STS-Service into its own structure. also obliged to invest in NIS upgrade set for intragroup purchases of crude program € 547 million by 2012. As part oil reflect a combination of market SIBIR ENERGY (SIBIR) of the upgrade, measures will be taken factors such as global crude pricing to improve the quality of produced environment, transportation, crude In the period from April 23, 2009, oil products to ensure that they meet processing costs, capital investment being the date of the Company’s first European standards (Euro-5). requirements as well as other factors. acquisition of shares in Sibir Energy

71 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

CHEVRON ITALIA S.P.A. BRAND of this transaction, the Company and to $61.67 per barrel from $97.26 barrel IN BARI (ITALY) Rosneft agreed to jointly manage the a year ago. business operations of Tomskneft and JSC Gazprom Neft acquired 100% of purchase their respective share of At the same time within the course of oils and lubricants producing facility in Tomskneft’s annual production. 2009 oil price has been Bari (Italy) from Chevron Global Energy. steadily increasing from its minimal The facility’s productive capacity Main Macroeconomic values in the beginning of the year includes 30 thousand tonnes of oils Factors Affecting ($39 per barrel on February 18) to and 6 thousand tonnes of lubricants $80 per barrel on December 1. In annually. The production range includes Results of Operations 2009 Brent crude price averaged at 150 types of oils used in cars and $61.67 per barrel and as of year end commercial transport as well as oils The main factors affecting the it stood at $77.67 per barrel. Growing meant for industrial use. Production Company’s results of operations crude pricing environment in 2009 was capacity also allows for production of include: following recovery on global markets 25 different special high-technology AAChanges in market prices of crude oil fueled by massive liquidity injections lubricants used particularly in the course and petroleum products; provided by world largest central of drilling operations. In accordance AARussian Ruble (“RR”) exchange rate banks as well as other measures by with technological agreement, Chevron versus the US Dollar (“USD”) and governments. Crude prices were also Global Energy has provided a license Inflation; supported by the reduced supply flows on technical data as well as patent AATaxation; from OPEC members effective from rights for 2 years on “Texaco” brand in AAChanges in transportation tariffs of January 1, 2009. Italy to LLC Gazprom Neft – Lubricants. crude oil and petroleum products Products manufactured at the facility The following table provides information under “Gazprom neft” trade mark will be Changes in Market on average crude oil and petroleum distributed both in Italian and Russian Prices of Crude products prices in the international and markets. domestic markets during the periods Oil and Petroleum analyzed:The following chart contains 2008/2007 Products information about average prices for oil and petroleum products on international Tomskneft and domestic markets over the periods The prices for crude oil and petroleum under analysis: In December 2007 the Company products in the international and acquired a 50% equity interest in Russian markets are the primary factor Tomskneft and its subsidiaries from affecting the Company’s results of a subsidiary of OJSC Oil Company operations. In 2009 average Brent Rosneft for US$ 3,567 million. As part crude oil price plummeted by 36.6%

Change, %

2009 2008 2007 2009–2008 2008–2007 International market USD per barrel Brent 61,67 97,26 72,34 (36,6) 34,4 Urals Spot (average Med. + NWE) 61,22 94,79 69,23 (35,4) 36,9 USD per ton Premium gasoline (average NWE) 578,99 841,55 697,41 (31,2) 20,7 Naphtha (average Med. + NWE) 527,28 779,84 662,27 (32,4) 17,8 Diesel fuel (average NWE) 536,98 948,49 667,70 (43,4) 42,1 Gasoil 0.2% (average Med. + NWE) 512,67 903,81 640,69 (43,3) 41,1 Fuel oil 3.5% (average NWE) 341,66 452,55 330,76 (24,5) 36,8

Domestic market USD per ton High-octane gasoline 600,06 1 023,15 835,47 (41,4) 22,5 Low-octane gasoline 494,07 803,38 656,82 (38,5) 22,3 Diesel fuel 419,88 880,67 617,92 (52,3) 42,5 Fuel oil 204,38 329,05 219,45 (37,9) 49,9

Source: Platts (international market) and Kortes (domestic market)

72 JSC GAZPROM NEFT ANNUAL REPORT 2009

Ruble vs. US Dollar Accordingly, any Ruble appreciation exchange rate the Company is engaged Exchange Rate and to the US Dollar negatively affects the in using derivative instruments. Refer to results of the Company’s operations, Note 16 to the Consolidated Financial Inflation though this is partially offset by Ruble Statements. denominated revenue from sales in A substantial part of the Company’s Russia. In 2009 Ruble depreciated The following table comprises revenues from sales of crude oil and against the US Dollar in nominal terms, the information on exchange rate petroleum products is denominated which positively affected the Company’s movements and inflation during the in US Dollars, while most of the margins. In order to mitigate the effects periods analyzed: expenses are settled in Russian Rubles. of fluctuation in Ruble – US Dollar

2009 2008 2007 Consumer Price Index (CPI), % 8,8 13,3 11,9 Producer Price Index (PPI), % 13,9 (7,0) 25,1 Ruble/US dollar exchange rate as of the end of the period 30,24 29,38 24,55 Average Ruble/US dollar exchange rate for the period 31,72 24,86 25,58 Real appreciation (depreciation) of the Ruble against the US dollar, % 5,7 (5,3) 20,0 Nominal period average appreciation (depreciation) of the Ruble against the US dollar, % (21,6) 2,9 6,3

Source: the Central Bank of the Russian Federation, the Federal State Statistics Service.

Taxation

The following table provides information on average enacted tax rates specific to the oil and gas industry in Russia for the periods indicated:

Change , %

2009 2008 2007 2009–2008 2008–2007

Export customs duty Crude oil (US$ per tonne) 179,93 355,08 206,70 (49,3) 71,8 Crude oil (US$ per barrel) 24,55 48,44 28,20 (49,3) 71,8 Light and middle distillates products (US$ per tonne) 133,54 251,53 151,59 (46,9) 65,9 Fuel oil (US$ per tonne) 71,92 135,51 81,64 (46,9) 66,0 Mineral extraction tax Crude oil (RUR per tonne) 2 299,00 3 329,09 2 472,69 (30,9) 34,6 Crude oil (US$ per barrel) 9,89 18,27 13,19 (45,9) 38,5 (RUR per 1,000 cm) 147,00 147,00 147,00 – –

Crude oil export customs duty The Government sets export custom rate duty rates according to the following formulas: Export customs duty rate per tonne of crude oil is established on a monthly basis by the Government of the Russian Quoted Urals price (P), Maximum Export Custom Duty Rate Federation. The actual rate is based on USD per tonne the average Urals price in the period 0 — 109,50 0% from the 15th calendar day in the month to the 14th calendar day of the following 109,50 — 146,00 35.0% * (P – 109.50) month (monitoring period). The rate is 146,00 — 182,50 12.78 USD + 45.0% * (P – 146.00) effective on the first day of the coming >182,50 29.20 USD + 65.0% * (P – 182.50) month after the monitoring period.

73 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

In 2009 the export customs duty on decrease was driven by the declining transport, by tankers, and by the own crude oil declined by 49.3% to US$ Urals prices, which decreased by export infrastructure of oil producing 24.55 per barrel compared to 2008. 35.4% to US$ 61.22 per barrel in 2009 companies. The reduction was associated with compared to US$ 94.79 per barrel in the decline of Urals prices, which 2008. Most of the oil produced by the decreased by 35.4% to US$ 61.22 per Company is classified as ‘‘Siberian barrel in 2009 compared to US$ 94.79 In 2008 mineral extraction tax rate Light’’ crude or “SILCO” and has sub- per barrel in 2008. on crude oil increased by 38.5% average density of 34.20 degrees API to US$ 18.27 per barrel primarily or 830-850 kg/cm and sub-average In 2008 the export customs duty on due to a 36.9% increase in average sulfur content of 0.56% compared to crude oil increased by 71.8% to US$ crude oil prices as compared to the average Russian crude oil. When not 48.44 per barrel from US$ 28.20 per corresponding period of 2007. blended with other Russian crude oil, barrel in 2007. The increase was due crude oil produced by the Company to the growth of Urals prices, which NATURAL GAS MINERAL EXTRACTION might be sold with a premium over the increased by 36.9% to US$ 94.79 per TAX RATE Urals blend. This advantage, however, barrel in 2008 compared to US$ 69.23 is generally lost because crude oil per barrel in 2007. The rate of mineral extraction tax for produced by the Company is blended natural gas has remained stable since with crude oil belonging to other Export customs duty rate on January 1, 2006 and equals 147.00 Russian companies when transported petroleum products Rubles per thousand cubic meters of through the trunk pipeline system. natural gas. The export customs duty rate on The Company exports SILCO through oil products is determined by the Transportation Tuapse, where the delivery is made Government based on the prices for of Crude Oil and through a special pipeline for this type crude on international markets is set of crude oil. separately for light and middle distillates Petroleum Products and for fuel oil. In 2009 the Company shipped 45% of Gazprom Neft transports its crude oil crude oil for export through the Baltic Mineral extraction tax (MET) for export primarily through Russia’s Sea ports (mainly Primorsk); 21% state-owned pipeline system, which is of crude oil was exported through Starting from January 1, 2007 mineral operated by JSC Transneft (“Transneft”). Transneft’s Druzhba pipeline (mainly to extraction tax rate on crude oil (R) is Russian Ministry of Industry and Energy Germany, Poland and Slovakia); 29% calculated using the following general is in charge of providing access to the of crude oil shipped from various Black formula: R = 419 * (P – 9) * D/261, pipeline system. Capacity in the pipeline Sea ports Novorossiysk, Tuapse and the where P is the average monthly network system is generally allocated Ukrainian port Yuzhniy and 5% of crude price on the Rotterdam and among all users in proportion to their oil was exported to China via transit Mediterranean markets (US$/bbl) quarterly supply volumes to the system pipeline through Kazakhstan. and D is the actual RUR/US$ average and on the basis of their requests. exchange rate. Effective from January Pursuant to the Natural Monopolies Transportation of refined products 1, 2009 the formula was amended to Law, pipeline terminal access rights are in Russia is performed by means of incorporate higher threshold oil price: allocated among oil producers and their railway transport and the pipeline R = 419 * (P – 15) * D/261. parent companies in proportion to the system of OJSC Transnefteproduct. volumes of oil produced and delivered The Russian railway infrastructure is Depleted oil assets are subject to lower to the Transneft pipeline system (and owned and operated by JSC Russian MET. Depleted oil assets are those that not in proportion only to oil production Railways. Both these companies are have depletion rate exceeding 80%. volumes). state-owned. Besides transportation of Depletion rate is calculated by dividing refined products, JSC Russian Railways accumulated production volume from The Federal Energy Agency currently provides oil companies with crude oil oil filed (N) by the field’s total reserves approves quarterly schedules detailing transportation services. We transport (V, where V is ABC1 + C2 reserves the precise volumes of oil each the major part of our refined products volume as per Russian classification). producer can transport through the by railway transport. Should the field’s depletion rate exceed Transneft system. Once the access 80% general MET formula is multiplied rights are allocated, oil producers The transportation tariff policies are by coefficient C, which is calculated as generally cannot increase their allotted defined by the state authorities to follows: C = -3.5 * N/V + 3.8. Thus every capacity in the export pipeline system, ensure the balance of interests of marginal percent of depletion in the although they have limited flexibility in the state and all participants in the excess of 80% reduces MET payable altering delivery routes. Oil producers transportation process. Transportation by 3.5%. are generally allowed to assign their tariffs of natural monopolies are set access rights to others. Alternative by the Federal Tariffs Service of the In 2009 mineral extraction tax rate on access to international markets Russian Federation (“FTS”). The crude oil decreased by 45.9% to US$ bypassing Transneft export routes tariffs are dependent on transport 9.89 per barrel compared to 2008. The can be obtained through railroad destination, delivery volume, distance

74 JSC GAZPROM NEFT ANNUAL REPORT 2009

of transportation, and several other Resource Base included in this supplementary factors. Changes in the tariffs depend information are prepared using on inflation forecasts made by the According to the independent reservoir definitions provided by the US Ministry of Economic Development engineers, DeGolyer and MacNaughton Securities and Exchange Commission of the Russian Federation, the on the basis of the standards set forth (SEC), which require the use of investment needs of owners of transport by the Society of Petroleum Engineers, a 12-month average of the first day infrastructure, other macroeconomic Petroleum Reserves Management of the month price for each month factors, and compensation of System (“PRMS”) as of December 31, within the reporting period. The PRMS economically reasonable expenses 2009 the Company had 4,989 millions reserves above use management’s best incurred by entities of natural of barrel of oil equivalent (BOE), estimate of future crude oil and natural monopolies. Tariffs are to be revised including proved crude oil reserves of gas prices. by FTS at least annually, comprising 4,610 millions of barrel and proved gas a dispatch tariff, loading, transshipment, reserves of 2.3 trillion cubic feet. pumping and other tariffs. The Company’s proved reserves The main Russian crude oil production including equity investees were 7,462 regions are remote from the main millions of BOE, including proved crude crude oil and refined products oil reserves of 6,924 millions of barrel markets. Therefore, the access of and proved gas reserves of 3.2 trillion crude oil production companies to the cubic feet. markets is dependent on the extent of diversification of transport infrastructure. The PRMS reserves above differ from Consequently, transportation cost is those reported in the supplementary an important macroeconomic factor information on oil and gas activities affecting our results. included with our consolidated financial statements. Oil and gas reserves

The following table represents the Company’s reserves for the periods indicated:

(millions barrels of oil equivalent (BOE) December 31, December 31, 2009 2008

Total Proved (consolidated subsidiaries) Beginning of year 4 847 4 945 Production (247) (248) Purchases of minerals in place 15 – Revision of previous estimates 374 150 End of year 4 989 4 847 Total Proved (company's share of equity method investees)* Beginning of year 1 961 1 961 Production (132) (109) Purchases of minerals in place 268 – Revision of previous estimates 376 109 End of year 2 473 1 961 Total consolidated and equity interests in proved reserves - end of year 7 462 6 808 Total consolidated and equity interests in probable reserves - end of year 4 069 4 927 Total consolidated and equity interests in possible reserves - end of year 1 850 1 856

* 49.9% reserves of JSC Slavneft; 50% of reserves of JSC Tomskneft and 50% of Salym Petroleum Development.

75 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

Production of Crude Noyabrskneftegaz, the Company’s production. Following acquisition of Oil, Gas and Petroleum major production unit (41% of the assets of Malka oil in February 2010, Company’s total proved reserves under Vostok will be an operator for its fields. Products PRMS classification), operates about 30 fields in the Yamal-Nenetsky and The NIS Exploration and Production CRUDE OIL PRODUCTION Khanti-Mansiysky autonomous districts division produces crude oil and natural and produces about 62% of Company’s gas in Serbia. In addition NIS holds Gazprom Neft is engaged in the consolidated production volume. a 7% non-operating interest in an exploration, development and Angola concession-type contract, from production of crude oil and gas Khantos is developing Zimnee field which it receives production volumes. principally through fields located in the in the Khanti-Mansiysky autonomous Crude oil produced in Serbia is primarily Yamal-Nenetsky and Khanti-Mansiysky district and Tumen region. It also refined by NIS’s Refining division. autonomous districts, the Omsk and provides operating services to Sibneft- Tomsk regions. Yugra LLC (“Sibneft-Yugra”). Sibneft- Slavneft (equally split and controlled by Yugra holds production licenses for two Gazprom Neft and TNK-BP) develops The Company’s major crude fields: Priobskoye and Palyanovskoye oil assets in the Urals Federal District oil production entities are JSC in the Khanti-Mansiysky autonomous and conducts exploration in the Siberian Gazpromneft-Noyabrskneftegaz district. Priobskoye field is one of the Federal District. (Noyabrskneftegaz), Gazpromneft- Company’s largest and most promising Khantos LLC (Khantos) and oil field, which account for 46% of Tomskneft (equally split and controlled Gazpromneft-Vostok LLC (Vostok). the Company’s total proved reserves by Gazprom Neft and Rosneft) holds Within the course of 2007 the Company under PRMS classification. Full- licenses for the development of fields in established two new operating scale development of Priobskoe was the Tomsk region and Khanty-Mansiysky subsidiaries: Gazpromneft-Yamal LLC launched in 2004. By the end of 2009 autonomous district. (Yamal) and Gazpromneft-Angara the field was already producing about LLC (Angara). Gazpromneft-Yamal 27% of the Company’s consolidated Following the acquisition of Sibir the LLC (Yamal) conducts exploration and production volume. Company simultaneously gained control development of JSC Gazprom’s oil over it’s production subsidiary Magma fields (the Company’s parent company), Vostok operates Archinskoye, and 50.0% share in Salym Petroleum whereas Gazpromneft-Angara LLC Shinginskoye and Urmanskoye fields in Development (an upstream joint venture (Angara) was established to develop the Tomsk and Zapadno-Krapivinskoye in between Royal Dutch Shell and Sibir). Company’s new crude oil fields in the Omsk region. All these fields form a new Eastern Siberia. production center with a yearly increase The following table represents the in crude oil output that constitutes Company’s production for the periods for about 5% of the Company’s total indicated:

Change , %

(millions of barrels) 2009 2008 2007 2009–2008 2008–2007 Crude oil produced by consolidated subsidiaries 224.9 228.6 243.2 (1.6) (6.0) Company’s share in production of equity investees 124.3 114.2 77.3 8.8 47.7 Total crude oil production 349.2 342.8 320.5 1.9 7.0

In 2009 and in 2009 the Company’s respectively. The increase was due to production which increase by 8.8% in production of crude oil including share the acquisition of 50% interest in Salym 2009 compared to 2008 and by 47.7% in equity investees increased by 1.9% Petroleum Development (“SPD”) in in 2008 compared to 2007. and by 7.0% to 348.6 million barrels June 2009 and due to the acquisition of (47.7 million tonnes) and to 342.1 million 50% interest in Tomskneft in December The following table summarizes the barrels (46.3 million tonnes) compared 2007. Company’s crude oil production Company’s crude oil purchases for the to the corresponding periods, includes our share in equity investees’ periods indicated::

Change , %

(millions of barrels) 2009 2008 2007 2009–2008 2008–2007 Crude oil purchases in Russia and CIS* 24,9 12,0 16,3 107,5 (26,4) Crude oil purchases internationally 16,2 15,3 3,9 5,9 292,3 Total crude oil purchases 41,1 27,3 20,2 50,5 35,1

* Crude oil purchases in Russia exclude purchases from Company’s equity investees Slavneft, Tomskneft and Salym Petroleum Development

76 JSC GAZPROM NEFT ANNUAL REPORT 2009

In 2009 and 2008 the Company In 2008 the Company produced 3.1 In particular, the program provides increased the volumes of crude oil billions of cubic meters of associated for the construction of associated purchased by 50.5% and 35.1% to and natural gas with an increase of gas transportation facilities from the 41.1 million barrels (5.6 million tonnes) 63.2% compared to 2007. This increase Shinginskoye, Yuzhno-Priobskoye oil and 27.3 million barrels (3.7 million relates to the Company’s program for fields, commissioning of the Phase Two tonnes) compared to the corresponding the utilization of associated gas, which is of Yuzhno-Priobskaya gas turbine power periods, respectively, as a result of described below. plant (GTPP) and implementation of the trading activities expansion. unified automated data management In February 2008, Gazprom Neft system for collection of associated Gas production adopted a medium term program for petroleum gas data on the oilfields of the the utilization of associated gas with Company. production of equity investees), an the goal of increasing its efficient use, increase of 3.2%, compared to 3.1 mitigating environmental and tax risks Production of petroleum billions of cubic meters in 2008. This and increasing revenues from the sale products increase relates to the Company’s of additional volumes of associated program for the utilization of associated gas and its refined products. The The following table summarizes the gas, which is described below and Company plans to invest Rubles 2.1 Company’s production of petroleum recent acquisitions during 2009. billion (approximately US$ 69 million) to products for the periods indicated: implement this program during 2010.

Increase, %

(millions of tonnes) 2009 2008 2007 2009–2008 2008–2007 Production of petroleum products at the Company’s refineries 21.5 17.2 15.5 25.0 11.0 Production of petroleum products internationally 2.2 - - - - Production of petroleum products at equity refineries 7.9 9.5 9.2 (16.8) 3.3 Total production of petroleum products 31.6 26.7 24.7 18.4 8.1

Petroleum products purchases in Russia 1.0 1.1 0.3 (9.1) 266.7 Petroleum products purchases internationally 1.2 1.7 1.6 (29.4) 6.3 Total petroleum products purchases 2.2 2.8 1.9 (21.4) 47.4

* Including acquiring petroleum products in Russia and abroad.

In 2009 and 2008 the Company in Moscow Refinery from 38.63% to The Company’s petroleum products produced 31.6 million tonnes and 59.75%. are distributed within Russia and CIS 26.7 million tonnes (including share primarily through 25 subsidiaries. in production of equity investees), The NIS Refining division consists of Most of these subsidiaries are retail respectively. The increase of 18.4% Pancevo and Novi Sad refineries with distribution companies engaged in and 8.1% in corresponding periods capacity of 7.2 millions tonnes of crude wholesale distribution or operate in was primarily due the Company’s oil processing per year including 5.2 the gas station retail markets. CJSC modernization program and recent million tonnes in Pancevo and 2 million Gazprom Neft Aero, Gazpromneft acquisitions during 2009. tonnes in Novi Sad. The refineries Smazochny Materialy LLC and also process external oil under tolling Gazprom Neft Marine Bunker LLC The Company processes domestic agreements whereby customers specialize in the sale of particular crude oil into refined products primarily provide crude oil and necessary petroleum products. at its Omsk Refinery, Moscow Refinery chemicals to refineries for processing and Yaroslavl Refinery. Gazprom and pay refining fee. The volume of NIS Distribution division operates the Neft owns the Omsk Refinery and tolling agreements is below 20% of total largest network of crude oil storages has access to the Yaroslavl Refinery processing volumes. and 478 oil and gas retail stations and in proportion of its equity interest. As is a leading supplier of oil products a result of the acquisition of 54.71% The Company primarily markets its own on the Serbian market. NIS produces interest in Sibir the Company also crude oil and petroleum products for about 80% of all domestically obtained control over Moscow Refinery, export through Gazprom Neft Trading consumed oil products. having increased its effective share GmbH, its trading subsidiary in Austria.

77 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

At the beginning of 2009, we owned The launch of the project was preceded Results of Operations 944 retail stations, operating under by a complex of preliminary works different brands. The Sibir and NIS including unification of management The following table represents the acquisitions added a further 612 and organizational principles at all Company’s results of operations for the stations. In the middle of 2009, we territorial sales outlets of Gazprom years ended December 31, 2009, 2008 launched a program to consolidate Neft. There are several standard and 2007: and rebrand all our stations on the design formats developed for Gazprom domestic market under the brand Neft branded filling stations in of Gazprom Neft. A scale project of accordance with the size and functional establishing a unified network of filling interpretation of the outlet. This is not stations involves modernization of just about new signs, but retraining over 1000 filling stations in 14 territorial service personnel, adding services, subjects of the Russian Federation installing a computer network, etc. The within 2009 – 2012. It is anticipated that impact on our bottom line will be growth the investments into the complex filling in volumes per location and also margin stations rebranding program will make expansion as we roll the rebranding out about RUR 7 bln within the next three over the next few years. years.

mln USD 2009 2008 2007

Revenues Refined products and oil and gas sales 23 648 33 205 22 248 Other 518 665 520 Total 24 166 33 870 22 768 Costs and other deductions Crude oil, petroleum and other products purchased 5 636 8 296 3 928 Operating expenses 1 862 2 015 1 941 Selling, general and administrative expenses 1 280 1 046 854 Transportation expenses 1 982 1 810 1 279 Depreciation, depletion and amortization 1 475 1 309 929 Export duties 3 948 7 328 4 372 Taxes other than income taxes 3 982 5 353 4 107 Exploration expenses 147 193 184 Cost of other sales 283 271 275 Loss on sale of assets, net 142 - - Total 20 737 27,621 17,869 Operating income 3 429 6 249 4,899 Other income (expense) Income from equity affiliates 212 407 408 Gain from Sibir Energy acquisition 470 - - Interest income 108 100 94 Interest expense (369) (167) (149) Other (expense) income, net (3) 89 45 Foreign exchange (loss) gain, net 50 (517) 161 Total 468 (88) 559 Income before provision for income taxes 3 897 6 161 5 458 Provision for income taxes 804 1 425 1 342 Deferred income tax expense (benefit) 12 39 (27) Total 816 1 464 1 315 Net income 3081 4697 4143 Less: Net income attributable to non-controlling interest (68) (39) -

78 JSC GAZPROM NEFT ANNUAL REPORT 2009

Revenues

The following table analyses revenues for the periods indicated:

Change, %

(in US$ million) 2009 2008 2007 2009–2008 2008–2007

Crude oil Export and sales on international markets 6 749 11 349 7 498 (40,5) 51,4 Export to CIS 990 1 410 874 (29,8) 61,3 Domestic sales 52 297 486 (82,5) (38,9) Total crude oil sales 7 791 13 056 8 858 (40,3) 47,4 Gas 107 148 44 (27,7) 236,4 Petroleum products Export and sales on international markets 7 139 8 166 6 403 (12,6) 27,5 Export and sales to CIS 1 080 1 304 850 (17,2) 53,4 Domestic sales 7 531 10 531 6 093 (28,5) 72,8 Total petroleum products sales 15 750 20 001 13 346 (21,3) 49,9 Other sales 518 665 520 (22,1) 27,9 Total sales 24 166 33 870 22 768 (28,7) 48,8

Sales volumes

The following table analyses sales volumes for the periods indicated:

Change, %

2009 2008 2007 2009–2008 2008–2007

Crude oil (millions of barrels) Export and sales on international markets 114,3 119,5 110,7 (3,7) 7,9 Export to CIS 24,2 24,2 18,3 - 32,2 Domestic sales 1,8 6,6 11,7 (72,7) (43,6) Crude oil (millions of tonnes) Export and sales on international markets 15,6 16,3 15,1 (3,7) 7,9 Export to CIS 3,3 3,3 2,5 - 32,0 Domestic sales 0,3 0,9 1,6 (72,2) (43,8) Total crude oil sales 19,3 20,5 19,2 (6,1) 6,8 Gas (bcm) 3.7 3.9 2.4 - 68.2 Petroleum products (mln tons) Export and sales on international markets 13.2 10.9 11.4 21.1 (4.4) Export and sales to CIS 2.3 1.9 1.9 21.1 - Domestic sales 18.3 16.2 13.4 13.0 20.9 Total petroleum products sales 33.8 29.0 26.7 16,6 8,6

79 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

Realized Average Sales Prices

The following table analyses the Company’s average realized export and domestic prices for the periods indicated:

Change, %

2009 2008 2007 2009–2008 2008–2007

Crude oil (US$ per barrel) Export 59,05 94,97 67,73 (38,3) 40,2 CIS 40,91 58,26 47,76 (29,8) 22,0 Domestic 28,89 45,00 41,54 (35,8) 8,3 Crude oil (US$ per tonne) Export 432,63 696,26 496,56 (38,3) 40,2 CIS 300,00 427,27 349,60 (29,8) 22,2 Domestic 208,00 330,00 303,75 (37,0) 8,6 Petroleum products (US$ per tonne) Export 540,83 749,17 561,67 (27,8) 33,4 CIS 469,57 686,32 447,37 (31,6) 53,4 Domestic 411,53 650,06 454,70 (36,7) 43,0

In 2009 the Company’s revenues sales volumes. The price increase was decrease in sales volumes. The decline decreased by 28.7% to US$ 24,166 attributable to the growth in Urals price in sales prices was due to decrease in million compared to US$ 33,870 million by 36.9%. The growth in volumes was Urals prices (-35.4%). in 2008. The decrease in revenues was primarily due to the acquisition of our primarily due to a significant decrease in 50% interest in Tomskneft in December In 2008 our revenues from domestic market prices. 2007. crude oil sales decreased by 38.9% to US$ 297 million compared to US$ During 2008 the Company’s revenues Crude Oil Sales to CIS 486 million in 2007. The decrease in increased by 48.8% to US$ 33,870 domestic crude oil sales was caused million compared to US$ 22,768 million In 2009 the Company’s revenues from by an increase in the relative volume of in 2007. CIS crude oil sales decreased by 29.8% crude oil that the Company sent to the to US$ 990 million compared to US$ export and CIS markets. The changes in revenues were primarily 1,410 million in 2008. The decrease due to the following: was due to reduction in sales prices by Petroleum Products Export AAan increase in crude oil and 29.8%. The decline in sales prices was Sales petroleum products production; due to decrease in world prices. AAan increase in sales volumes of crude In 2009 the Company’s revenues oil and petroleum products. In 2008 the Company’s revenues from from export petroleum product sales AAan increase in average prices CIS crude oil sales increased by 61.3% decreased by 12.6% to US$ 7,139 to US$ 1,410 million compared to US$ million compared to US$ 8,166 million Crude Oil Export Sales 874 million in 2007. This growth was in 2008. The decrease was primarily primarily due to an increase in sales a result of a decline in sales prices by In 2009 crude oil export revenues prices by 22.0% and a 32.2% increase 27.8%, which was partially offset by decreased by 40.5% to US$ 6,749 in sales volumes. The price increase a 21.1% increase in sales volumes. million compared to US$ 11,349 million was driven by the general growth in The increase in sales volumes was in 2008. The decrease was driven by world prices. Increase in sales volumes attributable to the Company’s recent a significant decline in sales prices was primarily due to the acquisition acquisitions of NIS and Sibir. The (-38.3%) as well as a reduction in the of our 50% interest in Tomskneft in price reduction was attributable to the relative volumes of crude oil (-3.7%). December 2007. decrease in Urals price by 35.4%. The decline in sales prices was due to decrease in Urals prices (-35.4%). Crude Oil Domestic Sales In 2008 the Company’s revenues from export petroleum product sales In 2008 our revenues from export In 2009 our revenues from domestic increased by 27.5% to US$ 8,166 crude oil sales increased by 51.4% to crude oil sales decreased by 82.5% million compared to US$ 6,403 million US$ 11,349 million compared to US$ to US$ 52 million compared to US$ in 2007. This growth was primarily 7,498 million in 2007. This growth was 297 million in 2008. This was primarily a result of an increase in sales prices primarily due to an increase in sales a result of a significant decrease in by 33.4%%, which was partially offset prices by 40.2% and a 7.9% increase in sales prices by 35.8% and a 72.7% by a 4.4% decrease in sales volumes.

80 JSC GAZPROM NEFT ANNUAL REPORT 2009

The price increase was driven by the million compared to US$ 10,531 million is 27.9% higher than in 2007) due to the general growth in world prices. in 2008. This decrease was primarily fall (increase) in prices and volumes. due to a decrease in sales prices by Petroleum Products Sales 36.7%, which was offset by a 13.0% to CIS increase in sales volumes. The growth Expenses and other in volumes was primarily due to the spending In 2009 our revenues from CIS Company’ acquisitions of Sibir. petroleum product sales were US$ Crude Oil, Petroleum and Other Prod- 1,080 million compared to US$ 1,304 In 2008 the Company’s revenues from ucts Purchased million in 2008, a decrease of US$ 224 domestic petroleum product sales million or 17.2%. The decrease was increased by 72.8% to US$ 10,531 In 2009 cost of purchased crude oil, gas primarily due to a reduction in sales million compared to US$ 6,093 million and petroleum products decreased by prices by 31.6%, which was offset by in 2007. This growth was primarily due 32.1% to US$ 5,636 million compared to 21.1% increase in the relative volumes. to an increase in sales prices by 43.0% 2008. This decrease was primarily due The increase in sales volumes was and a 20.9% increase in sales volumes. to a significant decline in crude oil and attributable to the Company’s recent The price increase was driven by the petroleum products prices. acquisitions of Sibir. The price decrease general growth in world prices. was attributable to the general reduction In 2008 cost of purchased crude oil, gas in sales prices. Other Sales and petroleum products increased by 111.2% to US$ 8,296 million compared In 2008 our revenues from CIS Other revenues consist primarily of to US$ 3,928 million in 2007. The growth petroleum product sales increased by sales of services such as processing was primarily due to the acquisition of 53.4% to US$ 1,304 million compared services, transportation, construction, our 50% interest in Tomskneft, which to US$ 850 million in 2007. This growth utilities and other services and are resulted in an increase in crude oil was primarily due to an increase in recognized when goods are provided to purchases in the domestic market by sales prices by 53.4%. customers and services are performed 42.7% (32.5 million barrels) in 2008. providing that the price for the service Petroleum Products Domestic can be determined and no significant Operating expenses Sales uncertainties regarding realization exist. The following table comprises operating In 2009 the Company’s revenues from Other sales were US$ 518 million in expenses for the periods indicated: domestic petroleum product sales 2009 that is lower by 22.1% compared decreased by 28.5% to US$ 7,531 to 2008 (665 US$ million in 2008 which

Change, %

(in US$ million) 2009 2008 2007 2009–2008 2008–2007 Hydrocarbon extraction expenses 1 203 1 371 1 368 (12,3) 0,2 Refining expenses at own refineries 410 310 282 32,3 9,9 Refining expenses at equity investee refineries 249 334 291 (25,4) 14,8 Total operating expenses 1 862 2 015 1 941 (7,6) 3,8

Hydrocarbon Extraction to Ruble depreciation to the US Dollar of oil equivalent increased from US$ Expenses and the Company’ acquisitions of Sibir 5.43 to US$ 5.72, or by 5.3% compared and NIS during 2009. The Company’s to 2007. Our hydrocarbon extraction expenses average hydrocarbon extraction cost include expenditures related to raw per barrel of oil equivalent decreased Refining Expenses at Own materials and supplies, maintenance from US$ 5.72 to US$ 5.07, or by 11.4% Refineries and repairs of extraction equipment, compared to 2008. labor costs, fuel and electricity costs, In 2009 the Company’s refining activities to enhance oil recovery and In 2008 the Company’s extraction expenses at our own refineries other similar costs at our extraction expenses increased by 0.2% to US$ increased by US$ 100 million, or 32.3%, subsidiaries. 1,371 million compared to US$ 1,368 compared to 2008. The increase relates million in 2007. This was primarily to the acquisition of NIS and obtaining In 2009 the Company’s extraction due to an increase in expenses for control over Moscow Refinery, which expenses decreased by 12.3% to US$ , workovers, materials became the Company’s subsidiary. The 1,203 million compared to US$ 1,371 and labor. The Company’s average Company’s average refining expenses million in 2008. This was primarily due hydrocarbon extraction cost per barrel per barrel at own refineries decreased

81 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

from US$ 2.30 to US$ 2.23 or by 3.0% benefits (except for wages and Company’s capital expenditure in 2009 compared to 2008. salaries at our production and refining program. subsidiaries), insurance, banking In 2008 the Company’s refining commissions, legal fees, consulting and Export duties expenses at our own refineries audit services, charity, allowances for increased by US$ 28 million, or 9.9%, doubtful accounts and other expenses. Export customs duties include duties compared to 2007. This resulted related to the export of both crude oil primarily from increase in expenses In 2009 and 2008 the Company’s and petroleum products. for electricity costs due to inflation selling, general and administrative and a 11.5% increase in the refinery expenses increased by 22.4% and The following table presents export throughout. The Company’s average 22.5% to US$ 1,280 million and customs duties for the periods analyzed refining expenses per barrel at own US$ 1,046 million compared to the (see below). refineries decreased from US$ 2.33 to corresponding periods. The growth US$ 2.30 or by 1.3% in 2008 due to an was due the Company’s M&A activities In 2009 export customs duties increase refining throughput. during the periods and an increase in decreased by 46.1% as compared to trading activities. 2008 and amounted to 3 948 mln US Refining Expenses at Equity dollars. The decrease was caused by Investee Refineries Transportation Expenses a decrease in the rate for oil by 49.3% and for petroleum products – by 46.9%. In 2009 the Company’s refining Transportation expenses include costs Export customs duties went down due expenses at equity investee refineries to transport crude oil and petroleum to a decrease in prices for Urals mix oil decreased by US$ 85 million, or 25.4%, products to final customers. These by 35.4%. compared to 2008. As mentioned costs consist of pipeline transportation, above the Moscow Refinery became sea freight, railway, shipping, handling In 2008 export customs duties grew the Company’s subsidiary from June and other transportation costs. by 67.6% to 7 328 mln US dollars as 2009 and its expenses were included compared to 4 372 mln US dollars as Refining Expenses at Own Refineries In 2009 and 2008 our transportation in 2007. The growth was caused by together with relative volumes for that expenses increased by 9.5% and 41.5% a growth in rates for oil by 71.8% and period. The Company’s average refining to US$ 1,982 million and US$ 1,810 for petroleum products – by 66.0%. expenses per barrel at equity investee million, compared to the corresponding Export customs duties went up due to refineries decreased from US$ 4.51 periods. This was primarily due to an increase in prices for Urals mix oil to US$ 4.10 per barrel, or by 9.1%, increase in transportation tariffs in by 36.9% and growth in the amount of compared to 2008. Russia and recent acquisitions of Sibir oil exported and sold to CIS countries: and NIS during the periods. by 7.9% and 32.0% respectively due to In 2008 the Company’s refining acquisition of a 50% share in Tomskneft. expenses at equity investee refineries Depreciation, Depletion and increased by US$ 43 million, or 14.8%, Amortization Taxes Other Than Income Taxes compared to 2007. This resulted primarily from increased cost of Depreciation, depletion and The following table summarizes the processing services due to higher amortization expenses include depletion Company’s taxes other than income electricity costs. The Company’s of oil and gas producing assets and taxes for the periods indicated. (see on average refining expenses per barrel depreciation of other fixed assets. the right) at equity investee refineries increased from US$ 4.09 to US$ 4.51 per barrel, In 2009 and 2008 our depreciation, In 2009 taxes other than income tax or by 10.3%, compared to 2007. depletion and amortization expenses decreased by 25.6% to US$ 3,982 increased by 12.7% and 40.9% to million compared to 2008 primarily due Selling, General and Adminis- US$ 1,475 million and US$ 1,309 to a decrease in mineral extraction trative Expenses million, respectively, compared to taxes, which was partially offset by an the corresponding periods. The increase in excise tax. The increase in Selling, general and administrative increase was a result of the growth excise tax was driven by an increase expenses include general business in depreciable assets due to the in refined production volumes at the expenses, wages, salaries, social Company’s refineries by 17.9%.

Change, %

(in US$ million) 2009 2008 2007 2009–2008 2008–2007

Export customs duties for crude oil 2,790 5,316 3,093 (47.5) 71,9 Export customs duties for petroleum products 1,158 2,012 1,279 (42.4) 57.3 Total export customs duties 3,948 7,328 4,372 (46.1) 67.6

82 JSC GAZPROM NEFT ANNUAL REPORT 2009

Change, %

(in US$ million) 2009 2008 2007 2009–2008 2008–2007

Mineral extraction taxes 2 215 4 202 3 139 (47,3) 33,9 Excise 1 412 828 681 70,5 21,6 Property tax 123 107 87 15,0 23,0 Other taxes 232 216 200 7,4 8,0 Total taxes other than income tax 3 982 5 353 4 107 (25,6) 30,3

In 2008 taxes other than income tax due to a decrease in crude oil prices to an increase in outstanding loans increased by 30.3% to US$ 5,353 decline. In 2008 income from equity compared to the corresponding million compared to US$ 4,107 million affiliates states approximately at the periods of 2008 and due to higher in 2007. This growth was a result of same level as in 2007. interest rates applied to the loans the increase in mineral extraction tax received in 2009 compared to 2008. rate on crude oil by 38.5% and excise Interest Income tax caused by increase in volumes of In 2008 interest expense increased by production of petroleum products by In 2009 and 2008 interest income 12.1% to US$ 167 million compared to 8.1%. increased by 8.0% and 6.4% to US$ US$ 149 million in 2007. The increase 108 million and US$ 100 million, was attributable to obtaining a US$ 1 Income from Equity Affiliates respectively, compared to the billion syndicated loan in May and July corresponding periods. This was due of 2008. The Company has investments in to an increase in cash and deposits affiliated companies and joint ventures. placed in banks during the related Income Tax Expenses These companies are primarily engaged periods. in crude oil production, refining and In 2009, 2008 and 2007 effective distribution activities in Russia. Interest Expense income tax rate was 20.9%, 23.8% and 24.1%, which state at a statutory level In 2009 income from equity affiliates In 2009 interest expense increased by for the respective years. decreased by 47.9% to US$ 212 million 121.0% to US$ 369 million compared compared to the same period of 2008 to 2008. The growth was mainly due

Reconciliation of Net income to EBITDA (Earnings before Interest, Income Tax, Depreciation and Amortization)

(in US$ million) 2009 2008 2007 Adjusted EBITDA $ 5,977 $ 8,610 $ 6,601 The Company’s share in EBITDA of equity affiliates (931) (1,052) (773)

Gain from acquisition of Sibir Energy 470 - - Share in income of equity affiliates 212 407 408 Foreign exchange gain (loss), net 50 (517) 161 Other (expense) income, net (3) 89 45 Loss on sale of assets, net (142) - - Interest expense (369) (167) (149) Interest income 108 100 94 Depreciation, depletion and amortization (1,475) (1,309) (929) Income before income taxes $ 3,897 $ 6,161 $ 5,458

83 PERFORMANCE AND Energy for life FINANCIAL INDICATORS ENERGY FOR PEOPLE

EBITDA represents earnings before the performance of the Company’s as an alternative to any other measure interest, income tax, depreciation and ongoing operating activities, as it of performance in conformity with US amortization. EBITDA is a supplemental reflects the Company’s earnings GAAP or as an alternative to cash flow non-GAAP financial measure used trends without showing the impact of from operating activities as a measure by management, as well as industry certain charges. EBITDA is not used of liquidity. EBITDA does not have analysts, to evaluate operations. by management as an alternative a standardized meaning prescribed by Management believes that EBITDA to net income as an indicator of the US GAAP. represents useful means of assessing Company’s operating performance,

Liquidity and Capital Resources

CASH FLOWS

Change %

(in US$ million) 2009 2008 2007 2009-2008 2008-2007 Net cash provided by operating activities 3,474 5,483 5,316 (36.6) 3.1 Net cash used in investing activities (4,879) (3,502) (5 636) 39.3 (37.9) Net cash provided by (used in) financing activities 185 (566) (320) (132.7) 76.9

NET CASH PROVIDED BY OPERATING NET CASH USED IN INVESTING Net Cash Provided by (Used in) ACTIVITIES ACTIVITIES Financing Activities

In 2009 net cash provided by operating In 2009 net cash used in investing In 2009 net cash provided by financing activities was US$ 3,474 million as activities was US$ 4,879 million activities was US$ 185 million as compared to US$ 5,483 million in the compared to US$ 3,502 million in 2008 compared to US$ 566 million of cash same period of 2008. The decrease of (39.3% increase). The increase of US$ used in financing activities for the same US$ 2,009 million or 36.6% in net cash 1,377 million in the net cash used in period of 2008. An increase was mainly provided by operating activities is due investing activities was mainly due to due to increase in net loans proceeds to the following: the Company’ acquisitions of NIS and over repayments by US$ 851 million, AAa decrease in income before tax of Sibir during 2009. which was partially offset by an increase US$ 2,264 million; in dividend payments of US$ 145 million AAan increase in working capital of US$ In 2008 net cash used in investing in 2009 compared to the same period 399 million; activities was US$ 3,502 million of 2008. AAa decrease in income taxes of US$ compared to US$ 5,636 million in 2007 648 million. (or 37.9% decrease). These changes In 2008 net cash used in financing in the net cash used in investing activities was US$ 566 million as In 2008 net cash provided by operating activities were due to acquisition of compared to US$ 320 million of net activities was US$ 5,483 million as 50% interest in Tomskneft in December cash used in financing activities for the compared to US$ 5,316 million in the 2007 and due to an increase of capital same period of 2007. The increase of same period of 2007. The increase of expenditures by US$ 1,154 million in US$ 246 million or 76.9% was due to US$ 167 million or 3.1% in net cash 2008 compared to 2007, which was net loans repayments over proceeds by provided by operating activities is due due to the necessity to maintain the US$ 1,480 million, which was partially to the following: Company’s production on existing offset by a decrease in dividend AA an increase in income before tax fields and development of the related payments of US$ 1,279 million in 2008 of US$ 703 million; infrastructure. compared to the same period of 2007. AA an increase in working capital of US$ 977 million; AA an increase in income taxes of US$ 149 million.

84 JSC GAZPROM NEFT ANNUAL REPORT 2009

CAPITAL EXPENDITURES

The following table represents the Company’s capital expenditures:

Change %

(in US$ million) 2009 2008 2007 2009-2008 2008-2007 Exploration and production 2,021 2,979 2,045 (32.2) 45.7 Refining 334 189 107 76.7 76.6 Marketing and distribution 188 159 60 18.2 165.0 Others 64 39 - 64.1 - Total capital expenditures 2,607 3,366 2,212 (22.5) 52.2

In 2009 the Company’s capital due to a result of the modernization the rapid development of Priobskoe expenditures decreased by 22.5% to program launched at the Omsk Refinery oilfield, refining - by 76.6% to US$ 189 US$ 2,607 million as compared to the and consolidation on Moscow Refinery million in 2008 compared to 2007. corresponding periods of 2008. The during the period June 23, 2009 through The increase in refining segment was decrease was primarily driven by the December 31, 2009. a result of the modernization program exploration and production decrease, launched at the Omsk Refinery. which was partially offset by the In 2008 the Company’s capital increase in refining and marketing and expenditures increased by 52.2% to distribution. Exploration and production US$ 3,366 million as compared to decreased by 32.2% to US$ 2,021 US$ 2,212 million in 2007. The growth million due to the Ruble depreciation was primarily driven by the exploration and cost cutting efforts, refining – and production and refining activities. increased by 76.7% to US$ 334 million Exploration and production increased compared to 2008. The increase was by 45.7% to US$ 2,979 million due to

DEBT OBLIGATIONS

As of December 31, 2009 the Company’s long-term debt was US$ 5,628 million as compared to US$ 3,080 million as of December 31, 2008. An increase of US$ 2,548 million or 82.7% was mainly due to the acquisition of NIS and Sibir during 2009.

The following table shows maturities of long-term loans as of December 31, 2009 (in US$ million):

Year due Amount due 2010 $ 1,466 2011 2,167 2012 1,747 2013 131 2014 and further 117 $ 5,628

85 ENERGY FOR LIFE ENERGY FOR PEOPLE 9 MAJOR RISK FACTORS MAJOR RISK Energy for life 9 FACTORS ENERGY FOR PEOPLE MAJOR RISK FACTORS

RISK MANAGEMENT POLICY OF THE COMPANY level and to ensure continuing operation of the Company.

RISKS ASSOCIATED WITH POTENTIAL In 2008 JSC Gazprom Neft developed a Risk Management Policy setting out CHANGES IN OIL AND PETROLEUM the risk management principles and objectives for the purpose of enhancing the PRODUCT PRICES efficiency of the Company’s operations in the short and long-term. The main Policy implementation tool is the introduction of an integrated risk management system The financial performance indicators (IRMS) covering all levels and areas of the Company’s operations. In the middle of the Company are directly related to of 2009 the Management Board of the Company initiated the process of applying the level of oil and petroleum product IRMS in subsidiaries and equity investees. prices. The Company cannot control prices for its products which depend on global and domestic changes to the supply and demand balance, INDUSTRY RISKS product transportation, and energy supply the volume of consumption of these services. markets, as well as the actions of The main areas of operations of Gazprom regulatory authorities. Neft are production of oil and gas, oil The Company has no control over the refining, sales of oil and petroleum infrastructure of such monopoly providers The major consequence of a drop in products. and the amount of rates charged. It is oil and petroleum product prices is important to note that though the amount a deterioration in the corporate financial Russia’s economic development in 2009 of rates is regulated by the controlling indicators. was affected by the global financial crisis bodies of the Russian Federation the rates and was not level. By the middle of 2009 grow annually and it leads to an increase To reduce adverse exposure to the the economic slowdown in Russia had in the expenses of the Company. above risks the Company has taken the halted. Since June a monthly growth in following measures: GDP has been seen. As a result of that, Having no control over the infrastructure of AAhas developed comprehensive during the third quarter the production service providers could lead to failures of measures for reducing the cost of dynamics adjusted to season went up the Company’s logistics system. mineral production; in a positive manner, and in the fourth AAhas introduced a flexible commodity quarter further increases in growth were To reduce exposure to these risks the flow distribution system allowing the seen. Company: Company to promptly and timely AAperforms long-term planning of redistribute commodity flows in the In the medium term no further aggravation commodity flows, timely reserves oil event of a gap in oil and petroleum is expected in the sector due to the stable and petroleum product throughput product prices between the foreign demand for oil and petroleum products on volumes and required rolling stock; and domestic markets; domestic and foreign markets. AAconducts optimal redistribution of AAhas a business planning system commodity flows by type of transport; based upon a scenario approach Risks Associated with Potential Changes AAtakes measures to use alternative and to identifying the key performance in the Prices of Target Raw Materials own power generation sources. indicators of the Company dependent and Services and their Impact on the on the level of world oil prices. This Company’s Operations These measures allow the Company approach enables the Company to to reduce risks associated with the use reduce costs, among other things, In the course of its business, JSC of services and goods acquired from by scaling back or postponing its Gazprom Neft uses the infrastructure monopoly providers to an acceptable investment programs. of monopoly providers of oil, petroleum

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These measures allow the Company to EXPLORATION RISKS potential, highly-developed industry, and reduce risks to an acceptable level and extensive transport network. perform the obligations assumed. The key strategic goal of the Company is to increase its hydrocarbon resource JSC Gazprom Neft is represented by It is important to note that as per the base in quantity and quality to ensure subsidiaries in the Siberian and Central analytical reports of the Ministry of an adequate production level which, Federal Districts. Economic Development for 2009, since in turn, is largely dependent on the April 2009 there has been a tendency success of exploration activities. On the whole, the Company estimates the towards growing exports’ value as political situation in the country as stable a result of the recovery of the oil price The major exploration risk is failure to and believes that at the moment there are growth (from 43.5 dollars per barrel in confirm the estimated hydrocarbon no signs of probable adverse risks. Q1 to 74.1 dollars per barrel in Q4). reserves. An important factor is the conduct of exploration in different Foreign Asset Risks INDUSTRY COMPETITION RISKS geographical regions, including areas with adverse climatic conditions, which Expansion into new regions creates both The oil-and-gas industry is known for often incurs the risk of cost growth. the possibility of gaining a commercial tough competition between the leading advantage and a risk of misjudging the Russian oil and gas companies in the At the same time, JSC Gazprom Neft political and economic situation in the main areas of production and economic has extensive experience in conducting countries where the Company holds operations, including: exploration work and using state- assets, which may result in the loss of AAobtaining subsoil licenses for of-the-art hydrocarbon prospecting assets and failure to meet the target hydrocarbon production at the and exploration methods as well as efficiency indicators. biddings organized by Russian advanced drilling and field infrastructure government authorities; development technologies, which, as The first step was the establishment of AAacquisition of other companies a result, reduces the probability of such Gazprom Neft Asia LLC in Kyrgyzia. An that hold subsoil licenses for risks. operator of 77 filling stations, Gazprom hydrocarbon production or existing Neft Asia LLC is already firmly established assets associated with hydrocarbon in the Kyrgyz market and in future plans production; COUNTRY AND REGIONAL to become a significant player among AAimplementation of foreign projects; RISKS companies selling petroleum products in AAengagement of leading independent Asia. service companies; AApurchase of high-tech equipment; Political Risks In December 2008 JSC Gazprom Neft AApurchase of existing retail network closed the purchase deal for a 51% enterprises and land plots for the As of now the political situation in Russia interest in Serbian company Naftna construction of new ones; is stable which is characterized by the Industrija Srbije (NIS). NIS is one of the AAexpansion of sales markets and sustainability of the federal and regional largest vertically integrated oil companies volumes. branches of power. of Central Europe which produces and refines oil and distributes petroleum Implementation of a portfolio of strategic JSC Gazprom Neft is registered as products. projects aimed at the development of a taxpayer in Saint-Petersburg which is JSC Gazprom Neft across key areas the second biggest city of the Russian In recent years the political situation in of operation enables the Company to Federation and the administrative center the countries where the Company holds strengthen its competitive positions in of the North-Western Federal District which its foreign assets has been stable. Since the oil and gas industry step by step by has a considerable nature and resource 2009 the Company has implemented reducing industry competition risks. a number of foreign projects aimed at

89 MAJOR RISK Energy for life FACTORS ENERGY FOR PEOPLE

the geographic expansion of production The Company places funds on deposit guarantee the performance of obligations operations. Presently JSC Gazprom Neft with a number of Russian banks. The by the Company. views the level of its foreign asset risks as Company has a Policy which is used to acceptable, however, negative changes regularly evaluate the creditworthiness of Risk cannot be ruled out, since said risks are the banks holding its deposits and to rank beyond the Company’s control. these banks by reliability. As a major borrower the Company is exposed to interest rate risks. The main Borrowing Risk source of borrowing is the international FINANCIAL RISKS financial market. The debt portfolio mainly In connection with the world financial consists of credits and loans denominated The Company’s policy in risk management crisis many Russian companies have in US dollars. The interest rate for a small is aimed at establishing and analyzing encountered a problem in borrowing. portion of these loans (the share is not risks that the Company identifies, This risk is effectively managed by fixed and may vary) is based on interbank setting appropriate limitations and JSC Gazprom Neft. In addition to bank LIBOR rates, which, if raised, may result control procedures, monitoring risks crediting, the Company actively employs in higher debt servicing costs for the and conformity to the limitations set. alternative sources of borrowing. For Company. An increase in the cost of loans Risk management policy is reviewed on instance, in 2009 the Company attracted for the Company may adversely affect the a regular basis in order to correctly reflect the funds required by placing two issues creditworthiness and liquidity indicators. the current market environment and the of bonds with a total cost of 18 bn rubles. However currently the LIBOR rate is at Group’s operations in this environment. In addition, the stable financial state of the a relatively low historical level and has Company as confirmed by international a medium-term tendency for stabilizing, Financial risk management at the rating agencies (the Company has ratings and that taken together with a relatively Company is performed by Company in effect at Moody’s (Ваа3), S&P (BВB-)) small share of LIBOR-based loans creates employees in accordance with their enables the attraction of necessary credit a low exposure of the Company to an professional fields of activity. resources from Russian and foreign banks interest rate risk. freely. The Financial Risk Management Inflation Risk Committee outlines a uniform approach Currency Risk to financial risk management at the Inflation risk is taken into account in the Company and its subsidiaries. This The major part of JSC Gazprom Neft’s preparation of the Company’s financial approach is based on reducing the level gross revenues consists of export plans. The current and projected inflation of risk exposure and probability of risk operations for sales of oil and petroleum rates are far from critical for the Company occurrence through implementation products. Therefore, fluctuations in and the industry on the whole, hence the of appropriate measures and control currency rates against the ruble have an impact of inflation factors on the financial procedures. impact on the results of the Company’s stability of the Company does not look financial and economic operations which significant in the long-term. The work performed by Company is a risk factor. employees and the Financial Risk Risk Associated with Currency Management Committee is instrumental in The currency risk of the Company is Regulation Changes reducing potential financial damage to the significantly lower due to expenses Company and meeting the objectives set. denominated in foreign currencies. The Company is a participant of foreign A considerable share of the loans is economic relations. Part of the Company’s Credit Risk taken by the Company is in US dollars assets and liabilities are denominated in from the international credit market. foreign currency, therefore any changes in The management of the Company Current obligations of these loans are also currency regulation mechanisms made by pays increasing attention to credit denominated in dollars. the state may generally affect the financial risk management. The Company has and economic operations of the Company. implemented a range of measures The currency structure of revenues providing for effective monitoring and and obligations function as a hedging Having said that, today the currency management of this risk, including: mechanism where differently directed regulation of the Russian Federation counterparties’ creditworthiness factors compensate each other. Balanced is significantly liberalized, which is evaluation, setting individual limitations arrangement of foreign currency claims attributable to the general policy of the depending on the financial state of and obligations minimize currency risk state designed to ensure free convertibility the counterparty, controlling advance exposure on the result of the Company’s of the ruble. payments, dealing with debts receivable financial and economic operations. by line of business, and other measures. The conducted liberalization of currency With a share of these claims and regulations reduces the risks of adverse These actions allow Management of obligations unbalanced, the Company consequences for the Company’s the Company to be assured that at the hedges these risks and, additionally, in operation associated with future changes moment there are no significant risks each specific situation draws upon internal in the currency legislation. of damage exceeding the amount of instruments and reserves, allowing it to accumulated reserves. effectively manage the currency risk and

90 JSC GAZPROM NEFT ANNUAL REPORT 2009

Risk Associated with Tax its efforts to minimize the related risks. The principles of taxation and introduction of Legislation Changes Company’s management believes that the new taxes; the effect of these principles Company’s positions connected with that and targeting on protection of property JSC Gazprom Neft is one of the top are stable and will not have a significant interests of tax-payers has been realized taxpayers whose operations are based effect on consolidated financial state and in law-enforcement practice. A special on the principles of good faith and tax operating results of the Company. part of the Tax Code sets down taxes transparency. building up the tax burden of the issuer and defines taxation items. Over the last The Company bears the burden of paying LEGAL RISKS 10 years the rate of the value added tax value-added tax, income tax, mineral has been reduced by 2%, the rate of extraction tax, property tax, land tax. JSC Gazprom Neft operates in strict income tax – by 15%, the descending compliance with the civil, tax, customs rate scale for unified social tax has The results of the tax reform can be and currency legislation. been set up, and sales tax and some estimated as positive: the taxation system other compulsory payments have been has been structured, taxation mechanisms The Company cannot guarantee there cancelled. and procedures have been simplified, will be no adverse changes in Russian and tax rates have been cut. As per legislation in the long-term, since most risk The results of the tax reform are seen as the experience of reviewing cases in factors are beyond the Company’s control. positive: the taxation system has been the Constitutional court of the Russian structured, taxation mechanisms and Federation, the statements of the basic The adverse exposure to this category procedures have been simplified, and tax law affect the taxation laws of economic of risks is reduced by monitoring and rates have been cut down. entities and protect tax-payers from ill- timely responding to the changes made founded and sudden increase of tax to different sections of legislation as well From our experience reviewing cases in burden. as by active interaction with legislative the Constitutional court of the Russian and executive authorities, and public Federation, the statements of the basic Since the taxable period 2009 the cut- organizations over the interpretation and law affect the taxation laws of economic off price of mineral extraction tax has improvement of legislation. entities and protect tax-payers from ill- been increased from 9 to 15 USD per founded and sudden increase of tax barrel; depreciation bonus for new capital Risks Associated with Currency burden. assets has been increased; license Regulation Changes amortization period has been reduced The aforementioned factors enable us to two years. Since the taxable period Limitations set by the state which entail to conclude that Russia’s tax system 2009 depreciation terms of some types reducing the possibilities for converting is becoming more stable, and the of equipment and oil and gas industry income denominated in rubles to foreign operations of economic entities in the structures (including oil producing currencies and reverse converting to Russian Federation are becoming more wells) have been reduced. Since 2010 ruble due to requirements of obligatory predictable. depreciation terms of drilling equipment, repatriation and conversion may have an and some types of oil and gas industry unfavorable impact on the Company’s In the course of business the Company structures have been reduced as well. operating results. The Company is performs online monitoring of tax a participant of foreign economic relations. legislation changes, changes in the The aforementioned factors enable us interpretation and application of current to conclude that Russia’s tax system Today currency regulation in the Russian provisions of the tax legislation. The is becoming more stable, and the Federation is significantly liberalized, Company also acts as an expert in the operations of economic entities in the which considerably reduces the risks of process of improving the legal framework Russian Federation are becoming more adverse consequences for the Company’s and developing new tax draft laws. predictable. However, one should not operations. rule out the possibility of the state raising Risks Associated with Changes the tax burden for tax-payers which may Risks Associated with Tax in Customs Regulations and result from changes in specific elements Legislation Changes Duties of taxation, cancellation of tax privileges, growth of duties, etc. JSC Gazprom Neft is one of the top JSC Gazprom Neft is a participant of taxpayers paying federal, regional and foreign economic relations, hence it In the course of business the Company municipal taxes; among them: mineral is exposed to risks associated with performs online monitoring of tax extraction tax, value-added tax, income changes in the legislation governing legislation changes, changes in the tax, unified social tax, property tax, and foreign economic activities as well as the application of current provisions. The land tax. Customs Legislation governing relations Company also acts as an expert in the with respect to establishment of the law-making process by assessing and Today the process of reforming of Russia’s procedure for transfer of goods through developing draft laws, including tax taxation law has been completed. The the customs border of the Russian ones. JSC Gazprom Neft assesses and legislative stock has been codified. Federation, imposition and application of forecasts the extent of potential adverse General part of the Tax Code which is customs regimes, imposition, introduction impact of tax legislation changes, directing in effect since 1999 sets down the main and collection of customs payments. The

91 MAJOR RISK Energy for life FACTORS ENERGY FOR PEOPLE

history and nature of changes made to the include a list of grounds for transferring the level of district arbitration courts, actively Customs Legislation since the enactment right to use subsoil plots and for reissuing using and employing it not only to protect of the Tax Code of the Russian Federation subsoil licenses. The right to use a subsoil in court its rights and legal interests but (effective from January 1, 2004) allows plot may now be transferred from the also to resolve legal issues arising in us to view the customs legislation of the parent to a subsidiary, from a subsidiary the course of the Company’s business. Russian Federation as one of the most to the parent and between subsidiaries In view of this, the risks associated with stable sections of Russian legislation. of the same parent. In this case, the changes in court practice are estimated as transferee legal entity must comply with insignificant. One can single out as a risk of the the requirements for subsoil users set forth possibility that the Government of the in Russian legislation. ENVIRONMENTAL RISKS Russian Federation will change customs duty rates (both export and import) for The above changes can be viewed on the JSC Gazprom Neft’s operations involve specific goods, in respect of which JSC whole as positive, since Russian legislation a potential risk of environmental damage Gazprom Neft signs foreign trade deals. has been revised to include provisions or contamination which may result in civil The major adverse consequence of this allowing the transfer of a license within liability and the need to carry out works to risk, if realized, will be higher costs and a group which enables JSC Gazprom eliminate such damage. lower export efficiency. Neft to optimize its license management system. The Company is fully aware of its The Company complies with the customs responsibility to society for the creation of control requirements, timely executes all JSC Gazprom Neft works to analyze and safe working conditions and preserving documents necessary for the performance evaluate the legislative initiatives of the the environment, continuously controls of both export and import operations and interested ministries and departments its operations to ensure compliance with has sufficient financial and personnel concerning the subsoil legislation and the appropriate environmental standards, resources to observe the customs rules the licensing of specific operations. The implements environmental protection and regulations. proposed and discussed amendments to programs. the current legislation will have an overall Risks Associated with Changes positive effect on the regime of subsoil The environmental policy of JSC Gazprom in Licensing Requirements for use and on the performance of licensable Neft is designed to ensure compliance Core Business operations in the Russian Federation. with the requirements of the current environmental legislation by investing Development of modern subsoil legislation JSC Gazprom Neft does not appear to considerable funds in the implementation is based on detailed regulation of the be directly exposed to any legal risks of environmental protection measures, subsoil use processes by the state, on associated with the loss of the right to use including employment of technologies the need to enhance the rational use of subsoil plots or violation of the current minimizing the negative environmental subsoil plots, need for strict compliance legislation, resulting from the above impact. As a result of such activities, the with the environmental legislation. changes. probability of environmental contamination risks has significantly diminished. JSC Gazprom Neft conducts its operations Risks Associated with Changes in the license plots in compliance with in Court Practice Regarding the strict requirements of the Russian Issues Related to the Company’s subsoil legislation, updating its license Business agreements subject to changes in the current legislation. JSC Gazprom Neft regularly monitors decisions made by the supreme The current law of the Russian Federation courts and evaluates the trends in law “On Subsoil” has been supplemented to enforcement practice taking shape at the

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CORPORATE Energy for life 10 GOVERNANCE ENERGY FOR PEOPLE CORPORATE GOVERNANCE

In the long term perspective JSC Gazprom The Company aims for high-level AAMaking detailed public financial Neft positions itself as an international corporate governance that can only be statements (including information vertically integrated oil company of Russian achieved through: on the related-party transactions, origin, one of the leaders in oil industry. AASetting up efficient procedures for major counterparties, list of interested strategic and investment planning; parties for the transactions, quarterly In order to achieve this goal the Company AAPublic financial statements, that allow financial statements with notes); recognizes the necessity to perfect the both shareholders and investors to AAEnsuring high financial transparency corporate governance system of JSC objectively assess the results of the by adhering to the international Gazprom Neft. High-level corporate culture Company’s activity; standards for financial statements and increases investment appeal of the Company AAHaving a system of internal control issuing the management reports both (both to Russian and foreign investors), and audit and a risk management in Russian and in English; its information and financial transparency system to give a reasonable AAEstablishing a separate structural and ensures the trust of partners and guarantee of the Company achieving entity for risk management, ensuring shareholders. its strategic goals; the integrated system of risk AAUnderstanding social responsibility; management and strategic planning; AAAn efficient staffing policy in order to AAActive social policy of the Company, attract highly qualified professionals to making public CSR reports; the Company; AAImplementing an efficient motivation AAAn adequate remuneration policy for system for the senior executive the Company’s senior management; management of the Company; AAAn information policy, aimed to AAEstablishing positive relations with fully satisfying the informational regional and local authorities, requirements of the shareholders, regulatory bodies of the industry, investors and other parties and employees and major counterparties; providing timely and reliable AAImproving workplace safety and information. compliance with environmental safety requirements. JSC Gazprom Neft carries out the above by means of: Over the reporting period in order AAEnsuring transparency of the to improve the level of corporate ownership structure and of the governance the Company has done the structure of JSC Gazprom Neft following: Group; AALaunched a project aiming at quicker AAPlanning activities for different time financial closing and publishing the horizons (short-, medium- and long- consolidated financial statements at term planning); an earlier date than most Russian AAInvolving the Board of Directors companies; in controlling the major areas of AAReduced dividend payout period; corporate governance (strategic, AASignificantly expanded the scope of investment, budget planning, internal information available to investors on control and risk management, etc); the official website of the Company: AAPlanning Company’s investments; apart from the information subject to AADrawing up financial statements obligatory disclosure, JSC Gazprom in accordance with the Generally Neft publishes the following: Accepted Accounting Principles (US ––Investor’s Calendar; GAAP); ––Company’s financial statements;

94 JSC GAZPROM NEFT ANNUAL REPORT 2009

––Quarterly management reports; positive and continuous interaction financial and economic activities of ––Minutes of the General with investors. the Company. Shareholders’ Meetings; ––Information for investors; The governance system of the The governing bodies of the ––Information on the organizational Company is based on compliance Company act within the scope of structure of the Company; with the current Russian legislation, their competence clearly defined by ––Charters, bylaws and internal the Charter, bylaws and other internal the Charter of JSC Gazprom Neft. documents of the Company, that documents of the Company and is Organizational aspects of the activity are not required to be made public composed of the following: are governed by internal documents, by the current legislation; AAGeneral Shareholders’ Meeting, approved by the General Shareholders’ ––Information of the Company’s the supreme governing body of the Meeting: shares price changes; Company; AARegulations for JSC Gazprom Neft ––Information on Company’s AABoard of Directors, whose main General Shareholders’ Meeting; management; functions are to ensure the exercise AARegulations for JSC Gazprom Neft ––Information on Company’s and protection of the shareholders’ Board of Directors; subsidiaries; rights, provide for long-term growth AARegulations for JSC Gazprom Neft ––Analytical information; of the Company’s shareholder Management Board; ––Databook on consolidated value, strategic planning of the AARegulations for JSC Gazprom Neft Company activity indicators for the Company’s activities, create effective General Director; 5-year period; mechanisms of internal control; AARegulations for JSC Gazprom Neft ––Press releases, supplying prompt AAExecutive Bodies (Management Auditing Comission. information disclosure concerning Board. General Director), managing major events; day-to-day operations of the The above documents are available on AAThe Company has launched an Company; the Company’s official website at the efficient internal control and audit AAInternal Audit Committee, ensuring following address: http://ir.gazprom-neft. and integrated risk management control over financial and economic ru/corporate-governance/. implementation project; activities of the Company; AAThe Company has set up an investor AAExternal Audit, elected at the General relations department, ensuring Shareholders’ Meeting for auditing

95 CORPORATE Energy for life GOVERNANCE ENERGY FOR PEOPLE

MEMBERSHIP OF THE BOARD OF DIRECTORS The Chairman and members of the Board of Directors did not hold Company shares during the reporting year. Members of the Board of Directors did not enter into any transactions for the purchase or sale of Company shares in the reporting year. In 2009 no suit was brought against the members of the Board of Directors.

Being in charge of strategic planning of the executive and non-executive directors in Miller Alexei Borisovich Company’s operations the Board of Directors the Board of Directors. (Chairman of the Board of Directors) is a key element of top level corporate Born in 1962 in Leningrad, graduated from governance, which explains a high degree The right of shareholders to freely elect N. A. Voznesenskiy Leningrad Finance and of attention paid to its activities by the members of the Board of Directors is Economics Institute. shareholders and investment community, provided for by the Policy of forming the Positions held over the past five years: independent experts and analysts, and Company’s Board of Directors due to: Company’s managers. AAmaximum transparency of the Board Since 2005 – Chairman of the Management Board, JSC Gazprom, of Directors’ election procedure; AAobligatory cumulative voting when since 2005 – Deputy Chairman of the Board electing members of the Board of of Directors, JSC Gazprom. The Board of Directors of JSC Gazprom Directors that allows to take into Neft consists of 10 members with a very account views of all shareholders, wide scope of professional knowledge including the owners of small stocks and experience, which ensures a full- of the Company’s shares; fledged comprehensive analysis of AAproviding all the information on the the issues submitted for the Board of current Board of Directors, including Directors’ consideration. names, biographies, information membership in boards of directors Activities of the Board of Directors or positions in other legal entities, are aimed at strategic development the amount of participation in the publishing explanation on the back of the Company with the purpose of Company’s stock capital, the dates side of the voting ballot); raising its capitalization and investment of election to the Board of Directors, AAannouncing resolutions made at the attractiveness in the long term, and direct and indirect connections with General Shareholders’ Meeting and maximizing the income upon shares, the Company, its management, family the results of voting at the General that complies with the interests of the members of the founders, major Shareholders’ Meeting; Company’s shareholders. shareholders, and other stakeholders, AApublishing resolutions of the General the services provided to the Company Shareholders’ Meeting (protocols) In accordance with the structure of JSC (aside from membership in the Board basing on the results of the meeting Gazprom Neft’s shareholders’ equity of Directors) and other significant on the Company’s official website; of which more than 95% is held by information; AAon-going communication with Support JSC Gazprom, representatives of the AAproviding information about services for institutional shareholders major shareholder of the Company are candidates to the Board of Directors on proxy voting at general members of the Board of Directors. in a timely manner on the Company’s shareholders' meetings. official website, including the English In addition, the Board of Directors version of it; comprises the executive management AAgiving the shareholders an opportunity of the Company represented by to nominate candidates for the its Director General. This ensures Company’s governance bodies within a balance of influence in the Board 2 months (this term is longer than of Directors and objective supply and required by the law); assessment of information during its AAinforming shareholders about voting activities. The Company is compliant procedures (by verbal explanation with the regulations of the current of the procedure (when organizing legislation regarding the ratio of a meeting with joint participation);

96 JSC GAZPROM NEFT ANNUAL REPORT 2009

Alisov Vladimir Ivanovich Golubev Valeriy Alexandrovich Dubik Nikolai Nikolaevich

Born in 1960, graduated from the Law Born in 1952, graduated from V. I. Ulyanov Born in 1971, graduated from the Lomonosov Faculty of the A.A. Zhdanov Leningrad State (Lenin) Leningrad Electrotechnical Institute Moscow State University. University. and the Academy of National Economy under Positions held over the past five years: the Government of the Russian Federation. Positions held over the past five years: 2005-2008 – Deputy Head of the Legal 2004-2007 – Head of the Legal Directorate of Positions held over the past five years: Directorate, JSC Gazprom JSC Gazpromregiongaz. 2005-2006 – Member of the Management 2008 – First Deputy Head of Legal 2007-2008 – Deputy Head of the Legal Board of JSC Gazprom Department, JSC Gazprom Department of JSC Gazprom 2005-2006 – Head of the Department Since 2008 – Head of Legal Department, Since 2008 – First Deputy Head of the Legal for Investments and Construction, JSC Gazprom, Department of JSC Gazprom. JSC Gazprom, General Director, Gazkomplektimpex LLC Since 2008 – Member of the Management Member of the Russian Lawyers’ Association, Board of JSC Gazprom. Member of the Expert Committee for since 2006 – Deputy Chairman of the Corporate Governance at FFMS of Russia Management Board of JSC Gazprom.

97 CORPORATE Energy for life GOVERNANCE ENERGY FOR PEOPLE

Dyukov Alexander Valerievich Kruglov Andrei Vyacheslavovich Mikheev Alexandr Leonidovich

Born in 1967, graduated from the Leningrad Born in 1969, graduated from the Saint- Born in 1944, graduated from the Oil Order-of-Lenin Shipbuilding Institute. In 2001 Petersburg Technological Institute of the and Gas Department of the Gubkin State obtained an IMISP MBA degree. Refrigeration Industry. University of Oil and Gas. Positions held over the past five years: Positions held over the past five years: Positions held over the past five years: 2005-2006 – President of JSC SIBUR Holding Since 2005 – Deputy Chairman of the Since 2005 - First Deputy Head of Gas 2006 – Director General, Sibur LLC Management Board of JSC Gazprom, Head and Liquid Hydrocarbons Processing and of the Financial and Economic Department, Marketing Department at OJSC Gazprom. Since 2006 - Chairman of the Board of JSC Gazprom. Directors, JSC SIBUR Holding. 2006-2008 – President of JSC Gazprom Neft. Since January, 2008 – Chairman of the Management Board, Director General, JSC Gazprom Neft.

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Pavlova Olga Petrovna Podyuk Vasiliy Grigorievich SeleznevKyrill Gennadievich

Born in 1953, graduated from the Far Eastern Born in 1946, graduated from Ivano- Born in 1974, graduated from D.F. Ustinov State University. Frankovsk Oil and Gas Institute Baltic State Technical University, and the Positions held over the past five years: Positions held over the past five years: Saint-Petersburg State University. Since 2005 – Head of the Property 2005-2010 – Member of the Management Positions held over the past five years: Management and Corporate Relations Board, JSC Gazprom, Head of the Gas, Gas Since 2005 – Member of the Management Department, JSC Gazprom Condensate and Oil Production Department, Board of JSC Gazprom, Head of the Since 2005 – Member of the Management JSC Gazprom. Department for Marketing and Processing Board of JSC Gazprom of Gas and Liquid Hydrocarbons, JSC Gazprom, Director General, LLC Mezhregiongaz. Since 2005 - Member of the Management Board of JSC Gazprom

99 CORPORATE Energy for life GOVERNANCE ENERGY FOR PEOPLE

Two committees were formed within JSC Gazprom Neft’s Board of Directors: the Audit Committee and the Human Resources and Remuneration Committee, both of them operating on the basis of internal Regulations approved by the Company’s Board of Directors

Information on The Board of Directors of JSC Gazprom AAAssessed external auditor’s report Changes in the Neft has set up two committees: the concerning JSC Gazprom Neft’s Membership of the Audit Committee and the Human 2008 annual financial statements; Board of Directors in Resources and Remuneration AARecommended an external auditor Committee, acting in compliance with for approval by the General the Reporting Year the internal Regulations, approved by Shareholders’ Meeting for 2009; the Company’s Board of Directors. AAMade recommendations concerning From the beginning of 2009 to the the fee for the approved external annual General Shareholders’ Meeting Over the reporting period the Company auditor of the Company; of JSC Gazprom Neft conducted on has reviewed the Regulations defining AAMade recommendations concerning June 22, 2009 the Board of Directors of the activity of both committees the allocation of the Company the Company was composed of: and further elaborated the scope profit, based on the results of the AAMiller Alexei Borisovich of competence of each committee Company’s activity in 2008; (Chairman of the Board of Directors) in accordance with the corporate AARecommended a part of net profit to AAGolubev Valery Alexandrovich governance policy of the Company and be allocated to dividend payout; AADubik Nikolai Nikolaevich the existing practice of operation. AAReviewed revised Audit Committee AADyukov Alexander Valerievich of the Board of Directors AAClaudio Descalci The Audit Committee fulfills the following Regulations. AAKruglov Andrei Vyacheslavovich tasks: AAMarco Alvera AAInforming the members of the Board Over the reporting period the Audit AAPavlova Olga Petrovna of the Directors objectively and Committee has also fulfilled the AAPodyuk Vasily Grigorievich independently of the financial and following: AASeleznev Kyrill Gennadievich economic state of the Company ; AAAnalyzed the issues concerning the AAEvaluating the efficiency of the Company’s participation in other No other changes were made in the Company’s internal control and risk organizations; membership of the Board of Directors. management systems, including AAReviewed a number of transactions the mechanisms of control over relating to borrowing by JSC preparation and presentation of Gazprom Neft and acting as surety Committees of the financial and other statements, their for third party; Board of Directors completeness and fairness; AAMade proposals concerning the AAAnalyzing the effectiveness of the schedule of the Board of Directors. Company’s internal and external Audit; Due to the considerable increase of Maximum effect of the Board of AAEnsuring constructive communication financial and economic issues requiring Directors’ activities in the major with the external auditor, bodies approval of the Board of Directors, the functional directions (audit, internal supervising the financial and Company intends to follow through with control, financial statements, promotion economic activities of the Company; the policy of active involvement of the and remuneration, etc) is achieved internal audit units of the Company. Audit Committee. through the creation and systemic operation of formalized structures – During 2009 the Audit Committee has As of December 31, 2009 the Audit committees of the Board of Directors, done the following: Committee was composed as follows: set up for the purpose of preliminary AAPreliminary review of the Annual AAKruglov Andrey Vyacheslavovich and in-depth study of issues falling Report draft; (Chairman of the Committee) within the competence of the Board of AAAnalysis of the JSC Gazprom Neft AAPavlova Olga Petrovna Directors. 2008 annual financial statements; AADubik Nikolay Nikolayevich.

100 JSC GAZPROM NEFT ANNUAL REPORT 2009

In 2009 composition of the Audit Committee reviewed a number Remuneration Committee presented for Committee remained the same. of internal documents that were consideration a number of proposals The committee Chairman, Andrey subsequently approved (reviewed) during the preparation of the schedule Vyacheslavovich Kruglov holds the by the Company’s Board of Directors, of the Board of Directors. position of deputy Chairman of the including: Management Board of JSC Gazprom AAGazprom Neft Human Resources Over the whole of the reporting and concurrently heads the Financial and Remuneration Committee period the Human Resources and and Economic department of Gazprom. Regulations; Remuneration Committee was Doctor of Economics, with sufficient AAJSC Gazprom Neft Corporate composed of the following: work experience in the financial Conduct Code. AAPavlova Olga Petrovna arena, A.V. Kruglov has the necessary (Chairman of the Committee); competence to act as a member of In 2009 in order to prepare for the AAKruglov Andrey Vyacheslavovich; the Board of Directors, concurrently annual General Shareholders’ Meeting AADubik Nikolay Nikolayevich. Chairman of the Audit Committee. the members of the Human Resources and Remuneration Committee Following election at the Annual The Human Resources and undertook the following: General Meeting, the new Board of Remuneration Committee of the AAReviewed the draft of the Company’s Directors resolved not to change the Company’s Board of Directors studies 2008 Annual Report; composition of the Human Resources and analyses issues concerning AASelected the candidates for election and Remuneration Committee. corporate governance, social sphere, to the Company’s Board of Directors; staffing policy, motivation system, AAReviewed procedures for the holding The Company intends to further develop including attracting, retaining, motivating of General Shareholders’ Meeting. the operation of the Human Resources and training staff. and Remuneration Committee, In compliance with the internal expanding the scope of issues that In 2009 the members of the Human regulations of JSC Gazprom Neft, the fall within the competence of the Resources and Remuneration members of the Human Resources and Committee.

101 CORPORATE Energy for life GOVERNANCE ENERGY FOR PEOPLE

BOARD OF DIRECTORS’ ACTIVITIES IN 2009

During 2009 the work of JSC Gazprom Neft’s Over the reporting period 4 meetings organized by the ratings services Board of Directors was minutely scheduled, in presentia and a number of meetings Expert RA; which serves as evidence of a systemic in absentia were held. The participation ––Recommended an external auditor approach to the organization of this governing and the regularity of the members’ candidate for approval by the body. This in turn guarantees efficiency in attendance of the meetings is Annual General Shareholders’ strategic decision making in the best interests praiseworthy. Meeting for conducting the audit of of the Company and its shareholders. the Company in compliance with The main activities of the Board of the Russian Accounting Standards Directors in 2009 are as follows: and generally accepted accounting AAstrategic planning: standards (US GAAP); ––Approved the JSC Gazprom Neft ––Determined the external Auditor’s Exploration and Production Block fee for 2009; Strategy till 2020, JSC Gazprom ––Recommended allocation of the Neft Oil Refining Strategy till Company’s 2008 profit, including 2020 and JSC Gazprom Neft dividend payout, for the approval of Petrochemicals Distribution the annual General Shareholders’ Strategy till 2020; Meeting; ––Approved JSC Gazprom Neft’s ––Approved the schedule of the Strategic Development Concept till Board of Directors for the second 2020; half of 2009; AAmonitoring the budget preparation, ––Reviewed and recommended control over financing third party revised JSC Gazprom Neft operations and acting as surety for Corporate Conduct Code third party liabilities: for approval by the General ––Approved JSC Gazprom Neft’s Shareholders Meeting; budget-plan for 2010; ––Updated JSC Gazprom Neft’s ––Reviewed JSC Gazprom Neft information policy; budget draft for 2010; ––Approved new Regulations ––Approved a number of borrowing concerning the Audit Committee transactions; and the Human Resources and ––Reviewed current level of debt and Remuneration Committee; JSC Gazprom Neft Group finance ––Due to the appearance of new plans for 2010-2012; managers in JSC Gazprom Neft’s ––Approved transactions, involving top management, corrected the acting as surety for the liabilities composition of the Management of the JSC Gazprom Neft Group Board of JSC Gazprom Neft; companies; AAimproving the corporate structure: AAthe corporate sphere: ––As part of the JSC Gazprom ––Preliminary approved JSC Gazprom Neft Group’s distribution assets Neft 2008 Annual Report that was consolidation in the Central region, selected among 180 reports of approved the transfer of polyfuel Russian and foreign companies filling stations from the ownership as the best product in the non- of JSC Gazprom Neft into the financial sector by the jury of the XI ownership of the Company’s annual Contest of Annual Reports, subsidiary;

102 JSC GAZPROM NEFT ANNUAL REPORT 2009

––Decided to purchase an interest in AAother: CJSC Cultural and Business centre ––Reviewed the initial activity report “Okhta”, belonging to the city of St. of JSC Serbian Oil Industry (Naftna Petersburg; Industrija Serbije A.D., Novi Sad), ––As part of corporate restructuring, a Company’s asset acquired in the made a number of decisions beginning of 2009; concerning participation/ ––Approved a number of related-party withdrawing participation of the transactions Company in other organizations; AAinvestment planning: ––Reviewed the progress status of the Medium-term Investment programme for 2008-2010 “ Associated Gas Recovery and Usage Efficiency Improvement”; AAthe social sphere: ––Approved sponsor support to the sport clubs in the areas of presence of JSC Gazprom Neft – FC Zenit and HC SKA, as part of the athletic season.

103 CORPORATE Energy for life GOVERNANCE ENERGY FOR PEOPLE

MEMBERSHIP OF THE MANAGEMENT BOARD

In accordance with legislation the The Company has an objective, Dyukov Alexander Valerievich implementation of goals, strategy and policy effective and complex system of top Chairman of the Management Board, of the Company is assigned to the executive executive remuneration ensuring Director General bodies: Management Board (collective a connection between the Company’s executive body) and Director General (sole strategic goals and the value of top Born in 1967 in Leningrad, graduated from executive body) holding the position of executive remuneration. Individual goals the Leningrad Order-of-Lenin Shipbuilding the Chairman of the Management Board for top executives are composed of Institute. In 2001 obtained an IMISP MBA degree. acting based on the Charter of the company a balanced combination of indicators. and relevant corporate Provisions of JSC The variable component of top Positions held over the past five years: Gazprom Neft. executive remuneration is calculated 2005 – 2006 – President of JSC SIBUR based on achieving the goal for these Holding. indicators. In general, the top executive 2006 – Director General of SIBUR LLC. remuneration system complies with the Since 2006 - Chairman of the Board of market remuneration principles and Directors, JSC SIBUR Holding. conditions. 2006 – 2008 President of JSC Gazprom Neft. Since January 2008 – Chairman of the During 20009 the membership of the Board of Directors, Director General of JSC Management Board of the Company Gazprom Neft. Since December 2006 Director General changed twice: of the Company has been Alexander AAIn June 2009 V.V.Baranov was Valerievich Dyukov representing the elected member of the Management executive management of the Company Board and appointed Deputy Director on the Board of Directors. General for Administration; AAIn November 2009 based on In 2009 the Management Board of a resolution of the Board of Directors JSC Gazprom Neft held 38 meetings of the Company the number of discussing the following key issues: members of the Management Board AAResults of JSC Gazprom Neft grew from 9 to 10 people and activities in 2008 and the first half of V.V.Baryshnikov, Deputy Director 2009; General for International Business AAPlanning Company’s activities for one- Development, joined the Management year perspective (2009); Board. AAThe concept of implementation of the integrated risk management system in In 2009 no suits were brought against the Company; Director General or members of the AAPersonnel policy of JSC Gazprom Management Board. Neft; AALaunching the internal control system As of December 31, 2009 the members in the Company; of the Management Board of the AAStrategic planning of activities of JSC Company were: Gazprom Neft; AAAnnual business-plan and budget of the Company; AAPlans and methods of financing the current activities of the Company.

104 JSC GAZPROM NEFT ANNUAL REPORT 2009

Zilbermints Boris Semenovich Cherner Anatoliy Moiseevich Yakolev Vadim Vladislavovich Deputy Chairman of the Management Deputy Chairman of the Management Deputy Chairman of the Management Board, Deputy Director General for Board, Deputy Director General for Board, Deputy Director General for Exploration and Production Logistics, Refining and Distribution Economics and Finance

Born in 1967, graduated from the Geology Born in 1954, graduated from Groznyy Oil Born in 1970, graduated from Moscow Faculty of Gubkin Russian State University of Institute. Engineering Physics Institute, Higher School Oil and Gas In 1997 was awarded a Masters Positions held over the past five years: of Finance at the International University in Degree in economics by Southern Methodist Since 2006 - Vice-President of JSC Gazprom Moscow. In 1999 qualified as a Member University (Dallas, USA). Neft for Refining and Distribution. of the Association of Chartered Certified Accountants (ACCA). In 2009 obtained Positions held over the past five years: Since January 2008 - Deputy Chairman 2002 - 2008 - Regional Director of LUKOIL a diploma from the British Institute of of the Management Board, JSC Gazprom Directors (ID). Overseas Service Ltd. in Kazakhstan. Neft, Deputy Director General for Logistics, Since February 2008 - Deputy Director Refining and Distribution. In charge of Positions held over the past five years: General for Exploration and Production, oil refining, logistics and sales of oil and In 2005-2006 - Deputy Director General for JSC Gazrpom Neft. In charge of reserves, petroleum products. Economics and Finance, LLC SIBUR-Russian geology, exploration and production. Tyres. 2006-2008 - Head of the Budget Planning Department, JSC Gazprom Neft. Since January 2008 - Deputy Chairman of the Management Board, JSC Gazprom Neft, Deputy Director General for Economics and Finance. In charge of economics and finance.

105 CORPORATE Energy for life GOVERNANCE ENERGY FOR PEOPLE

Baranov Vitaly Vitalyevich Baryshnikov Vladislav Valeryevich Dybal Alexander Mikhailovich Deputy Chairman of the Management Member of the Management Board, Member of the Management Board Board, Deputy Director General for Deputy Director General for International Deputy Director General for Corporate Administration Business Development Communications

Positions held over the past five years: Born in 1965 graduated from the Military Born in 1966, graduated from Leningrad Since 2003 employed with SIBUR Group first Krasnoznamenny Institute. Electrotechnical Institute. as Advisor to President for General Matters, Positions held over the past five years: Positions held over the past five years: Head of President’s Administration. Since 2002 - 2009 - Director of JSC Gazprom rep 2005-2007 – Chairman of the Board of May 2006 - Vice-President for Managerial office in China – the regional rep office in the Directors of OJSC Gazprom-Media. Matters at SIBUR. Asia-Pacific Region. 2007-2008 – Vice-President of JSC Gazprom Since March 2009 employed as Deputy 3-Class Counsellor of State of the RF. Neft. Director General for Managerial Matters at JSC Gazprom Neft. In June 2009 elected Since April 2009 – Deputy Director General Since January 2008 – Member of the Member of the Management Board of JSC for International Business Development, Management Board of JSC Gazprom Neft, Gazprom Neft. since November 2009 – Member of the Deputy Director General for Corporate Management Board of JSC Gazprom Neft. Communications. V.V.Baryshnikov supervises matters related Responsible for information and regional to international business development, policy, interior corporate and marketing relations with international partners, communications. entering new international markets, and implementation of international projects.

106 JSC GAZPROM NEFT ANNUAL REPORT 2009

Ilyukhina Elena Anatolievna Kravchenko Kyrill Albertovich Antonov Igor Konstantinovich Member of the Management Board Member of the Management Board, Member of the Management Board Deputy Director General for Corporate Deputy Director General for Foreign Deputy Director General for and Legal Matters Assets Management Born in 1951, graduated from the Leningrad Born in 1969, graduated from Ulyanov Born in 1976, graduated from the Aeronautic Engineering Institute. (Lenin) Saint Petersburg State Lomonosov Moscow State University, Positions held over the past five years: Electrotechnical University and from Saint the Open British University, IMD Business Petersburg State University. In 2001 was School. Doctor of Science in Economics, 2000-2005 – Director General of the awarded a Ph.D. in economics. Professor. St.Petersburg State Unitary Enterprise “Informatika”. Positions held over the past five years: Positions held over the past five years: 2004 - 2007 – Administrative Director, 2005 – 2007 - Vice-President for Security at 2001-2007 - Deputy Director General, JSC “Sibneft”. FGUP Rublevo-Uspensky LOK (medical JSC MHK EuroHim. Many times elected and recreational complex) of the Property Member of the boards of directors of major Since 2007 – Deputy Director General for Management Department of the President of companies. Security at JSC Gazprom Neft. the Russian Federation. 2007 - 2008 - Vice-President of JSC Prior to employment with JSC Gazprom Neft Gazprom Neft. held a position of Executive Director of North- 2008 – 2009 – Deputy Chairman of the Western Investment Company LLC. Management Board of JSC Gazprom Neft, Since January 2008 – Member of the Deputy Director General for Managerial Management Board of JSC Gazprom Neft, Matters, JSC Gazprom. Deputy Director General for Corporate and Since February 2009 - Director General of Legal Matters. Responsible for providing the Serbian oil company NIS. legal and corporate support to the Since March 2009 – Deputy Director General company’s activities. for Foreign Assets Management at JSC Gazprom Neft.

107 CORPORATE Energy for life GOVERNANCE ENERGY FOR PEOPLE

Information on JSC Gazprom Neft Shares Held by Members of the Board of Directors and Management Board (as of December 31, 2009)

Members of the Board of Directors and Number of Common Share in Authorized Management Board, JSC Gazprom Neft Shares Capital, %

Zilbermints Boris Semenovich 20 000 0,0004218253

TOTAL AMOUNT OF REMUNERATION TO THE MEMBERS OF THE BOARD OF DIRECTORS AND MANAGEMENT BOARD

In 2009 the members of the Board of Directors were not paid any remuneration (no resolution was made on remuneration to be paid to the members of the Board of Directors at year end of 2008 at the annual General Meeting of the Shareholders held on June 22, 2009).

The total amount of payments to the members of the Management Board in 2009 was 406,022 mln rub. Payments included salary for the reporting period, taxes assessed on salary and other mandatory payments to the relevant budgets and extra-budgetary funds, payment for annual paid leave for work in the reporting period, treatment and medical expenses.

No additional remuneration is paid to the members of the Management Board for work in management bodies of JSC Gazprom Neft or its affiliated entities.

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ENERGY FOR LIFE ENERGY FOR PEOPLE 11 ENVIRONMENT, ENERGY SAVING, INNOVATION ENVIRONMENT, ENERGY SAVING, Energy for life 11 INNOVATION ENERGY FOR PEOPLE ENVIRONMENT, ENERGY SAVING, INNOVATION

INTRODUCTION OF AN INTEGRATED health, safety and environment, deal HSE is based on the best international MANAGEMENT SYSTEM with system problems and the major models and mechanisms, and seeks to causes of these incidents. In 2009, constantly improve. The corporate “Health, Safety and this was used as a basis for analyzing Environmental Policy” lowers risks causes and dynamics of incidents. Also DECREASING NUMBER OF INJURIES of injuries, occupational diseases, a set of regulations was developed, AMONG EMPLOYEES accidents at work, and environmental which enabled the adoption of a unified problems through the implementation of approach to solving issues in this area As a result of implementing the first and leading innovations in areas throughout throughout the company, facilitates full second stages of realizing the Policy “Gazprom Neft”, including personal and immediate exchange of information the Company gathered and analyzed liability for personal safety and safety of between industries. Therefore a new statistical information regarding injures others. strong foundation for the Company’s at work, and developed top priority new type of activity in the area was laid. standards. Based on the gathered The Company has developed incident data, special correctional a program for implementing the This Policy was adopted by all daughter measures were developed. We began requirements of the Policy and joint-stock companies. In order to to implement these measures, which Integrated Management System in the realize this Policy, the Company is resulted in a significantly lower number area health, safety and environment. taking steps to implement the integrated of deaths and stopped the growing The Company began to realize this management system in areas of health, number of accidents leading to program in 2008, the plan for that safety and environmental protection temporary inability to work. year was to become more disciplined (hereinafter HSE). The stages of in registering all incidents, create realizing the integrated management In 2009 the incident transparency index a statistical database which would system in the area of HSE were was 20 times higher, compared to 2007, comply with international procedures. developed and approved by the Board and is now the same as that of leading This database enables the development of “Gazprom Neft”. The company’s international oil companies. of adequate measures in the area of management system in the area of

STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5

TRANSPARENCY STATISTICS, INVESTIGATION PLANNING IMPLEMENTATION INCIDENTS DATABASE INDUSTRIAL MONITORING CORRECTIONAL MONITORING REGULATIONS AUDITING MEASURES ANALYSIS MONITORING PROJECTS, PROGRAMS CORRECTION IMPLEMENTATION OF CORPORATE STANDARDS RISK ASSESSMENT 2008 2009 2010 2011...

112 JSC GAZPROM NEFT ANNUAL REPORT 2009

FAR LTIFR 122 coaches inside the Company had been trained by the time this report came out: 58 driving/road safety coaches and 64 HSE and CP SOURCE: SOURCE: COMPANY COMPANY coaches. These coaches trained DATA DATA 14050 employees of subsidiaries and affiliates, 7013 of them received training 159,0 in defensive driving, and 7037 – in HSE 30,23 158,5 and CP. 158,0

12,39 157,5 PROVIDING EMPLOYEES WITH MODERN PERSONAL PROTECTIVE 157,0 2,53 EQUIPMENT 156,5 2007 2008 2009 2007 2008 2009 “Gazprom Neft” consistently works to identify industrial hazards by monitoring work stations. Employees are supplied with personal protective equipment. In 2009 the fatal accident rate (FAR) INCREASING COMPETENCE OF They are trained in the area of health went down, lost injury time frequency EMPLOYEES IN THE AREA OF HSE and safety at their work place. Even rate (LTIFR) remained at last year’s in difficult economic conditions the level, which reflects a very positive In order to increase the employees’ Company has not cut its safety budget. dynamic, considering also the fact that competence and efficiency of their Employees’ health and safety is the the Company is now more disciplined in participation in the HSE and CP area in which the Company’s leadership registering incidents. (Health, Safety, Environment and Civil and trade unions work together Protection) Management System, the in a constructive manner. Mutual As a result of implementing a standard Company adopted the M-16.03.01- obligations are stipulated by labour for regulating the investigation of 01 manual “Training Guidelines for contracts. incidents, the chances of using a formal Employees in the Area of HSE and CP in approach are now minimal, and the 2008-2010”. Since 2009 the Company’s supply emphasis is now on identification department has been purchasing all of major causes, rather than finger- The Training Program that these personal protective equipment (PPE), pointing. To prevent identical incidents, Guidelines put forward was developed in compliance with the Technical the subsidiaries and affiliates exchange in order to provide preventive measures Conditions and corporate identity information about incidents and the to decrease the number of incidents, of “Gazprom Neft”. Budgeted PPE lessons learned from them. The work related injuries and occupational expenses for 2010 are 360 million process of recording minor incidents diseases. It stipulates general provisions rubles. The catalogue of authorized PPE and prerequisites thereof has been for HSE and CP training in addition is constantly updated and improved. established, thus enabling the Company to training procedures required by As of today, average cost of PPE for to take preventive measures to avoid legislation. All Company employees, one employee is 12.5 thousand rubles. major incidents rather than deal with including executive management, have The company conducts regular training their consequences. to undergo this training. teaching employees how to select, use PPE and take care of it.

113 ENVIRONMENT, ENERGY SAVING, Energy for life INNOVATION ENERGY FOR PEOPLE

The main goal of scientific research is to accelerate the development of technical progress achievements, to implement new tools and technologies at a level necessary for dynamic production development.

INCREASING DRIVING SAFETY

In order to promote safe driving, the Company is implementing a procedure for safe driving of the Company’s motor vehicles.

The standard requirements have stricter regulations for registering road accidents. At this point all road accidents are to be registered, including minor ones and the ones where a third party is at fault. The Company conducts internal investigation of road accidents.

In order to have ongoing education of drivers, internal coaches have been obligations, and compensate for measures, including the use of trained, who are now in charge of any damages to the environment. technologies minimizing the adverse improving driving in the Company. The Company puts large emphasis environmental impact significantly A simulation machine has been on making environmentally friendly exceed payments made by the purchased in order to provide drivers products. Company for environmental with opportunities to practice their contamination. Current costs also skills and learn how to act in extreme The amount of payments for exceeding include expenses on the development and emergency situations. After existing environmental impact standards of regulatory documents, environmental implementing this program, the number at the major enterprises of Gazprom monitoring, industrial environmental of people injured in road accidents has Neft in 2009 totaled 89 mln rub., which control, improving environmental gone down by 50% in 2009. is a 58% decrease compared to competence and environmental training 2008. A total of 2 mln rub. was paid in of specialists. MANAGING ENVIRONMENTAL SAFETY penalties for violation of environmental legislation. In 2009 measures were In 2009, environmental expenditure Oil companies have an inevitable taken to correct the violations found. increased. It included financing anthropogenic impact on the The Company plans to further develop environmental measures to protect environment, including atmospheric the procedures for investigation and water from contamination (liquidating emissions, utilization of water and analysis of incidents related to violation blowing wells), modernizing the land resources and their pollution of legislation and introduce corrective treatment bank for process condensate, and contamination. The Company’s measures which will enable it to installing KT-1/1 at the Omsk Refinery, Environmental Strategy aims to minimize the probability of such events reconstruction of purification facilities, minimize this impact, to balance the occurring again. conservation (recultivation) of waste utilization of natural resources and deal tank. with damages inflicted by previous ENVIRONMENTAL EXPENDITURE generations. The Company strives to comply with all the requirements of The Company’s current and capital Environmental Law, fulfill its license expenditure on environmental

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ENVIRONMENT, ENERGY SAVING, Energy for life INNOVATION ENERGY FOR PEOPLE

ENVIRONMENTAL COSTS, TOTAL HARMFUL ATMOSPHERIC WATER CONSUMPTION MLN RUB EMISSIONS, Th. T (WATER USED TOTAL) MLN M3

SOURCE: SOURCE: SOURCE: COMPANY COMPANY COMPANY DATA DATA DATA

190 130 2500 180 2000 110 170 1500 90 160 1000 70 150 500 140 50 0 2007 2008 2009 2007 2008 2009 2007 2008 2009

ATMOSPHERIC EMISSIONS Neft. The main objective of this new unit of accumulated waste is represented is to increase production of gasolines by the drilling waste of hazard class The Company’s enterprises constantly of Euro 4 and Euro 5 standards. IV (low hazard). In total, IV and V work on reducing harmful atmospheric Implementation of the isomerization class (low hazard and essentially emissions. In 2007-2009 total emissions unit will enable processing of oil at non-hazardous) waste accounts for at Gazprom Neft have increased due to deeper levels and increase production over 90%. Drilling waste accumulates an increased scope of operations. of gasolines. Isomerizate which during the operations of oil producing “Isomalk-2” will produce is considered and oil service (overall share of these The bulk of the Company’s emissions the most valuable component for high enterprises is over 90%). The main occur in the oil and gas production octane fuel, free from olefine and method of drilling waste treatment sector, whereas in the oil refining aromatic hydrocarbons. remains the placing of such waste in sector they are on a decline. Lower designated storage areas. In 2009, 135 emissions in refining can be attributed UTILIZATION OF WATER RESOURCES sludge pits have been recultivated. As to environmental measures: renovations a result of these measures, the risk of of refining capacities, replacement of The Company’s enterprises seek to above-limit payments for prolonged burner units, equipping reservoirs with utilize water resources with maximum storage of drilling waste in the amount modern emission lowering devices, efficiency by injecting reservoir waters over 1 bln rubles was avoided. introduction of an installation ensuring back into the wells to maintain the precise and leak proof oil loading. reservoir pressure during oil production All industrial sectors of the Company and by setting closed cooling cycles work on improving their waste treatment PRODUCTION OF in refining. In 2009 water consumption technologies. The Omsk Refinery, ENVIRONMENTALLY-FRIENDLY FUEL for the Company’s own needs was up for example, processes 100% of by 4.4% compared to 2008 due to an accumulated oils independently. The oil refining sector of the Company increase in oil production volumes and New efficient technologies are being works consistently on improving the injecting reservoir waters back into the introduced in petroleum product environmental friendliness of its fuels. wells in order to maintain the reservoir distribution, these include a mobile The Omsk Refinery has come up with pressure. treatment complex, designed to clean a development program designed to the inside of tanks from solid deposits. ensure a complete transition to the Water consumption grew slower than Gazprom Neft has also been successful production of environmentally-friendly the Company’s operations. It was also in implementing the pre-drilling fuels by 2012. By the end of 2009 the slower than the last year’s growth rate program, when drilling of development plant completed modernization of the (in 2008 water consumption for the test wells with significant displacement L-24/6 diesel fuel hydrotreater. After Company’s own needs was up by 15%, of whole targets is done from already restoration of the split-flow system, the compared to 2007). made pads. So the geological structure installation can upgrade both summer and mining potential of the deposit are and winter diesel fuel to Euro-3, 4, and WASTE TREATMENT clarified in the zone of development do it simultaneously. Construction of test pads without prior back filling. This an isomerization unit for light naphtha The Company strives to reduce waste enables the Company to spare the land “Isomalk 2” plays an important role in accumulation and improve its waste where areal limits of soil sand have the further development of Gazprom treatment practices. The largest share not been confirmed. This technology

116 JSC GAZPROM NEFT ANNUAL REPORT 2009

CONTAMINATED LAND REMEDIATION, HA

SOURCE: COMPANY DATA

180

170 176

160 184 150

140 148

130 2008 2009

cancels the need to set up additional The Company’s enterprises use Increasing the AG utilization rate is sludge pits, drilling waste is processed advanced chemical biological agents a priority set by the state, and in order at the pad, which means that sludge for land remediation (like Fare Zyme), to contribute to reaching this goal, in does not need to be transported designed to destroy oil. They are based 2008 the Company adopted a Medium- elsewhere. The consolidated footing on mineral, rather than biological term Investment program for 2008-2010 braces pollutants and lowers the components, feeding the natural on AG utilization and more efficient use risk of them migrating elsewhere to florula and facilitating land restoration. (hereinafter MTIP). Based on the MTIP a minimum. This solid drilling mix could Biological remediation also involves Gazprom Neft has now developed an be later used as a construction coating planting area-specific grass and updated Gas program. Actual financing for firming up roads and laying down the perennials. of the MTIP projects in 2009 was 105% body of the pad. of what was planned. Implementation UTILIZATION OF ASSOCIATED GAS of the Gas program will allow the LAND CONTAMINATION CONTROL Company to bring up the AG utilization AND REMEDIATION In the production sector a lot of work rate to 95% by 2012 at Gazprom Neft is being done on increasing the level production assets. The Company takes measures to of associated gas utilization. The rate decontaminate land and remove of associated gas (hereinafter – AG) Automated AG control system will make unauthorized waste storage spots. In utilization across the Company’s major management in this area more efficient. 2009, 219 ha of contaminated land were production enterprises remains at the Such system was designed in 2009. remediated. To reduce the number of medium level – 48.1% of recovered gas It will allow to quickly receive precise areas with disturbed land the Company was used in 2009 (in the tables below information on production and usage plans to continue implementing pitless you can see the volumes of received of AG. drilling. and utilized AG in 2006-2009).

117 ENVIRONMENT, ENERGY SAVING, Energy for life INNOVATION ENERGY FOR PEOPLE

ASSOCIATED GAS resources of Gazprom Neft SUBSIDIARIES, mln cubic meters

Subsidiary 2007 2008 2009

LSC Gazprom Neft-Noyabrskneftegaz, including Muravlenkovskneft 4247,9 3936,8 3543,2 Gazprom Neft-Khantos LLC 515,9 477,0 543,5 Gazprom Neft-Vostok LLC 121,7 155,0 195,7

ASSOCIATED GAS utilization rate at Gazprom Neft SUBSIDIARIES, %

Subsidiary 2007 2008 2009

LSC Gazprom Neft-Noyabrskneftegaz, including Muravlenkovskneft 39,9 52,6 55,3 Gazprom Neft-Khantos LLC 6,0 8,4 13,3 Gazprom Neft-Vostok LLC 16,0 18,0 14,7

Source: Company Data

ENERGY Yuzhno-Priobskaya GTEP is a “medium due to decreasing volumes of liquid generation” object. Specialists set the production by 1.9% and oil — by 2.8%. Russian oil companies realized power range for such objects at 100- a long time ago that it is a lot better to 500 MW (“small” generation is up to 100 The Company’s thermal energy construct your own energy generators MW). The Priobskoye field is one of the consumption went up from 314 th. Gcal in the field. Developing local energy key assets of Gazprom Neft upstream in 2008 to 334 th. Gcal in 2009. systems allows companies to cut block, it is the fastest growing asset. In energy expenses and therefore lower 2009, oil production here amounted to Specific power consumption at JSE the prime cost of oil production. 27% of the Company’s production. Gazprom Neft has increased due to the increase in operations, mostly resulting In 2006, Gazprom Neft adopted Such emphasis on energy projects is from energy consumption in the a special program “Utilization and due to the Company’s internal demand, reservoir pressure maintenance system Higher Efficiency of Associated Gas”, regardless the energy system. There at Gazprom-Khantos LLC. which demonstrates that this is a priority are also potential external prospects for the Company. Under this program for developing this sector. The Yuzhno- Gazprom Neft works on ensuring the Company constructs so called Priobskoye field is only 70 km away efficient use of energy. The Company internal generators (IG). At this point the from the fast growing city of Khanti- introduces energy consumption control overall electrical power of Gazprom Neft Mansiysk, and Gazprom Neft’s GTEP and reduction measures, develops OGs is 51 MW, the plan is to bring it up may become the energy sources for the and implements efficient energy use to 220 MW by 2013. In December 2009, city. programs. the first unit (48 MW) of the gas-turbine electrical plant (GTEP) at the Yuzhno- The Company’s overall energy Implementation of the energy saving in Priobskoye field was launched, this field consumption dropped from 5,536 mln oil production program saved 34 mln is developed by Gazprom Neft-Khantos. kW/h in 2008 to 5,484 mln kW/h in 2009, rubles in 2006, 152 mln rubles — in The second unit (48 MW) of the Yuzhno- so it decreased by 53 mln kW/h (1%) 2007, 880 mln rubles — in 2008, and Priobskaya GTEP is being constructed. 1071 mln rubles — in 2009.

118 JSC GAZPROM NEFT ANNUAL REPORT 2009

INNOVATIVE ACTIVITIES innovations. This concept defines the difficult geological conditions to achieve main goals, objectives and principles fuller reserve recovery yielded additional The main objective in the area of of the Company’s policy on managing oil production of 119.4 th. tons and science and technology is accelerated protection of intellectual property. 158.1 th. tons respectively. 656 new implementing of new technologies, wells were launched in 2009, 172 HF introducing new technical equipment In 2009, Gazprom Neft-NTC LLC spent were created (without HF at the new to ensure dynamic development of the following amounts on science and wells), 45 wells were sidetracked and 47 production. technology: deepened into lower formations. AAgeology and exploration — 698.7 mln The priority science and technology rub. (179% increase compared to The key factor for innovational aspects for Gazprom Neft are the 2008); development of any industry is an following: AAdesign and control over development ability to create and use new technical AAUsing geographic methods to — 812.9 mln rub. (184% increase); solutions, technologies and techniques. discover potential gas and oil AAplanning and surveying — 109.5 mln Application of the latest technologies deposits; rub. becomes the most important criteria for AAConducting production log tests a company’s competitive abilities: in pioneer, exploration, and The main purpose of innovations in AAIn 2009 Gazprom Neft continued to development wells in order to dissect exploration is developing efficient apply latest technologies in drilling the geological cross-section, find survey complexes, improving reserves and casing pay horizons, assess technical estimation methods, lowering geological AAA dimensional visualization center conditions of the well and monitor risks and reaching precision in opened up at the Gazprom Neft field development; identifying exploration targets. Research and Technology Center AAConducting research, experimental in St.-Petersburg. It uses the latest and methodological, pilot-plan works, In 2009, JSC Gazprom Neft conducted technologies in the area of geological to increase geological and economic geotechnical operations (GTO) at 1,088 and hydrodynamic simulation. The efficiency of the geophysical wells, this resulting in extra production goal of the new division is to design research, improving its methods and of 4,705.8 th. tons of oil. trajectories for new wells, create techniques; a 3D seismological simulation in AADevelopment, testing and One of the most important results of the order to enhance field development. implementation of new technical Company’s technology improvement The visualization center will improve equipment and technologies for is extensive use of oil production the joint efforts of the researchers, studying the subsurface, natural intensification and enhanced oil geoscientists, geologists, and drilling completion, lowering expenses per recovery (EOR) methods. In 2009 total specialists working at the center. It will ton of produced oil; production from the EOR operations also help to analyze the structure and AACreating science and technology conducted in the reporting year (without characteristics of the fields in more products: design and technological the carryover effect) was 1.13 mln tons detail. documents, plans for developing or 2.3% of the Company’s total output. AAGazprom Neft-Khantos implemented fields and producing oil, technical- These methods allow Gazprom Neft a new technology “dual completion economic proposals and justifications to substantially increase recoverable arrangement” (DC), which provides (TEP, TEJ), including geological reserves and bring into production solutions to several problems: control and hydrodynamic models, other low quality reserves (high viscosity, in over field development, better quality documents needed for developing impermeable reservoirs). of reserve recovery, shortens the new fields of hydrocarbons; wells’ down time: now specialists get AAFurther improvement of design The Company uses physical, chemical, data on the flow from each reservoir methods and control over field hydrodynamic and thermal recovery online in real time. development at later stages, stimulation methods. The bulk of AAUpon Gazprom Neft’s request, creating permanent geological and additional production was attributable specialists from the Oil and Gas mathematical models. to physical methods, first and foremost, Research Center in Sarov are working to (HF) — 378 th. on developing the Iskender Program EXPLORATION AND PRODUCTION t. Hydrodynamic and chemical field and Industrial Complex, which is TECHNOLOGIES development methods that were used in an instrument for hydrocarbons

By the end of 2007 the Company’s analytical department was turned GeoteLOGICAL AND ENGINEERING Operations in 2007–2009 into Gazprom Neft-NTC LLC, an independent corporate science- 2007 2008 2009 production center in the area of geological exploration, design, Number of wells 1 003 1 194 1 088 control and oil and gas production. In Extra production, th. t 4 919,3 4 649,3 4 705,8 September 2009, Gazprom Neft-NTC LLC adopted a Concept for protecting the Company’s intellectual property and Source: Company Data

119 ENVIRONMENT, ENERGY SAVING, Energy for life INNOVATION ENERGY FOR PEOPLE

reservoirs studies through computer OIL REFINING TECHNOLOGIES was developed for the OJSC numerical calculations. Iskender Gazprom Neft-Omsk Refinery and the enables the performing of such 2009 saw this performance of research OJSC Moscow Oil Refinery. Under calculations as determination of the and development (R&D) in oil refining, this program in 2009 the Company perfect well and downhole equipment commissioned by Gazprom Neft, for continued to work on the following operations, more precise estimation a total of 18.3 mln rub. The main areas projects: of deposit reserves in the gross. of R&D in 2009 were related to safety AAOJSC Gazprom Neft-Omsk Refinery In addition, utilizing Iskender will and environmental protection; as well — implementation of isomerization, enable the completion of a number as product quality maintenance and diesel fuel hydrotreatment and of application tasks: drawing up production technologies, efficient catalytic cracking gasoline feasibility studies and draft field inventory consumption technologies, hydrotreatment, L-24/9 and L-24/6 development projects, analyzing including those used to inspect hydrotreater reconstruction field development risks, forecasting installations and issue operation AAOJSC Moscow Refinery — selection production performance, etc. optimization recommendations. of licensors and development of AAGazprom Neft-Noyabrskneftegaz basic projects for implementing launched a new device for heating The Company pays special attention to isomerization, catalytic cracking the well annular space at the modernization and new construction for gasoline hydrotreatment, choosing Vyngapurovskoye field. The new the purpose of meeting the technical catalytic system for L-24/2000 diesel heaters for the valve of a well mouth regulations “On Requirements for Motor fuel hydrotreater reconstruction. prevent freezing of the valve on the and Aviation Gasoline, Diesel and Xmas tree and failure to operate. It Marine Fuel, Jet Fuel and Residual Fuel also enables the reduction of direct Oil”, which came into force in 2009. oil losses by 90% and requires fewer To meet the legislative requirements personnel and equipment. a motor fuel quality upgrade program

120

ENERGY FOR LIFE ENERGY FOR PEOPLE 12 SOCIAL POLICY SOCIAL POLICY Energy for life 12 ENERGY FOR PEOPLE SOCIAL POLICY

Personnel, In 2009 the efficiency control system Program”, “Specific Features of Civil Occupational Safety was developed further to establish Law Contracts with Individuals, Control correlation between the employees and Payment Procedures”; improved and Health wage and assessment results of their the version of the Standard “Procedure performance based on KPIs. for Paying Quarterly Bonuses to Gazprom Neft invests in personnel, Employees of Subsidiaries and supporting initiatives and innovations In order to design methodological Associates of the Company”. designed to enhance operation and approaches to a uniform wage system management efficiency. The Company and social benefit policy, in 2009 In 2009 the Company started to acts as a responsible employer the Company and SACs continued develop a uniform concept for granting maintaining equal relations with the developing the Company standards social benefits in the Gazprom employees, ensuring decent wages, for personnel incentives and social Neft group adjusted to the market career opportunities and comfortable welfare, including “Procedure for practice. The Company has analyzed working conditions. Position Assessment and Its Grading”, existing social benefits in SACs “Procedure for Setting Compensation under effective collective contracts PERSONNEL MANAGEMENT POLICY Packages and Individual Grades for and other local statutory regulations, AND STANDARDS Company and SACs’ Employees”, as well as analyzed actual costs “Procedure for Paying Bonuses to under the mentioned articles and In 2009 Gazprom Neft developed Employees from the Executive’s searched for ways to optimize the and approved a uniform personnel Reserves”, «Procedure for Voluntary social benefit package maintaining management strategy, identified key Medical Insurance”, “Procedure for its competitiveness in terms of its priorities and areas in dealing with Calculating, Depositing and Paying components. A template has been employees. Bonuses to SACs’ Employees for designed for the uniform collective Their Contribution into Implementing contract that will be recommended for To design uniform principles and wage Corporate Projects”, “Procedure for use in all SACs. system, implementation of the grading Implementing the Corporate Mortgage system continues in subsidiaries and associates of the Company (SAC). In all SACs top management positions AVERAGE NUMBER OF PERSONNEL IN 2005–2009, PEOPLE (Director General and their Deputies) have been assessed and assigned grades.

SOURCE: COMPANY In 2009 the grading system was DATA fully introduced in 9 SACs, including Gazprom Neft-Khantos, LLC, JSC Omsk 51000 Oil Refinery (Gazprom Neft-ONPZ), 50000 48 339 50 153 CJSC Gazprom Neft-Kuzbass, JSC 49000 48000 47 686 Gazprom Neft – Omsk, Gazprom Neft 47000 – Lubricants LLC, Gazprom Neft 46000 45 775 – Nefteservice LLC, Gazprom Neft – 45000 44 640 NTC LLC, LLC Gazprom Neft – Aero, 44000 Complex Galernaya 5 LLC. 2005 2006 2007 2008 2009

124 JSC GAZPROM NEFT ANNUAL REPORT 2009

Distribution of Gazprom Neft CHANGES IN PERSONNEL COSTS Average Employee Wages at Personnel by Region in 2009 IN 2005–2009 (ТHOU. RUB) the Company in 2005–2009, rub.

SOURCE: SOURCE: COMPANY COMPANY DATA DATA

30 000 000 SOURCE: 45000 COMPANY DATA 25 000 000 40000 35000 20 000 000 30000 25000 15 000 000 20000 15000 10 000 000 2009, % 10000 5 000 000 5000 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009

Moscow & Moscow Region PERSONNEL COSTS AND WAGE average, 31 th. rub. per employee spent St. Petersburg & Leningrad Region GROWTH over the year in comparison to 32 th. Omsk Region rub. in 2008). During this period socially Khanty-Mansi Autonomous District The Company ensures competitive significant benefits were preserved Yamal-Nenets Autonomous District wages and decent social benefits to its for the personnel (voluntary medical Tyumen Region employees in accord with the market insurance, accident insurance, free Kemerovo Region trends. Personnel costs in 2009 showed meals, etc.) Yekaterinburg & Sverdlovsk Region a 13,5% increase compared to the year Novosibirsk Region before and totaled 28.2 bn rub. COOPERATION WITH EDUCATIONAL Kyrgyzstan INSTITUTIONS AND RECRUITMENT OF Yaroslavl Region The 2009 average wage amounted to YOUNG SPECIALISTS Other regions 44 227 rubles that is 10.4% higher than the year before. Overall average wage In 2009 Gazprom Neft continued Other regions are those with the average increase amounts to 78% for the period its cooperation with three higher headcount less than 100, including: 2005-2009. educational institutions – the Company’s – Kazakhstan – 88 employees; strategic partners, i.e. G.V. Plekhanov – Tajikistan – 70 employees; A perfect employee incentive system, Saint-Petersburg State Mining Institute, – Kaluga Region – 51 employees; providing for effective work by the Gubkin Russian State University of Oil – Murmansk Region – 35 employees; personnel, enables the Company and Gas, M.V. Lomonosov Moscow – Sakhalin Region, Bryansk Region, Zabaikalsk to achieve its business objectives. State University. The Company also Region – 4 employees per region. Therefore, Gazprom Neft continues to concluded a cooperation agreement develop and introduce a comprehensive with Moscow Geological Exploration incentive system based on competitive College. wages, performance bonuses and intangible elements. In 2009 the Company continued its initiatives as part of cooperation with As of today Gazprom Neft enterprises SOCIAL PACKAGE the higher educational institutions. employ over 50 thousand people Jointly with G.V. Plekhanov Saint- working in more than 20 regions of Company employees, in addition to Petersburg State Mining Institute the the Russian Federation as well as statutory benefits, are provided with Company organized Olympiads for in Kyrgyzia, Kazakhstan, Tajikistan, a social package, which includes school graduates in the cities where the and Belorussia. The largest part of voluntary medical insurance, accident Company operates (Noyabrsk, Omsk) Gazprom Neft personnel – about insurance, free meals, material aid to select winners and enroll them to half of the Company total headcount for different occasions, payment in the higher educational institution. (46%) – is concentrated in the Yamal- for employee trips as well as leave The Company arranged internship Nenets Autonomous District. The allowance and additional allowances, for students of the partner higher share of Omsk and the Omsk Region e.g. childcare allowance, death educational institutions at the Company is 17% of Company employees allowance, etc. enterprises. The total number of interns (47% of them employed at the Omsk was about 530 persons. Gazprom Neft Refinery). Moscow and the Moscow In 2009 social package payments NTC, LLC and Gubkin Russian State Region account for about 11% of the reduced by 3% compared to the University of Oil and Gas made an employees, roughly 21% of them work previous year due to optimization of the agreement on starting a basic sub at the Head Office. social benefits in a number of SACs (on department in the university.

125 SOCIAL POLICY Energy for life ENERGY FOR PEOPLE

The Company seeks to become one were developed based on an analysis professional sports among Russian oil of the industry leaders in efficiency of the Company business needs. The companies: Gazprom Neft supports and is interested in the recruitment of programs are designed to train 250-280 Zenit Football Club (Saint-Petersburg), talented specialists. The key areas of persons annually in total. Avangard Hockey Club (Omsk) and SKA personnel development in the Company Hockey Club (Saint-Petersburg). include working with young specialists, In 2009 the Company launched a large building a personnel reserve, creating project for proficiency development In the future the Company will continue a comprehensive continuing training of its personnel. It started designing its commitment to strategic priorities, system which would embrace all a professional competence system first and foremost, to supporting the categories of personnel and all levels of for specific activities followed by health and development of children management. assessment and focus on aspects of and youth and, when determining the personnel target development. the charitable targets and the scope The main purpose of cooperation – is of charitable programmes, will do its to recruit talented graduates to work for For personnel the key career planning utmost to take into account the opinions the Company. In 2009 the Company tool is Individual Development Plans, and expectations of all interested units recruited 305 young specialists. which are prepared taking into account parties. the requirements for a specific position, EMPLOYEE PROFESSIONAL assessment results of employee These priorities apply to both the socio- DEVELOPMENT development capabilities, and also economic agreements with the regions opinions of line managers and mentors. of operation and to specific charitable Gazprom Neft is traditionally committed programs and projects. to the professional development of its SOCIAL RESPONSIBILITY personnel. In 2009 1290 employees Thus, in 2008 in the settlement of Purpe, received training. The training rate The Company approved a “Charity construction of a sports-and-fitness remains high (over 1.1) in the last three Policy” setting out the principles and center was undertaken (acceptance years. In 2009 training and professional objectives of Gazprom Neft’s charitable of the facilities is scheduled for 2010), development costs totaled 105.550 mln activities, major priorities and rules of in 2009 renovation of the stadium was rub. specific projects. completed in town (Yamal- Nenets Autonomous District). Gazprom Neft’s professional training JSC Gazprom Neft’s key charitable system is designed to comply with priorities are determined by the In Noyabrsk town JSC Gazprom Neft- the requirements of the Company’s following programs: Noyabrskneftegaz continues to support business and its corporate culture. AASupport of children and youth such children’s sports events like the Gazprom Neft’s training and AARegional cooperation Mini-Football Town Championship for development programs include three AASupport of sports. Noyabrsk school children, Motorcross main sections: professional training Competition for the Yamal-Nenets programs designed to provide Total charitable expenses, including Autonomous District Cup, and Mini- knowledge and skills for particular those under socio-economic Football Tournament. specialties and functions, corporate agreements with the regions of the and management competence Company’s operation, were over 800 In 2009, supported by JSC development programs, and business mln rub. in the reporting period. Gazprom Neft – Vostok school children awareness development programs. from Kargasoksky and Parabelsky Personnel training and development The activities of the Charity Commission Districts of the Tomsk Region, and from programs comprise additional corporate set up by JSC Gazprom Neft in 2008 the Tarsky District of the Omsk Region mandatory training and development allowed the Company to systematize spent their holidays at children’s holiday of the personnel reserve and young its charitable activities and to work centers. specialists. on priority areas. It helped reduce total expenses (financing of sports OJSC Gazprom Neft-Omsk Refinery In 2009 642 persons attended corporate organizations, indirect support is implementing a special-purpose management competence development through charitable organizations, program: “To Provide Assistance trainings for Company personnel, which foundations and associations was to Educational Institutions in the is five times more than in the previous scaled down), while at the same time Bolsherechie Municipal District”. period. increased the funding of social aid programs for orphanages, schools and It has become a tradition to hold In 2009 the Company introduced boarding schools, cultural institutions, the Interregional Gazprom Neft Cup modular programs for the administrations of the districts, cities and Children’s Ice Hockey Tournament. comprehensive development of regions where the Company operates. In 2007 the first tournament took management potential of Gazprom place in Omsk supported by the Neft personnel, managers of various Over several years the Company has Omsk Region government boasting levels, “Business Leaders”, “Success been actively involved in financing over 100 participants from Tyumen, Vector”, “Growth Managers”, and professional and amateur sports Omsk, Tomsk, Noyabrsk, “Growth Managers +”. The programs and is one of the largest sponsors of and Khanty-Mansiisk. Arranging the

126 JSC GAZPROM NEFT ANNUAL REPORT 2009

tournament, its sponsors pursued the Children’s Ice Hockey Tournament in of customary activities and households objective to attract as many young Omsk. of indigenous minorities in the North. people as possible to play sports, With this purpose in the northern to enhance popularity of hockey, Thanks to the Company finance, in settlements residential housing and and to prepare teams for All-Russia Noyabrsk construction of the sports- fish processing facilities have been competitions. and-fitness center will commence and constructed as well as fishing boats, provide a pool and an all-purpose snowmobiles, and nets are purchased. The tournament fully met expectations stadium with 400 seat terraces, of its sponsors, participants and calisthenics hall and gyms. The Company is involved in arranging spectators. The idea was approved the 2010 World Chess Olympiad that will to hold this tournament annually in the The Company shall take part in take place in Khanty-Mansiisk. cities where the Company operates. financing the construction of the In 2008-2009 the hockey tournaments Youth Center in Tarko-Sale town of the Additionally, as part of the agreements took place in Khanty-Mansiisk attracting Purovsky District and a multi-functional with the regions, funds will be allocated over 400 participants. gym in Muravlenko town. for capital repairs of social facilities, purchase of medical equipment and In 2010 it is planned to hold the 4th It has become a tradition to allocate improvement of towns and settlements. Interregional Gazprom Neft Cup funds under agreements to create conditions for sustainable development

127 ENERGY FOR LIFE ENERGY FOR PEOPLE 13 TO SHAREHOLDERS AND INVESTORS TO SHAREHOLDERS Energy for life 13 AND INVESTORS ENERGY FOR PEOPLE TO SHAREHOLDERS AND INVESTORS

AUTHORIZED CAPITAL, STOCK MARKET AND CAPITALIZATION SHAREHOLDER CAPITAL Background Information on the Outstanding Securities STRUCTURE of JSC Gazprom Neft: AACommon registered shares, State Registration Number 1-01-00146-А of The Company’s authorized capital is 7 17.06.2003 586 079.4224 rubles and it is accrued AAPar value per issued share: 0.0016 rubles through offering 4 741 299 639 common AANumber of issued securities: 4 741 299 639 shares registered shares. The par value per AAIssue Value: 7 586 079.4224 rubles share is 0.0016 rubles. The state AAStock Symbol – SIBN. registration number of JSC Gazprom Neft’s issue of common registered Stock Trading Information shares is 1-01-00146-А . JSC Gazprom Neft shares are traded on the main trading floors in Russia: CJSC As of 31.12.2009 the shareholder MICEX, where, as of December 31, 2009, they accounted for 0.8% in the index and register contains 9 688 accounts, OJSC RTS Stock Exchange (0.9%). including 17 legal entities, 9 660 individuals, 1 beneficial owner and 10 The volume of trading in JSC Gazprom Neft shares on the MICEX Exchange totaled nominee holders. 77 bn rubles (2 468 mln USD) in 2009, compared to 56 bn rubles (2 295 mln USD) in 2008. At yearend of 2009 the American Depository Receipts (ADR) issued for As of 31 December 2009 JSC Gazprom JSC Gazprom Neft shares accounted for 0.3% of total trading volume among Neft does not have any preference foreign company ADRs quoted on the in the IOB system shares. (641 mln USD).

List of registered entities that carry on their accounts the block of securities worth of no less than 1 % of the authorized capital

As of 31.12.2009 As of 31.12.2008

Entities registered in the Share in Authorized number of Share in Authorized number of shareholder register Capital, % shares Capital, % shares

JSC Gazprom 66,9837 3 175 898 234 55,9961 2 654 942 903 Gazprom Finance B.V. 5,6791 269 261 275 16,6667 790 216 606 Deutsche Bank, LLC (Nominee holder) 20,0002 948 271 442 20,0002 948 271 442 CJSC Depository Clearing Company (nominee holder) 3,3742 159 982 715 3,4363 162 926 684 CJSC ING Bank (Eurasia) (Nominee holder) 2,0960 99 379 791 2,3660 112 179 295 “National Depository Center” Non-Profit Partnership (Nominee holder) 1,2865 60 997 170 1,1104 52 648 608

130 JSC GAZPROM NEFT ANNUAL REPORT 2009

At year-end 2009 growth in the price of Company shares was recorded: over the year the price increased 170.7% (in RTS Trading) to be quoted at 5.55 USD at yearend. JSC Gazprom Neft capitalization as of 31.12.2009 was 26.31 bn USD. Among the major external factors that positively affected the price of Company shares, the investment community singled out the following: AArecovered oil prices; AAa number of successful M&A transactions; AApositive changes in fiscal policy of governmental authorities regarding oil companies.

CHANGES IN THE PRICE OF JSC GAZPROM NEFT SHARES, MICEX OIL AND GAS INDEX AND PRICE OF URALS Despite a substantial increase in capitalization in 2009, there exist serious SOURCE: fundamental prerequisites for further MICEX growth of the Company’s shareholder 300% value – it is the best “value-added” 250% business among Russian companies

200% in terms of the depth of refining, availability of distribution capacities and 150% plans for further development of the 100% distribution business which, under the 50% current tax regime, create considerable 0% value for the Company. Judging by Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec the commonly accepted market value indicators, JSC Gazprom Neft 2009 was underestimated by the market in comparison both with international oil JSC Gazprom Neft companies and Russian competitors. MICEX Oil & Gas index All these factors provide a significant Urals competitive edge for the Company, creating a considerable value growth potential in the long-term.

CHANGES IN THE PRICE OF JSC GAZPROM NEFT SHARES, RTS OIL AND GAS INDEX, AND PRICE OF URALS

SOURCE: RTS

300%

250%

200%

150%

100%

50%

0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

JSC Gazprom Neft RTS Oil & Gas Index Urals

131 TO SHAREHOLDERS Energy for life AND INVESTORS ENERGY FOR PEOPLE

PARTICIPATION IN THE Neft’s common shares. At yearend of of investors’ pool, enhancement of AMERICAN DEPOSITORY 2009, the total number of ADRs issued the Company securities liquidity on for common shares was equivalent to international trading floors, as well as RECEIPT PROGRAM 84 mln shares, which is 1.8% of the increased Company recognition among Company’s authorized capital. global investors. During the first trading During 2009 the American and Global year on OTCQx JSC Gazprom Neft’s Depository Receipt Programs for In 2009 Gazprom Neft was the first ADR volumes amounted to 62 mln Company shares traded in the US, UK, among Russian companies to start USD. The depository of JSC Gazprom German, and other over-the-counter trading its ADRs on the OTCQx. For the Neft’s receipts is The Bank of New York markets was still in operation. One Company commencement of trading Mellon, 101 Barclay Street, 22nd Floor, ADR accounts for 5 JSC Gazprom on OTCQX means further diversification New York, New York, 10286.

Capitalization of JSC Gazprom Neft on the RTS Stock Exchange in 2003–2009, USD

SOURCE: RTS

45 000 000 000 40 000 000 000 35 000 000 000 30 000 000 000 25 000 000 000 20 000 000 000 15 000 000 000 10 000 000 000 5 000 000 000

01.01.0301.07.0301.01.0401.07.0401.01.0501.07.0501.01.0601.07.0601.01.0701.07.0701.01.0801.07.0801.01.0901.07.0901.01.10

Information on JSC Gazprom Neft ADRs:

Ticker GZPFY (GAZ, SCF) Closing Price as of 31.12.2009 $26.85 CUSIP 36829G107 52 week Max price $30.00 Ratio 1 ADR: 5 common shares 52 week Min price $8.42 Effective as of April 20, 1999 Average monthly trading volume (IOB) $53 Mln SEDOL 5109407 ISIN RU0009062467 Depository Bank BNY Mellon

132 JSC GAZPROM NEFT ANNUAL REPORT 2009

Changes in the Price of JSC Gazprom Neft ADRs, Russia IOB Index and Urals Crude

SOURCE: Bloomberg

300%

250%

200%

150%

100%

50%

0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec JSC Gazprom Neft Russia IOB Urals

JSC Gazprom Neft Russia IOB Urals Changes in Trading Volumes of JSC Gazprom NEFT on rTS, MICEX, LSE, and OTCQx, MLN USD

MICEX SOURCE: RTS BLOOMBERG, OTCQX, RTS, LSE IOB MICEX OTCQX 700 600 500 400 300 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Trading Volumes of JSC Gazprom Neft ADRs 2009 in London (IOB), USD

SOURCE: COMPANY DATA

160 000 000 140 000 000 120 000 000 100 000 000 80 000 000 60 000 000 40 000 000 20 000 000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

133 TO SHAREHOLDERS Energy for life AND INVESTORS ENERGY FOR PEOPLE

DIVIDEND HISTORY AAEnsuring positive changes in the The resolution of the Annual General dividend payments provided that the Shareholders’ Meeting of the Company, The dividend policy of JSC Gazprom Company net profit increases; dated June 22, 2009, established the Neft is based on protection of the AACommitment to providing a most total amount of accrued dividends for shareholders’ interests, maintaining convenient way to receive dividends the 2008 financial year at 25 603 018 the balance of interest between the to the shareholders; 050.60 rubles: the dividend amount per Company and its shareholders and AACommitment to paying dividends common share was set at 5.40 rubles. intended to improve welfare of the within a short time span. Company shareholders. The right to receive dividends is To ensure the greatest transparency granted to all shareholders of record The main principles of the Company of the dividend allocation mechanism as of the date of compiling the list of dividend policy are: and procedure for its payment, JSC shareholders entitled to participate in AAObservance of the effective legislation Gazprom Neft stated its dividend policy the General Shareholders’ Meeting, at regulations of the Russian Federation, that it had been implementing in recent which the resolution to pay dividends the Articles of Association and the years, in the Provision on Dividend was adopted. The registration date Company bylaws; Policy approved in January 2010. for holders of Company ADRs is set AACommitment to high standards of separately by the depository bank, corporate governance; In the Provision the Company fixed which is The Bank of New York. AAImprovement of the Company a minimum amount of annual dividends investment potential; for shares - 15% of the Company net Dividend payment period – by May 31 AAEnsuring maximum transparency profit, calculated pursuant to the US of the year following the year in which of the mechanism to determine the GAAP. the resolution to pay dividends was amount of dividends; adopted.

Dividend History:

PERIOD 2005 2006 2007 2008 Dividend per share (rub.): 7,90 8,0822 5,40 5,40 Total dividend per class of shares (rub.): 37 456 227 806 38 320 131 942 25 603 018 051 25 603 018 051 as % of US GAAP net income 47,21 38,50 24,16 22,11 Name of the issuer’s governing body which General General General General adopted the resolution to pay dividends: Shareholders’ Shareholders’ Shareholders’ Shareholders’ Meeting Meeting Meeting Meeting Date of the meeting of the issuer’s governing 22.06.2006 22.06.2007 20.06.2008 22.06.2009 body at which the resolution to pay dividends Minutes № 40 of Minutes № 40 of Minutes № 45 of Minutes № 47 of was adopted, date and No. of the Minutes: 29.06.2006 27.06.2007 30.06.2008 03.07.2009 Dividend payment period: By 31.05.07 By 31.05.08 By 31.05.2009 By 31.05.2010 Method of payment and other terms: In cash In cash In cash In cash

Dividends were not paid to the shareholders who failed to provide the data required for dividend transfer under cl.5 of Article 44 of Federal Law № 208-FZ “On Joint Stock Companies”, dated 26.12.1995. Dividends accrued on shares of unidentified holders are paid as the shareholders’ rights to their securities are established.

134 JSC GAZPROM NEFT ANNUAL REPORT 2009

OBSERVING THE ––Fixing the responsibility in the for wrongdoing in the spheres of CORPORATE CONDUCT Company Articles of Association entrepreneurship or finance or tax to notify shareholders about the and duties or stock market; CODE Annual General Shareholders’ ––Highly professional executives in Meeting not later than 30 days the governing bodies; The level of the Company corporate prior to its date, unless a longer ––Setting forth the procedure for governance may be evaluated first of all notification period is stipulated by holding Board of Directors meetings through the set of guidelines outlined in law; in the bylaws; the Corporate Code of Conduct of the ––Providing the opportunity to ––Assigning strategic management Federal Commission for the Securities the shareholders to read the of the Company’s operations to the Market. information (materials) subject to Board of Directors and effective disclosure during preparation for control of the Board of Directors The JSC Gazprom Neft in its the General Shareholders’ Meeting over the activities of the Company’s operations follows the policy of ultimate via the Internet (the information executive bodies; implementation of the corporate culture should be published online in ––Determining the value threshold of principles set forth therein. the bilingual format (Russian and transactions subject to approval by English) to meet the timeframe the Company Board of Directors Operations of the Company are based stipulated by the effective legislation in the Company Articles of on the following principles of corporate of the Russian Federation); Association; governance: ––Ensuring the most simple and ––Accountability of the Board AAConducting activities for the benefit unobstructed registration procedure members to General Shareholders of shareholders and observing rights for the participants of the General Meeting; of the Company employees and other Shareholders’ Meeting ; ––Creating Board of Directors interested parties ––Ensuring the rules of order of the committees: Audit Committee and AAObservance of applicable legislation; General Shareholders’ Meeting that HR and Remuneration Committee ; AAOobservance and effective protection guarantee equal opportunities for all ––Existing bylaws approved by the of the rights of Company shareholders shareholders present at the meeting Board of Directors that describe through: to express their opinions and to ask establishing and operating ––Giving shareholders the opportunity any agenda-based questions; procedures for the Board of to manage their shares at their own ––Ensuring availability of the Directors committees; discretion, quickly and at will; Management Board representatives ––Absence of Company executives ––Giving the Company a reliable and at the General Shareholders’ in the HR and Remuneration effective system for recording stock Meeting which gives the opportunity Committee; ownership rights, which is ensured to the shareholders to ask their ––A special executive in the Company by cooperation of the Company questions; (Secretary of the Board of with an independent registrar; AAmaintaining high standards of social Directors) that ensures observance ––Establishing a maximally clear responsibility; by the Company governing bodies and transparent mechanism for AACreating an efficient system of the and executives of procedure determining the dividend amount Company governing bodies based requirements that guarantee and ensuring the dividend payment on: shareholders’ rights and their lawful procedure that allows shareholders ––Clearly stated competence of the interests; to best exercise their right to governing bodies set out in the ––Establishing the procedure for receive dividends; Company Articles of Association; appointment of the Board of ––Having effective control over the ––Absence of persons employed by Directors Secretary and outlining financial and economic activities competitive entities in the Company their job description in the bylaws; of the Company by both the governing bodies; ––Collegial executive body internal bodies of the Company ––Responsibility of governing body (Management Board); (Board of Directors, Management members set forth by the Company ––Accountability of the executive Board, Audit Commission, Audit bylaws to refrain from actions that management to the Board Committee) and the external may cause a conflict of interests of Directors and General Auditor; as well as to inform the Company Shareholders’ Meeting; ––Ensuring equal rights and about any situations (transactions) ––Setting forth in the Company opportunities for all shareholders that may potentially cause a conflict bylaws the responsibility of and other interested parties to of interests executive bodies to report regularly receive information; ––Absence of persons in the to the Board of Directors about AAEnsuring equal treatment of Company Company governing bodies that implementation of Company shareholders holding the same class have been found guilty of economic programs and plans, General (type) of shares; crimes or crimes against the Shareholders Meeting’s and Board AAProviding Company shareholders with state authorities, or state service of Directors’ Decisions, and about the real opportunity to exercise their interests or local governance other results of the Company rights associated with participation in interests or those that were operations, including asset the Company’s operations: imposed administrative penalties management issues;

135 TO SHAREHOLDERS Energy for life AND INVESTORS ENERGY FOR PEOPLE

AAInformation transparency of the financial standing, the results of ––Ensuring disclosures about its Company activities that is achieved its operations, as well as about operations are made as soon as through: material facts related to its financial possible to avoid reducing the ––Availability of the bylaws approved and economic activities; relevance of such disclosures; by the Board of Directors ––Not avoiding negative disclosures ––Making sure disclosures made determining the Company about the Company and its by different methods and/or in information policy; operations which are essential for different forms are consistent and in ––Publishing information about the Company shareholders and all agreement with each other; Company in Russian and English interested parties; ––Using such information on its corporate website (www. ––Making disclosures, on a regular dissemination methods that gazprom-neft.ru) to the extent basis, about the most important provide for its shareholders and provided by the current legislation events and facts of the Company’s other interested parties free, easy and bylaws of the Company; operations affecting the interests and least expensive access to ––Giving its shareholders access of its shareholders and other disclosures; ensured by the Provision of the interested parties, using the ––Not giving preference to meeting Information Policy to complete communication means available the interests of one audience over and reliable information, including to the Company, including online another when making disclosures. that about the Company's press-release publishing;

136

ENERGY FOR LIFE ENERGY FOR PEOPLE 14 MAJOR TRANSACTIONS AND RELATED PARTY TRANSACTIONS MAJOR TRANSACTIONS Energy for life AND RELATED PARTY ENERGY FOR PEOPLE 14 TRANSACTIONS MAJOR TRANSACTIONS AND RELATED PARTY TRANSACTIONS

In 2009 JSC Gazprom Neft did not enter into any major transactions as defined by the current legislation of the Russian Federation. List of Related Party Transactions concluded in 2009 and Approved by the Governing bodies of JSC Gazprom Neft

№ Party to Subject and material terms of Related party Minutes № , Transaction Transaction date

1. CJSC FC Zenit Advertising Services Agreement of 1. JSC Gazprom, holding through its № 179, 01.04.2009 01.01.2009. Buyer: JSC Gazprom Neft, affiliates OJSC GPB and Gazprom Executor: CJSC FC Zenit. Contract value 514, Transgaz Sankt-Peterburg, a more than a 2 mln. rub. 20% interest in CJSC FC Zenit ; 2. Member of the Board of Directors, General director of JSC Gazprom Neft , holding the position of Member of the Board of Directors and President of CJSC FC Zenit: Dyukov A.V.; 3. Member of the Board of Directors of JSC Gazprom Neft, concurrently Member of the Board of Directors CJSC FC Zenit : Seleznev K.G.

2. «Gazprom Neft- Polyfuel filling stations Purchase and Sale JSC Gazprom, due to the fact that its № 179, 01.04.2009 Tsentr» LLC Agreement of 10.12.2008. Seller: JSC affiliate – JSC Gazprom Neft holds a more Gazprom Neft , Buyer: Gazprom Neft-Tsentr than 20% interest in the authorized capital LLC. Contract value: 112,01 mln. rub. of a party to the transaction

3. «Gazprom Neft- Polyfuel filling stations Purchase and Sale JSC Gazprom, due to the fact that its № 179, 01.04.2009 Tsentr» LLC Agreement of 10.12.2008 . Seller: JSC affiliate – JSC Gazprom Neft holds a more Gazprom Neft , Buyer: Gazprom Neft-Tsentr than 20% interest in the authorized capital LLC. Contract value: 108,88 mln. rub. of a party to the transaction

4. «Gazprom Neft- Polyfuel filling stations Purchase and Sale JSC Gazprom, due to the fact that its № 179, 01.04.2009 Tsentr» LLC Agreement of 10.12.2008 . Seller: JSC affiliate – JSC Gazprom Neft holds a more Gazprom Neft , Buyer: Gazprom Neft-Tsentr than 20% interest in the authorized capital LLC. Contract value: 105,41 mln. rub. of a party to the transaction

5. «Gazprom Neft- Polyfuel filling stations Purchase and Sale JSC Gazprom, due to the fact that its № 179, 01.04.2009 Tsentr» LLC Agreement of 10.12.2009 . Seller: JSC affiliate – JSC Gazprom Neft holds a more Gazprom Neft , Buyer: Gazprom Neft-Tsentr than 20% interest in the authorized capital LLC. Contract value: 105,93 mln. rub. of a party to the transaction

140 JSC GAZPROM NEFT ANNUAL REPORT 2009

№ Party to Subject and material terms of Related party Minutes № , Transaction Transaction date

6. «Gazprom Neft- Polyfuel filling stations Purchase and Sale JSC Gazprom, due to the fact that its № 179, 01.04.2009 Tsentr» LLC Agreement of 10.06.2009. Seller: JSC affiliate – JSC Gazprom Neft holds a more Gazprom Neft , Buyer: Gazprom Neft-Tsentr than 20% interest in the authorized capital LLC. Contract value: 35,27 mln. rub. of a party to the transaction

7. «Gazprom Neft- Polyfuel filling stations Purchase and Sale JSC Gazprom, due to the fact that its № 179, 01.04.2009 Tsentr» LLC Agreement of 16.10.2009 . Seller: JSC affiliate – JSC Gazprom Neft holds a more Gazprom Neft , Buyer: Gazprom Neft-Tsentr than 20% interest in the authorized capital LLC. Contract value: 98,14 mln. rub. of a party to the transaction

8. OJSC NGK OJSC Gazprom Neft-Yaroslavl Stock Members of the Management Board of № 181, 11.06.2009 Slavneft Purchase and Sale Agreement of 06.07.2009 JSC Gazprom holding positions in the Contract value 657,14 mln. rub. governing bodies (Board of Directors) of OJSC NGK Slavneft : Dyukov A.V. Zilbermints B.S., Kravchenko, K.A., Cherner A.M., Yakovlev V.V.

9. NIS a.d., Novi Special-Purpose Loan Agreement of Members of the Management Board of № 183, 18.06.2009 Sad 04.05.2009 for renovation and modernization JSC Gazprom, holding positions in the of the technological complex NIS. governing bodies (Board of Directors) of Borrower: NIS a.d. , Novi Sad Nis a.d. Novi Sad: Lender: JSC Gazprom Neft Kravchenko K.A., Contract value is less than 118 mln euro. Ilyuhina E.A., Maturity date: 15.05.2013, Libor+2% Yakovlev V.V., Antonov I.K., Cherner A.M., Baranov V.V.

10. ОJSC Signing of a Surety Agreement between 1. JSC Gazprom, holding a more than 20% № 184, 19.06.2009 JSC Gazprom Neft (Surety) and OJSC interest in JSC Gazprom Neft and OJSC Gazprombank (Bank). Surety is liable to the GPB; Bank for the performance by JSC Gazprom 2. Members of the Board of Directors of Neft ONPZ (Omsk Oil Refinery) (Principal) JSC Gazprom Neft, concurrently Members of the obligations arising from the Bank of the Board of Directors of OJSC GPB: Guarantee Agreement entered into between Miller A.B. ; the Bank and the Principal. Bank guarantee Kruglov A.B.; amount 8,9 bln. rub. Surety Agreement Pavlova O.P.; expires on 28.02.2011.

11. ОJSC Signing of a Bank Guarantee Agreement 1. OJSC Gazprom, holding a more than № 185, 31.08.2009 Gazprombank , entered into between the Bank and the 20% interest in JSC Gazprom Neft and Principal. Bank guarantee amount: 763 mln. OJSC GPB; rub., fee - 0,5% per annum of the guarantee 2. Members of the Board of Directors of amount. Valid through 30.06.2010 JSC Gazprom Neft, concurrently Members of the Board of Directors of OJSC GPB: Miller A.B. ; Kruglov A.B.; Pavlova O.P.;

12. OJSC Signing of Swap Contracts: transferring 20 JSC Gazprom, due to the fact that its № 185, 31.08.2009 Gazprom Neft- fuel filling stations into the ownership of OJSC affiliate – JSC Gazprom Neft holds a more Ural Gazprom Neft-Ural in exchange for additional than 20% interest in the authorized capital issue shares in the amount of 48 845 shares of a party to the transaction at a purchase price 7850 rub per share

141 MAJOR TRANSACTIONS Energy for life AND RELATED PARTY ENERGY FOR PEOPLE TRANSACTIONS

№ Party to Subject and material terms of Related party Minutes № , Transaction Transaction date

13. CJSC FC Zenit Advertising Services Additional Agreement 1. JSC Gazprom, holding through its № 188, 21.10.2009 of 05.10.2009. Buyer: JSC Gazprom Neft, affiliates OJSC GPB and Gazprom Executor: CJSC FC Zenit. Contract value Transgaz Sankt-Peterburg LLC, a more 500,0 mln. Rub. than a 20% interest in CJSC FC Zenit ; 2. Member of the Board of Directors, General director of JSC Gazprom Neft , holding the position of Member of the Board of Directors and President of CJSC FC Zenit: Dyukov A.V.; 3. Member of the Board of Directors of JSC Gazprom Neft, concurrently Member of the Board of Directors CJSC FC Zenit : Seleznev K.G.

14. ОJSC Signing a Bank Guarantee Agreement of 1. OJSC Gazprom, holding a more than № 190, 03.11.2009 Gazprombank 13.10.2009 to guarantee JSC Gazprom 20% interest in JSC Gazprom Neft and Neft’s liabilities in respect to the contract with OJSC GPB; the Federal Agency for State reserves. Bank 2. Members of the Board of Directors of guarantee amount: 20,3 mln rub, fee - 0,5% JSC Gazprom Neft, concurrently Members per annum of the guarantee amount . Valid of the Board of Directors of OJSC GPB: through 20.02.2010 Miller A.B. ; Kruglov A.B.; Pavlova O.P.;

15. CJSC Hockey Signing a Services Agreement for providing Dyukov A.V, who is concurrently Member № 191, 05.11.2009 Club SKA GPN advertisement (sponsor advertisement) of the Board of Directors, single-member manufacture and placement services to executive body of JSC Gazprom Neft and CJSC Hockey Club SKA on the following Chairman of the Board of Directors of terms: Period of services: from 01.08.2009 till CJSC Hockey Club SKA. 30.04.2010 , total cost 456,1 mln. rub.

142

ENERGY FOR LIFE ENERGY FOR PEOPLE 15 ASSET MANAGEMENT AND IMPROVEMENT OF THE CORPORATE STRUCTURE ASSET MANAGEMENT Energy for life AND IMPROVEMENT OF THE ENERGY FOR PEOPLE CORPORATE STRUCTURE

ASSET MANAGEMENT AND IMPROVEMENT OF THE CORPORATE STRUCTURE

Improvement of the Company’s In 2009 Gazprom Neft continued the In 2009 JSC Gazprom Neft jointly with corporate governance structure is consolidation of distribution assets. its partner OJSC TNK-BP continued designed to enhance the efficiency the division of the assets of the Slavneft of Gazprom Neft’s operations as In the Sverdlovskaya region all assets Group. The division of Slavneft Group’s a vertically integrated company of the Company are consolidated distribution assets is completed in the and optimize the core business into OJSC Gazprom Neft-Ural. As Central Federal region and in Belarus management structure at the level of a result of the restructuring, OJSC Republic. As a result of the division subsidiaries. Ekaterinburgnefteproduct and OJSC and optimization of the network, JSC Uralnefteproduct are included into Gazprom Neft had by the end of 2009 OJSC Gazprom Neft-Ural. a network of 77 retail filling stations in Yaroslavskaya and Ivanovskaya regions In Krasnoyarski Krai the Company and a network of 38 retail filling stations completed the reorganization in Belarus Republic under its control. by merging SibKras LLC into Gazprom Neft-Krasnoyarsk LLC. Gazprom Neft-Yaroslavl and Gazprom Neft-Belnefteproduct In the Central Federal region were established for the purpose of Gazprom Neft-Moskva LLC and managing the acquired assets. The Gazprom Neft-Kaluga LLC were division of Slabneft Group’s assets integrated into Gazprom Neft-Tsentr allowed JSC Gazprom Neft to expand LLC as part of the consolidation of the into new markets in Yaroslavakaya and distribution assets strategy. Ivanovskaya regions and the Belarus Republic, thus increasing production JSC Gazprom Neft continued to volumes, raising the efficiency of the consolidate hydrocarbon production Company and providing customers an assets. In 2009 CJSC Pechora-Neftegaz access to the high-quality products and and NGP Ortyagunskoye LLC were services, supplied by the Company. merged into OJSC Gazprom Neft- Noyabrskneftegaz with the subsoil Upon completion of the acquisition license for Severo-Romanovsky and of 51% interest in the Serbian oil Ortyagunski licensed areas transferred company Naftna Industrija Srbije (“NIS”) to the latter. in February 2009 JSC Gazprom Neft started the process of integrating the Shinginskoye LLC was merged into new asset. Decisions concerning NIS Gazprom Neft-Hantos LLC with the management are taken on a parity basis subsoil license for Shinginsky licensed jointly with the second shareholder, area transferred to the latter. the Serbian Government, and in full accordance with the terms of the The Company continued to set up purchase agreement. joint ventures in the area of jet fuel distribution. In 2009 JSC Gazprom Gazprom Neft bought out a controlling Neft established Gazprom Neft-Aero stake in Sibir Energy. Starting from April Dushanbe LLC (Gazprom Neft Group is 23, 2009 ( the date of the acquisition holding a 50% stake). of the first stake in Sibir Energy) the

146 JSC GAZPROM NEFT ANNUAL REPORT 2009

Group has invested a total of 1057 mln. licensing round. In the Badra oil field In February 2010 Gazprom Neft Group pounds (approximately 53 bln rub) into development project, JSC Gazprom purchased a 100% interest in STS- the acquisition of 55% of voting shares Neft is acting as an operator of the Service LLC from Swedish company in Sibir Energy. This acquisition ensured consortium. Other members of the Malka Oil. STS-Service LLC holds the Company’s direct control over consortium are Kogas (Korea), the license for West-Luginetskoye, Sibir Energy and indirect control over (Malaysia) and TPAO (). The Iraqi Nizhneluginetskoye and a part of the Moscow Oil Refinery, thus increasing Government holds a 25% interest. In Shinginskoye fields, the total reserves the share of effective ownership of the order to start working on the project this of which in categories С1+С2 amount refinery from 38,63% to 59,75%. year, the partners plan to invest a total to 11,5 mln. tons. One of the key of more than 200 mln. USD, including factors that determined the asset’s Sibir Energy — is a vertically integrated the signature bonus pay-up. attractiveness for Gazprom Neft is STS- company, with its production assets Service’s location in close proximity located in Western Siberia and its In 2009 JSC Gazprom Neft started to the area of Shinginskoye oil field, distribution assets located in Moscow working on increasing its presence developed by Gazprom Neft-Vostok. and Moscow region. Core distribution abroad in the area of production Expanding Gazprom Neft-Vostok assets include OJSC Oil Company through its participation in projects in will create a new impetus to the Magma assets (Sibir Energy holding Iraq, Libya, Equatorial Guinea, Cuba. In development of the enterprise and a 95% interest) and 50% in joint venture 2010 Gazprom Neft intends to continue will enable the level of production to with Royal Dutch Shell, Salym Petroleum expansion in this direction. be maintained despite the fall due to Development (SPD). Sibir Energy’s natural reasons — depletion of this current oil production level is over 80 In June 2009 Gazprom Neft became part of the oilfield. Supplementary 000 barrels per day. Apart from that, party to the National Oil Consortium exploration will also enable an increase Sibir Energy holds a 38,63% interest LLC. All the members of the Russian of the reserves of the subsidiary, as well in Moscow refinery, that is under joint National Oil Consortium (apart from as consolidating the reserves of the management by Sibir Energy and JSC Gazprom Neft, members include Company. Gazprom Neft, and owns a network of OJSC Oil Company Rosneft, OJSC 134 retail filling stations in Moscow and Lukoil, OJSC TNK-BP Holding and In 2009 the Company started working Moscow region, operating under the OJSC Surgutneftegaz), that share the on the acquisition of oil fields of JSC brands MTK and Nefto. common goal of the exploration of Gazprom, coordinated and approved Venezuelan oil fields together with the the transfer plan for Novoportovskoye In December 2009 JSC Gazprom state company of Venezuela, hope for and Orenburgskoye oil fields, began Neft approved and in January 2010 the prompt signing of the agreement the relevant corporate coordination and signed a services contract for Badra establishing a joint venture with approval procedures. oil field in Iraq as part of the second oil PDVSA.

147 ENERGY FOR LIFE ENERGY FOR PEOPLE 16 CREDIT RATINGS AND DEBT PORTFOLIO MANAGEMENT CREDIT RATINGS AND DEBT Energy for life PORTFOLIO MANAGEMENT ENERGY FOR PEOPLE

CREDIT RATINGS AND DEBT PORTFOLIO MANAGEMENT

Changes in the Company’s Credit Ratings (ВВВ/Negative/А-3) holding a 96% interest in Gazprom Neft remain unchanged, accounting for one-notch uplift in the rating.

Moody’s Investors Service BBB/Baa2 BBB/Baa3 Investment Grade On July 4, 2008 Moody's Investors BB+/Ba1 Service upgraded the senior unsecured BB/Ba2 ratings of JSC Gazprom Neft from “Ba1” BB/Ba3 to “Baa3”. As part of the upgrade of the B+/B1 investment ratings, the Ba1 Corporate B/B2 B/B3 Family Rating and Probability of Default Rating have been withdrawn. 2003 2004 2005 2006 2007 2008 2009

JSC Gazprom Neft ratings have a stable outlook, which is based on the S&P Moodys expectation that the recently upgraded investment grade rating will remain STANDARD & POOR’S RATINGS According to S&P Ratings Services, the unchanged over the immediate term due SERVICES key factors that contributed to downside to the fundamental factors. To maintain rating are: the company’s asset the current rating Moody's expect the On December 15, 2009 15 Standard & acquisition activity, indebtedness and Company to continue delivering a robust Poor’s Ratings Services changed the the Company’s liquidity ratio. operational and financial performance, outlook on JSC Gazprom Neft ratings while adhering to its financial policies from Stable to Negative and affirmed S&P continues to rate the business-risks and business plan targets. all the Company’s ratings: a ‘BBB-‘ of the Company as “acceptable” and corporate credit rating and a ‘ruAA+’ the financial risks of the Company as JSC Gazprom Neft’s investment grade Russia national scale rating. “significant”. The S&P expectations of ratings expand its borrowing options parental support from JSC Gazprom and reduce the cost of loans.

Information on the credit ratings assigned to JSC Gazprom Neft in 2009

Agency Scale Rating Outlook Standard&Poor's International scale in foreign currency ВВВ- Negative International scale in national currency ВВВ- Negative National scale (Russia) ruAA+ Negative Moody's International scale in foreign currency Ваа3 Stable

Issuer Securities Agency Date Rating Outlook Rating of the 3d and the 4th issues Standard&Poor's (International scale in foreign currency) 17.04.2009 ВВВ- (Reg. №№ 4-03-00146-А and 4-04-00146- А of August, 14 2008 ) Standard&Poor's (National scale Russia) 17.04.2009 ruAA+

150 JSC GAZPROM NEFT ANNUAL REPORT 2009

DEBT OBLIGATIONS Srbije A.D., the acquisition of the control Payable, Consolidated Indebtedness stock of Sibir Energy, borrowings from to Consolidated Tangible Net Worth As of December 31, 2009 the Russian and foreign banks and ruble and Consolidated Indebtedness to Company’s long-term debt amounted to bonds issuance. Consolidated EBITDA. Management 5 628 mln USD as compared to 3 080 believes that the Company was in mln USD as of December 31, 2008. The The loan agreements contain financial compliance with these covenants increase was due to the acquisition of covenants that set requirements for as of December 31, 2009 and 2008 51% interest in The Serbian vertically the Company’s ratios of Consolidated respectively. integrated company Naftna Industrija EBITDA to Consolidated Interest

Major borrowings in 2009

Lender Loan amount Date of Due Date Interest Rate agreement

Vnesheconombank $600 000 000,00 15.12.2008 tranche 1 15.12.2010; Libor+5,0% tranche 2 16.03.2011; tranche 3 15.06.2010; tranche 4 14.09.2010; tranche 5 14.12.2010

Vnesheconombank $375 000 000,00 30.12.2008 24.07.2009 10,75% Sberbank $724 000 000,00 06.02.2009 30.12.2009 8,40% Ruble bonds 10 000 000 000,00 rub. 21.04.2009 19.04.2011 16,70% Transkreditbank $175 000 000,00 28.05.2009 28.12.2009 6,90% Sberbank $857 186 080,22 29.05.2009 29.12.2009 8,46% Absolutbank $50 000 000,00 01.07.2009 04.08.2010 5,50% Ruble bonds 8 000 000 000,00 rub. 21.07.2009 17.07.2012 14,75% BTMU, Unicredit, Nordea, Raiffesenbank, Societe General $500 000 000,00 07.08.2009 05.10.2012 Libor+5% Russian Commercial bank $624 000 000,00 23.12.2009 24.12.2012 6,50% Sberbank $857 186 080,22 28.12.2009 28.09.2012 8,46%

151 CREDIT RATINGS AND DEBT Energy for life PORTFOLIO MANAGEMENT ENERGY FOR PEOPLE

Borrowing plans for 2010 JSC Gazprom Neft’s Debt Structure by Type of In 2010 the Company intends to Borrowing, % concentrate on improving its credit portfolio by increasing the average term of the borrowings and by decreasing their amount. In 2010 the Company plans to borrow 2 066 mln. USD for refinancing of the credit portfolio. JSC Gazprom Neft has already borrowed SOURCE: COMPANY 100 mln USD from Nordea bank as of DATA February, 24 2010

Proposed Instruments: AASyndicated Secured Loan; 2009, % AABilateral Loans; З-years foreign currency AAExchange-traded debentures; З-years rubles AARuble bonds. 2-years foreign currency 2-years rubles Short-term

Maturities of Long-Term Borrowings as of December 31, 2009:

Year Due Amount Due, mln USD

2010 1 466 2011 2 167 2012 1 747 2013 131 2014 and forthwith 117

5 628

152

GLOSSARY OF KEY Energy for life 17 TERMS AND DEFINITIONS ENERGY FOR PEOPLE GLOSSARY OF KEY TERMS AND DEFINITIONS

ADR of JSC Non-CIS compliance with the subsoil and Gazprom Neft environmental protection requirements. Foreign countries, other than CIS and Explored gas reserves (categories An American depository receipt (an Baltic States ABC1) are deemed fully recoverable. American depository share) issued For oil and gas condensate reserves for JSC Gazprom Neft shares. It is SA a special extraction factor is used, equivalent to four common shares of calculated on the basis of geotechnical Subsidiaries and associates JSC Gazprom Neft. factors. Dollars, USD FS С1+С2 Hydrocarbon US dollars Filling Station Reserves DNEM C1 category - oil or gas reserves APR established to be present in specific Differentially-normalized electrical wells, with favorable production and Asia-Pacific Region. It includes measurements geological data also available for other countries located in the continental part wells. C2 category – oil or gas reserve of Asia and America and the Pacific expected to be present within certain Ocean area. EU known gas-bearing areas on the basis European Union of geological and geophysical data. BOE C2 reserves are treated as preliminary Barrel of oil equivalent EBITDA estimates and serve as the basis for Earnings before interest, taxes, organizing exploration at a specific field. VIOC depreciation and amortization CS Vertically-integrated oil company Associate Compressor station GCR A company in which Gazprom Neft 3 Group holds more than 20% of voting m Gas- and / or condensate refinery shares (if a joint stock company) or 20% Cubic meter of natural gas as measured of the authorized capital (if a limited EW at a pressure of one atmosphere and liability company). 20°C Exploration work АВС1 Hydrocarbon PRMS and SEC Gazprom Neft Reserves International Group, Group, Explored reserves by Russian Standards Gazprom Neft classification standards. They represent International classification and the part of geological reserves, JSC Gazprom Neft (parent) and its estimation of hydrocarbon reserves extrac¬tion of which, as of the date subsidiaries taken as a whole. by PRMS (Petroleum Reserves of estimation, is cost-effective, taking Management System) and SEC into account the market conditions (Securities and Exchange Commission) GTO and rational use of modern equipment standards. The standards not only Geotechnical operations and technologies, and subject to

154 JSC GAZPROM NEFT ANNUAL REPORT 2009

assess the presence of hydrocarbons RTS FC but also provide estimates as to the economic practicability of their Russian Trading System Stock Fueling Complex extraction and the justification of their Exchange presence as well as take into account FTS of Russia the economic life of a field (term of the CIS Federal Tariff Service of Russia licenses for its develop¬ment). Commonwealth of Independent States – former republics of the USSR, other FFMS of Russia MICEX than Latvia, Lithuania and Estonia Federal Financial Markets Service Moscow Interbank Currency Exchange JV KhMAD OGCF Joint Venture Khanty-Mansi Autonomous District Oil and gas condensate field LNG Central Asia MET Liquefied natural gas Kazakhstan, Kyrgyzstan, Tajikistan, Mineral extraction tax ISO 14001 Standard Turkmenistan, Uzbekistan VAT International environmental standard. BFLH Value-added tax It identifies the requirements for the environmental quality management Broad fraction of light hydrocarbons R&D system, is used to develop environmental policies subject to ETF Research and development legislative requirements. It applies Electronic trading floor to the environmental aspects of an NPZ organization’s activities which can be controlled and should be influenced. YNAD Refinery The standard is voluntary and does not Yamal-Nenets Autonomous District replace legislative requirements. Netback 2D, 3D Selling price excluding transportation Baltic States Seismic survey expenses Latvia, Lithuania and Estonia SILCO (Siberian Light) AG TOE Siberian light crude oil Associated gas Ton of oil equivalent (coal equivalent). Equal to 877 m3 of natural gas. UGS Underground Gas Storage FER Fuel and energy resources

155 ADDRESSES Energy for life 18 AND CONTACTS ENERGY FOR PEOPLE ADDRESSES AND CONTACTS

FULL NAME PRESS SERVICE AUDITOR Joint Stock Company Gazprom Neft STENYAKINA EKATERINA The 2009 accounting (financial) statements Tel: +7 (495) 777-31-43 were audited by independent auditing Fax: +7 (495) 777-31-42 firm CJSC PricewaterhouseCoopers Audit ABBREVIATED NAME (CJSC PwC Audit). Address: 10 Butyrsky E-Mail: [email protected] JSC Gazprom Neft Val., “White Square” Business-Centre, 125047, Moscow, Russia. Tel: (495) 967-60-00. LEGAL ADDRESS SHAREHOLDER RELATIONS Fax: (495) 967-6001 5A Galernaya St., Saint-Petersburg, CHUBAROVA IRINA www.pwc.ru 117467, Russian Federation Corporate Governance Department Company registered on November 6, 1995 Tel: +7 (495) 961-13-24 by the Omsk State Registration Chamber. Fax: +7 (495) 961-27-59 REGISTRAR State Registration Certificate № 38606450 E-Mail: [email protected] Closed Joint Stock Company Primary State Registration Number Specialized Registrar – Holder of the 1025501701686 Gas Industry Shareholder Register INVESTOR RELATIONS (ZAO Spetsializirovanny Registrator Head of the Consolidation and International Derzhatel Reestra Aktsionerov Gazovoy MAILING ADDRESS Reporting Department Promyshlennosti) (ZAO SP-DRAGa). 125A Profsoyuznaya St., Moscow, 117647, SHVETSOV ANDREI Address: Russia 71/32 Novocheremushkinskaya Street, Tel: +7 (495) 662-75-48 117420, Moscow E-Mail: [email protected] Phone: (495 719-40-44. INTERNENT ADDRESS Fax: (495 719-45-85. www.gazprom-neft.ru Head of the Investor Relations Web: www.draga.ru SIDORKINA ANNA E-Mail: [email protected] INFORMATION SERVICE Tel: +7 (495) 662-75-48 Tel: +7 (495) 777-3152 E-Mail: [email protected] Fax: +7 (495) 777-3151 Chief Specialist of the Investor Relations KAMENSKIY ALEXEI Tel: +7 (495) 662-75-48 E-Mail: [email protected]

This Annual Report was preliminarily approved by the Board of Directors of JSC Gazprom Neft on May 14, 2010. (Protocol No. PT-0102/15 dated May 17, 2010).

Director General Chief Accountan Dyukov A.V. Barabash L.A.

156 of thest The Annual Reportusephoograph aff andsubidiarieofJ SC GazpromNeft

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