sign in sign up
<<
Home , LUKOIL, LUKOIL Neftochim Burgas, Our Future (fund), Soyuzneftegaz, Teboil, Tsilma

years

OF SUSTAINABLE DEVELOPMENT LUKOIL Group Sustainability Report

for 2020 Sustainability Report for 2020 LUKOIL Group 2020 LUKOIL for Report Sustainability 30 YEARS OF SUSTAINABLE

We have defined LUKOIL’s next mission in the context of a global energy transformation as a “responsible producer”. We believe DEVELOPMENT2 Message from the President 119 OUR EMPLOYEES that considering LUKOIL’s competitive of PJSC LUKOIL 4 30 years of sustainable development 123 Our goals advantages, the best we can do is to 6 Business model 124 Protecting workers during continue to supply the world economy 8 Geography the coronavirus pandemic 10 Strategic goals of LUKOIL Group regarding 126 Employment relations with the most efficient fossil energy sustainable development 129 Personnel characteristics resources, while at the same time 12 Material topics and issues of the Report 132 Social policy 136 Training and Development focusing on reducing the carbon 14 Our contribution to the UN Sustainable Development Goals in 2020 footprint of their production. 16 About the Report 139 SOCIETY 18 About the Company: highlights of the year 142 Product quality and customer relations 146 External social policy priorities 21 SUSTAINABLE DEVELOPMENT 155 Supporting indigenous minorities MANAGEMENT of the North President, Chairman of the Management Committee 25 Message from the Chairman of PJSC LUKOIL of the Strategy, Investment, Sustainability 156 CONCLUSION and Climate Adaptation Committee 27 Management System 33 Ethics and Human Rights 157 APPENDICES 37 Stakeholder engagement 157 Appendix 1. 40 Principles of sustainable development LUKOIL Group’s structure in production projects outside 160 Appendix 2. 42 Supply chain Identification of material topics of the Report 44 Technologies 162 Appendix 3. Incidents and financial sanctions 47 CLIMATE CHANGE 164 Appendix 4. GRI Content Index 50 Carbon management system Appendix 5. Individual GRI Indicators 53 Reporting 172 Appendix 6. 56 Climate Strategy 174 References: Acronyms and Abbreviations, 59 Reducing methane emissions Definitions and Calculation Formulas 60 APG utilization and flaring reduction Appendix 7. Main ESG Indicators 61 Energy conservation 179 Appendix 8. Indicator boundaries 66 Renewable energy sources 203 204 Appendix 9. Independent assurance statement 69 SAFETY 208 Appendix 10. Conclusion of the Board 73 Integrated HSE management system of Non-Financial Reporting of the RSPP 76 Industrial Safety 214 Contact information 79 Reliability of Russian Pipeline System 83 Prevention of spills at sea 85 Occupational health and safety 90 Safety of facilities in the Arctic Zone 92 The

The e-version 97 ENVIRONMENTAL PROTECTION of the LUKOIL Group 103 Water resources Sustainability Report 2020: 108 Emissions 109 Waste 114 Biodiversity conservation 2 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 3

01 MESSAGE FROM THE PRESIDENT OF PJSC LUKOIL We also optimized our investment and this thereby protected other LUKOIL is approaching its 30th program and cut down on our staff members. Enhanced safety anniversary as a leader in the global production volumes; however, this measures and special working energy market. We continue to did not affect the implementation conditions were introduced at our evolve in line with UN Sustainable Dear Readers, of our principal growth projects non-stop production facilities. We Development Goals and the highest across all business segments were able to prevent mass infection, environmental standards. We are pleased to present you with or our environmental initiatives. and our personnel continued to work the LUKOIL Group Sustainability LUKOIL’s capital investments in 2020 throughout the pandemic. We place great value on the Report for 2020. The year 2020 surpassed the figure for 2019. We assessment of our efforts by our proved to be uniquely challenging believe that retaining investment Despite all the external challenges stakeholders. It is gratifying to for the entire world, on account in growth projects was the right faced, LUKOIL fully met its wage observe that LUKOIL is ranked higher of the COVID-19 pandemic and all decision, since the situation vis-à- indexation plans, and we preserved in leading international and Russian the economic consequences that vis the global economy is gradually all previously approved employee ratings and is receiving awards entailed. Epidemiological restrictions returning to normal and energy guarantees and compensations. In for the quality of our non-financial for the energy market as a whole, demand is recovering – and we are addition, a new agreement between reporting. We see this as proof of and for LUKOIL in particular, ready to satisfy this demand as the employer and the trade union our commitment to the principle of translated into an unprecedented restrictions on production are eased. association for 2021–2023 stipulates responsible business conduct. drop in the consumption of our an increase in the scope of a number products, significant difficulties in That said, we understand that many of guarantees. organizing the production process, other challenges the world is facing and uncertainty surrounding will continue to be relevant in 2021 In 2020 LUKOIL continued to roll out planning our work. and beyond, which is why we stick its environmental and industrial to our traditional conservative safety programs to the fullest extent Looking back on the year-end assessment of macroeconomic and stepped up efforts to adapt results, we see that LUKOIL was parameters and remain cautious in the Company’s strategy to tackling

ABOUT THE COMPANY ABOUT able to successfully navigate our investment decisions. climate change. these challenges. Our Company’s corporate governance system once Last year we increased the amount We thoroughly revised the factors again proved its effectiveness: we of financial support for the regions affecting greenhouse gas emissions provided a flexible – one might say where we operate. We spent over from our operations and analyzed online – response to the volatile RUB 2 billion alone on preventing the risks associated with climate dynamics of global markets by the spread of the pandemic and on change. These steps allowed us optimizing our production structure supporting medical institutions, both to make a fair assessment of our and reorganizing our product supply in Russia and abroad. In addition, all potential and to proceed with chains. our sales and distribution entities developing our climate strategy. worked as usual and ensured a The year 2020 witnessed consistent fuel supply to customers Our climate change adaptation and disinvestment in the and in all regions where our gas stations decarbonization plans will form an gas industry as a result of the and oil depots are located. We also essential part of LUKOIL Group’s consumption slowdown and the provided fuel to ambulances and Strategic Development Program, need to comply with the OPEC+ other medical service vehicles free which we will be updated in 2021. As President of PJSC LUKOIL agreement, with many companies of charge. part of this work we have analyzed Vagit Alekperov within the industry leaving the various scenarios regarding the market. At the same time LUKOIL, LUKOIL also did its utmost to protect long-term development of the thanks to its robust financial position its personnel. We promptly arranged global , including and low debt load, confidently for remote working options to be the possibility of the most stringent fulfilled all its obligations to the available, and around a quarter climate-related regulations being states and regions where we of our employees switched to enforced. operate, employees, shareholders, telecommuting, which enabled sick partners, and customers. colleagues to be diagnosed early, 30 YEARS OF SUSTAINABLE DEVELOPMENT

4 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 5

01

YEARS

2001–2005 2006–2010 2011–2015 2016–2020 OF SUSTAINABLE

DEVELOPMENT The Company Sea and River The first renewable energy Certification for compliance Adoption of the Arctic Terminals Safe Operation projects were implemented with the international Biodiversity Program Concept was approved standard ISO 50001 Energy Management System Joining the World Bank’s An inventory of GHG “Zero Routine Flaring by ENVIRONMENTAL RESPONSIBILITY emissions was conducted, Participation in 2030” initiative The Department of Industrial The first Environmental A zero-discharge implementation of Kyoto international CDP and Environmental Safety and Safety Program was put principle was introduced projects in progress An agreement was signed Reporting and the Global Improvements to the Labor Protection was created into effect for offshore projects between the employer and Environment Facility’s carbon management trade union associations Biodiversity Conservation system LUKOIL’s first Energy Saving across foreign entities Program Program was adopted SOCIAL RESPONSIBILITY The Council for Young An agreement was signed Establishment of the LUKOIL The first APG utilization The Social Code was A quality management Professionals was founded with the WWF Charity Foundation and the projects were implemented adopted system was created Association of Trade Union Organizations The first collective Russia’s first Social Project agreements were signed Competition was held The Human Capital

ABOUT THE COMPANY ABOUT CORPORATE First cooperation agreements Management Policy was GOVERNANCE signed with Russian regions The Company’s HR Policy LUKOIL became a member adopted was adopted of the UN Global Compact An agreement was and the Social Charter A cooperation agreement signed between the The HSE Policy of LUKOIL of Russian Business was signed with the ILO employer and the trade Group in the 21st Century (the Russian Union union associations was adopted. of Industrialists and Transition to the production The HSE Committee was The LANGEPASURAICOGALYMNEFT across Russian entities Entrepreneurs — RSPP) of only Class 5 established oil company was founded The Institute of Trade Committees of the Board of (-5 compliant) (“LUKOIL”) and incorporated as Unions for Occupational Directors were established The LUKOIL Code of The Strategy and LUKOIL Oil Company OJSC Safety and Health was Business Conduct and Investment Committee established The first Sustainability Ethics was adopted was reorganized as the Start of organized trading of Report was published Strategy, Investment, the Company’s shares on the LUKOIL Group’s Technical Sustainable Development secondary market (Russian Policy on Energy Efficiency and Climate Adaptation Commodity Exchange LUKOIL’s single share was adopted Committee gained blue-chip status, and LUKOIL bonds were The Risk management LUKOIL Group’s strategic listed on the Stock function was established goals for sustainable Exchange and elaborated development were determined

The Antimonopoly Policy and Anti-Corruption Policy were approved

1991–1994 1995–1997 1998–2000 BUSINESS MODEL

6 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 7

LUKOIL is a global vertically integrated company accounting for around 01 BUSINESS MODEL 1.4% of global oil production and around 0.5% of proved hydrocarbon reserves.

EXPLORATION AND PRODUCTION REFINING

EXPLORATION Our product mix is used as a fuel for a variety of means of transport, as well as a raw material in other industries LUKOIL is among leaders by proved liquid hydrocarbon reserves and by 76% proved reserves to production ratio. The majority of LUKOIL reserves are of Share conventional type. of oil Climate zones: from subarctic to equatorial OIL REFINING GAS PROCESSING 4 oil refineries in Russia 4 gas processing plants DEVELOPMENT OF RESERVES and 4 — in Europe2 and 2 processing facilities AND HYDROCARBON PRODUCTION Products: motor fuel, at other plants in Russia We develop reserves located, inter alia, in major oil and lubricants and bitumen, Liquid hydrocarbon and gas provinces in Russia, and , producing bunker and fue marketable gas liquid (oil and gas condensate), natural and 14 associated gas. 92.6% worldwide Oil • Leadership in • Share of international yield development of projects hydrocarbon hard-to-recover production in total 6 reserves in Russia hydrocarbon production — countries 2 plants in Russia around 15%. 24% worldwide and 2 production facilities at European oil refineries Offshore Share Pyrolysis and organic synthesis products, fuel fractions (0.3 to 3,000 m) and onshore projects of gas and polymeric materials

ABOUT THE COMPANY ABOUT MARKETING POWER GENERATION AND DISTRIBUTION The power generation sector is represented by a Renewable LUKOIL is a major crude oil and marketable gas trader and complete chain from generation to transmission 6% energy a supplier of premium quality fuels and lubricants. and sale of thermal and electric energy to external RES share sources1 consumers. in total commercial power in 3 generation countries >100 Thermal power worldwide countries International trading: Lubricants production plants and boiler 4 wholesale of our crude oil and marketing: houses hydroelectric power plants worldwide and petroleum products, in the southern trading third-party hydrocarbons >800 types part of Russia of lubricants

61% 3 1 share in sales of solar power plants wind power plant EKTO branded fuel sales: fuel stations Marine and river network bunkering

23 countries worldwide

Aircraft refueling 1. Commercial and supporting 2. LUKOIL owns a 45% share in the Dutch refinery. GEOGRAPHY

8 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 9

01 GEOGRAPHY IN RUSSIA, WE OPERATE IN OVER 60 CONSTITUENT ENTITIES

OFFSHORE PROJECTS WE OPERATE • “Zero discharge” principle • Satellite monitoring of marine and coastal ecosystems 29 >30 4 COUNTRIES WORLDWIDE CONTINENTS REGULATION ON CLIMATE 18 STAFF IS EMPLOYED1 • GHG emissions reduction projects REGION

BARENTS SEA 11% 84% RENEWABLE ENERGY 23 IN IN RUSSIA

KOMI REPUBLIC, , YAMALO-NENETS Wind monitoring Construction of small 9 AUTONOMOUS OKRUG, project hydro-power stations KHMAO-YUGRA 15 Exploration Marketing and transportation ARID REGIONS 21 RUSSIA 3 Production of oil & gas Power generation • Modernization of water supply infrastructure • Water-loss reduction measures 16 2 Oil refining, gas processing and petrochemicals • Supply of potable water to schools, orphanages and healthcare centers ABOUT THE COMPANY ABOUT 13 19 AZOV 14 26 SEA 7 24 RUSSIA INDIGENOUS PEOPLE 25 20 • The khanty, mansi, nenets, selkup, dolgan, 4 17 BLACK 1 nganasan people SEA 16 10 30 • Economic agreements with indigenous people 2 • Historical and cultural area surveys 1 17 Macedonia 27 3 CASPIAN 18 SEA 4 THE ARCTIC 19 • Pit-free drilling 5 20 • Construction of pile-supported pipelines over 12 6 Congo permafrost terrain 21 7 22 8 8 23 9 11 24 22 10 28 25 5 11 26 12 Iraq GULF 6 27 OF GUINEA 13 28 UAE 14 29 USA 15 30 Uzbekistan

1. Of the average headcount as at December 31, 2020. STRATEGIC GOALS OF LUKOIL GROUP REGARDING SUSTAINABLE DEVELOPMENT

10 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 11

01 STRATEGIC GOALS OF In 2017, the Board of Directors of PJSC LUKOIL determined four strategic goals of LUKOIL Group in the field of sustainable development, which can be related to 11 UN Sustainable Development LUKOIL GROUP REGARDING Goals and 15 targets. SUSTAINABLE DEVELOPMENT

INDUSTRIAL AND ENVIRONMENTAL COMPETITIVENESS SOCIAL RESPONSIBILITY, A WORTHY RETURN ON EQUITY, RETURN ON SAFETY, RELIABILITY, AND EFFICIENCY CONTRIBUTION TO SOCIAL DEVELOPMENT INVESTMENT, AND CONTINUOUS OF PROCESSES CREATION OF SHAREHOLDER VALUE

We are committed to improving industrial safety, We are focused on boosting our overall We are very responsive to the requirements of our We follow a flexible reinvestment policy, work reducing on-the-job injury rates, ensuring operational performance and achieving more many stakeholders and always take their needs into constantly to improve our performance, and accident-free operations at our production rational use of resources (natural, human, account. We pursue a responsible social policy towards foster technological development. Thanks to facilities, and continuously reducing our production, and financial). our employees and make a significant contribution to the successful implementation of our strategy, environmental impacts. improving living standards in the regions where we we maintain our competitive advantages, create operate. shareholder value, and boost the Company’s investment appeal. SDGs SDGs

TARGETS TARGETS TARGET TARGET TARGETS TARGET TARGETS TARGET TARGET TARGET TARGET TARGETS TARGET 6.3, 6.4 8.3, 8.8 12.5 13.1 14.1, 14.5 15a 7.2, 7.3 9.4 13.1 4.4 5.5 8.3, 8.8 17.17 KPIs KPIs

1 2 97.8% efficiency of APG usage throughout 92.7% Refinery yield RUB 56 Specific revenue (labor RUB 281 Free cash flow LUKOIL Group million / productivity) billion 95.1%3 Energy intensity index EII (Solomon) person 0.28 lost time injury frequency rate (LTIFR) 280 electricity intensity of refining one tonne CONTRIBUTION TO NATIONAL PROJECTS OF THE RUSSIAN FEDERATION ABOUT THE COMPANY ABOUT kWh/t of basic raw material at entities of the “Petrochemicals” business sector • Labor Productivity and Employment Support • Education • Healthcare CONTRIBUTION TO NATIONAL PROJECTS OF THE RUSSIAN FEDERATION • Culture Ecology Digital Economy of the Russian Federation SUSTAINABLE DEVELOPMENT MANAGEMENT SYSTEM INDICATORS

SUSTAINABLE DEVELOPMENT MANAGEMENT SYSTEM INDICATORS 90% of LUKOIL Group employees covered by RUB revenue of LUKOIL Group collective agreements 5,639 billion 0.15 lost time injury frequency rate (LTIFR) 55% reduction in flaring GHG emissions across LUKOIL Group compared to 2016 RUB 407 paid in dividends shares 584 of training reached across LUKOIL Group billion thousand

person- 1. 7% cut of air pollutant emissions in Russian 6% average share of electric power courses Indicator-related entities generated from renewable sources dynamics are assessed per year RUB >8 external social support contributions in in relation to 2019, billion LUKOIL Group unless otherwise stated. Comparison with PLANS indicators for a longer PLANS period is caused by the • Creation of a pool of key management • Implementation of programs to improve specifics of indicators. 2. • Further increase in the APG use • Development of the Decarbonization Program personnel operational efficiency, digitalization, and The indicator relates to • Further implementation of industrial and • Further implementation of the energy the processing of raw • Further implement social and economic investment programs Improvement of materials by LUKOIL environmental safety programs conservation program and of renewable development programs in the Russian corporate governance Group entities at its own • Improvement and expansion of our working energy projects regions refineries (excluding mini-refineries). relationship with Сontractors in the area of • Further improvement of the efficiency 3. The value is calculated occupational health and safety of processing raw materials and the against the 2014 base modernization of the product mix year. The decrease in • Implementation of programs related to the indicator relative to the base year reflects boosting operational efficiency, digitalization increased energy and investments efficiency.

REPORTING GUIDELINES REPORTING GUIDELINES

GRI / IPIECA / UNCTAD / SASB / RSPP GRI / IPIECA / UNCTAD / SASB/ RSPP GRI / IPIECA / UNCTAD / SASB / RSPP GRI / UNCTAD MATERIAL TOPICS AND ISSUES 2020

12 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 13

MAIN GROUPS OF STAKEHOLDERS 01 MATERIAL TOPICS AND ISSUES OF THE REPORT Employees Shareholders Clients. State authorities Society (residents of regions, media and trade unions and investors Suppliers and public organizations) and contractors Based on the result of a comprehensive analysis six topics were identified as material1 for public reporting

6 ENVIRONMENT Environmental safety

Water 1 SUSTAINABLE DEVELOP- MENT MANAGEMENT Biodiversity and ecosystems

Ethics, Emissions and waste corruption Human rights Stakeholder engagement 5 EMPLOYEES ABOUT THE COMPANY ABOUT Working environment, collective agreements 2 CLIMATE CHANGE Remuneration and bonuses

Climate strategy Training and reporting GHG emissions, reduction Leadership philosophy of emissions

4 SOCIETY 3 SAFETY Programs for regions, Workplace Social and Cultural safety Projects Competition Digitalization, cybersecurity Quality of products and services Industrial safety Product impact and oil spills on the environment

Long term trends:

“Green (carbon-free) economy” Freshwater availability Technological revolution Engagement and collaboration 1. Information on the procedure for material topics identification is provided in Appendix 2. Details on page 158 Natural ecosystems degradation Waste and plastic recycling OUR CONTRIBUTION TO THE UN SUSTAINABLE DEVELOPMENT GOALS IN 2020

14 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 15

01 OUR CONTRIBUTION TO THE UN SUSTAINABLE DEVELOPMENT GOALS IN 2020

OUR PROGRAMS OUR PROGRAMS OUR PROGRAMS RUB billion • RES development projects • The Environmental Safety 224 • Charity projects in regions • Energy Conservation Program of LUKOIL Group, • Social programs for employees TARGETS 7.2, 7.3 Programs of LUKOIL Group TARGET 13.1 “Clean Air” subprogram Expenses entities • Program for the rational Total investment in achieving the RUB Expenses Expenses UN Sustainable Development RUB RUB use of APG of LUKOIL Group Goals in 2020 2,086 entities million 3,426 18,131 million million

OUR PROGRAMS OUR PROGRAMS OUR PROGRAMS Taking into account the strategic • A comprehensive program of interaction between • Social programs and • Industrial environmental guidelines of LUKOIL Group, the LUKOIL Group entities and higher education institutions remuneration costs control Company’s experience in implementing with oil and gas, chemical or energy profiles • Industrial safety, workplace • Emergency prevention and TARGET 4.4 TARGETS 8.3, 8.8 TARGETS 14.1, 14.5 environmental and industrial safety • Support programs for students and professors of higher safety and occupational response Expenses Expenses programs, social programs for RUB and secondary education institutions in Russia RUB health improvement, • Biodiversity Conservation employees of our entities and for the • Charitable support of schools and educational emergency prevention and Program for the Company’s response Program of LUKOIL facilities operating in the regions where we operate, as well as 939 institutions 156,597 million • Employee education programs million Group entities (Occupational Arctic zone of the Russian

ABOUT THE COMPANY ABOUT the expectations of stakeholders, we • Charitable support of the “Sirius” center safety subprogram) Federation have chosen 11 priority UN Sustainable TARGET 15а • Environmental Safety Development Goals and 15 Targets. Expenses Program, “Biodiversity” RUB Considering the events of 2020 (the subprogram COVID-19 pandemic), the estimated 27,024 • Environmental Safety contribution of LUKOIL Group to the OUR PROGRAMS OUR PROGRAMS million Program, “Remediation” achievement of the Sustainable • Support for families • Program for scientific and subprogram Development Goals includes costs technical works associated with the protection of • Digitalization Programs TARGET 5.5 TARGET 9.4 as part of the Information health of LUKOIL Group employees and Expenses Expenses residents of the regions of operation RUB RUB Strategy of LUKOIL Group (SDG 3 “Good health and well-being”). 721 7,389 million million

These goals and targets are OUR PROGRAMS OUR PROGRAMS OUR PROGRAMS harmoniously combined with • Environmental Safety Program of LUKOIL Group • Environmental Safety • Participation in the Project operational programs implemented entities, “Clean Water” subprogram Program of LUKOIL of the World Bank and by LUKOIL Group entities, and are • Charity projects and programs in Iraq and Group entities, “Waste” the UN TARGETS 6.3, 6.4 TARGET 12.5 TARGET 17.17 Uzbekistan subprogram • Membership in the UN part of corporate planning and Expenses Expenses Expenses budgeting. Therefore, we believe that RUB • Social and Cultural Projects Competition RUB RUB Global Compact Initiative their implementation, alongside the (“Ecology” nomination) 3,005 • Voluntary cleanup campaigns to remove waste 3,751 829 other steps taken by the Company, million million million largely determines the contribution from riverbanks LUKOIL Group makes to achieve the UN Sustainable Development Goals. 16 LUKOIL Group 17

01 ABOUT THE REPORT Strategic environment The UN annual report for 20201 the beginning of a decade of bold production and consumption states that after considerable action to achieve the Sustainable of goods and services, creating progress towards the 2030 deadline Development Goals, based on the a modern waste management PJSC LUKOIL is pleased to present (having passed one third of 2016- “Make it better than before” principle. system, developing a national the 11th Sustainability Report of In preparing this Report, we used the following non-financial 2030 period) for achieving the UN The European Council, for example, system for regulating greenhouse the LUKOIL Group (the “Report”), reporting standards and guidelines: Sustainable Development Goals has approved a new mechanism, gas emissions, improving forest summarizing performance for • Business Reporting on the Sustainable Development Goals (SDGs) (SDGs), there was a drastic slowdown the “Taxonomy of Sustainable management, etc.). Concurrently, the the period from January 1, 2020 • Global Reporting Initiative (GRI) Sustainability Reporting Standards in sustainable development Development”, which will allow both Ministry of Economic Development to December 31, 2020. The (“Core” option) The table of standard general and specific GRI efforts in many countries due to companies and investors to identify of the Russian Federation has previous report was published disclosures is provided in Appendix 4 the COVID-19 pandemic and “the economic activities that contribute identified5 promising areas for in June 2020 (for the reporting • The United Nations Global Compact worst peacetime recession2”. Visible to sustainable development and to sustainable development in the next period from January 1, 2019 • The Basic Performance Indicators and the Responsibility and progress had been made in many channel investments accordingly. The decade, such as health care, recycling to December 31, 2019). Transparency and the Sustainable Development Vector indices of the countries on some SDGs before the United Nations, in turn, intends to and waste management, and Russian Union of Industrialists and Entrepreneurs (RSPP) COVID-19 pandemic outbreak, such mobilize efforts across the board in required changes in the industrial We have been publishing as education (SDG 4) and healthcare support of cooperative actions. and energy sectors. sustainability reports since 20051. (SDG 3), providing clean drinking They are addressed to a wide range water (SDG 6), access to energy In 2020, the United Nations published When the Report was drafted, of stakeholders and seek to provide We also used the following reporting platforms: (SDG 7), and reducing unemployment the First Voluntary National Review LUKOIL representatives were balanced information relevant to • Guidance on Core Indicators for Entity Reporting on Contribution (SDG 8). Improvements at a global of the Implementation of the 2030 included in 17 thematic working the interests of each stakeholder Towards Implementation of the Sustainable Development Goals, level, however, have been uneven, Agenda for Sustainable Development groups under the Analytical Center group. The Company pays significant UNCTAD, 2019 and stronger and more extensive in the Russian Federation4. The for the Government of the Russian attention to the corporate • SASB (Sustainability Accounting Standards Board) reporting efforts will need to be made in all Review noted that several SDGs had Federation, provided materials, governance of sustainability issues standards – material topics and individual indicators countries. already been achieved in Russia and and took part in expert discussions and continuously strives to improve • IPIECA (International Environmental Conservation that significant progress had been throughout the year. The Report the quality of reported information. Association) Oil and Gas Industry Guidance on Voluntary The authors of the Report estimate made on the remaining goals through features LUKOIL’s projects that We believe that independent audits Sustainability Reporting, 2019 that the crisis has affected every existing government programs best demonstrate the Company’s of disclosed information and social stratum, economic sector, and and national projects. Areas of contribution to attaining certain external assurance of the Report geographic location of the world. greatest accomplishment include SDGs in Russia, specifically SDG contribute to these objectives. The The words “LUKOIL Group,” LUKOIL,” Previous reports are available As a result, the pandemic undid SDG 1 “No Poverty,” SDG 4 “Quality 8.5 (“Provide full and productive

ABOUT THE COMPANY ABOUT audit firm’s opinion is published “the Company,” “the Group,” the on the PJSC LUKOIL website, at: decades of work regarding several Education,” and SDG 8 “Decent Work employment and decent work for on page 204. The conclusion of pronoun “we” and its various SDGs, with profound economic and and Economic Growth.” At the same all”); SDG 13.2 (“Integrate climate the RSPP Council on Non-Financial related forms refer to PJSC LUKOIL social implications3. What needs to time, there are still issues that change measures into national Reporting concerning the external and LUKOIL Group entities, unless focus the world’s attention now is require increased joint efforts by the policies, strategies, and planning”), assurance of the Report is published specified otherwise. Some indicators how this situation can be overcome state, business, and society, most and SDG 14.1 (“Prevent and on page 208. The Report was in the Report are abbreviated; by creating economic and social prominently in such areas as, for significantly reduce marine pollution reviewed at the meeting of the see Appendix 7 for details. The systems with greater flexibility and example, improving the efficiency of all kinds”). Strategy, Investment, Sustainability list of abbreviations, formulas for resilience to various challenges. If of water resources management, and Climate Adaptation Committee calculating indicators, and definitions this was to happen, 2021 could mark developing models for responsible and was recommended for of terms can be found in Appendix 6. disclosure.

1. Source: The Sustainable Development Goals Report. United Nations, 2020. 2. Source: The Global Risk Report 2020. WEF, 2021. 3. Sources: ibid (footnotes 2 and 3). 4. Source: Voluntary National Review of the Implementation of the 2030 Agenda for Sustainable Development. Analytical Center for the Government of the Russian Federation, Ministry of Economic Development of the Russian Federation, Ministry of Foreign Affairs of the Russian Federation, Federal State Statistics Service, 2020. 5. Source: Global Trend for Sustainable Development: Business Opportunities. Department for Multilateral Economic Cooperation and Special Projects of the Ministry 1. of Economic Development of the Russian Federation, 2020. Previous reports are available on thePJSC LUKOIL website, at: http://www.lukoil.ru/InvestorAndShareholderCenter/ReportsAndPresentations/SustainabilityReport. 18 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 19

01 power generation). The aggregate solar power plant at the functions of the Corporate center ABOUT THE COMPANY: installed capacity of our power Refinery and digital substations is to coordinate and manage generating facilities1 in 2020 was continued in 2020. organizational, investment, and 6.2 GW2, including a combined financial processes at the Company’s HIGHLIGHTS OF THE YEAR capacity of renewable power The Corporate and Other business subsidiaries. A full list of LUKOIL generating facilities of 395 MW. The segment consists of PJSC LUKOIL Group entities in accordance with construction of a 20 MW second and other entities. One of the main IFRS can be found in Appendix 1.

Public Joint-Stock Company “Oil the energy of natural resources Company ‘LUKOIL’” is one of the serve the interests of and provide • EXPLORATION AND world’s largest publicly traded, benefits to humankind. We strive for PRODUCTION vertically integrated oil and gas technological leadership that is based • REFINING, MARKETING AND companies in terms of total proved on an ecological balance so that all of DISTRIBUTION reserves and hydrocarbon production. us can share in a prosperous future. Key financial and operational indicators PJSC LUKOIL is the corporate center of • CORPORATE AND OTHER LUKOIL Group. LUKOIL Group entities LUKOIL Group’s operations and 2018 2019 2020 employs over 100 thousand people financial activities are coordinated Financial across the globe – in Russia, Europe, from its head office located in , Africa, and the Americas (more in the Russian Federation. Revenue, RUB billion 8,036 7,841 5,639 than 30 countries worldwide). LUKOIL We divide our operations into three EBITDA, RUB billion 1,115 1,236 687 stays true to its mission of making business segments: Total debt to EBITDA, % 48 45 96

Capital expenditures, RUB billion 452 450 495 Exploration and production Free cash flow, RUB billion 555 702 281

The Company has a high-quality LUKOIL Group’s oil and gas restrictions on production output, we Research and development costs, RUB billion 6 6 5 portfolio of assets, diversified condensate production in 2020, continued with our forward-looking both geographically and by type of excluding the West Qurna-2 project, strategy based on the development Number of patents received 37 30 25 reserves. Our proved reserves of oil was 77.2 million tonnes, 10.1 percent of priority projects in Western Labor productivity, RUB million / person 78 77 56 and gas are mostly conventional. In lower than in 2019. This decrease is Siberia, the , and the 2020, they amounted to 15.4 billion attributable to the OPEC+ agreement Komi Republic. During the year the Operational 1

ABOUT THE COMPANY ABOUT BOE , 24 percent of which was gas. and the impact of the COVID-19 Company launched oil production at Production of oil and gas condensate (including the share in associates), million 644 646 590 The Company’s proved reserve life is pandemic on global demand for nine new fields in Western Siberia, barrels of oil equivalent 20 years. hydrocarbons. Despite a sharp the Volga Region, the Urals, and Production of oil and gas condensate (including the share in associates), 87,124 87,488 80,049 decline in oil prices and external Timan-. thousand tonnes

Gas production, million cubic meters 33,543 35,046 29,005

Refining, marketing and distribution • including APG 8,772 9,548 9,176

This business segment maintenance at four refineries. compared to 2019, mainly due to Output of petroleum products, thousand tonnes3 70,188 69,296 54,964 2 includes organizations whose Despite the challenging situation, we increased utilization at the Stavrolen Lubricants production (full cycle), thousand tonnes 961 963 923 operations relate to the refining continued to build a delayed coking complex after repairs. In 2020, of hydrocarbons, transportation, facility and isomerization unit at the the Company continued designing Output of marketable petrochemicals, thousand tonnes 1,246 1,137 1,229 wholesale and retail trade and refinery and moved polypropylene production complexes trading, and generation of electricity forward with projects to boost energy at the Nizhny Novgorod Refinery and More information is available: and heat. efficiency at European refineries. the refinery in Bulgaria. in the Company’s financial reports: The Annual Report of PJSC LUKOIL The Analyst Databook In 2020, refinery throughput at The output of decreases, The Power Generation business for 2020 for 2020 LUKOIL’s refineries decreased while the share of light products sector is represented by a complete by 15 percent compared to 2019, and low-sulfur marine fuel with vertically integrated chain, from following the optimization of some enhanced environmental properties generation to transmission and refineries’ utilization rates amid lower continues to grow. LUKOIL continues distribution of heat and power to demand for oil products and refining to develop new formulas for and external consumers (commercial margins caused by the COVID-19 lubricants. In 2020, petrochemical power generation) and for pandemic, as well as to scheduled output was up by 8 percent operational needs (supporting

1. 1. According to the classification of the Securities and Exchange Commission (SEC); BOE – barrels of oil equivalent. The total electric capacity of the Group’s entities takes into account facilities owned by the Company but leased out to other legal entities. 2. 2. This business segment includes several business sectors, such as: Oil refining in Russia, Oil refining abroad, Petrochemicals, Oil product supply in Russia, Oil product The data do not include the West Qurna-2 project. 3. supply abroad, Transportation, and Other entities from the Refining, Marketing and Distribution business segment. At own, affiliated, and third-party refineries (according to the Group’s share). 20 02 SUSTAINABILITY MANAGEMENT SYSTEM BUSINESS BUSINESS LUKOIL Group Responsible levels. strategic and operational management on sustainability matters at the implemented asystem of interaction our activity. The Company has for SustainableDevelopment into the goals of the UN2030 Agenda We are committed to integrating 21 SUSTAINABILITY MANAGEMENT SYSTEM 22 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 23

SUSTAINABLE DEVELOPMENT MANAGEMENT KEY DOCUMENTS

02 LUKOIL is one of the leaders in resources in a cleaner and more developments. The positions that • The LUKOIL Code of Business Conduct and Ethics the global oil and gas market, and environmentally friendly manner. we take largely determine how our • The Anti-Corruption Policy of PJSC LUKOIL is committed to the responsible customers and partners, investors and • The Risk Management and Internal Control Policy of PJSC LUKOIL production of affordable energy in The Company’s management and shareholders, government agencies, • The LUKOIL Group Antimonopoly Policy order to meet the needs of people and its employees share this view of and all other stakeholders perceive • The Health, Safety, and Environment Policy of LUKOIL Group in the 21st century the economy in Russia and around corporate goals and strategy in the LUKOIL. • Human Capital Management Policy of PJSC LUKOIL the world, while striving to develop context of a speeding up in global • The Social Code of PJSC LUKOIL • LUKOIL Group’s Technical Policy on Energy Efficiency • The Information policy We recognize our social responsibility and remain committed to integrating the goals of the 2030 Agenda for Sustainable Development and the Agreement into our activities with regard to reducing greenhouse gas (GHG) emissions, advancing new technologies and improving energy efficiency, preserving natural ecosystems, and ensuring workplace safety. LUKOIL actively participates in LUKOIL’s positions in ratings international initiatives and discussions on a wide range of sustainability-related issues and supports actions that are required to mitigate the consequences of In 2020, LUKOIL substantially enhanced its positions in leading international and domestic climate change sustainability ratings. The ratings in particular underscored the improvement of carbon management and the development of anti-corruption practices within the Company. KEY DOCUMENTS OUR MISSION Previous Current1

All of LUKOIL’s activities support the Company’s mission — to use the energy of natural resources for the benefit of progress and humanity. Our operations are based on corporate values that allow us to conduct our business while D C adhering to the highest ethical standards. 30 46

42 33 SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY OUR VALUES C– C

EFFICIENCY PEOPLE DEDICATED TO ACHIEVING THE BB BBB AND TECHNOLOGIES COMPANY’S GOALS ARE OUR MOST VALUABLE ASSET Note. In terms of Sustainalytics Risk Rating, the assessment corresponds to the level of risk. The lower, the better. For SAM S&P, the higher the score, the better.

SAFETY AND ENVIRONMENTAL SOCIAL RESPONSIBILITY LUKOIL’s improved standing is also reflected in the following ratings and rankings: SUSTAINABILITY • The MOEX — RSPP Responsibility and Transparency Index and MOEX — RSPP Sustainable Development Vector Index: in the top 10 • The FTSE Russell ESG International Rating: 3.7 scores (out of 5) • The Corporate Human Rights : 7.5 (Russian average: 7.3) PARTNERSHIP ETHICS • The ESG Corporate Rating RAEX Rating Review: 2nd place • World Wildlife Fund (WWF) and CREON analytical group rating of environmental transparency of Eurasian oil and gas companies: top three

1. As at the end of 2020. 24 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 25

AWARDS MESSAGE FROM THE CHAIRMAN 02 OF THE STRATEGY, INVESTMENT, The LUKOIL Group Sustainability Report for 2019 won top positions at both Russian and international report SUSTAINABILITY AND CLIMATE contests: • LUKOIL won first place in the Russian Ministry of Energy Contest for the best socially-oriented energy company in the Best Non-Financial Report by an Oil and Gas Company Category among Companies with 20 ADAPTATION COMMITTEE to 110 Thousand Employees. • LACP (League of American Communications Professionals) awarded LUKOIL a Gold Winner rank among sustainability reports presented by oil and gas companies. • The LUKOIL Group Sustainability Report won Silver at the world’s biggest corporate annual reports contest The spectrum of matters that fall We consider the work we have ARC Awards, in the Sustainability Report: Americas & Europe category under the responsibility of our accomplished in the past year to be • The interactive e-version of the Report won a LACP Silver and an ARC Awards Bronze Committee rose significantly in the a milestone in the development of • LUKOIL was the winner at the RSPP All-Russian competition “Leaders of Russian Business: Dynamics, reporting year. This change was the Company’s climate agenda and Responsibility, Sustainability-2020” in the nomination “For High Quality of Sustainability Reporting.” reflected in the Committee’s new a validation of the effectiveness of name and expanded functionality. In the consistent approach we have 2020, it was renamed the Strategy, pursued in our activities. Our efforts Investment, Sustainability, and have yielded positive results: both Climate Adaptation Committee, on the ground and as reflected in SUSTAINABLE DEVELOPMENT AWARDS demonstrating the importance the the improvement of the Company’s Company’s management places on positions in the CDP and other climate change. The Committee’s sustainability ratings. new responsibility includes elaborating recommendations to Adaptation to climate change is • LUKOIL won the ComNews Awards in the category of Best Solution for Remote Work of GeographicallySep- the Board of Directors on strategic not the only topic covered by the arated Specialists. The 2020 awards celebrated the best digital projects and solutions for the at-homeand climate adaptation goals and setting Committee. Last year, we addressed remote working regimes neccesitated by the COVID-19 pandemic. out a roadmap for achieving them, issues related to occupational health • LUKOIL won an award in the Best in Social Good and Public Service category for its media project “LUKOIL’s while taking into account both the and safety and the work of the Cultural, Social and Tourism Initiatives in ”. risks and opportunities associated Sustainability Task Force. • LUKOIL received the Grand Prix of the Eventiada IPRA Golden World Awards 2020 for the best initiative sup- Chairman of the Strategy, with global decarbonization. porting the Ninth UN Sustainable Development Goal (Building resilient infrastructure, promoting sustain- Investment, Sustainability I would also like to acknowledge the able industrialization, and fostering innovation). Since 2020, the Eventiada IPRA Golden World Awards has and Climate Adaptation Committee The focus of the Committee in Company’s substantial contribution SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY partnered with the United Nations and joined the program to support UN Sustainable Development Goals. Sergei Shatalov 2020, as instructed by the Board to the joint efforts to fight the COVID- of Directors, was to improve the 19 coronavirus at LUKOIL entities, in accounting system for greenhouse the regions where we operate and at gas emissions. This involved Company locations abroad. completing several projects that Management facilitated setting the next corporate In the coming year we plan to continue goals aimed at reducing greenhouse to develop our climate adaptation PJSC LUKOIL President Vagit Alekperov and several other LUKOIL executives made the list of the top 1,000 Russian gas emissions. (For more strategy and to implement it managers, an annual rating published by the Kommersant Publishing House and the Russian Managers Association. information, see the Climate Change throughout the Company. We will also section of the Report). continue to enhance the quality of our Vagit Alekperov, President of LUKOIL, was named among the Russian business leaders. corporate sustainability management.

Toby T. Gati, an Independent Member of the PJSC LUKOIL Board of Directors, won in the Best Independent Director nomination as part of the top-1,000 award for managers in a Russian company of the Russian Institute of Directors.

Victor Blazheev, Roger Munnings, and Pavel Teplukhin, Independent members of the Board of Directors, were named among the 50 Best Independent Directors in the XV National “Director of the Year” Award.

Alexander Matytsyn, First Vice President of LUKOIL, was listed as one of the 100 best Russian financial directors.

Evgeny Khavkin, Vice President — Chief of Staff of PJSC LUKOIL, was named among the 50 most effective corporate governance directors.

Gleb Ovsyannikov, Head of LUKOIL Public Relations, was named one of the 100 best public and corporate relations directors. 26 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 27

THE REPORTING YEAR’S MANAGEMENT SYSTEM 02 CHANGES AND RESULTS

LUKOIL’s long-term development and socially acceptable manner. priorities. LUKOIL Group’s Strategic model is focused on satisfying Environmental, industrial, Development Program defines society’s energy needs in an social, and personal safety are sustainable development as one of economically, environmentally, among the Company’s absolute its strategic goals.

GREATER INVOLVEMENT ON THE PART OF APPROVAL OF THE ANTI-CORRUPTION AND HUMAN Organizational structure THE BOARD OF DIRECTORS IN MATTERS OF CAPITAL MANAGEMENT POLICIES The Company has created a system of communication SUSTAINABILITY, SOCIAL AND ENVIRONMENTAL The Board of Directors, the Strategy, on sustainable development matters. The established RESPONSIBILITY, AND CLIMATE CHANGE Investment, Sustainability and organizational structure incorporates all management Climate Adaptation Committee levels, from the Board of Directors to LUKOIL Group of the Board of Directors1, the entities. Sustainable development tasks are monitored at President and the Management both the strategic and operational levels. Committee of PJSC LUKOIL determine the course of action to be taken at a strategic level. In addition, the Sustainability Task (see the Climate Change section Maksim Reshetnikov. The Force and Corporate Secretary for more details). Sustainable Council addresses the social and actively engage with the Board of development indicators are environmental aspects of corporate CONTINUOUS IMPROVEMENT OF THE CARBON CHANGES TO PROCUREMENT MANAGEMENT Directors and its committees on incorporated within the personnel activities as well as the private MANAGEMENT SYSTEM BUSINESS PROCESS, THE INTRODUCTION OF A these matters. incentive program, and cover all sector’s contribution to attaining COUNTERPARTY INTEGRITY MONITORING SYSTEM PJSC LUKOIL employees as well as the UN SDGs. At the operational level LUKOIL’s the heads and managers of the Health, Safety and Environmental Group’s entities. A detailed description Committee (the HSE Committee), of communication functions the Sustainability Task Force, During the process of improving and issues related to sustainability the Decarbonization and Climate our sustainability management at each management level can be Change Adaptation Task Force, system we adhere to the UN found on the website. CONTRIBUTION heads of LUKOIL’s structural Sustainable Development Goals business units, and heads of and the guidelines of the World SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY TO SDGs Group entities analyze sustainable Business Council for Sustainable development activities and Development (WBCSD). elaborate necessary proposals. In 2020, LUKOIL was invited The total financial contribution to achieving SDGs stood at The communication structure on by the Russian Ministry of aspects of sustainability (see the Economic Development to join RUB 224 billion chart) illustrates the changes that the Expert Council for Sustainable were introduced in 2020 following Development, chaired by Russian the creation of the climate strategy Minister of Economic Development

PLANS FOR 2021 AND THE MIDTERM

Finalize LUKOIL Group’s Strategic Development Program Improve the cooperation in the supply chain in order to for 2022–2031 and Climate Strategy implement responsible business practices

1. Before 2020: the Committee was called the Strategy, Investment and Sustainability Committee. 28 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 29

Organizational Structure of the Sustainable Development Management System Risk Management Detailed descriptions of risks In 2020, the Board of Directors and their management can be found addressed 13 issues, including: PJSC LUKOIL has established a risk in our quarterly reports and in annual • LUKOIL Group’s development 02 management system that regularly reports of PJSC LUKOIL (Appendix 2 in the context of energy GENERAL • STRATEGY, CORPORATE SHAREHOLDERS INVESTMENT, SECRETARY identifies, describes, evaluates, and of the Annual report for 2020). transformation MEETING SUSTAINABILITY AND monitors possible events that could • Enhancement of the risk CLIMATE ADAPTATION adversely affect the Company’s management and internal control BOARD COMMITTEE activities, and elaborates measures system OF DIRECTORS • AUDIT COMMITTEE to prevent their occurrence or to • Assessment of the occupational SUSTAINABILITY DECARBONIZATION minimize their negative impact health and safety status and • HUMAN RESOURCES TASK FORCE AND CLIMATE CHANGE should they occur. The Company is measures to improve the level of AND COMPENSATION ADAPTATION TASK constantly working to identify and Board of Directors work safety PRESIDENT COMMITTEE FORCE assess new risks and to update • Assessment of the results of information in the corporate The Board of Directors of remediation efforts following information system, including as it PJSC LUKOIL plays a critical role in environmental incidents MANAGEMENT applies to sustainability risks. defining the Company’s strategy and • Relations with investors and COMMITTEE initiatives concerning sustainability shareholders PJSC LUKOIL’s Risk Management and the climate change agenda. • Approval of the Anti-Corruption and Internal Control Policy sets The growing involvement of Board and Human Capital Management • HEALTH, SAFETY AND ENVIRONMENTAL (HSE) forth unified and mandatory members is evidenced by the policies of PJSC LUKOIL COMMITTEE basic principles and approaches increased number and frequency • Review of the LUKOIL Group’s • RISK MANAGEMENT COMMITTEE to organizing the Company’s risk of issues addressed: during 2020, Sustainability Report for 2019 management system, outlining its reports on specific issues were key objectives, and defining the included on the agenda of almost Information updates for members tasks of risk management system every meeting. The appointment of the Board of Directors and the participants. in 2020 of Leonid Fedun, Vice Management Board were held • PUBLIC RELATIONS • STRATEGIC • DEPARTMENT OF OIL • DEPARTMENT OF President for Strategic Development, thanks to extensive assistance from DEPARTMENT DEVELOPMENT AND GAS PRODUCTION ENERGY ASSET The Company has identified the and member of the Strategy, the Corporate Secretary, Natalia CENTER SUPPORT DEVELOPMENT AND following key sustainability risks: Investment, Sustainability and Podolskaya. • CORPORATE SECURITY PROJECT SUPPORT DEPARTMENT • INTERNAL CONTROL • ORGANIZATIONAL • Risks to public health and those Climate Adaptation Committee, as DEPARTMENT DEVELOPMENT AND • PROCUREMENT associated with the spread of the member of the Board of Directors Information on the independence of • INVESTOR RELATIONS CAREER MANAGEMENT AND PROPERTY epidemics who is directly responsible for the Board members, its committees, DEPARTMENT • BUSINESS DEPARTMENT MANAGEMENT • Climate change risk Company activities related to climate gender composition, number of OPTIMIZATION DIVISION • Health, safety and environmental change was a significant event for meetings, and other performance DEPARTMENT • DEPARTMENT OF risks the Company. indicators for 2020 can be found in SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY INDUSTRIAL SAFETY, • INTERNATIONAL • Risk of shortage of qualified Appendix 7. ECOLOGY AND SCIENTIFIC REPORTING personnel An independent Board member, AND TECHNICAL WORKS DEPARTMENT • Reputational risk Toby T. Gati, contributes significantly Information on the structure to advancing the Board’s efforts of the PJSC LUKOIL Board Risk data are included in reports to address climate change and the of Directors, compliance submitted to the Company’s SDGs. She is actively involved in of the Company’s corporate HEADS OF LUKOIL GROUP ENTITIES management when deciding on the discussion of these topics and governance practices whether to take part in investment brings international experience and with the Corporate Governance Administrative reporting projects and when creating budgets, in-depth expertise to the table. Code of the Central Bank of Russia, DEDICATED BUSINESS UNITS Functional relationship investment programs related to and other information can be found the Group’s entities, and strategic in annual reports of PJSC LUKOIL development programs. Information and in the Corporate Governance on the most pertinent sustainability section of LUKOIL’s website: risks, including climate change and HSE risks, can be put forward for discussion by the Audit Committee as well as the Board of Directors, if necessary. 30 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 31

Issues addressed at Board Committees Task Force the preparation of the LUKOIL Group Corporate Secretary Sustainability Task Force Sustainability Report, as well as SUSTAINABILITY-RELATED analyzing stakeholder feedback. The Corporate Secretary, Natalia 02 COMMITTEE The Sustainability Task Force Sustainability Task Force meetings Podolskaya, is actively involved ISSUES ADDRESSED focuses on establishing a uniform regularly included information on the in improving LUKOIL’s sustainable corporate position and preparing preparations progress and results of development activities, focusing recommendations for LUKOIL’s the independent audit of the Report, on supporting corporate initiatives management bodies on various on the concept of the 2020 Report and the practical application of aspects of sustainable development. and material topics to be included the expertise and exceptional Strategy, Investment, The Task Force also serves as a in it, and on the Company’s priority competencies of Board of Director Sustainability and Climate Seven meetings were held in 2020 to review various issues, including: • The Roadmap for the Climate Adaptation Strategy liaison between the Company’s SDGs. Toby T. Gati, an independent members in this area. Adaptation Committee • The Program for the development of renewable energy sources structural units and augments the member of the Board of Directors, (RES) system used to gather, prepare, and was an active participant in Natalia Podolskaya pays special • The petrochemical and gas industry development program disclose reporting information. discussing the material issues of the attention to developing the annual • HSE status and measures to improve work safety Report for 2020. action plan for the Sustainability Despite the necessity to work Task Force, preparing meetings, and

remotely during the pandemic, the In future periods the Sustainability organizing presentations by external Audit Committee Key issues covered included further improving the risk management Task Force held seven meetings Task Force objectives include experts and other stakeholders. In and internal control system, as well as recommendations to the Board in 2020 (four in 2019), addressing further improving sustainability 2020, she initiated training sessions of Directors for approval of the Anticorruption Policy of PJSC LUKOIL. 20 issues related to sustainability practices and their integration and courses for members of the reporting, climate change, human into the Company’s business Sustainability Task Force, as well as

rights, and responsible supply processes, with special emphasis on for employees of PJSC LUKOIL and Human Resources The committee reviewed the issue of recommendations to the Board of chain. To expand the expertise of developing responsible supply chain Group entities. and Compensation Committee Directors on the approval of the Human Capital Management Policy of Sustainability Task Force members, and strengthening human rights PJSC LUKOIL. The matters discussed included: independent consultants and observance practices. The Corporate Secretary is involved experts spoke at the meetings on the in promoting LUKOIL’s best practices • Improvement of the payroll system for senior executives of The Decarbonization and Climate PJSC LUKOIL following topics: Change Adaptation Task Force in sustainable development to the • KPI performance in the reporting period • The Climate Action 100+ Net-Zero expert and scientific community, • The effectiveness of proactive and preventive measures to ensure Emissions Company Benchmark This task force was set up in 2020 to and speaks at professional forums compliance with workers’ labor rights • Reporting requirements in the elaborate future steps to be taken to dedicated to shaping the corporate • Measures to incorporate ethical standards and the analysis of CDP and recommendations of implement the Company’s climate management system for sustainable 1 employee feedback on these issues TCFD strategy. development. Natalia Podolskaya • An assessment of physical risks has been appointed Head of the Full information on Board committees activities is available in the Company’s Annual Report for 2020, page 88. due to climate change See the Climate Change section Sustainability / ESG Task Force • An analysis of legislation for more information. of the National Association of SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY regulating GHG emissions in the Corporate Secretaries. In 2020, Health, Safety and The Committee holds meetings health and safety programs for the countries where LUKOIL Group the Sustainability Task Force had Environment Committee twice a year. The first meeting reporting year, schedules activities operates its first video meeting, featuring of PJSC LUKOIL considers material risk registers for the next period, and considers • Human rights and responsible Toby T. Gati, a Board member, as for LUKOIL Group in HSE issues, as measures to enhance the culture of supply chain management a speaker on a panel dealing with The HSE Committee is an effective well as regulatory developments in safety. In 2020, the Committee also corporate governance trends as they mechanism for facilitating the countries of operation. These discussed the results of the GHG The Sustainability Task Force relate to Environmental, Social and interactions between the Company’s factors are subsequently taken into emissions inventory and potential focuses specifically on organizing Governance (ESG) factors. management and functional and account during the development paths towards decarbonization. linear divisions of PJSC LUKOIL and and implementation of target LUKOIL Group entities on health, programs. The second meeting See the Climate Change section safety, and environmental issues. summarizes the results of the for more information.

1. The Task Force on Climate-related Financial Disclosures. 32 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 33

02 ETHICS AND HUMAN RIGHTS YEARS

Our corporate values are at the The Company has grievance The deficiencies identified of sustainable development. Responsible business practices heart of our business approach. mechanisms (a hotline, Business were mainly associated with These values enable us to observe Ethics Commission) that any staff the unsatisfactory execution of high ethical standards, including member can use to report violations. corporate procedures. At the same LUKOIL’s corporate culture was shaped by the views and values of its “One of the goals of creating unconditional statutory compliance, In 2020, nine inquiries were filed time, no violations of the Code founders, who were well ahead of their time. In the early 1990s, when the Company was to prove strict observance of human rights, with the Business Ethics Commission of Business Conduct and Ethics the first private companies started to appear in Russia, V. Alekperov, to society that it is possible zero-tolerance towards corruption (seven in 2019); the inquiries mainly of PJSC LUKOIL and LRAs were now the President of PJSC LUKOIL, was convinced that business could to build not only a successful of any kind, and adherence to the related to labor relations during recorded that would have had a be built with the environmental and social well-being of society in mind. venture, but a socially rules of fair trade. the COVID-19 pandemic, including significant effect on the Company’s Bringing this idea to life, in the early years of the Company’s operations responsible business as the specifics of working remotely. achievement of its strategic goals. basic mechanisms were established, facilitating the step-by-step well.” Each case was investigated, and the Business Ethics transformation of diverse and persistent activities into a coordinated Commission provided clarifications Preventative guidelines have sustainability management system. V. Alekperov, The ethical principles set forth or feedback. since been prepared for LUKOIL President of PJSC LUKOIL, 1995 in the PJSC LUKOIL Code of Group entities. Details of the The very first staff schedule of PJSC LUKOIL introduced the position of a Business Conduct and Ethics are a The Company’s internal control and most significant and systematic Health, Safety and Environment Specialist. It was not until almost 10 years fundemental part of our corporate internal audit systems are intended, deviations/deficiencies were later that a federal law1 was approved in Russia requiring all entities that culture and cover all aspects of among other things, to enhance the reported to the heads of group have an impact on the environment to appoint specialists responsible doing business. We also promote efficiency of risk management and entities and the functional and line for this aspect of their business. By that time, LUKOIL had already ethical behavior among our to provide LUKOIL’s management managers of PJSC LUKOIL. completed its first environmental safety program, The Health, Safety business partners, suppliers and bodies and external stakeholders and Environmental Policy of LUKOIL Group in the 21st Century had been contractors, informing them about with reliable and up-to-date LUKOIL’s Code of Business elaborated, and the Zero-discharge principle for offshore projects had our rules, and requiring them to information on Company activities. Conduct and Ethics can be found been put in effect. familiarize themselves with the on the corporate website at: Code of Business Conduct and Among the most effective methods Despite the challenging social and economic situation in Russia in the Ethics of PJSC LUKOIL. of monitoring compliance with LRA 1990s, the LUKOIL Charity Fund was established to support people requirements and corporate ethics and businesses across Russia. Indeed this was one of the first-priority Group entities are instructed to standards are internal audits and decisions made by Company managers. The development of corporate ensure that all personnel are made consultations. Audits conducted philanthropy in Russia only began in the 2000s. By that time the familiar with the Code of Business in 2020 uncovered 88 significant1 SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY LUKOIL Charity Fund, together with the Group’s entities, had been holding a Conduct and Ethics as well as main deviations/deficiencies related Detailed information Social Projects Competition in several regions of the . local regulatory acts (LRAs). This to non-compliance with LRA on the performance of the business recommendation is communicated requirements (53 in 2019). This ethics monitoring system A crucial decision relating to the social sector was preserving the trade to the entities’ directors, as well growth was the result of changes is available at: unions. These were later merged into one structure: the Association of as to HR managers during annual made to the audit process, including Trade Union Organizations. Trade unions joined together with employees meetings. All new hires at LUKOIL an increase in the scope and number and helped develop the Company’s social policy as full partners. Group entities are required to sign of audited areas, as well as in the a document affirming that they are provision of consultations by the In 2020, 30 years after the Company was established, LUKOIL Group has familiar with the Code of Business internal audit unit for LUKOIL Group clear strategic goals defined and a sustainable development management Conduct and Ethics and key LRAs. entities during the year. system in place that is committed to achieving new goals related to climate change, the environment, labor protection, and social welfare.

1. 1. Federal Law No. 7 of January 10, 2002 “On Environmental Protection”. See Appendix 6 for the definition of a significant deviation/deficiency related to non-compliance with LRA requirements. 34 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 35

Anticorruption Policy New employees are required to sign of international statutes and the Policy upon joining the Company. directives. Group companies do not The Company’s reputation as a good-faith taxpayer has been confirmed LUKOIL Group adopts a zero- enter into transactions intended to by the recent transitioning of the Group’s Russian entities to a new form 02 tolerance approach towards Any stakeholder can report reduce tax remittances and do not of tax administration. This new system of tax monitoring gives the tax corruption of any kind or suspected or known violations of engage in aggressive tax planning authorities real-time access to data from the Group’s accounting systems manifestation, regardless of anti-corruption laws or Company practices. and documents. jurisdiction and local laws, even if Policy via an established hotline the local laws permit certain types and can also agree to assist in such The management and control of behavior (for example, facilitation investigations. system for tax relations in A global trend in tax administration , Switzerland, Italy, Romania, There were no penalties imposed payments). LUKOIL Group1 is integrated with the is the tightening of tax controls and the of America. on the Company in 2020 by state The Hotline can be reached via general mechanism for strategic and over the activities of international To ensure the transparency and authorities in cases2 related We do not engage in or in any anticorruptionline@.com. The corporate management, planning, holdings through a set of measures completeness of the tax base in the to breaches of anti-corruption way encourage corrupt practices, confidentiality of messages received and control2 and is designed to elaborated by the OECD (BEPS Plan). context of the jurisdictions where regulations, or involving product including by our business partners, is guaranteed. prevent tax risks and ensure timely These are intended to strengthen Group entities operate, LUKOIL quality and labor relations, which and we do our utmost to prevent and complete fulfillment of tax controls over the distribution of the annually prepares the BEPS 13 resulted in personal injuries them. The Company does not LUKOIL’s Anti-Corruption Policy liabilities. tax base of multi-national holdings, Country Report, Master File, and or loss of life of personnel and tolerate any payments or other is available at including more stringent tax controls National Documentation. product consumers, or in amounts forms of incentives provided to There is a consolidated system in in the area of transfer pricing. exceeding RUB 1 million. No material representatives of state authorities. place for managing tax relations, In 2020, a total of RUB 1,096 billion claims3 relating to any violations of ensuring a systematic and uniform LUKOIL Group has created the was remitted to governments antitrust laws were initiated against LUKOIL’s stance on the above approach to applying tax legislation necessary environment to comply according to IFRS1. the Company. Five significant fines4 issues is outlined in the LUKOIL across LUKOIL Group. All of the with transfer pricing legislation. We totaling RUB 105 million related Anticorruption Policy, which was main processes for monitoring and have controls in place that allow Statutory compliance to the Company’s environmental elaborated and approved in 2020 fulfilling tax liabilities are automatic, us to perform a comprehensive impact were paid in Russia. In according to the instructions of the Tax Policy and their effectiveness is assessed assessment of applicable market LUKOIL respects the laws of the 2019, there was one major fine Board of Directors. regularly. LUKOIL’s Tax Department is pricing principles in principal supply countries in which its facilities and of RUB 68.9 million. LUKOIL is one of the largest a unified competence center for tax chains and intra-group financing. offices operate, constantly strives to The Policy sets common principles, taxpayers in Russia, paying taxes in matters. We effectively employ the method of prevent legal violations, and upholds Details of fines paid can be found goals, and objectives for combatting more than 60 constituent entities signing transfer pricing agreements the principles of fair business in Appendix 3. corruption, and defines key activities of the Russian Federation. Thus, the Detailed description of the system with the tax authorities to eliminate conduct. LUKOIL Group does not that reduce the chance of corruption Company has a significant impact of management and control transfer pricing risks. Such tolerate any manifestations of bad risks in the following contexts: on the income of Russian regions. over the implementation of legal agreements have been concluded faith, or abuse of a dominant or gifts and hospitality, conflicts of Foreign entities of LUKOIL Group relations regarding taxes can be in Russia, the Netherlands, , monopolistic position. interest, charitable donations and operate in over 45 jurisdictions, of found on the website: sponsorships, interaction with which the largest taxpayers are SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY counterparties, participation in companies located in Romania, politics, relations with competitors Bulgaria, Italy, and Belgium. and public authorities, etc. We strictly abide by the applicable The Company conducts due tax laws of the Russian Federation, diligence screenings of the Group’s international treaties, the legislation counterparties (see details in the of foreign jurisdictions where Group “Supply chain” section). entities operate, and the provisions

1. Data include the amount of taxes (except income tax), excise and export duties, income tax (current + deferred). 1. 2. PJSC LUKOIL Management Committee approved LUKOIL’s Policy on Cooperation with its Subsidiaries in Managing the Tax Planning and Administration Business See Appendix 6 for the definition of a “Case’’. 3. Process through Resolution No. 18 dated September 16, 2019. See Appendix 6 for the definition of a “Material claim relating to a breach of antitrust law’’. 2. 4. LUKOIL Group’s Policy on Strategic Management, Planning, and Control in LUKOIL Group was approved by Resolution No. 12 of the Management Committee dated See Appendix 6 for the definition of a ‘‘Material claim relating to a breach of environmental law’’. Information about the amount of the significant fine is included in June 18, 2018. the description of this term. 36 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 37

Human Rights We engage in a constructive dialogue on human rights STAKEHOLDER ENGAGEMENT We recognize, respect, and uphold with stakeholders in the Group’s operating regions. Our 02 human rights, including freedom stance on human rights extends to our relationships with of speech, and operate under the partners and counterparties. fundamental principles outlined LUKOIL recognizes its responsibility Annual Report, and Sustainability online customer support and quality in the UN Universal Declaration of to stakeholders and maintains a Report are the main channels used training in new digital logistics skills Human Rights. Our commitments human rights issues, such as the in six Group entities: no material2 continuous dialogue with them. to update our stakeholders on our for employees and dealers. apply to all the Company’s regions right to fair and favorable working violations of human and labor rights We endeavor to build long- activities. of operation and areas of activity. conditions and social security rights, were identified. term constructive relations Leading media outlets, both in Risk assessments related to human arranges sessions with trade union that are based on the principles In 2020, in response to the COVID-19 Russia and abroad, extensively rights form part of the general risk representatives, and maintains a Stakeholders can raise concerns of partnership, Company pandemic, many traditional covered LUKOIL’s efforts to provide management system. high level of collective agreement about the Company’s non- participation in implementing contacts and work processes assistance in the fight against the coverage for employees. compliance with human rights via long-term development goals, and were successfully switched to a pandemic, to improve the situation LUKOIL Group prohibits all forms various communication channels transparency of operations and remote format using modern digital through deliveries of medical of violence and abasement of Twice a year, Professional Training (e.g., ethics and anti-corruption information. These principles are set solutions. We made every effort to equipment, ventilators, medicines, human dignity, aggression of any Days for managers of LUKOIL Group hotlines) and through the HR units or forth in the Social Code, the Code of stay as open and transparent as protective clothing for doctors, and kind, and the use of child, forced, entities are organized, where the trade unions. If a violation of human Business Conduct and Ethics, and ever in response to the emergence of disinfectants. or slave labor. We believe that it is most current issues are discussed. rights is committed as a result of the LUKOIL Group’s Health, Safety fundamentally novel issues related unacceptable to hinder the work For example, in 2020, this event the activities of the Company or its and Environment Policy in the 21st to the pandemic. LLK-International, See the relevant sections of the of human rights organizations and included training on “Social representatives, LUKOIL takes the Century. The corporate website, for example, provided excellent Report for details. show respect for their activities engineering” devoted, among other necessary measures to eliminate the carried out within the existing legal things, to security issues in modern consequences of such violations. framework. conditions of information systems We distinguish the following groups of stakeholders: development. Detailed information on human In terms of labor rights, the Group’s rights activities and on observing entities comply with established The Company continuously monitors the rights of the indigenous norms related to working hours, the observance of human rights. minorities of the North CLIENTS SHAREHOLDERS create a favorable environment for In 2020, there were no reports of and interaction with them can AND INVESTORS professional training and career human rights violations (including be found on the website development, and ensure equal child, forced, or slave labor, and and in the Society section pay for employees in the same job involuntary resettlements of of this Report. positions. The Company regularly indigenous people) by the Group’s organizes meetings to discuss entities. HR audits1 were conducted EMPLOYEES SUPPLIERS AND CONTRACTORS AND TRADE UNIONS SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY

NATIONAL SOCIETY Share of employees covered by collective agreements in LUKOIL Group, % AND LOCAL LEGISLATIVE AND EXECUTIVE AUTHORITIES

2018 2019 2020

98% 96% 98%

90% 89% 90% Share of employees covered by collective agreements Share of Russian entities’ employees covered in LUKOIL Group entities by collective agreements

1. HR audits are performed to check the compliance of processes related to the registration of employment relations and the payment of wages, with the labor legislation of the host country and corporate regulatory acts, as well as other labor law requirements. 2. See Appendix 6 for the definition of a “Material violation of human rights”. 38 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 39

Stakeholder engagement

Principal regular channels Main events in 2020 Issues of importance in 2020 Results Principal regular channels Main events in 2020 Issues of importance in 2020 Results 02 for interaction for interaction

CLIENTS NATIONAL LEGISLATIVE AND EXECUTIVE AUTHORITIES

Surveys and studies Ongoing information Compliance with sanitary regulations The Company is perceived Participation in industry Company experts and The Company submitted proposals as part of its The Company is perceived Loyalty programs campaign for gas station Providing information on gas station operations as being a supplier associations, expert representatives were anti-crisis response to the pandemic, including as being a responsible Mobile apps retail customers and and product ranges, the benefits of the “Fill Up of quality goods and councils, and working involved in developing the the following issues: business participant Universal hotline and wholesale clients to with Profit” loyalty program, and publicizing services groups as part of public system of government • tax and environmental regulation grading system in a mobile promote goods and features of the LUKOIL gas stations mobile app discussion mechanisms for oversight • investment and export incentives application services and the placement Leader in consumer trust the drafting of regulatory • control and supervision activities Registration of Company of materials focused on and brand awareness legal acts • labor relations and other matters. addresses in social networks enhanced safety measures ratings among the largest Some of the Company’s initiatives were to fight the pandemic Russian fuel suppliers included in the National Action Plan to restore Consistent growth in employment and personal income, ensure the quality of fuels and economic growth, and provide long-term services at gas stations structural changes. The Company contributed to the discussion of the Energy Strategy of the Russian Federation EMPLOYEES AND TRADE UNIONS

Meetings of the President of The 10th agreement Most questions are related to remote working The Company is perceived SOCIETY PJSC LUKOIL with employees between the Employer and arrangements and changes to work schedules as being a responsible Collective agreements and the Trade Union Association and processes due to restrictions employer Meetings of the President of Online meetings between Cooperation agreements (or supplementary The Company is perceived contracts with trade unions for 2021–2023 was signed PJSC LUKOIL with the heads the President of PJSC LUKOIL agreements) signed with nine constituent as being a strategic social Social and safety culture Ongoing information A system of social of the constituent entities of and the heads of the entities of the Russian Federation investor programs campaign for employees partnership is in place the Russian Federation constituent entities of the Corporate events and media, related to COVID-19 Commitments under Workshops and meetings Russian Federation Consistent support to sports competitions pandemic the Agreement between with the governments of businesses and regions the Employer and Trade the constituent entities of in the social areas that Unions are fulfilled the Russian Federation and matter most in people’s executive authorities lives Youth support and new SUPPLIERS AND CONTRACTORS opportunities Roundtables, dialogues Roundtables ( and Saiga antelope population rescue program Ongoing involvement Tenders Workshop (Perm, A road map for the development of cooperation The Company is perceived , Russia) Increased efforts in the area of ecological safety jointly with our regional Hotline the Russian Federation) with enterprises in the Perm Territory was as being a reliable partners in projects Agreements with strategic signed. The primary issues in the supply chain: partner designed to improve the Public discussions on the Project impact on the natural environment and suppliers • Digital logistics, changes in contract terms quality of life D33 project (, local communities Technology field days in the due to the pandemic Extensive experience in Russia, online) Russian regions • Protecting the employees of contractors and international projects

SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY service entities against infection Transparency of tender procedures Roundtable held by the Support for indigenous minorities of the North Engagement with ‘local Federal Agency for Ethnic and public organizations, preservation of producers’ Affairs, attended by languages and folk crafts representatives of the National Delphic Council of SHAREHOLDERS AND INVESTORS Russia (, Russia)

Lines of communication: Participation in Responses to inquiries from representatives As of December 31, 2020, • investor conferences 16 conferences, over of the investment community and credit rating 63 percent of analysts III International Youth The 90th anniversary of Yugra, production of the – regularly 250 meetings attended by agencies were provided, including on the of investment banks Scientific and Practical twelve-billionth tonne of oil in the region, and • meetings and calls with more than 500 investors. following topics: and finance companies Forum "Oil Capital -2020" the 55th anniversary of the Samotlor oil field investors – regularly Over 1.5 thousand requests • fiscal policy to deal with adverse conditions recommended buying the (Nizhnevartovsk, Russia) discovery. Oil and gas industry development • senior management from shareholders and • climate strategy and the climate Company’s shares trends interviews in the media professional securities management system • press releases market participants • results of the inventory of GHG emission – regularly processed. sources, reduction of GHG emissions and Talk show, "Dialogue of LUKOIL-Komi Environmental Policy • annual and other Two General Shareholders pollutants Equals" (Usinsk, Russia) Human Resources Policy reports, analyst Meetings held. • sustainability KPIs for top management Social projects in the Komi Republic handbook – annually The most popular • measures to reduce injuries, including for • corporate website international sustainability contractors – regularly ratings, which are of • activities to minimize oil spillages in the Komi Social and Cultural Projects The Accelerator for Active Selection of the best youth ideas for subsequent interest to the investment Republic Competition Youth Project (Kogalym, support community, were analyzed. • impact of the COVID-19 pandemic Russia) The Company’s position • ensuring the safety of facilities in the Arctic in these ratings was zone significantly improved. 40 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 41

The main technical solutions for designing each In line with the Integrated HSE (Health, Safety, project and the results of social and environmental Environment) Management System (IMS — see the PRINCIPLES OF SUSTAINABLE DEVELOPMENT assessments are reviewed for compliance with the Safety section for details), an HSE Management 02 requirements of the corporate standards by LUKOIL’s policy or project Plan is elaborated; in Iraq there is an IN PRODUCTION PROJECTS OUTSIDE RUSSIA Technical Support Center. For major capital projects, or HSE Observation Management System in place. when a project moves from one phase to the next, the Company’s functional units conduct a comprehensive The Group’s entities operating abroad adhere to the LUKOIL Group entities comply with these principles In host countries, LUKOIL is often the originator review of the documentation package to decide on common corporate standards and sustainability and ethical standards at all stages (design, of new technology and engineering solutions, the further participation in project execution. principles outlined in the Integrated Project implementation, and project closure or exit). Project application of which noticeably reduces the negative Management System. The general approach is tailored managers are responsible for their implementation. impacts on local communities of operations, and on to each country’s environment and LUKOIL’s license Regardless of its share in each project, LUKOIL When a project is in progress, LUKOIL maintains regular ecosystems and the social environment. For example, liabilities, and coordinated with the management informs its partners of its corporate standards contact with state authorities, partners, as well as a custom tail gas recovery unit was designed to treat systems of partners (project operators) and with the during preliminary negotiations and when signing local residents (if LUKOIL is the operator). Committees, gas with high hydrogen sulfide content as part of the requirements of local legislation and other norms, such agreements, and takes part in decision-making during workgroups, and other joint managing bodies are Yamama project in Iraq. as the Directives of the European Parliament and the project implementation. created to boost the transparency and efficiency of EU Council. communications and to discuss environmental, safety, Approaches to sustainability management and an Application of Corporate Standards and sustainability issues. assessment of results achieved are standard for LUKOIL has international hydrocarbon production LUKOIL Group entities. projects in Uzbekistan, Iraq, and Egypt, where it acts Social and environmental impact assessments are Project operator as the operator, and also in Azerbaijan, Kazakhstan, carried out during project feasibility studies in all the UAE, and the Republic of the Congo, where LUKOIL countries, and the results of these assessments are Projects in which LUKOIL acts as the operator are is a project participant. Exploration and development agreed upon by all project participants and state implemented in full compliance with corporate of hydrocarbon reserves are underway in Kazakhstan, authorities. Local communities are also involved in requirements and standards. Since the employees on Norway, Romania, and West Africa (Ghana, Nigeria, and discussions. Assessments are generally based on such projects are usually local hires, they undergo Cameroon). In the , LUKOIL is an operator international standards (for example, the World Bank). mandatory orientation training on LUKOIL’s Code of of one of four hydrocarbon production and exploration Project feasibility studies always specify measures Business Conduct and Ethics. Specific employees or projects. related to energy efficiency, APG utilization, and GHG functional units of the Group’s entities are responsible emission reduction, as well as support for residents for ensuring this procedure is fulfilled. The document Sustainability principles and small businesses, if the project affects their is available to all employees (via the intranet, or interests. on information boards at facilities). Compliance with ethical standards is monitored during internal Respect for human rights and strict compliance with inspections and audits. the norms of the Code of Business Conduct and Ethics If there is a difference between standards of project and the Anti-Corruption Policy are fundamental participants and local legislation, the general approach prerequisites for LUKOIL Group entities’ participation is to adhere to the most stringent rules (of the country in projects outside Russia. Our priorities across all of operation, LUKOIL, or the project operator). countries include ensuring worker and facility safety and choosing the best technologies to reduce GHG SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY emissions as well as any impacts on the environment and the way of life of local communities. 42 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 43

Information on potential tender participants that submitted tender bids for the procurement of SUPPLY CHAIN goods, work, and services for the benefit of LUKOIL Group entities

02 Reporting period Total number of Including for tenders Number of potential tender consolidation potential tender requiring HSE assessment participants admitted to tenders perimeter bidders based on the assessment results

Each year, LUKOIL Group entities We have introduced a procedure material and technical resources Number Percentage of the Number Percentage of the procure a significant amount of for assessing the level of HSE to confirm compliance with stated total number of total number of goods, work, and services and management based on completion parameters; technical audits of potential tender potential tender interact with a large number of of a qualifications questionnaire, suppliers; committee investigations participants participants suppliers and contractors from which includes information related into failures involving supplier submitting bids checked different economic sectors. At the to injury and accident rates, representatives; multilevel control Russian entities same time, LUKOIL supplies products availability of certificates and of supplied raw materials; and the to a wide range of wholesale and licenses, staff qualifications, safety storage rules for raw materials and 2018 4,241 1,720 41% 1,579 92% retail consumers worldwide. compliance control procedures, finished goods. Incoming inspections 2019 3,330 1,465 44% 1,352 92% and other factors. New bidders involve collecting retained samples, Events surrounding the COVID-19 undergo field audits to confirm the inspecting raw materials before 2020 3,181 1,588 50% 1,492 94% pandemic did not have a significant information they have provided in their transfer to production, and impact on the operation of our the qualifications questionnaire. inspecting finished goods based on Foreign entities of the Exploration and Production Business Segment supply chains, although, in some (Similar procedures are in place at retained samples. 2018 268 93 35% 93 100% cases, delivery times for goods and foreign production entities, based equipment or the provision of work/ on the International Standards on Candidates can contest actions taken 2019 305 94 31% 94 100% services were extended. Each issue Internal Auditing for detecting fraud or omissions on the part of tender 2020 41 16 39% 16 100% was discussed individually with risks). organizers that may have violated suppliers and contractors. A joint their rights or tendering procedures, decision was reached in each case, The following procedures are and can appeal the decision of the and a supplementary agreement prescribed when interacting Tender Committee of a LUKOIL Group Counterparty due diligence has developed a counterparty due Detailed information was signed to extend existing with suppliers of material and entity to the PJSC LUKOIL Internal diligence index calculation model, on the organization contracts or postpone the timeline technical resources that are used, Audit Service (in Russia) for review, In accordance with the principle which comprises 62 risk indicators of the “Procurement Management” for delivering work/services. No for example, to produce chemical as outlined in the Instructions to the of due diligence, an integrated and has been tested on more than business process, on corporate cases were recorded of contractors reagents: incoming inspection of Candidate. management system “Counterparty two thousand active contracts. documents, the system refusing to fulfill their contractual Due Diligence Monitoring System” There is also a Counterparty’s for evaluating tenders, and also obligations. was introduced in 2021, allowing to Personal Account subsystem for on interaction with applicants assess the level of risk of Russian the centralized registration of and counterparties at the stages counterparties when signing information on LUKOIL Group’s of participation in the tender SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY Tenders contracts for acquisition of goods counterparties. and performance of contractual Most goods, work, and services are In 2020, 94 percent of bidders in Russia and 100 percent and services, as well as when obligations can be found procured through public tenders, abroad who were subject to HSE assessment successfully executing the contract. Corporate security, tax, and legal on the website. with mandatory open public bidding passed the due diligence procedure. The share of local services are chiefly responsible for on the contract tendered. The suppliers of material and technical resources (MTR) The system allows to automate conducting these inspections. The selection of suppliers is performed in in Russia remained the same in terms of quantity (in the process of contractors due Internal Audit Service performs an accordance with the Regulations on 2020, as well as in 2019, it stood at 93 percent) and rose diligence and decrease the additional (selective) due diligence Holding Tenders to Select Suppliers insignificantly in financial terms (from 95 in 2019 up to human factor impact on the of bidders who are the proposed and Contractors of LUKOIL Group 96 percent in 2020). assessment of tax, commercial winners of tenders. In addition to this Entities (in Russia) and based on and reputational risks. The system improvement, internal regulatory similar documents approved by facilitates screening applicants documents on procurement the foreign entities. Interested and monitoring the integrity of the activities approved in 2021 were candidates with the right experience, Group’s counterparties. LUKOIL updated. resources, and technology can participate in tenders by completing a qualification questionnaire and submitting a package of documents.

When dealing with bidders in Russia and abroad, great attention is paid to safety, quality of goods, work and services supplied, responsible business practices, and technological innovations. 44 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 45

TECHNOLOGIES Sample projects in the Refining, Marketing and Distribution business segment 02 The following projects have been put into commercial operation: • Predictive analytics of the technological and dynamic equipment state (duplication stage). The project will boost In 2018, we launched a program1 Investment projects have been • Predictive equipment the availability of process equipment by cutting down on unscheduled repairs and detecting early signs of to further enhance the Company’s developed that are currently at maintenance and repairs equipment wear. Predictive analytics systems have been implemented at the Perm (70 equipment automation processes. The main different stages of implementation. • Health controls and the items are being monitored) and at the Volgograd Oil Refinery (10 items of equipment). A task force made up purpose of the program is to Most of them are at the pilot stage automation of mobile personnel of predictive analytics engineers has been set up to consolidate their experience for the subsequent roll out boost the efficiency of decision in Russian entities, and a decision functions of solutions. In 2021, the Volgograd Oil Refinery plans to continue this project, involving the monitoring of an making at all levels: from wellsite will be made on whether to roll them • Intelligent video analysis systems additional 50 units of equipment. operations to integrated planning out in other areas. The Company • Digital social interaction and • The APC+ enhanced management systems make it possible to optimize the operation of process units using at the PJSC LUKOIL level. By applying works on developing end-to-end a knowledge-sharing support artificial intelligence methods and the analogs of virtual analyzers and to use artificial intelligence to predict the information technology, we can technologies across all business platform future conditions of units. The project is at the final stage of implementation at the Nizhny Novgorod Oil Refinery ascertain and prevent a wide range of segments, including in the following • Mobile services and the Oil Refinery in Bulgaria. risks early on, including investment areas: • An intelligent video surveillance and video analysis system has been installed at the Volgograd Oil Refinery to mistakes and the ineffective • Digital information management enhance operational safety: 25 cameras are able to detect fire and smoke and record violations of personal execution of investment projects, and cybersecurity protective equipment rules. the loss and corruption of data, big • Operational data analytics The following projects are at the final stage of implementation: Unified Digital Platform and Mobile Personnel (Perm data analysis, and poor integration of • The robotic automation of routine Oil Refinery), and implementation of enhanced management systems. management processes. operations

In 2020, we continued to implement and roll out projects across key business segments. Sample projects in the Corporate and Other business segment

• A working prototype of the new Intranet Portal has been developed to display information and provide services, Sample projects in the Exploration and Production business segment depending on the user profile and employee category. The system will go into pilot operation in 2021. • As part of the Data-Driven and Visual Analytics Employee Performance Management project prototype services • Integrated simulation (implementation). The models created determine the optimal risk-adjusted production for goal-based management, employee performance analysis, and decision support were developed. potential. During 2020, we built 61 field models. • Drilling emergency forecast (pilot stage). These projects optimize drilling times, reduce the number of complications from operations, and mitigate the severity of consequences from unavoidable complications. • Management of mature field development using neural networks (pilot stage). The project is designed to optimize Improving cybersecurity the operation of reservoir pressure maintenance systems, which positively affects the energy output ratio. SUSTAINABILITY MANAGEMENT SYSTEM MANAGEMENT SUSTAINABILITY • Completion of the pilot project of the power equipment maintenance system, based on a predictive condition analysis in LUKOIL-West Siberia. In 2021, we plan to roll out the project for all regional subdivisions of LUKOIL-West • Design of the information security system for significant facilities of critical information infrastructure has been Siberia, LUKOIL-Komi, and LUKOIL-Perm. completed. • Solutions to protect resources and services of the Shared Information System against modern cyberthreats have been implemented, and the quality of access controls improved. • Transition to a new secure Internet access solution is in progress, to bolster anti-malware and cyber-fraud protection. • A Zero-Day Exploit defense solution has been implemented, which provides additional scanning of corporate email messages for threats.

1. In 2019, the Board of Directors decided call this program the LUKOIL Group’s Functional Development Program for Information and Technology Support. 46 LUKOIL Group 47

03

Responsible producer of

CLIMATE CHANGE CLIMATE ENERGY

We take a responsible approach to CHANGE CLIMATE climate change and strive to make the most possible contribution to the achievement of the global climate goal. 48 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 49

KEY CLIMATE CHANGES AND RESULTS CONTEXT IN THE REPORTING YEAR The COVID-19 pandemic took center to 1990 levels. The European Union Russia has set a national goal to stage for much of the year, reducing Emissions Trading System (EU ETS) is reduce emissions to 70 percent of the 03 the attention to climate change one of the instruments to stimulate 1990 level by 20308, and a Strategy issues for many months. However, change: cutting down the emission for Socio-Economic Development as this was a temporary phenomenon allowances for major industrial a Low-Carbon Country up to 2050 and the attention of both countries enterprises will increase the cost of is being developed. Governments and companies is now intensely purchasing them. It is also planned to and experts are discussing9 the focused on next steps. At the Global add maritime and road transport to prospects of creating a national RESPONSIBILITY FOR CLIMATE LUKOIL GROUP’S CARBON LUKOIL GROUP’S GHG Economic Forum in Davos in 2021, the EU ETS. trading system for GHG emission CHANGE ISSUES IS A PRIORITY MANAGEMENT SYSTEM EMISSIONS FROM FLARING1 for the first time all discussions of quotas or ‘low-carbon’ certificates. A 1 AT THE BOARD OF DIRECTORS CONTINUED TO IMPROVE DECREASED BY 56 PERCENT “risks” were related to climate change In March 2021, the European pilot project with special regulation LEVEL COMPARED TO THE 2016 LEVEL and the human impact on the global Parliament adopted a resolution of GHG emissions is already being ecosystem. supporting the implementation of implemented in the Sakhalin Region. another instrument — a carbon This pilot may result in establishing In 2020, the downturn in economic border adjustment mechanism for a national GHG emissions trading activity and transportation, complete imported carbon products from system and its integration with or partial shutdowns in a number of countries that do not have national international systems. CONTRIBUTION industries, and the general decline GHG emissions regulation systems in in consumption led2 to reduced place. Later in the year, the ’s two year chairmanship of the TO IMPLEMENTATION OF SDG anthropogenic GHG emissions, clearly Commission will consider four Arctic Council in 2021-2022 will also illustrating the scale of human impact possible options for a mechanism bring renewed attention to issues on the climate3. According to the compatible with WTO principles. of climate change in the North – the 4 • Controlled GHG emissions (Scope 1 + Scope 2) reduced by 2.15 million tonnes of СО2E forecasts , however, the effect of area of the planet that is warming

between 2016 and 2019 and by 4.78 million tonnes of СО2E in 2020 compared to 2019. this reduction will be short-lived, and Expanded economic mechanisms, tied most rapidly and is most likely to be

• The volume of GHG emissions was reduced to 340 thousand tonnes of СО2E in 2020 by emissions are forecast to increase in to EU direction, will require specific affected by the melting of permafrost. selling electric power generated from renewable sources and by substitution of grid 2021 as national economies recover. actions from oil and gas companies electricity used internally. Experts estimated5 that the lockdown among others to ensure sustainability Among the significant external factors period only slightly affected global in the long term. for oil and gas companies, in 202010 CLIMATE CHANGE CLIMATE warming, reducing the temperature was the COVID-19 pandemic, which increase expected by 2030 by only The EU and other countries, significantly influenced the structure 0.001 °C. Reductions of a much greater including , India, and the UK of supply and demand in 2020, magnitude are required every year have committed to ambitious goals exacerbating operational and financial PLANS FOR 2021 for the next decade6 just to avoid the concerning carbon neutrality first efficiency issues. This is considered worst effects of climate change. by 2050, — by 2060. US policy as the beginning of a long-term trend, AND THE MIDTERM OUTLOOK has already changed dramatically. which will inevitably lead oil and gas On the other hand, some countries One of the first steps of the Biden companies to change their strategies have not only kept their commitments Administration was to rejoin the and business models. Guided by the Development and implementation Development of the Energy Further development of renewable to reduce GHG emissions, but have Paris Agreement and a series of far accumulated experience of structural of the Decarbonization Program Conservation Program energy sources projects. announced more ambitious emission reaching domestic and international transformation and innovation, and the Climate Adaptation KPIs. for 2022–2024, taking into account goals, committing themselves to initiatives have been proposed. companies will need to find solutions the climate adaptation strategy. pursue long-term breakthrough in line with their objectives to reduce solutions. International cooperation on the GHG emissions. climate agenda will intensify, and, if The EU has presented plans to the steps outlined are implemented, LUKOIL contributes to SDG 13 (Climate accelerate the transition to a net-zero more than half of the world’s action), consistently reducing GHG development path7 under the Green GHG emissions will be controlled emissions and developing projects Deal, aiming to reduce GHG emissions through decarbonization projects by with low carbon footprints. by 55 percent by 2030 as compared mid-century.

1. Source: The Global Risks Report 2020. World Economic Forum, 2021. 2. Source: The Global Risks Report 2020. World Economic Forum, 2021. 3. Source: https://climate.nasa.gov/news/3054/seeing-the-covid-19-pandemic-from-space/ 4. Sources: Climate Gap Report. UN Environmental Program, 2021; The COVID-19 Effect on the Paris Agreement. Nature, 2021 (https://www.nature.com/articles/ s41599-020-00698-2#Tab1). 5. Source: Report “Global Climatic Threat and Russian Economy: Searching for the Way”. Moscow School of Management SKOLKOVO, 2021. 6. Source: The Global Risks Report 2020. World Economic Forum, 2021. 7. Source: https://ec.europa.eu/clima/policies/eu-climate-action/2030_ctp_en 8. Source: Decree No. 666 of 04 November 2020 “On Reducing Greenhouse Gas Emissions”. 9. Source: Report “Russia’s Climate Agenda: Responding to International Challenges”. Center for Strategic Research, Analytical Center of the Fuel and Energy Complex of the Russian Energy Agency of the Ministry of Energy and Situation Center LLC. 1. 10. At stationary units in the Exploration and Production and Refining, Marketing and Distribution business segments. For example, Oil and Gas after COVID-19: The day of reconning or a new age of opportunity. McKinsey & Company, 2021 50 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 51

CARBON MANAGEMENT SYSTEM Our actions Climate change issues are prioritized and decisions taken of Directors. In 2020, new management bodies were in the Strategy, Investment, Sustainability and Climate established at the operational level and were involved in 03 With more than 15 years of calculations and technologically level. This goal was achieved ahead Adaptation Committee. Proposals developed at the the formation of a climate strategy and in activities aimed successful experience in feasible solutions and what needs of schedule1. In 2020, another major Committee meetings are then considered by the Board at achieving the stated goals of reducing GHG emissions. implementing measures to reduce to be done to achieve global climate step forward was made in GHG GHG emissions, LUKOIL’s goal is to goals. The first corporate target emission management by setting narrow the gap between what can set for the Group’s Russian entities 2030 as the target date for achieving As part of implementing the be located in vulnerable areas The main changes in the functions be done to contain global warming was to reduce direct GHG emissions even larger cuts in GHG emissions. decision of the Board of Directors (primarily in the Arctic) have been of management bodies and new based on economically sound by 1.2 percent by 2020 from the 2016 of PJSC LUKOIL, amendments were put into effect. management bodies are presented made to the LUKOIL Group’s Health, in the table below. Safety and Environment Policy for To develop competencies on climate- the 21st Century. We supplemented related topics, a lecture course Climate risk analysis is performed Management the Policy with objectives aimed for employees, specialists, and within the framework of the at minimizing the impact of the managers of LUKOIL Group entities Company’s risk management Leonid Fedun, Vice President and a member of the Board of Directors of PJSC LUKOIL, is responsible for the Company’s operations on the was conducted in 2020 on Global system. Detailed description of the Company’s climate change activities climate and a commitment to Climate Change and GHG Emissions risks is given in the Annual Report continuous improvement of the GHG Management at the Company for 2020, page 71. PJSC LUKOIL established a Decarbonization and Climate Change Adaptation Task Force emission management system. level. More than 500 people were trained; at the end of the course, Detailed Safety measures are Corporate requirements for they were tested and certificates described in the Safety of Facilities Strategy mandatory assessment of the were issued. It is planned to continue in the Arctic Zone case study. impact of climate change on such training activities within the The target2 to reduce GHG emissions by 2030 was announced based on presentations of several climate scenarios planned production facilities and framework of the corporate Distance to contain global warming at 1.5 and 2 ° centigrade. critical infrastructure that will Learning System.

Risks CLIMATE CHANGE CLIMATE The main risks associated with climate change are enumerated in the Company’s risk management system3. Requirements for assessing the climate change impact on production facilities and infrastructure are documented in the corporate standard4

Reporting

An extended inventory of GHG emissions

Data on GHG emissions is published in the draft CDP, Sustainability Report, Annual Report, Analyst’s Handbook

1. Detailed information is provided in the LUKOIL Group Sustainability Report 2019. 2. The new target was announced by LUKOIL President V. Alekperov in March 2021 at Investor Day. 3. Information is published in the issuer’s quarterly reports. https://lukoil.ru/InvestorAndShareholderCenter/RegulatoryDisclosure/EmitentReports. 4. The requirements are in the form of amendments to LUKOIL STO 1.6.9.2. “Pre-project and Project Documentation. Requirements to the Composition and Content of Supporting Materials”. 52 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 53

Key changes in the functions of governing bodies and of new governing bodies REPORTING MANAGEMENT LEVEL FUNCTIONS AND TASKS

03 In preparing public carbon reporting, In 2020, in preparation for the The inventory data reflects a we strive for fuller disclosure of development of the climate strategy consistent decrease in GHG The Board of Directors of PJSC LUKOIL Leonid Fedun, Vice President for Strategic Development, Member of the climate data in accordance with and the setting of a new GHG emissions (Scope 1 + 2) for LUKOIL Strategy, Investment, Sustainability and Climate Adaptation Committee the recommendations of the Task reduction goal, we performed a Group between 2017 and 20192. of PJSC LUKOIL, has been given responsibility as a member of the Board Force on Climate-Related Financial full inventory of emission sources The reduction in direct emissions of Directors for the Company’s climate change activities. Further steps to Disclosures (TCFD) and the new and calculated emissions of the is mainly due to an increase in the adapt the Company to climate change will be planned and implemented benchmarking system for companies three types of GHG emissions share of APG utilization. under his supervision and with his direct participation. His functions to ensure “net zero” emissions under (methane, carbon monoxide, nitrous include: the Climate Action 100+ initiative. oxide) in accordance with the new The reduction of indirect (energy) • preparing recommendations for the Board of Directors on defining methodological approaches (GHG emissions was achieved as a result strategic goals and related measures; Protocol) and the recommendations of the implementation of APG • assessing the impact of decarbonization projects on the Company’s of Russian regulatory documents1. utilization and energy efficiency asset portfolio; The data is consolidated based on programs at production and • building a unified corporate position on various climate change issues. the “operational control” criteria. processing entities. Based on the results of the adjusted methodological approach to the Details are in the “APG utilization Strategy, Investment, Sustainability To ensure the effective performance of strategic goals, the name and consolidation of GHG emissions and flaring reduction” and “Energy and Climate Adaptation Committee of functions of the Committee1 were changed and documented in the data, indicators for 2016–2020 are conservation” subsections of this the Board of Directors new version of the Committee Regulations. The Committee’s new presented in the approved reporting section of the Report. responsibility is to develop recommendations for the Board of Directors boundaries. on strategic climate adaptation goals and provide a roadmap to move the Company toward achieving these goals, as well as to manage risks associated with changes in global supply chains.

Decarbonization and Climate Change The Task Force was created under the leadership of Vadim Vorobyov, First CLIMATE CHANGE CLIMATE Adaptation Task Force Executive Vice-President of PJSC LUKOIL. It includes Vice Presidents of PJSC LUKOIL in charge of all areas of the Company’s operations: finance, strategy, economics and planning, and sustainability, as well as heads of key specialized departments. The main functions of the Task Force include: • regular assessment of climate risks and opportunities; • drafting the LUKOIL Group’s decarbonization program and monitoring its implementation; • establishing criteria for assessing the effectiveness of investment projects aimed at reducing GHG emissions; • improving the Decarbonization and Climate Change Adaptation business process

The first meeting of the Task Force was held in December 2020, when the standard STO LUKOIL “Regulations for the Inventory of Greenhouse Gas Emissions” was approved, and instructions were given to develop a new business process “Decarbonization and Adaptation to Climate Change.”

The Department for Industrial Safety, The Department for Environmental Safety and Decarbonization is the the Environment and Scientific and center for expertise and coordination of activities of PJSC LUKOIL and Group Technical Development entities in operational management of GHG emissions, including regulation, monitoring, implementation of the decarbonization program, and reporting.

1. The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard Revised Edition; Methodology and Guidelines for Quantifying Greenhouse Gas Emissions by Entities Engaged in Economic and Other Activities in the Russian Federation approved by Order of the Ministry of Natural Resources and Environment 1. Formerly the Strategy, Investment and Sustainability Committee of the Board of Directors of PJSC LUKOIL. of the Russian Federation of June 30, 2015 No. 300. 2. Methodological Guidelines for Quantification of Indirect Energy Emissions of Greenhouse Gases approved by Order of the Ministry of Natural Resources and Environment of the Russian Federation of June 29, 2017 No. 330; 2006 IPCC Guidelines for National Greenhouse Gas Inventories. 54 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 55

GHG emissions of LUKOIL Group Greenhouse gas emissions (Scope 1) of LUKOIL Group, by type of activity and geography,

million tonnes of CO2E Indicators 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Scope 1. Direct gross GHG emissions, million tonnes of СО2E 40.150 40.448 39.599 39.796 36.705 30.780 03 Including by GHG composition: Russian entities 33.765 34.043 33.403 32.851 Exploration and Production 10.883 10.043 9.833 10.065 9.920 СО2, million tonnes of СО2E 38.574 39.024 38.615 38.999 35.764

Methane (CH4), million tonnes of СО2E 1.545 1.396 0.959 0.772 0.916 Oil Refining and Petrochemicals, KGPZ and LLK International 10.170 11.454 11.271 11.217 10.770 Share of methane, % 3.8 3.5 2.4 1.9 2.5 Power Generation 12.625 12.468 12.213 11.479 9.980 Nitrogen monoxide (N O), million tonnes of СО E 0.031 0.028 0.025 0.025 0.024 2 2 Transportation 0.086 0.078 0.087 0.091 0.111 Other GHGs 0 0 0 0 0 Foreign entities 6.385 6.405 6.196 6.945 5.924 Scope 2. Indirect (energy) GHG emissions (СО2), million tonnes 10.435 10.450 8.947 8.636 6.947

of СО2E Exploration and Production (Uzbekistan, Central Asia) 0.043 0.223 0.393 0.360 0.297 Scope 1 + Scope 2, million tonnes of СО E 50.585 50.897 48.546 48.433 43.651 2 Oil Refining and Petrochemicals (EU countries) 6.342 6.181 5.803 6.585 5.628 Total energy consumption (purchased and internally generated) NA NA 502 502 465 within the calculation of GHG emissions (Scope 1 + Scope 2), Share of emissions (Scope 1) accounted for by countries 16 15 15 17 15 excluding mobile sources, million GJ where the regulation of GHG emissions has been implemented (Romania, Bulgaria, Italy), %

Note. Notes. The 2019 growth in GHG emissions of the Exploration and Production business segment was due to the growth of exploration 1. Detailed data, including the reporting boundaries, are given in Appendix 7. and production drilling and the increase in production mainly in the Caspian Region and the Komi Republic, as well 2. In the LUKOIL Group Sustainability Report 2019 data on GHG emissions (Scope 1) were presented based on calculations as the commissioning of additional power capacity at oilfields, which led to an increase in consumption. The increased in accordance with the previously used methodology: “Methodology and Guidelines for Quantifying Greenhouse Gas GHG emissions at oil refining and petrochemical entities in 2017 were caused by production of the largest volume of high value- Emissions by Entities Engaged in Economic and Other Activities in the Russian Federation” approved by Order of the Ministry added products between 2016 and 2019. of Natural Resources and Environment of the Russian Federation of 30 June 2015 No. 300. The 2019 Report contains

the following information: 2016 — 38.02 million tonnes CO2E; 2017 — 37.85 million tonnes CO2E; 2018 — 36.44 million tonnes

CO2E; 2019 — 37.22 million tonnes CO2E. Specific GHG emissions, by types of activity (Scope 1 + Scope 2) 3. In 2020, the reduction in GHG emissions was mainly driven by a decrease in demand and production of major types CLIMATE CHANGE CLIMATE of products due to the pandemic. Business segment/ business sector 2016 2017 2018 2019 2020 4. The increase in CO emissions in 2017 was caused by a rise in exploration and production drilling in the Exploration 2 Exploration and Production across LUKOIL Group and Production business segment. 5. The 2020 results are not indicative because they are mainly driven by changes resulting from the pandemic. tonnes СO2E / thousand BOE 25.396 23.954 21.106 21.009 21.622 6. In the LUKOIL Group Sustainability Report 2020, the indicators of greenhouse gas emissions were adjusted compared tonnes СO E / GJ 4.334 4.008 3.602 3.585 3.690 to those presented in the Annual Report of PJSC LUKOIL 2020. 2 Oil Processing and Petrochemicals across LUKOIL Group (excluding LLC LUKOIL-KGPZ and LLC LLK-International)

tonnes СO2E / tonne of processed raw materials 0.281 0.293 0.282 0.291 0.305 Power Generation (Russian entities)

tonnes СO2E / MWh of generated electrical and heat energy 0.341 0.340 0.323 0.328 0.350 (excluding emissions of LLC LUKOIL-ENERGOSETI)

Note. The increase in specific GHG emissions in all business sectors in 2020 was related to a decline in production due to the pandemic and the need to maintain the working capacity of production units and technological processes, as well as to rising complexity of production processes and an increase in the refinery yield at oil refining and petrochemicals entities. 56 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 57

CLIMATE STRATEGY We have set a new goal for the reduction of GHG emissions by 2030. We plan to reduce controlled emissions (Scope 1 + Scope 2) per unit of energy equivalent by 20 percent compared to 2017. We have chosen this year as a baseline in accordance with the approach of the Intergovernmental Panel 03 Scenario analysis overcome quickly. In addition, it Climate Strategy on Climate Change. This target is the equivalent of reducing gross GHG is very important that progress emissions by 10 million tonnes, given comparable conditions. In 2020, new targets for towards energy transformation does Given LUKOIL’s competitive edge reducing GHG emissions were not conflict with the achievement and our commitment to reduce calculated in accordance with of other SDGs. To ensure that all emissions, we will continue to Based on an assessment of the Ministry of Energy, the Ministry amendments to the Forestry Code the Recommendations of the sustainability goals are taken into supply the world economy with technologically achievable and of Economic Development, the of the Russian Federation – which Intergovernmental Panel on Climate account, alternative energy must be the most efficient fossil fuels while potentially effective measures, we Ministry of Natural Resources and would allow including reforestation Change (IPCC) and with the Paris affordable and sufficient to not only focusing on reducing the carbon have identified about 60 measures Environment, and other institutions. as a measure to reduce GHG Agreement goals based on scenarios gradually replace fossil fuels, but footprint associated with production. to help reduce emissions. The LUKOIL representatives take part in emissions, as well as participation in of keeping global temperature also to provide additional power to a To support this mission, we have economic efficiency of these projects the work of industry associations, the discussion of draft laws related increases between 1.5 0C and 2 0C. growing global economy. For these identified three tasks for LUKOIL’s can be increased with government for example, in the work of the to the regulation of GHG emissions In addition to the “Evolution”1 reasons, none of the scenarios we climate strategy and the goals and support. The introduction of Committee on Climate Policy and and the introduction of a low- scenario previously discussed, we have developed involves a complete means associated with each. national regulation and support Carbon Regulation created by the carbon certification system, as well have developed the “Equilibrium”, rejection of fossil fuels. Oil will retain for decarbonization measures and Russian Union of Industrialists and as national support for emissions “Transformation”, and “Two Degrees a significant role in the global energy adaptation projects which take into Entrepreneurs1. The Committee is a reduction. Celsius” scenarios. All these scenarios balance and as a raw material for account the specifics of the Russian platform for discussing the policy- assume a significant increase in the the production of consumer goods oil industry will significantly expand making initiatives of the Government PJSC LUKOIL also actively participates share of renewable energy sources, for a long time to come. Oil and gas the Company’s capabilities to reduce of the Russian Federation and in the discussion of key legislative recycled plastic and accelerated companies, suppliers of energy GHG emissions in Russia. determining the position of business initiatives in the European Union, electrification of vehicles. resources, are to ensure energy regarding various options for including such topics as the EU supplies for the global economy, Interaction on climate policy regulating GHG emissions in the ETS emissions trading system, Each of these scenarios presents adjusting their operations to SDGs context of the national goals set emission standards in the transport complex challenges for the global and global efforts in reducing GHG We constantly monitor climate by the Russian Federation. LUKOIL sector, and renewable energy. Much community, which cannot be emissions. regulation and actively participate presents its position2 and experience attention is paid to discussions in discussions of the climate agenda in implementing greenhouse gas on the impact of introducing the and policy-making initiatives in the emissions reduction projects. EU carbon border adjustment CLIMATE CHANGE CLIMATE MISSION: RESPONSIBLE HYDROCARBON PRODUCER Russian Federation and abroad. In mechanism, which is expected to be Russia, we are in direct dialogue The legislative program of implemented in 2023. with the Government Executive PJSC LUKOIL in Russia for 2021 Task 1 Task 2 Task 3 Office of the Russian Federation, contains initiatives — in particular

Continue development of core Reduce controlled GHG emissions Participate in climate initiatives and business. (Scope 1 + Scope 2). develop climate opportunities.

Focus on efficiency of using Improve energy efficiency Implement GHG emission reduction conservative oil pricing and domestic Enhance RES energy consumption technologies carbon price scenarios in investment Develop carbon capture and storage Develop the regulatory environment decisions. projects in Russia Optimize the asset portfolio. Expand commercial generation from renewable energy sources Study low-carbon energy resources (biofuel and hydrogen) Implement reforestation projects.

1. Leonid Fedun, Vice-President of PJSC LUKOIL, was appointed the Deputy Chairman of the Committee. 2. In particular, LUKOIL presented its position on Russian draft laws and regulations on Limiting Greenhouse Gas Emissions, on Amendments to the Guidance for Quantification of Indirect Energy Emissions of Greenhouse Gases Approved by Order of the Ministry of Natural Resources of Russia dated June 29, 2017 No. 330, on 1. Source: “Major Trends in the Global Liquid Hydrocarbon Market to 2035” report: http://www.lukoil.ru/Business/Futuremarkettrends. the Approval of Guidance and Target Indicators on Adaptation to Climate Change, on Amendments to the Federal Law on the Electric Power Industry. 58 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 59

REDUCING METHANE EMISSIONS

03 YEARS According to the inventory results, Based on the results of inspections future operations. The results of in 2018–2020 the share of methane and diagnostics, the action plans expert evaluations are used to make in the total GHG emissions (Scope 1) of the Program of Industrial decisions on the timely upgrading of Sustainable Development. Climate-related projects is less than 3 percent. The volume of Safety, Improvement of Labor (replacement) of equipment. emissions is mainly due to methane Conditions and Occupational Safety, emissions from APG flares during and Emergency Prevention and An important tool for maintaining LUKOIL was one of the first Russian companies to start implementing projects to reduce APG flaring and to production. Liquidation of LUKOIL Group entities a high level of safety in connection utilize this energy resource in gas turbine power plants to generate electricity. In 2012, a corporate program for will include necessary repairs of with gas leaks is control of the the sustainable use of APG was launched, to which more than half of the Company’s environmental budget was The amount of permissible gas pipelines and gas collection and work of service organizations. Their allocated annually. dispersion of methane, including compression facilities. responsibilities include monitoring as part of APG, is regulated by emissions using gas analyzers Even earlier, in 2007, the first projects were developed based on the provisions of the Kyoto Protocol. At that time, legal requirements1 and corporate Industrial safety expert evaluation installed at the wellhead of each a corporate system for managing and accounting for GHG emissions was established. The implementation of these standards. For all entities of oil and and technical inspection of gas well. If the sensor gives a signal of an Kyoto projects produced major results: 32.8 million emission reduction units. gas production in Russia, standards equipment and pipelines are carried approaching explosive concentration, for losses during APG production out annually by independent certified the contractor must immediately During the intervening year, LUKOIL has continued implementing projects to reduce GHG emissions, and by 2021 at fields are developed annually2. organizations. Based on the results, close the wellhead and inform formalized them in its climate strategy. Considering the high level of APG judgements are made concerning representatives of the LUKOIL entity. utilization at LUKOIL’s fields, the 1990s 2020 share of methane dispersion is much lower than the established Engineering solutions to prevent methane leaks standards. APG utilization at the fields of Western Siberia >> APG utilization in LLC LUKOIL-West Siberia The possibility of gas migration during well construction is one of (where the Company was founded) in the mid- amounted to 98.3 percent. The Group’s entities regularly take the problems in the development and operation of gas fields. Gas 1990s was about 70 percent . measures to reduce gas leaks in a formation under pressure can penetrate through cracks and into the atmosphere caused by clearances in the equipment into the annular space. As a result, a buildup of pressure building at the wellhead can threaten its safe scheduled repairs and equipment CLIMATE CHANGE CLIMATE operation. Carbon dioxide was not considered a pollutant >> A carbon management system has been failures. The technical condition of main and interfield gas pipelines in Russia, and data on CO emissions was not created and is constantly being improved LUKOIL-Engineering has developed a solution to ensure the 2 is monitored once a year during a airtightness of the annular space using special grouting slurries subject to statistical reporting. taking into account modern requirements: helicopter inspection using lasers a comprehensive climate strategy is being prepared on the basis of “self-healing” cements with the addition to locate gas leaks. Gas pipelines of gas blockers. Additional airtightness is provided by filling the developed. are inspected and examined annular space with gel-polymer compounds. The use of these on a monthly basis to ensure substances allows for a quick restoration of an annular space and maintenance of equipment and prevention of gas migration. This approach has already been applied prevent depressurization. As part at the Pyakyakhinskoye field and has proven its effectiveness, of the inspection, the corrosion since the occurrences of annular pressures have been significantly rate and residual life, service life, reduced. LUKOIL-Engineering is carrying out further research specific failure rate and other and development work, as a result of which it will be possible parameters are assessed. In 2020, to completely eliminate the likelihood of behind-the-casing gas gas pipelines in the Perm Territory migration. and the Volgograd Region of a total length of 45 km, were diagnosed.

1. Regulations, federal policies and procedures of the oil and gas sector, such as FZ-116 of July 21, 1997 on the Industrial Safety of Hazardous Production Facilities, FZ-22 of March 4, 2013 on Making Amendments to the Federal Law on the Industrial Safety of Hazardous Production Facilities, STO LUKOIL 1.19.1-2012, Federal Policies and Procedures on the Rules for the Safe Operation of In-Field Pipelines. 2. Calculations are carried out by specialized institutes and approved by the Russian Ministry of Energy. 60 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 61

APG UTILIZATION ENERGY CONSERVATION AND FLARING REDUCTION 03 Management system ELEMENTS OF THE MANAGEMENT CORPORATE Since 2017, we have been a member As part of the “Zero Routine Flaring • The APG utilization increased from SYSTEM DOCUMENTS of the World Bank’s “Zero Routine by 2030” initiative, two investment 87.8% to 97.1%. Flaring by 2030” initiative and projects are being implemented • The volume of GHG emissions committed to reducing APG flaring in the Perm Territory and the decreased by 44 thousand tonnes GOALS The strategic goals and key activities to improve the energy LUKOIL Group’s Technical Policy on Energy Efficiency through further technologically Khanty-Mansi Autonomous Area of CO2E per year (from 62.5 achievable APG utilization. — Yugra in Russia. In 2020, the thousand to 18.5 thousand tonnes efficiency in each business segment were determined was approved by the Management Committee OJSC LUKOIL on March 26, 2012 project to construct a system for of CO2E). Since 2003, Russian entities have collecting and transporting APG been implementing an investment from the Zhilinskoye, Belskoye, Design and survey work has been PRIORITIES/STANDARDS program for the sustainable use and Rostovitskoye fields (Perm completed under the second project, The composition of process-related indicators, fuel consumption Seven corporate STO 1.20 standards of APG1, including measures for Territory) was fully completed. “Reconstruction of the Povkhovskaya rates and other indicators were formalized the construction of new facilities The project began in 2018, and Compressor Station”. Сompressor and reconstruction of facilities for the targets were set during the equipment will be supplied and KPIs APG preparation, transportation planning phase. Upon completion of the elements of the APG collection Specific energy consumption per tonne of fluid produced (in the The KPI regulations were approved by the and processing that have been in the project in 2020, all the targets system will be installed in 2021. The Exploration and Production business segment). Management Committee of PJSC LUKOIL The Solomon Energy Intensity Index (EII) on September 16, 2019 operation for a long time. In 2020, were achieved. expected date of completion of the Energy intensity per tonne of basic raw material for entities in the 12 projects of the program were • The volume of APG flaring project is 2022. Petrochemicals business sector completed in the Perm Territory, the decreased over three times (from Delivery of the approved energy conservation program1 Komi Republic, and in the Khanty- 17.8 million to 5.3 million cubic Mansi Autonomous Area — Yugra. meters). CERTIFICATION OF THE MANAGEMENT SYSTEM The Russian entities of LUKOIL Group integrated the STO LUKOIL 1.20.6-2019 “Energy Conservation. Energy ISO 50001:2011 and ISO 50001:2018 compliant energy Management System of LUKOIL Group Entities. General management system. In 2020, the level of efficient APG use across LUKOIL Group increased to Provisions and Regulated Facilities” (introduced CLIMATE CHANGE CLIMATE As of December 31, 2020, 25 entities possessed compliance by order of PJSC LUKOIL No. 229 of December 17, 2019) 97.8 percent. Since 2016, this indicator has grown by 5.7 percentage points. certificates covering 69 percent of the total headcount of LUKOIL Group.

TARGETED PROGRAMS, PROJECTS, AND INITIATIVES Total volume of APG flaring and APG utilization rate across LUKOIL Group Energy Conservation Program of LUKOIL Group Entities STO LUKOIL 1.20.2-2017 “Energy Conservation. Energy 2. for 2020−2022 in Russia Conservation and Energy Efficiency Improvement Program for LUKOIL Group Entities. General 2016 2019 2020 Requirements to Development and Execution” Total volume of APG flaring, million cubic meters 952.5 309.534 275.556 (introduced by order of PJSC LUKOIL No. 184 of November 20, 2017) including: ENERGY AUDITS • Russian entities 937.6 298.933 269.271 Energy audits performed at the entities of the Exploration and STO LUKOIL 1.20.3-2019 “Energy Conservation. Energy • Foreign entities 14.9 10.601 6.285 Production and Refining, Marketing and Distribution segments Audits of LUKOIL Group Entities. Methodology” (introduced by order of PJSC LUKOIL No. 229 of December 17, 2019) APG utilization rate, % 92.1 97.6 97.8

including: FURTHER INFORMATION The examination of investment projects covers the evaluation of energy efficiency of business plans and related activities. • Russian entities 91.7 97.5 97.7 The findings are an important part of the considerations that go into the general assessment of the project’s economic performance • Foreign entities 98.1 98.9 99.4

Note. The indicator boundaries include the following Russian and foreign entities (based on thePJSC LUKOIL shares in the projects): LUKARCO B.V. (Tengiz project in Kazakhstan), LUKOIL Overseas Kumkol B.V. (Kumkol project in Kazakhstan2), and LUKOIL Upstream Congo SAU (Marine XII project in Republic of the Congo). In Egypt and Iraq, in accordance with the concluded agreements, APG is not subject to production sharing, and the entire volume of APG produced is contractually owned 1. by the host countries. The KPI relates to the Exploration and Production in Russia, Oil Product Supply in Russia, Transportation in Russia and Power Generation business sectors, as well as to the following entities belonging to the Refining, Marketing and Distribution business segment: LLC LUKOIL-Trans, transshipment facilities, and LLC LUKOIL-AERO. 1. 2. The program covers a 3-year period and is revised and approved by management of PJSC LUKOIL on an annual basis. The program for 2020–2022 was approved in The energy conservation program covers a 3-year period and is revised and approved by management of PJSC LUKOIL on an annual basis. The program 2019. During the previous reporting period, the program for 2019–2021 was in effect. for 2019–2021 was approved on May 31, 2018. During the previous reporting period, the program for 2018–2020 was in effect. 2. PJSC LUKOIL withdrew from the project in December 2020; the data is shown until the end of the license period, i.e. until 10 December 2020 inclusive. Marine XII project in the Republic of the Congo was included in reporting in 2019. 62 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 63

Our goals Targeted program In the Exploration and Production Between 2014 and 2020, as part Price-dependent reduction in consumption segment, we are developing a of the continuous improvement We view energy efficiency The power saving program of partnership with Sulzer to localize system, the Energy Intensity Index improvement as one of the key ways With the adoption of the Decree of the Government of the Russian Russian LUKOIL Group entities is production of spare parts for was improved by 5 percentage points to adapt to global climate change. Federation No. 287 dated March 20, 2019, a mechanism for managing aimed at increasing the efficiency of formation pressure maintenance (the reduction relative to 20104 was The Company’s policy is focused on the electricity demand from retail consumers, i. e. price-dependent power consumption and reducing system pumps in Kogalym. In 12 percentage points). 03 reduction in consumption (Demand Response), began to operate the sustainable and efficient use of its losses as a result of planned addition, the possibility of joint in a pilot mode in Russia. This mechanism is considered one of the energy resources, which helps to annual activities in the main research with international oil Dynamics of Solomon EII promising areas to facilitate the “energy transition”. reduce GHG emissions and improve business segments. For 2018– service companies for the production as compared to 2014, % overall production efficiency. By changing levels of electricity consumption during peak hours on 2020, power savings as a result of of asynchronous motors with the electricity market, the participants in price-dependent reduction the implementation of the power magnet motors (PMSMs) of various 00 95.1 Long-term energy efficiency goals in consumption contribute to lower prices for consumers in the saving program in Russian entities types for pump drives is being are an integral part of the LUKOIL electricity market as well as to increased efficiency of the entire amounted to 11.9 million GJ1. considered. 0 96.5 Group’s Strategic Development energy system by levelling the load schedule and optimizing the Program and Climate Strategy. composition of equipment at generating capacities. In 2020, program performance In 2020, within the framework of the 0 98.8 Within the framework of the energy results were achieved primarily by continuous improvement system, management system, medium- Managed energy consumption can obviate the need for the the following activities. the Energoproryv strategic project 0 00 and short-term planning is carried construction of new generation facilities, facilitate decommissioning • For production entities: was launched at refineries and out by setting quantitative goals of inefficient and expensive facilities — which ultimately contributes introduction of power-efficient petrochemical plants2, with the in relation to the amount of energy to the reduction of GHG emissions within the unified energy system equipment (replacement of goal of increasing energy efficiency. savings for one year and for three of the Russian Federation — and also create economic benefits for asynchronous motors with At the first stage, a portfolio of each participant in plans based on price-dependent reduction in years. Activities aimed at achieving magnet motors (PMSM) and measures is planned which are consumption. the goal are monitored during the upgrading of fluid lifting and aimed at reducing CO2 emissions, year. The achievement of the goal formation pressure maintenance eliminating the consumption of Based on the selection made in 2020, two of the LUKOIL Group is assessed annually at the end of system pumps) , increasing the efficiency entities, LUKOIL-West Siberia and LUKOIL-Perm, were among the the year and the planned indicators largest participants in the demand response market. Their total • In processing entities: technical of heat transfer, and reducing the for three years are adjusted. The reduction in load volume for the year amounted to 6.6 MW, and the upgrading, optimization of Energy Intensity Index EII Solomon. KPI “Implementation of the Energy economic effect for PJSC LUKOIL was RUB 16.5 million. production processes, schemes The expected target effect for 2020– Conservation Program” was for the distribution of power 2030 includes: introduced and is used to motivate In terms of sustainable development goals, this project represents flows and heat transfer among • the Energy Intensity Index the Group’s entities to achieve the one of the models for the future, corresponding not only to SDG 13 technological facilities (EII)3 Solomon at refineries CLIMATE CHANGE CLIMATE goals set. “Climate action”, but also SDG 12 “Responsible Consumption and • In power entities: replacement will be reduced by an average Production”. and modernization of technical of 13 percent (compared to Our energy efficiency goals include: equipment, shifting heat loads the 2018 level)

• Ensuring the efficiency of from inefficient boiler stations • the CO2 emissions will be reduced operating procedures and Management system changes In accordance with the approved which can then be subsequently by an average of 10 percent

the functioning of process schedule for certification of LUKOIL closed (~ 1.5 million tonnes of CO2E per equipment The Russian entities of LUKOIL Group Group entities under ISO 50001:2018 • In oil product supply and year). • Securing the effective use of fuel have an energy management system standard, 19 entities passed the transportation entities: lighting and energy resources based on the requirements of ISO certification of management systems upgrades • Effective development and 50001:2011 and ISO 50001:2018 systems for compliance with the upgrade of energy assets “Energy Management System” requirements of the new version • Reduction of indirect GHG standards. Key management tools of the standard. A draft checklist emissions include energy audits and internal has been developed that will allow audits, energy efficiency programs for a comparative analysis of the and activities. Energy efficiency efficiency of energy management requirements are monitored in all systems throughout the Group’s business segments of the Group. entities.

1. Hereinafter in the section, data on power consumption is within the reporting boundaries for GHG emissions, details in the “Climate Change” section. 2. At four refineries in Russia, Stavrolen and Saratovorgsintez, refineries in Bulgaria and Romania. 3. The EII Solomon Energy Intensity index is calculated pursuant to the HSB Solomon Associated LLC methodology with the use of its own factors. 4. 2010 data are given in the comparable boundaries with 2020 boundaries. 64 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 65

Energy consumption for production purposes across LUKOIL Group entities within the GHG Specific power consumption in producing entities, GJ/boe emissions reporting boundaries (Scope 1 + Scope 2), mln GJ 2018 2019 2020 2018 2019 2020 Specific power consumption in the Exploration and Production 0.297 0.302 0.320 Energy consumption for production purposes 502 502 465 business segment 03 (1.1 + 1.2 + 1.3 - 1.4) Note. 1.1. Purchased energy consumption for production purposes, 79 74 69 The data are given for producing entities of Exploration and Production in Russia business segment and project including: in Uzbekistan. • electricity 59 57 54

• thermal power 20 17 15 Specific power consumption in refining entities, GJ/tonne of manufactured products • cold 0 0 0 2018 2019 2020 • steam 0 0 0 Total for the business segment, including: 3.9 3.7 4.0 1.2 Supporting power generation from non-renewable energy 553 545 515 sources and fuel consumption by stationary production units, • Russian entities 3.7 3.5 3.7 including: • Foreign entities 4.3 4.3 4.8 1.3. Supporting generation from renewable energy sources 0.00525 0.03726 0.04905

1.4. Power sales and supply, including: 130 117 119 Note. • electricity 74 66 68 1. The data are given for “Refining in Russia” and “Refining abroad.” 2. The increase in specific power consumption in 2020 was due to a decrease in refinery utilization during the pandemic. • thermal power 56 51 51

• cold 0 0 0

• steam 0 0 0 Parma Energy

Notes. In 2020, the 16 MW Chashkinskaya GTEPS, operating on These facilities are key components of the LUKOIL 1. Consumption for production purposes does not take into account utility electricity/heat consumption, or power consumption APG from the Zhilinskoye, Belskoye and Rostovitskoye Group’s large-scale investment project in the fields, as well as Chashkino 110/35/6 kV, the first energy sector covering the entire production cycle, by mobile sources. CLIMATE CHANGE CLIMATE digital substation across LUKOIL Group and in the Perm including APG collection, transportation, preparation, 2. When converting data, the following factors under GOST R 51750-2001 were used: 1,000 kWh = 3.6 GJ, 1 Gcal = 4.19 GJ, 1 tonne Territory, of 2x16 MVA installed transformer capacity compression, power generation, distribution, of oil equivalent = 29.3 GJ). were commissioned. Both stations provide electricity and consumption. Within the framework of this 3. Indicators of energy consumption for production purposes for 2018-2019 were specified: to the oil production facilities of LUKOIL-Perm and to project, a second digital substation is being built, a) ISAB fuel consumption data were recalculated using unified conventional units corresponding to the coal equivalent the residents of the territories of the Bereznikovsko- Shustovo of 8 MVA installed transformer capacity. (7000 kcal/kg) used in the Russian Federation; Solikamsky power center. The construction is planned to be completed in 2021. b) data on fuel consumption at LLC LUKOIL-Nizhnevolzhskneft were calculated taking into account the fuel used by the energy complex to generate electric and heat energy, as well as the fuel used in gas turbines of mechanical drive of high-pressure compressors. 4. In the LUKOIL Group Sustainability Report 2020 the indicator “Energy consumption for production purposes” was adjusted compared to the data presented in the Annual Report of PJSC LUKOIL 2020.

Power consumption by types of activity, mln GJ

2018 2019 2020

LUKOIL Group 502 502 465

Exploration and Production business segment 179 182 172

• Russian entities 176 178 169

• Foreign entities 2.9 4.4 3.1

Refining, Marketing and Distribution business segment 323 320 293

• Russian entities 244 238 225

– including Power Generation 72 69 64

• Foreign entities 79 82 68 66 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 67

Plans long-term electricity purchase and reservoirs, and, as a consequence, RENEWABLE ENERGY SOURCES sale agreement (for 15 years) in order a decrease in water consumption Our plans for the mid-term include to compensate for electric power grid by HPPs. This is especially true at further expansion of solar generation losses. the Tsimlyanskaya HPP and the at the sites of LUKOIL entities located Krasnopolyanskaya HPP. Given 03 The Company is focused on green the refineries and filling stations in The development of a construction in the south of Russia (20 MW SPP The SPP will be located on land plots that the volume of electric power power generation development Romania and refineries in Bulgaria is project for a 50 MW WPP in the area of in Volgograd and 2.35 MW SPP in of the Krasnodar CHPP of LLC LUKOIL- generated from renewable sources in those regions of operation with used for the entities’ own production the Tsimlyanskaya HPP (Rostov region) Krasnodar). Kubanenergo which are not involved in depends on weather conditions suitable climatic conditions and needs. When electricity generated continued during 2020. Winds were production. The commissioning of the and other natural phenomena, existing renewable energy support from renewable energy sources is monitored for a year, and based on the The project for the construction of power plant will make it possible to LUKOIL analyzes risks and pays due programs. supplied to the power system, it results of the data obtained, the wind a SPP in Krasnodar was one of the generate about 3 million kWh per year consideration to the forward-looking serves to prevent GHG emissions at energy potential was clarified. A final winners of an open competition of ‘clean’ electricity for consumers, conclusions of scientists and experts. Our goals thermal power plants using fossil decision on the project may be made held by the Administration of the which is equivalent to preventing In particular, as part of the GHG fuels, as well as up the supply chain in 2021. Krasnodar Territory and will become emissions of up to 1.5 thousand tonnes emission inventory, climate change Our goal in the field of renewable at the stages of fuel extraction and a participant in the government of CO2 per year (Scope 3). The SPP is to risks were assessed for the southern energy is to increase LUKOIL Group’s transportation. Another area of ”green” energy RES support program for the retail be commissioned in 2022. regions of Russia where generating competitiveness and contribute to investment includes upgrading and electricity market; it is also included capacities are located , including those the SDGs by implementing renewable 2020 projects improving efficiency of hydropower in the Scheme and Program for the Indicators powered by RES. energy projects for generating green assets. After analyzing the options Development of the Electric Power energy. In 2020, the construction of the for advancing the hydropower cluster Industry in the Krasnodar Territory. Over the past three years, the HPP second line of the solar power plant on in the vicinity of Krasnopolyanskaya All generated electricity will be electricity generation has been The key tasks include: the territory of the Volgograd Refinery HPP, it was decided to reconstruct a supplied to the local power grid declining , which is mainly explained • Implementation of commercial continued. The first phase (with a small 1.5 MW HPP on the Beshenka company at special rates under a by lower water levels in rivers and RES projects, including with the capacity of 10 MW) was commissioned river. In 2020, the following main involvement of government in 2018. The new phase will have a works were completed: the support mechanisms1 capacity of 20 MW, which will bring operation of the hydroelectric Total volume and share of electric power generated from renewable sources across LUKOIL Group • Reduction in GHG emissions the total plant capacity to 30 MW. The unit was restored, equipment for 2018 2019 2020 • Synergy2 from the construction phase is to be commissioned in 2021. the automation of technological of RES facilities at existing oil processes was installed, and Commercial electric power from renewable sources, million kWh 1,365 1,100 822 and gas production entities and The project will be implemented communication channels for remote including: refineries using a long-term capacity supply control from the Tsimlyanskaya CLIMATE CHANGE CLIMATE agreement for generating facilities HPP were arranged. The station will • wind power 192 218 211 In 2020, LUKOIL’s renewable energy based on renewable energy sources supply power to the retail electricity • solar power 17 14 12 capacity amounted to 395 MW and on the wholesale electricity and market of the Krasnodar Territory, included four HPPs in Russia with a capacity market. All capacity will be providing electricity to consumers • hydroelectric power 1,156 868 599 total capacity of 291 MW, four solar supplied to the wholesale electricity in the Krasnaya Polyana mountain Total electric power produced by commercial generating facilities of LUKOIL Group, 19,919 18,307 17,139 power plants at its own refineries in and capacity market at a special climate resort and the Big . The million kWh Russia, Romania, and Bulgaria with price under the agreement effective project will serve as a platform for the a total capacity of 20 MW, and an for 15 years. The commissioning of introduction of advanced technologies Share of commercial electric power generation from renewable sources in total 6.9 6.0 4.8 84 MW wind power plant in Romania. the second phase of the station will for automating the operation of HPPs electric power produced by commercial generating facilities of LUKOIL Group, % additionally generate more than with remote control from the dispatch Energy that is produced by the SPPs 24 million kWh of green electricity per center (without the physical presence in Russia and the WPP in Romania is year, which is equivalent to preventing of personnel). Economic indicators supplied to the power system and CO emissions of up to 12 thousand 2 2018 2019 2020 sold on electricity markets. Electricity tonnes per year (Scope 3). generated by solar power plants at Investments in RES advancement, million RUB 2,580 526 1,855 Share of investments in renewable sources in CAPEX in the Power Generation 47 12 36 business segment, %

Share of income from sales of electric power produced from renewable sources, % 10.5 11.7 13.9

Note. The indicator “Share of income from sales of electric power produced from renewable sources” is calculated as the ratio of income received from the sale of electricity produced from renewable sources to the total amount of income received from the sale of electricity generated by commercial generation facilities of LUKOIL Group.

1. Capacity supply agreement for qualified generating facilities based on renewable energy sources. 2. The synergistic (economic) effect means reducing the cost and time for the development and implementation of RES projects due to the availability of free sites at production facilities not involved in the production cycle, as well as the infrastructure and resources of the Group’s entities. 68 LUKOIL Group 69

04

Technology SAFETY SAFETY

LEADER SAFETY

Our main priorities are to improve accident-free performance, to ensure safe working conditions, to preserve the life and health of our employees and employees of contractors employed at our facilities. 70 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 71

THE REPORTING YEAR’S CONTEXT CHANGES AND RESULTS Occupational safety and health, Companies must prepare for this4 risks to both business processes a key element of well-regulated by implementing appropriate health and employees, since the internal workplaces1, have become and safety measures and creating structure and functioning of the increasingly important during the a comfortable work environment to systems are usually hidden from end 04 COVID-19 pandemic2. Changes in the ensure the safety of all personnel. users, making it difficult to assess organization of work and production The effectiveness of business the correctness of their work. processes (for example, limiting the continuity plans tailored to specific A SUSTAINED LONG-TERM TREND TOWARDS INTRODUCTION OF DRONES AND INNOVATIVE OIL number of people on the premises) situations will largely determine how LUKOIL contributes to SDG 8 (“Decent REDUCTION IN ON-THE-JOB INJURY RATES BOTH LEAK DETECTION SYSTEMS may create new hazards that need quickly companies are able to act. work and Economic Growth”) keeping AT LUKOIL GROUP ENTITIES AND CONTRACTOR to be identified early. There is also high coverage of Group’s entities ORGANIZATIONS a growing need for measures to Furthermore, experts note that with occupational health and safety reduce the level of work-related the quality of management of management system, and expanding stress. information technology related measures to reduce injuries and to swift spread of data analysis emergencies considering external The demands of workers and the instruments, machine learning environment changes and internal requirements for safe working and neural networks needs to be objectives. conditions are certain3 to change enhanced. This pervasive reliance in the post-coronavirus world. on complex algorithms can pose INCREASED SHARE OF ON THE AVERAGE, AN INCREASE IN THE SHARE OF CORROSION-RESISTANT AN 11 PERCENT INCREASE PER THE COMPANY’S CORROSION- PIPELINES IMPROVED THE YEAR DURING THE PAST FIVE RESISTANT PIPELINES — NOW SITUATION IN SIBERIA, AND THE YEARS OF PIPELINES WITH OVER ONE-THIRD OF THE TOTAL PERM TERRITORY INTERNAL ANTI-CORROSION (32.2 PERCENT) (23.6 PERCENT COATING IN 2016) SAFETY SAFETY CONTRIBUTION TO IMPLEMENTATION OF SDG

• 82 percent was the coverage of employees of LUKOIL Group entities, which have occupational health and safety and environmental management systems certified of compliance with the requirements of ISO 14001 and ISO 45001 standards. • Outbreaks of COVID-19 were treated and contained.

PLANS FOR 2021 AND THE MIDTERM

To implement the To continue integration To implement and To review Company oil Program of Industrial of digital technology and replicate best practices and oil product spill Safety, Improvement of new safety culture tools. for safe operation prevention and response Labor Conditions and and actions in both plans at the hazardous Occupational Safety, and routine situations and facilities of the Group Emergency Prevention emergencies. entities. and Liquidation of 1. LUKOIL Group entities for Source: Ensuring Safety and Health at Work during the Pandemic. International Labor Organization (ILO), 2020. 2. 2021–2023. In response to the pandemic, ISO published on an expected basis newly developed standard ISO/PAS 45005, Occupational health and safety management — General guidelines for safe working during the COVID-19 pandemic. 3. Source: COVID-19 and the World of Work. International Labor Organization (ILO), 2020. 4. Source: The Sustainable Development Goals Report, United Nations, 2020. 72 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 73

Integrated Health, Safety, and Environmental Protection Management System INTEGRATED HSE MANAGEMENT ELEMENTS OF THE MANAGEMENT CORPORATE SYSTEM DOCUMENTS SYSTEM

04 GOALS Corporate policy establishes LUKOIL Group’s strategic goals, LUKOIL Group Policy for Health, Safety, and According to its corporate Elements of the Integrated above occur, the Group’s entity principles, and obligations Environmental (HSE) Protection in the 21st Century; HSE policy, LUKOIL Group’s top HSE Management System receives the maximum number of approved by the decision of the Management priorities are to create a safe work penalty points. Committee of PJSC LUKOIL dated May 25, 2020 1 environment, protect the health of The Integrated HSE Management its employees and people living in System provides for the Annual HSE training programs PRIORITIES / STANDARDS the areas where we operate, and identification and management of ensure that we maintain employee Corporate standards are applicable to all LUKOIL Group entities. 15 corporate standards of STO 1.6 “HSE Management ensure sustainable use of natural risks and environmental issues. The awareness and skills as appropriate Safety culture tools are used System” series (approved by Orders of PJSC LUKOIL resources drawing on the best risk-oriented approach is applied under legal regulations and No. 26 dated February 11, 2019, No. 86 dated May 17, available technologies to preserve to system planning, implementing corporate standards. 2019, No. 98 dated June 11, 2019, and No. 149 dated August 26, 2019) a healthy environment. We apply targeted functional programs, the precautionary principle and and monitoring results by The data on the amount RISK MANAGEMENT prioritize preventive measures over assessing KPIs and reporting to the of HSE training and training costs The Material HSE Risks Register and the Material Environmental STO LUKOIL 1.6.6 (order of PJSC LUKOIL No. 133 dated reactive ones as part of the existing Management Committee and the are given in Appendix 7. Information Issues Register are updated on an annual basis. These Registers July 24, 2019) risk management system. Board of Directors of PJSC LUKOIL. on the Integrated HSE Management are analyzed by the HSE Committee of PJSC LUKOIL and approved System can be found on the website by the First Executive Vice President of PJSC LUKOIL The Integrated System of The targeted functional programs Management of Industrial, Fire, are aligned with the corporate COMMUNICATION WITH TRADE UNIONS Radiation Safety, Emergency mid-term planning procedures; An ongoing contact is maintained with authorized occupational Agreement between the employer and the Trade Union Prevention and Mitigation, the they are developed for three years, health and safety representatives and trade unions of PJSC “Oil Company ‘LUKOIL’” for 2015–2020 Protection of Civilians, Occupational reviewed annually and approved by Safety and Environmental the management of PJSC LUKOIL. SAFETY SAFETY KEY PERFORMANCE INDICATORS Protection (the Integrated HSE Measures implemented as part of Leadership and Safety Culture The composite indicator “Ensuring the Required HSE Levels at Regulations on Evaluating the Key Performance Management System) has been the targeted programs are funded LUKOIL Group Entities” comprising those related occupational Indicator “Ensuring the Required HSE Levels at LUKOIL implemented and operating for and form an integral part of the We enhance the Integrated injuries and accident rates, and also the key environmental Group Entities,” approved by Order of PJSC LUKOIL more than 20 years to address LUKOIL Budget and the Investment Management System by using impacts (pollutant emissions and discharges, waste No. 83 dated April 22, 2020 these tasks. The Integrated Program. In addition, research and leadership and safety culture tools management) is established annually HSE Management System was engineering projects are undertaken that focus primarily on minimizing introduced on the Company’s own as part of the R&D program. human error, which is most often will; it is compliant with Russian the principal cause of accidents. CERTIFICATION OF THE MANAGEMENT SYSTEM legislation and best international The incentives system for Implementation of safety culture The Integrated HSE Management System has been certified for As at December 31, 2020, certificates issued practices and covers all Group managers and employees based tools at our entities is intended to compliance with the international standards ISO 14001-2015 and to 42 LUKOIL Group entities were in effect (covering entities as part of the operational on the “Ensuring the Required HSE stimulate safe employee behavior. ISO 45001–2018 82% of total LUKOIL Group headcount) control of PJSC LUKOIL. Levels” KPI is a critical element of the Integrated HSE Management PJSC LUKOIL holds annual Safety TARGETED PROGRAMS, PROJECTS, AND INITIATIVES Our strategic goal is to enhance System shaping our corporate Days1. Heads of PJSC LUKOIL The Program of Industrial Safety, Improvement of Labor The Programs were approved by Order of PJSC LUKOIL industrial safety, reduce on-the-job culture. The Management subdivisions and LUKOIL Group Conditions and Occupational Safety, and Emergency Prevention No. 28 dated February 18, 2020 injury rates, ensure accident-free Committee of PJSC LUKOIL annually entities take part in Safety and Liquidation of LUKOIL Group entities for 2020–2022. operation of production facilities sets KPIs for each Group entity, for Leadership Visits. We work The Environmental Safety Program for 2020–20222 and consistently reduce our PJSC LUKOIL, and LUKOIL Group. continuously on raising awareness environmental footprint. Heads of the Group entities receive and competence of the Group’s FURTHER INFORMATION quarterly bonuses based on their specialists and executives. For safety record. The requirements example, the Safety Days program Corporate HSE Policy: Integrated Management System: Insurance Policy include a record of zero fatal always includes discussions of best on-the-job accidents among their practices and challenging cases, as full-time employees, and the well as training sessions. absence of accidents and incidents resulting in significant property Projects are under way to introduce damage or facility downtime of leadership tools and to involve more than thirty days. If any of the personnel at all levels in conscious

1. HSE Policy 2. 1. ESP. The Environmental Safety Program. During the previous reporting period, the target programs for 2019–2021 were in effect. Safety Days are held in each LUKOIL Group entity at least twice a year. 74 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 75

and active efforts to improve safety In the event of an accident or Changes in the Integrated HSE • The following changes were the reliability of production out activities on safety culture and develop strong beliefs and incident at a hazardous production Management System during introduced into the assessment processes and equipment are through the Occupational Safety behavioral patterns in employees. facility, the Company is committed 2020 methodology of “Ensuring formulated within the Industrial commissioners. In 2020, a new In our daily operations, we already to taking responsibility and the Required HSE Levels at Safety Program, resulting in more method of improving occupational use electronic work permits and providing compensation for the During the reporting year, the HSE LUKOIL Group Entities” KPI: funding for the program. safety — the Leadership and Safety on-the-job training for more than damage caused. All the Group Policy, risk assessment system – a new criterion for evaluating • The Regulation on Best HSE Culture System of Occupational twenty occupations1, digital video entities that operate hazardous and target program structure the Group entities (“an Practices was approved to ensure Safety Commissioners. Its principal surveillance and intelligent video production facilities are insured were modified. We updated the KPI unsatisfactory assessment continued strengthening of our objective is to convince each 04 analysis systems, instructional videos and compensated for damage using evaluation criteria and introduced new based on the results of HSE safety culture1. Identifying and employee of their ability to become on the safe operation of certain types insurance coverage or profits, if the leadership and safety culture tools. compliance audits”) was sharing best practices will help a safety leader, thus shaping a of activities, and the Mobile Inspector insurance coverage is insufficient. • The HSE Policy reflects changes incorporated; improve existing practices and new mindset in the workforce. application, among other safety tools. related to PJSC LUKOIL’s transition – a procedure for interaction implement new management and The IATUO Chairman has already Efficiency assessment of the 2 Every year, we hold competitions Integrated HSE Management System to the new ISO 45001 Occupational between PJSC LUKOIL manufacturing processes and held his first Leadership Visits. where we award the participants Health and Safety Management structural subdivisions during operations, and this will enhance We have organized seminars developing the best projects, and the The Integrated HSE Management Systems standard (instead of the KPI evaluation was added. safety overall. attended by 479 occupational success of safety culture measures is System is constantly updated OНSAS 18001); it adds an accident • The structure of targeted • In addition to the leadership safety commissioners and taken into account when drawing up following the results of internal risk reduction goal and obligations functional programs was programs of the Group’s entities, created the e-learning course on the results. and external audits for compliance to consult with employees on amended to focus on emergency the Technical Inspectorate of “Leadership and Safety Culture” to with legal requirements and HSE requirements and effective prevention. From 2020, all the Trade Union Association continue the training. The information corporate standards, the result management of GHG emissions activities related to ensuring (IATUO of PJSC LUKOIL) also rolled about the implementation is the development of systemic (see the “Climate change” section of safety culture tools can be found actions to eliminate violations for details). We successfully passed Financing of HSE targeted and investment programs at LUKOIL Group, RUB million on the website. both at the audited facilities and an external audit, confirming our Program 2018 2019 2020 at similar LUKOIL Group sites. compliance with the requirements Internal audits are intended to of ISO 45001. Environmental Safety Program 35,529 35,903 22,440 assess the system’s performance • The risk management system including: and provide the Company’s introduced criteria for a more management with unbiased and comprehensive analysis of • capital costs 28,498 30,046 17,857 relevant information on the HSE the causes of risk events and

SAFETY SAFETY Industrial Safety Programs, Better Working Environment, Emergency 10,093 12,008 31,161 Liability insurance status. In 2020, due to the COVID-19 responsibility for their occurrence. Prevention and Response Program pandemic we adjusted the number When compiling the registers of The Integrated HSE Management of routine internal audits to focus significant risks, a new risk typical including: System includes voluntary third- on unscheduled, targeted audits for all Group entities associated • costs to improve labor conditions and protect health, reduce 4,946 5,281 6,532 party civil liability insurance of the of facilities operating in the most with the COVID-19 pandemic and occupational injury and occupational disease rates Group entities and compensation for vulnerable areas — the Arctic and potential similar events in the personal injury and environmental the Baltic Sea. future was identified. • costs to reduce accident, incident, fire, and emergency risks 5,147 6,727 24,629 damages. The insurance principles, R&D, experimental engineering, and scientific technical works in Russia 80 57 29 including those concerning catastrophe coverage, are defined by Number of entities where audits of management systems were including: the Insurance Policy of PJSC LUKOIL performed • environmental protection 58 34 19 and LUKOIL Group entities. 2018 2019 2020 • industrial safety 22 23 10 External audits (for compliance with ISO 19 20 16 Total, RUB million 45,702 47,968 53,630 14001 and ISO 45000 standards) Note. Internal audits (for compliance with 27 23 17 corporate requirements) Following the decision of the HSE Committee in 2020, expenses for several activities related to emergency prevention and response (including activities to improve the reliability of pipeline transportation) were reallocated from ESP to ISP. Cost Notes. changes for R&D projects depend on funding schedules for approved projects. External audits are conducted in a three-year cycle in accordance with ISO committee recommendations. During this period, all 42 LUKOIL Group entities that had applied for certification, and where certification or supervisory audits take place, are examined.

1. 1. Full name of the document: Regulation on Best HSE Practices of LUKOIL Group to fulfill the objective of improving industrial safety, reducing injuries and ensuring This project will be completed across the LUKOIL Group entities in 2021. accident-free operation of production and other facilities, as well as continuous reduction of environmental impact and systematization of the experience 2. In the Group’s entities and PJSC LUKOIL. accumulated in LUKOIL Group entities. 76 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 77

Measures to prevent spills LUKOIL Group entities have set up Employees from our corporate INDUSTRIAL SAFETY and emergencies emergency response teams1 from ERTs are also involved in liquidating among the Company’s employees to emergencies that occur in LUKOIL’s The Company has a system of address accidents. The total number regions of operation but are not measures to prevent spills and of responders exceeds 2 thousand associated with the Company’s LUKOIL is engaged in onshore To achieve these goals, LUKOIL Group and accidents and approved action emergencies. people, some of whom are stationed activities. This way, LUKOIL assists and offshore activities that can has committed to take all available plans to reduce the likelihood of any directly at production facilities. In regional administrations and local potentially pose a risk to territories, steps and to effectively implement recurrence. A mandatory assessment is made addition, we have signed agreements communities. For instance, our 04 residents, and the environment. We them in order to mitigate the risk of of the risks of potential spills using with third-party professional response response workers helped with cannot prevent every incident, but injuries and occupational diseases, The President of PJSC LUKOIL met scenario simulation at the stage teams. All response teams have putting out forest fires in Western we recognize our responsibility and accidents, and emergencies. with the heads of the Group’s entities of designing production activities, been certified to perform emergency Siberia in 2019. apply the principle of due diligence to This commitment is part of the to discuss the need to enhance as well as during the operation of response and recovery operations. mitigate risks and prevent incidents LUKOIL Group HSE Policy. Reliable industrial and environmental production facilities. Detailed description and emergencies1, including those functioning of the Integrated HSE safety measures. Following the The arrival of ERT on the scene of of the prevention system caused by oil and Management System is key to meeting, the President gave All of our Russian entities operating an incident is regulated by the SPR for oil spills, including spill spills. In accordance with the laws achieving the goals. instructions to carry out additional hazardous production facilities have Plans. If an incident takes place in risk assessment, description of the countries where we operate audits of production facilities. As Emergency Spill Prevention and a remote area, the first to respond of spill prevention and response and on the basis of voluntary We strive to comply with global best part of implementing this order, Response Plans (SPR Plans) in place. is the ERT closest to the site of the plans, Emergency Response commitments undertaken by LUKOIL, practices and have consistently we arranged for an inspection of Each document contains step-by- emergency. The containment period Teams activities can be found the Company has established a maintained low rates of accidents, equipment and preparedness of all step instructions for emergency for the oil spill may not exceed four on the website. comprehensive system of measures work-related injuries, and our Russian organizations to prevent prevention, detection, and response hours (in case of a spill on waters) to prevent, respond and eliminate occupational diseases for a long and respond to oil spills. activities to ensure a rapid response and six hours (in case of a land the consequences of emergencies. time2. • The technical condition of and efficient cooperation between spill) from the moment the spill is facilities and machinery was emergency response and recovery detected or the notification about the Our goals Industrial Safety Program inspected and evaluated with personnel. spill is received. due regard to the environmental • Improving HSE conditions, Thanks to the measures taken as impact. Emphasis was placed reducing the risk of accidents at part of the ISP programs over the on reservoirs and tank farms ERT headcount, people hazardous production facilities, long term, there has been a steady located in the vicinity of water SAFETY SAFETY including by improving the improvement in pipeline system bodies. Total 2 095 reliability of process equipment, reliability and a reduction in injuries • All mothballed sites were The Komi Republic 392 including the integrity of pipelines among full-time employees and inspected, and proposals were The Khanty-Mansi Autonomous Area – Yugra, 423 • Ensuring the preparedness of contractor personnel. Most of prepared to terminate or continue the Yamal-Nenets Autonomous Area The Astrakhan Region the management bodies of the the ISP activities scheduled for operating the equipment. 159 LUKOIL Group entities, personnel 2020 were completed, despite the • Technical means and the The Perm Territory 391 and Emergency Response Teams challenges presented by the COVID- availability of trained personnel The Volgograd Region 188 (ERT) to liquidate potential 19 pandemic. of the Emergency Response The Kaliningrad Region 66 accidents, fires, and emergencies Teams were carefully reviewed. The Stavropol Territory 95 • Improving procedures for the The year 2020, however, saw A new procedure for continuous Other regions 381 preparation and implementation several indicators decline as a monitoring of the ERT efficiency of programs addressing the most result of oil spills and an increase was introduced during the pressing issues of industrial, in the number of accidents (for pandemic. Plans for emergency fire, environmental safety, detailed information, see the operation drills were adjusted: occupational health and safety, sections “Reliability of Pipeline in regions with a complicated and prevention of emergencies Transportation in Russia” and epidemiological situation, full- “Occupational Health and Safety”). scale drills were replaced by The meetings of the HSE Committee office- and site-based training and the Board of Directors addressed to minimize contact among the issues of occupational injuries participants.

1. In Russia, an emergency is defined as a situation resulting from, among other things, an accidental oil or petroleum product spill that may cause or has caused human casualties, damage to human health or the environment, significant material losses, and disruption of living conditions of people. Emergencies can be split into categories. The minimum category refers to spills of less than 100 tonnes (or 714 boe, with 1 boe = 0.14 tonnes). 2. Transportation safety issues are not significant for LUKOIL’s operations as they apply to a small volume of traffic (which includes the personnel transfers and transportation of fuel by motor vehicles for retailing) and are taken into account in the corporate occupational safety system. The bulk of products is supplied to foreign and domestic customers through the transportation systems of and Russian Railways, as well as by marine and river tankers of third party 1. carriers. LUKOIL does not have its own rolling stock of rail cars and tanker fleet. Establishing in-house emergency response teams and contracting professional response teams is regulated by the legislation of the Russian Federation. 78 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 79

Measures for contractors’ • Joint discussions of field practices and present their own performance quality enhancement engineering reports with service experiences. RELIABILITY OF RUSSIAN companies and the chief designer PJSC LUKOIL uses a comprehensive (LUKOIL-Engineering) for design The existing contracts with all approach which combines control solutions implementation and contracting entities provide for PIPELINE SYSTEM and interaction methods with cooperation on ways to improve penalties for any violations of contractors to enhance the quality the quality of service. health, safety, and environmental of work performed by service • Regular control field audits requirements. 04 organizations of exploration and are conducted to inspect work Management system production. performance of engineering and In 2020, more than a thousand • In-house and outsourced technical personnel of drilling inspections1 of contractors were ELEMENTS OF THE MANAGEMENT CORPORATE supervisors, who act as units and occupational and conducted at the Russian entities of authorized representatives of the industrial safety departments. LUKOIL Group as part of corporate SYSTEM DOCUMENTS customer, continuously monitor • West Siberian sites employ a governance and production control. service companies’ compliance method designed and tested Employees of counterparties GOALS with design documentation, to rate well construction and were held liable for any violations The Company’s policy related to improving the functional Federal Law No. 116-FZ “On the Industrial Safety work plans, industrial safety reconstruction service companies. and penalties were imposed. reliability of is governed by legal requirements of Hazardous Production Facilities” dated July 21, requirements. Checklists were • Constant interaction is Counterparties were required to and corporate standards 1997, Federal rules and regulations on industrial elaborated to cover the entire maintained with service initiate measures to eliminate safety “Safety rules in oil and gas industry” scope of issues, from record- companies, for discussion of and prevent violations in a timely (approved by Rostekhnadzor order No. 534 dated keeping to the quality and safety pressing issues and a joint search manner. December 15, 2020); “Rules for the Safe Operation of In-Field Pipelines” of work performance. Carrying for improving the quality and (approved by Rostekhnadzor order No. 515 dated out works is safety of operations. Contractor November 30, 2017); accompanied by enhanced control representatives’ participation other federal regulations and rules on industrial safety of supervisors and hydraulic in Safety Days, where there is fracturing specialists. an opportunity to learn best PRIORITIES/STANDARDS Our priority is to adopt an integrated approach to the safe Corporate regulations (STO LUKOIL 1.19.1-2012; operation of pipelines: inhibitor coating, the introduction of 1.19.2-2013 and 1.19.3-2013) In 2020, LUKOIL launched pilot projects to compile contractor ratings at corrosion-resistant pipes, timely diagnostics, and the prompt

SAFETY SAFETY elimination of detected defects LUKOIL-West Siberia and the Perm refinery to encourage contractors to improve their safety culture. The experience was deemed positive, and there are plans to replicate it at other entities. INDICATORS The pipeline failure rate for oilfield pipelines, number of failures Resolution of the Network Group “Improvements to per 1 km, per year the Oilfield Pipe and Tubing Reliability” of PJSC LUKOIL (further, Network Group)

ASSESSMENT The principal source of expertise is the activities of LUKOIL’s Regulations on the Knowledge Management System of Improvement of the Oilfield Pipe and Tubing Reliability the Exploration and Production business segment Network Group, which forms part of the Corporate Knowledge (approved by the First Executive Vice President Ravil Management System Maganov on March 19, 2014)

RESPONSIBILITY The system covers all management levels, from senior The approved annual work plan of the Network Group management to specialized units at LUKOIL Group entities. as part of the Industrial Safety Program Responsible individuals in this area also include the experts and the head of the Network Group

TARGETED PROGRAMS, PROJECTS AND INITIATIVES Every Russian oil and gas producer has an investment program Annual and mid-term investment programs of “The renovation and technical re-equipment of pipeline transport PJSC LUKOIL facilities” The Integrated Program on the Improvement of Oilfield Pipeline Reliability, adopted by each entity of the Exploration and Production business segment

1. Full details of the total scope of the inspections are provided in the Annual Report for 2020, page 70. 80 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 81

Our goals • Increase of the share of pipelines The share of operating pipelines, Pipes made of alternative materials. their reliability and quality indicators, RITEK facilities, and the multiphase with anti-corrosion coating: when including corrosion-resistant We see the use of pipes made of and contribute to better reliability of pipeline at the new D-33V field in the In Russia, LUKOIL operates a well- replacing corroded sections of pipes older than 20 years has alternative (polymer) materials as pipelines in the Russian oil and gas Kaliningrad Region. developed field pipeline system that pipelines, we used such pipes been reduced. This indicator was the primary way to improve the industry overall. is longer than the Earth circumference 100 percent of the time. 19 percent of the total length of corrosion-prone sections of pipelines. To ensure the safe operation of at the equator and the most extensive • Additional laying of internally coated the pipeline system in 2020 and Non-metallic pipes are already in use In 2020, LUKOIL, together with a high-pressure water pipelines, self- offshore pipeline system among pipes, which has increased on decreased significantly over the at RITEK’s facilities in the Volgograd pipe manufacturer and with the pressure stabilizers that prevent Russian oil and gas companies (over average 11 percent per year over the past five years (it was 23 percent Region, and field trials are ongoing participation of St. Petersburg fractures resulting from internal 04 550 km, in length). We consistently last five years. in 2016). The inspection and at LUKOIL-West Siberia and LUKOIL- Polytechnic University, conducted hydraulic shock are installed at carry out work to mitigate pipeline • The share of pipes with a longer monitoring of these pipes are more Perm’s facilities. tests of various labeling methods, potentially hazardous sections. This failure risks and have a well-run service life, as well as pipes made frequent, with the concurrent use of which resulted in determining the solution increases the reliability reliability management system for of non-corrosive materials, is being several methods of control during The Ministry of Energy of the most promising types. Labeling of high-pressure water pipeline oilfield and mainline pipelines in place1. increased. one visit (for example, magnetic Russian Federation appointed an durability and traceability of the pipe operation. • The share of pipeline replacement inspection, automated diagnostic interdepartmental task force to life cycle will be demonstrated by pilot Our goal is the consistent maintenance in 2020 was 2.3 percent. The complexes, and other modern develop national standards for trial runs scheduled for 2021–2022. Unmanned aerial vehicles. We and stabilization of the system and the replacement volume and methods). the use of polymer pipe products. started using UAVs (including those 2 reduction of pipeline accidents as per rate are determined based LUKOIL’s experts partake in the work New methods for monitoring with internal combustion engines the best global practices. on the results of diagnostics, Thanks to the comprehensive of the task force. In 2020, a national pipeline integrity that can operate in Arctic conditions) examinations, and inspections measures taken, reliability indicators standard was developed for the for aerial surveillance of production Continuous and targeted work to of their technical condition and improved in 2020 in the main oil design and operation of field pipelines During the last two years, new facilities and monitoring of changes improve pipeline reliability indicators subject to the following criteria: production areas — Siberia and made of fiberglass pipes, and this methods to improve pipeline safety in conditions during emergencies. is crucial for minimizing the risk any potentially hazardous sections the Perm Territory. The specific standard is expected to be approved have been tested and implemented. The main advantage of UAVs is the of accidents. At the same time, and preconditions for incidents, coefficient of pipeline failures3 in all in 2021, while two other standards These include: early detection of depressurized other underlying causes, such as scheduled increase in product Russian entities continued to decline for using polymer-reinforced pipes • oil leak detection systems and pipelines with oil spills. The “human error” during construction, transfer volumes, and elimination in 2020 and stood at 0.062 cases are to be developed and approved. technical devices that prevent frequency of flights depends on local maintenance, and repair activities of regulations by regulatory per 1 km of pipeline per year (0.081 We believe that with the new national hydraulic shocks; conditions and the nature of the performed by service organizations, authorities. in 2019). standards in place and, given positive • unmanned aerial vehicles (UAVs). facilities: in particular, in-field and the integrity of other process test results, the use of non-metallic inter-field pipelines are circled at equipment, etc., also influence the pipes in the oil and gas industry will Leak and tamper detection systems, least once every three days. SAFETY SAFETY overall accident results. For this Reliability indicators of the Russian pipeline system, % increase significantly. pressure stabilizers. Leak detection reason, we combine measures to systems are being installed along LUKOIL’s specialists have been 2018 2019 2020 improve the reliability of the pipeline Interaction with suppliers. Incoming vulnerable sections of pipelines to working closely with contractors who system with steps to ensure the safety Share of corrosion-resistant 26.8 30.4 32.2 quality control of pipe products allow for early detection of even perform aerial patrols using UAVs to of production facilities and contractor pipelines delivered and cooperation with minor oil leaks and enable a response fine-tune the software of the drones responsibility. pipe manufacturers to improve the within 2 hours. The equipment has when operating in different weather performance characteristics of pipes already been delivered to the Komi conditions, as well as to improve Prevention of land spills are vital aspects of our efforts to Republic and to RITEK facilities. Four methods of surveying and processing The principal methods of improving reliability increase the reliability of pipelines. of these systems have already been the data obtained. To improve pipeline reliability, we of field pipeline operation installed in the Komi Republic. We continuously monitor the condition • Quality control of tubular products at manufacturing plants and The proposal by LUKOIL experts to plan to continue expanding their use of pipelines using various methods close interaction with suppliers use the manufacturer’s pipe labeling by installing seven more systems in designed to prevent corrosion, as • Industrial safety reviews, early engineering diagnostics, and will help in tracing products, including the Komi Republic, the Perm Territory, well as unintentional or intentional corrosion monitoring of pipelines with a risk rating of anomalies and damage that may be caused by third defects identified. Based on the results of inspections, identification parties. of potentially hazardous sections that need to be repaired or replaced • Expanding the application of alternative non-corrosive materials The main activities under the and pipes with internal protective coatings “Reconstruction and technical • Application of inhibitor and electrochemical protection of pipelines re-equipment of pipeline transport facilities” program resulted in the following:

1. The information in this section pertains only to the Russian entities of LUKOIL Group. 2. The rate of replacing rejected pipes is determined not only by the Company’s investment plans but also by the need to comply with statutory procedures and documentation. 3. A pipeline failure does not always entail a spill of oil, oil products or formation water, or a gas leak. Pipeline failure means a failure of performance associated with a sudden total or partial shutdown of the pipeline due to depressurization of the pipeline itself or shut-off and control valves or a blockage of the pipeline. The calculation uses the total length of pipelines (oil pipelines, gas pipelines, and water pipelines). 82 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 83

Indicators • over 500 emergency response Steps that were taken to efficiently workers, more than 100 pieces respond to these emergencies were PREVENTION OF SPILLS AT SEA Since 2016, the indicators for the of machinery and equipment, highlighted as “lessons learned”. pipeline system reliability of Russian and over 27 tonnes of sorbent • The use of UAVs made it possible to entities improved as a result of annual (on the Kolva River in the Nenets significantly cut the leak detection ISP activities. Yet, four significant1 Autonomous Area); time and to accurately determine Oil field development offshore is oil spills occurred in 2020 with oil • more than 20 emergency response the contamination area and technologically more complicated For over 15 years, LUKOIL has been operating offshore facilities released into water bodies (in the Komi workers from ERT, 12 pieces of working conditions. than onshore, and, therefore, (terminals, oil and gas production platforms, subsea pipelines) 04 Republic, the Nenets Autonomous equipment, and 1.5 tonnes of • The methodology for removing requires special attention and accident-free. This is the result of the Company’s highly Area, and in Western Siberia), which sorbent (on the Nong-Egan River in a spill in a fast-flowing river was efforts to ensure the reliability responsible approach to safety and preservation of marine affected the data dynamics. Western Siberia). finalized to include the following: of equipment and the safety of resources. the technology for installing oil operations. The detailed description of incidents The root causes of accidents and booms was improved; the most can be found in Appendix 3, including lessons learned were analyzed by suitable transportation (small Our actions in effect, which provides for the In accordance with the Oil and preliminary data on the accident in the each of the Group entities and during vessels with outboard motors) classification of well defects and Oil Product Spill Prevention and Komi Republic in 2021 the LUKOIL Safety Day. The root and equipment (portable sprayers) LUKOIL’s system of in-house the rules for their repair. Starting Response Plans, special vessels causes identified were: were prioritized. regulations and internal standards from 2018, all work has been with full equipment for emergency LUKOIL’s personnel acted strictly in • violation of labor regulations and • The availability of trained personnel and procedures accords with the performed in accordance with these management (under a contract with accordance with the Spill Prevention work discipline by employees; (including those with skills to Safety Rules for Offshore Oil and documents. professional emergency rescue and Response Plans with operational • use of unsafe work practices by operate non-standard equipment) Gas Facilities of the Federal Service teams) are on 24-hour duty around headquarters set up in all cases. contractors; facilitated the prompt cleanup of for Environmental, Technological Design and construction all LUKOIL’s offshore facilities. For localization and clean-up, the • improper handling of pipelines and the spilled oil. and Nuclear Supervision Company mobilized: their safe operation; • Local residents were consistently (Rostekhnadzor) and the Rules Design, construction, maintenance, Well condition monitoring • 47 emergency response workers • failure of the production kept informed, and the of the Register for classification diver inspection, and repair of from the ERT, more than 19 pieces equipment. environmental community was and construction of offshore offshore facilities are carried Wells are assessed and monitored of equipment, and 4.5 tonnes of engaged. fixed platforms and Pipelines of out by specialized service during downhole operations sorbent (on the Laia River in the the Russian Maritime Register organizations that are selected using instruments that assess the Komi Republic); of Shipping1. Construction and through tender procedures and condition of downhole equipment operation of offshore facilities technical audits. At the design and the string operation (pressure SAFETY SAFETY is permitted upon availability of and construction stage, LUKOIL and temperature sensors and Indicators of oil spills in Russian LUKOIL Group entities statements of compliance with assesses compliance of design devices for measuring other these requirements and based on and working documentation with parameters). The operation and 2018 2019 2020 permits issued by state authorities. reliability and safety requirements condition of the equipment are Volume of oil spilled in accidents, tonnes 32 16 43 by engaging independent expert monitored 24 hours a day; the PJSC LUKOIL has developed organizations. All well construction measurement results are sent to Including significant spills, tonnes 0 0 6 Methodological Guidelines for work at the fields is performed by the remote-control system, which Number of significant spills, incidents 0 0 4 ensuring reliability of offshore contractors under the supervision is constantly monitored in the pipelines and corporate standards, of LUKOIL Group entities through presence of service personnel. Specific coefficient of spills, kg of spilled oil and oil products per 1,000 tonnes of 0.4 0.2 0.6 which contain even more stringent drilling supervisors (working extracted oil and gas condensate safety requirements as compared directly on drilling platforms) and Notes. to the Russian legislation. There is production engineers (working 1. Data are provided for all the Russian oil and gas production entities under operational control (the list of LUKOIL Group also a standard operating procedure from the office). entities can be found in Appendix 1). 2. The specific coefficient of spills is calculated based on the volume of oil and gas condensate production in Russia (excluding the share in affiliates).

1. This organization is a full member of the International Association of Classification Societies and oversees compliance with the maritime law and the requirements 1. The definition of a material spill is given in Appendix 6. of international conventions for offshore facilities. 84 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 85

Offshore pipeline monitoring of the marine environment from Environmental and Satellite the possible negative impact of Monitoring of Offshore Zones OCCUPATIONAL HEALTH AND Every year, diver inspections of production operations. and Shorelines subsea pipeline routes and work In Russia, LUKOIL- to maintain their proper technical Zero Discharge Kaliningradmorneft and LUKOIL- SAFETY condition are carried out. In-line The main principle of offshore Nizhnevolzhskneft entered and visual diagnostic methods are work is Zero Discharge, which into contracts with specialized used: pipeline wall thickness is prohibits disposal of any type of organizations for continuous 04 measured, metal loss/stratification waste generated as a result of environmental monitoring of the The Company’s key priorities are As part of the Industrial Safety • Digital video surveillance systems and equipment spatial positioning production activities into the marine waters of the Baltic and Caspian to ensure safe working conditions, Program, measures are taken are installed at the oil refineries to are assessed, and corrosion environment. All waste is collected seas within the boundaries of the to preserve life and health of its annually to ensure safe working detect and prevent the occurrence monitoring systems are installed. in hermetically sealed containers, licensed subsoil areas. employees, as well as employees of conditions and preserve the health of abnormal2 situations. The results of inspections are which are then transported to the contractor organizations working of employees. The timeframe • Interactive training calendars for entered into databases for GIS shore for decontamination and For more details, please refer to the at LUKOIL facilities. The Policy for implementation is one year, 2021 named “Safety Culture” have applications. The frequency of disposal. “Environmental Protection” section. includes the Company’s obligations while some of them are of an been developed. inspections is strictly regulated by to require all employees of ongoing nature. The main areas • A solution was implemented in industry legislation1 and corporate LUKOIL Group entities and personnel for the reduction of injuries and the corporate automated control standards. of contracting organizations occupational diseases include the system for fuel stations: i.e., Platforms in the Caspian Sea to comply with the established following measures: pop-up windows now remind There was no need to replace safety rules, to offer training • Key safety rules and liability personnel of the safety rules pipelines during the entire life of the The duty rescue vessels and Kogalym are on duty around and continuously improve the mechanisms for non-compliance before the start of hazardous projects at the Northern Caspian the LUKOIL platforms in the Caspian Sea. In 2020, new equipment to qualifications of employees, and to by LUKOIL employees and operations (for example, receipt of and Baltic fields. LUKOIL adopted localize and eliminate emergency oil spills was purchased for them. provide incentives. contractor personnel have been fuel tankers). The Speed Sweep allows cleaning the oil film from the water surface the new Russian technology introduced. at a higher speed. This technology goes down from the vessel and “Beluga”, which can be used to • Best practices in the work of Additional information does not require the use of a loader crane and auxiliary equipment, Our actions perform repairs without stopping all of which all of which increase the response speed. LUKOIL entities and contractors on occupational health measures can the pumping of the product. In order to prevent injuries, we are disseminated and replicated. be found on the website. regularly identify risks (including • Digital solutions and equipment In order to avoid environmental critical risks) in accordance with are introduced. SAFETY SAFETY risks, a safety system is in place to the corporate standard and take • The institute of technical labor ensure a high degree of protection measures to manage them, take inspectors1 is introduced in key occupational safety measures, contracting organizations with and regularly inform our staff and the participation of the IATUO contractors about the state of association of trade unions. injuries. The COVID-19 pandemic accelerated In the event of accidents, all the introduction of digital LUKOIL Group entities carry out technologies based on remote investigations and the results operations. are communicated to the heads • An automated system for of LUKOIL entities and structural generating and approving work subdivisions of PJSC LUKOIL, permits is used, which made it considered at the meetings of the possible to minimize interaction HSE Committee of the PJSC LUKOIL between employees when issuing Board of Directors and included in hazardous work permits. the annual report to the PJSC LUKOIL • Automated systems for briefing Management Committee and on the projects are being implemented agenda of the Board of Directors’ and full implementation is meetings. planned for 2021.

1. The Institute of Technical Labor — exercise of public control (on behalf of trade union organizations) over compliance with labor laws and other regulations in the field of labor protection by forces of technical labour inspectors. 1. 2. Russian Maritime Register of Shipping “The Guidelines on Technical Supervision during Construction and Operation of Subsea Pipelines. Abnormal situation is the occurrence of conditions and states in the operation of technical systems that differ from those envisaged by projects, standards and Regulatory Document No. 2-030301-002” regulations and can lead to dangerous conditions. 86 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 87

Occupational injuries involving our employees at LUKOIL’s Information on the injury case on Implementing a safety culture at oil refineries and petrochemical entities entities was a fall from height. 2019 that was investigated in 2020 Ensuring safe working conditions is In contracting organizations, the is provided in Appendix 3. LUKOIL refineries are state-of-the-art production Open Days on safety for employees’ families and a priority task for all LUKOIL Group accidents occurred as a result facilities with a large amount of complex equipment competitions among employees for best projects are entities. Every year measures are of one employee falling from At the end of the year, two LUKOIL and potentially hazardous technological processes. held. Accident-free work is rewarded both financially taken to prevent workplace injuries height and the others were a entities with fatal injuries were Therefore, we are constantly focused on fostering and non-financially. among full-time employees and result of extreme temperatures. found to have failed to meet the KPI safety culture. At the entities of the PJSC LUKOIL oil contractor personnel. According All accidents involving employees “Ensuring the required level of HSE”. refining units, Industrial Safety Committees have Since 2019, a contest has been held annually to create 04 to our internal analysis, LUKOIL’s of LUKOIL Group entities were As a result, the annual remuneration been established, and extensive campaign work has the best video on industrial and occupational safety. been carried out using visual materials, including: injury rates are lower than those investigated. of the CEOs of those entities was of companies with comparable reduced. • stands with statements of the Company’s President, In 2020, a new tool was tested — the International Vice President and Chief Executive Officers; intellectual game “Occupational Safety Online”. The production volumes and headcount. Measures taken • leadership visits by the plant management and Unit game aroused great interest not only among the In order to strengthen occupational managers; employees, but also among the “fans”, 17 teams from In 2020, we note an increase in In order to prevent cases like those safety measures, the circumstances • accident-free counters; nine entities took part in the first game. It is planned the number of accidents at LUKOIL which occurred in 2020, the following and causes of injuries are • broadcasting of materials on safe behavior on to hold the second game at the Volgograd Oil Refinery entities and the number of injured measures were taken based on the communicated to the LUKOIL Group monitors in places where employees will see them; in 2021 to coincide with the World Day for Safety and (mostly in foreign entities). Due to results of the investigations. entities on a quarterly basis via • “Five steps” safety rules; Health at Work. continuous efforts to improve the • LUKOIL-PERM. The circumstances information letters, which provide • “Stoppage of unsafe work and self-monitoring of safety culture, the rate of fatalities and causes of accidents were an overview of injuries and a risks” cards. as a result of work-related injury communicated to employees, description of measures to be taken remains at the same level1. The and unscheduled briefing (including communication with Liability and compensation contracts that are not mandatory lump sum benefits in accordance change is mainly due to an increase and extraordinary checks of contractors). When identifying risks in the country of operation (for with collective bargaining in the number of minor injuries (for knowledge of labor safety and hazards in the area of industrial In all the countries where example, third-party liability agreements. The terms and amount example, as a result of employees requirements for the operation of safety and occupational health and LUKOIL Group entities operate, insurance contracts, insurance of benefits are determined during falling on a flat surface). At the wells equipped with sucker-rod safety, the Group entities should the employer’s responsibility for contracts in Iraq or Uzbekistan3). negotiations with trade unions same time, LUKOIL Group was able pumps were carried out. apply the results of these analyses preserving life and health of its In addition to mandatory insurance and representatives of labor to prevent group injuries. Moreover, • Nizhny Novgorod Oil Refinery. in their work. employees at the workplace is benefits, employees may be paid collectives. the number of accidents resulting The assignment of personnel enshrined in law1. Employees who from traffic accidents decreased between technological facilities For example, based on the analysis SAFETY SAFETY have suffered from accidents at (one case in 2020, nine cases in of the entity according to process of the frequency of injuries to work, from an illness or disability Case studies of LUKOIL Group foreign operations 2019). Based on the results of our characteristics was organized. employees (including contractor as a result of an accident, shall be investigations, the main causes Additional control over the work of personnel), in 2020 we increased provided with monetary payments, On an annual basis, the oil refinery in Bulgaria takes out “Health” group of occupational injuries were the operators using video surveillance our assessment of the probability the amount of which is determined joint policy (supplementary health insurance) and “Life” risk insurance. violation of labor regulations and systems is now exercised; new of exposure to the risk of falling by the terms of insurance contracts The “Health” policy enables the employee to be reimbursed (up to a labor discipline by employees and various means of communication from height during high-risk work. certain limit) for inpatient and outpatient treatment, medicines, and and local laws and bylaws2. personal negligence by the injured, are used and checklists on To mitigate the risk, it is planned dental care. The “Life” policy covers the risks of death of the insured, as i.e. the so-called “human factor”. the actual employment of to equip the Corporate Training well as their loss of labor capacity by more than 50% as a result of an In most countries, employers are accident or illness. technological personnel during Center with a training complex required to take out individual or We regret to say that we were the shift are maintained, while where personnel working at heights group life and health insurance In Iraq, local workers are insured against accidents at work, terrorism unable to avoid fatalities in 2020: unauthorized access to the and emergency rescue teams will policies for their employees. The or mass disorders, and occupational diseases. If the amount of damage two of our employees (at LUKOIL- premises of ventilation chambers be trained. Also, stationary safety Group entities fully comply with the to health is not covered by insurance, an additional lump-sum benefit Perm and the Nizhny Novgorod is excluded. systems for safe passage at height legislative requirements and apply is paid, the entire period of sick leave is paid, and the cost of medical Oil Refinery) and four employees are being installed at production a uniform approach in accordance services is compensated within the limit. Seconded Russian workers are of contracting organizations died. facilities. A project to equip oil tank with the Insurance Coverage also provided with insurance policies and VHI policies. The cause of both fatal injuries farms with bottom loading systems Program for LUKOIL Group entities, including entering on a voluntary basis into certain types of

1. In Russia the Group entities are insured for civil liability under the Federal Law No. 225-FZ “On Compulsory Insurance of Civil Liability of the Owner of a Hazardous Object for Inflicting Damage as a Result of an Accident at the Hazardous Object” dated July 27, 2010. 2. In Russia in accordance with the Federal Law No. 116-FZ of July 21, 1997 “On Industrial Safety at Hazardous Production Facilities”. 3. The legislation of Uzbekistan does not establish the requirement for mandatory conclusion of insurance contracts. However legislative acts provide for mandatory 1. monetary compensation for those injured as a result of accidents at work and for employees with occupational diseases. Further quantitative information on injury rates is given in Appendix 7. 88 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 89

is being implemented in Oil Product them access to LUKOIL facilities. If To ensure compliance with the Indicators related to occupational injuries at contractor organizations in Russia and abroad requirements of safe work at height, Supply entities. the assessment is unsatisfactory, 2018 2019 2020 the contractor’s personnel will disciplinary measures are applied In addition, it is planned to check the be sent for training to the centers in the event violations are detected Including: 9 13 10 knowledge of those responsible for equipped with simulator complexes, or personal protective equipment is fatal organization and safe performance and will not be allowed to work not used. of work at height in contractor at height until positive results on • high-consequence work-related injuries 1 6 3 organizations before allowing the knowledge check are obtained. 04 • Number of victims of accidents 3 1 1 Indicators related to occupational injuries at LUKOIL Group Number of victims of accidents 9 16 11

2018 2019 2020 Note. Lost time accident frequency rate (LTAFR) 0.20 0.19 0.28 The detailed calculation can be found in Appendix 7.

Lost time injury frequency rate (LTIFR) 0.12 0.13 0.15

Rate of fatalities as a result of work-related injury 0.01 0.01 0.01 Health in the workplace Occupational illnesses are extremely Among other things, this project rare among the LUKOIL Group is intended to improve safety and Rate of high-consequence work-related injuries (net of fatalities) 0.03 0.05 0.04 In 2020, significant efforts of the employees. LUKOIL-Komi is the only working conditions in accordance Rate of registered occupational injuries or damage to health 0.15 0.18 0.19 Company’s medical services were entity where difficult conditions with the Rules for industrial safety focused on protecting employees remain (i.e., in the shaft oil in the mine development of oil from COVID-19 (for details, see the production). fields, which were developed at the Notes. section “Our Employees”). initiative of LUKOIL. 1. The lower all indicators the better. LUKOIL-Komi implements projects 2. The formulae used to calculate the indicators are provided in Appendix 6. The corporate health control to improve working conditions in Number of LUKOIL-KOMI system for employees is based on oil mines, such as introduction of workers with newly managing the risks of occupational new ventilation systems; purchase diagnosed occupational and work-related diseases. The of equipment that excludes contact illnesses, people Number of occupational accidents and employees injured in workplace accidents at LUKOIL Group risk management system identifies with vibration sources; introduction entities typical hazards, such as increased of automation equipment; and SAFETY SAFETY noise, vibration, chemical exposure, the use of specialized personal 2020 6 2018 2019 2020 labor intensity and others. If the protective equipment. Priority is Total number of occupational accidents 21 19 28 risks identified at the LUKOIL Group given to the early identification of 2019 11 entity level are assessed as workers predisposed to occupational Including: significant, measures are developed diseases, and their treatment, and 2018 16 • fatal 1 2 2 to control and reduce their impact. transfer to work that excludes contact with sources of harmful 7 • high-consequence work-related injuries 5 8 The Company has appointed production factors. Number of victims of accidents 23 25 28 a Health Protection Officer to hold regular consultations with In 2020, a priority project was employees on health-related issues; launched to reconstruct the oil Note. trade union organizations are also mines at the Yaregskoye field and the If during the reporting period an employee suffered more than one injury, each case is counted as a separate injury. involved in this work. related infrastructure.

Measures to prevent injuries in contractor organizations Occupational illness trends in Russian LUKOIL Group entities 2018 2019 2020 Injury rates in contractor on a regular basis, and compliance Detailed information can be found Occupational disease rate (ODR) 0.19 0.13 0.071 organizations have improved checks are performed in the course in the “Supply Chain” section on the per 1,000 workers (of particular note is that the of work. In addition, representatives website. number of injured has decreased of contractor organizations are per 1,000,000 man-hours 0.11 0.08 0.04 significantly), in part due to invited to attend Safety Days and increased cooperation in this quarterly meetings held by the area. Pre-tender assessments of Group entities to analyze injuries contractors for compliance with the and discuss measures to prevent HSE requirements are performed accidents in the future. 90 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 91

SAFETY OF FACILITIES IN THE ARCTIC ZONE

The safety of production operations of nature resource pipelines. The largest production facility in the Arctic Zone is producing companies in the Arctic Zone became particularly the Varandey Terminal. 04 important in 2020 due to a number of major accidents and accelerated climate changes in the region. LUKOIL pays The Company has built an effective management system special attention to environmental and industrial safety that enables timely control of the condition of facilities in the Arctic, applying cutting-edge technical solutions located in the permafrost area. The climatic specifics of the and methods of engineering protection of facilities and northern territories are taken into account at the design, territories. construction and operation stages of all production facilities located in the Arctic Zone; all facilities are insured against Observations of the Arctic climate the risks of property loss or damage.

1 According to estimates of climatic changes in the Arctic, Design and construction stages average surface air temperatures are predicted to rise across a large part of the Arctic over the next decade, At the design stage of production facilities possible and, according to the WWF2, the ice cover may almost thawing of permafrost is taken into account, facilities are completely disappear by the end of the 21st century. These designed with a large safety margin based on engineering trends indicate physical risks primarily associated with the calculations and geological surveys. Engineering degradation of permafrost. The expansion of the area and solutions are used, which make it possible to prevent depth of seasonal soil thawing can lead to critical disruption permafrost thawing, maintain equipment integrity and of the reliability of production processes, equipment and reduce product losses. safety systems at engineering facilities, especially those • Pipelines, buildings, structures and tank farms are built decades ago. built on pile foundations. • Aerial crossings are constructed when water bodies SAFETY SAFETY At the same time, there is3 a growing global interest in are crossed. the Arctic macro-region, since more than a quarter of the • Boreholes are drilled using the slant-hole directional with thermometer wells up to 25 m deep. Soil temperature • monitoring of the foundations of buildings and world’s hydrocarbon reserves are located here, and the drilling method (“pipe-in-pipe”), which prevents is measured twice a year, and the measurement results are structures; development of these territories is intensifying rapidly. New intense warming of soils. recorded in logs and reviewed. • control of the depth of seasonal thawing and the economic opportunities are also associated with the use groundwater level. of ice-free waters of the Arctic Ocean for transportation. Construction on piles. During construction of facilities, piles Thermal stabilization systems. Temperature stabilization This opportunity is already being implemented in the Arctic made of cold-resistant steel are submerged in boreholes. systems, plastic-frozen soil stabilizers, thermal insulation Equipment is monitored at least once a year by qualified region countries, including Russia4, and, in accordance Cavities within the seasonal freezing and thawing layer are screens at the base of underground tanks and external specialists engaged on a contractual basis and by with national objectives, will expand. In 2020, LUKOIL used filled with frost-resistant concrete. The lower ends of the thermal insulation of facilities are used to maintain the LUKOIL employees (surveying inspections, geotechnical the Northern Sea Route (NSR) for the first time to deliver piles are at least 0.5 m lower than the ice foot. The piles are temperature regime of permafrost soils and eliminate monitoring). In the event any violations of the thermal products to the eastern region. marked with geodetic markers that indicate pile deflection unforeseen heat releases. regime of soils exceeding the permissible values are due to settling or movement of the ground. For timely identified, additional measures are taken to restore the Our actions identification of equipment sludge, the pile substructure and This approach is also used at the Pyakyakhinskoye field. original temperature. foundation markers are leveled (once every two years). Temperature stabilization systems “GET” and “VET”, which There are 30 fields in the Arctic Zone of the Russian are hermetically sealed structures made of pipes filled with The technical condition of the main gas pipeline of the gas Federation (onshore) developed by LUKOIL Group For example, five oil storage tanks with a volume of refrigerant, are installed in the base of oil storage tanks. transportation system of the Bolshekhetskaya Depression organizations (in the Yamal-Nenets Autonomous Area, 10,000 cubic meters each are located at the site of A similar system was used in the construction of the tank is monitored once a year by helicopter inspection using a the Nenets Autonomous Area and the Komi Republic5), acceptance and delivery point of Pyakyakhinskoye field (the farm of the Yuzhnoye Khylchuyu Central Gathering Facility laser gas leakage locator, as well as on a monthly basis by the largest of which are the Pyakyakhinskoye and Yamal-Nenets Autonomous District). The tanks are installed (the Nenets Autonomous Area): temperature of foundation visual inspection driving along line pipes. Nakhodkinskoye fields. The length of the pipelines is on a pile foundation. The base of the tank farm is equipped soils is stabilized using the “GET” temperature stabilization about 2 percent of the total length of the existing field systems and plastic-frozen soil stabilizers. During the entire period of operation of the equipment,

1. buildings, structures and tanks, no significant changes Sources: The IPCC Fifth Assessment Report on climate change for 2014 (https://www.ipcc.ch/site/assets/uploads/2018/02/SYRAR5FINALfullru.pdf); publication related to thawing of permafrost soils have been identified. of the Sixth Assessment Report is expected in 2021. Report of the Russian Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet) on Operation stage climate change and its consequences in the Russian Federation for 2019 (http://www.meteorf.ru/press/news/20626/). Specialized research projects (https:// In the future, we will continue to pay more attention to the www.weforum.org/agenda/2020/08/arctic-sea-ice-global-warming-climate-change-predictions/; https://arctic-rcc.org/sites/arctic-rcc.org/files/documents/ acf-fall-2020/ACF-6ConsensusStatementFinal.pdf); Global Climatic Threat and Russian Economy: Searching for the Way. Energy Center of the Moscow School of At the operation phase, systematic maintenance and risks associated with activities in the permafrost zone as Management SKOLKOVO, 2020. (https://energy.skolkovo.ru/downloads/documents/SEneC/Research/SKOLKOVOEneCClimatePrimerRU.pdf ) control of the buildings and equipment condition are part of our climate strategy and to developing measures 2. Source: https://wwf.ca/habitat/arctic/last-ice-area/. 3. carried out, including: to deal with identified risks and prevent damage to the Source: https://www.cfr.org/emerging-arctic/#!/ 4. The strategic objectives of Russia are outlined in the 2018 Comprehensive Plan for the modernization and expansion of trunk infrastructure for the period up to • control of temperatures of critical units, environment. 2024. The development of the Northern Sea Route is indicated as one of nine federal projects. characteristics and vibration, check of alignment of 5. In 2020, the municipality of Usinsk was added to the land territories of the Arctic Zone in the Komi Republic. the main technological equipment; 92 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 93

• Treatment (disposal) of wastewater from the combined the steam was examined and samples of water, bottom THE KOMI REPUBLIC cycle plants. The work will be carried out in stages and is sediment and soil were taken. In 2021, it is planned to planned to be completed in 2022. implement the second stage — the treatment of water, • Elimination of old settling tanks of the treatment bottom sediments and the shoreline. The completion of the “LUKOIL-Komi” is one of the largest subsoil users in the of the Maly Voyvozh stream. The new facilities were facilities of oil mines. It is planned to pump out the oil- project is expected in 2023. Timan-Pechora oil and gas province in the north-western commissioned at three sites: in the villages of Yarega (near containing liquid, as well as to remove and dispose of Russia and operates in the Komi Republic and the Nenets oil mine No. 1), Pervomaysky (near oil mine No. 2) and Nizhny bottom sediments. The pits will then be backfilled with Land remediation Autonomous Area. The entity includes territorial production Domanik (near oil mine No. 3). the mined-out rock of the oil mines and reclaimed. The 04 enterprises (TPE) LUKOIL-Usinskneftegaz, LUKOIL- completion of the project is expected in 2023. In 2020, 40 hectares of contaminated land were Ukhtaneftegaz, LUKOIL-Severneftegaz, the Yareganeft oil After the commissioning of the new facilities, the volume remediated, including in the District (near the Maly and mines division, as well as the Usinsk gas processing of insufficiently treated water discharges was reduced to Voyvozh stream) and the Izhemsky District (in a forest area). plant. High-viscosity oil is produced in the region, including a minimum already in 2020 (from over 400 thousand to Maly Voyvozh by means of shafts. Production volume in 2020 was 43 thousand cubic meters), and the mass of pollutants The implementation of all those projects will significantly 14 million tonnes, 12 percent less than in 2019 (16 million contained in the wastewater decreased by 94 percent One of the environmental problems in Yarega is pollution improve the environmental safety of oil production at the tonnes). The Group also includes the Ukhta oil refinery (as compared to 2019). At the same time, fresh water of the Maly Voyvozh stream (part of the ecosystem of Yaregskoye field. located in the region. intake from local surface water bodies was reduced the Yarega and Ukhta rivers) which accumulated both in (by three times) due to the fact that wastewater from the the pre-privatization period and during LUKOIL-Komi’s Prevention of oil spills Our actions oil mines after deep treatment is sent to a closed cycle operations. LUKOIL set as its goal to carry out a complete for the production of steam required for high-viscosity oil cleaning of the stream and return the water body to its LUKOIL continues to act diligently to improve reliable When planning and performing the production activities, production. The operation of the treatment facilities is under original state if possible. In 2019, a stationary hydraulic operation of our pipelines. Key areas to improve reliability we take into account the complexity of issues that need to constant control of the control center. The project cost seal was commissioned to prevent the spread of pollution and safety of the LUKOIL-Komi pipeline system include be resolved in the Komi Republic. LUKOIL is committed to amounted to RUB 1.9 billion. downstream. pipeline corrosion protection, timely current repair and reducing environmental risks for LUKOIL-Komi producing overhaul, pipeline reconstruction, continuous corrosion companies and the population, in 2020 the implementation We took a comprehensive approach to the task of improving In 2020, LUKOIL-Komi and the Biological Institute of Tomsk monitoring, in-line diagnostics and cleaning, as well as of the program Comprehensive Organizational and Technical the environmental situation in the area of the oil mines in State University entered into a contract to clean the expert examination of industrial safety and technical Measures to Reduce Social and Environmental Risks in Yarega. In addition to the commissioning of new treatment water and bottom sediments of the stream of oil and oil diagnostics of pipelines. the Komi Republic (2020–2022) started. It is a part of the facilities, two other projects were undertaken to eliminate products. Our partner has its own technology for bottom LUKOIL Group’s investment program and includes measures, liquid waste and pollution accumulated in the pre- sediments treatment, which has already been tested on The most stable result is achieved by replacing pipeline that are aimed at significantly reducing the negative privatization period. Shchuchiy Lake (the Komi Republic). The project underwent sections with corrosion-resistant pipelines. The following SAFETY SAFETY environmental impact of LUKOIL-Komi’s operations in the a public hearing procedure and then, during the first stage, results were obtained thanks to the measures taken by following key areas: LUKOIL: the length of corrosion-resistant pipelines has • liquidation of the sediment ponds of oil mines 1, 2 and 3 increased by 18 percent since 2018 while during the same • construction of water pipelines for the injection of period, the specific failure rate of pipelines has decreased wastewater from the combined-cycle plants (Usinskoye by 30 percent. A promising area is the use of corrosion- field); resistant pipelines (about 200 km of non-metallic pipelines • implementation of the roadmap to restore water bodies are in operation as part of a pilot project). from historically accumulated pollution (the Maly • In accordance with the roadmap, the reconstruction Voyvozh stream); of the interfield oil pipeline of the central gathering • disposal of accumulated oil-saturated sandstone from facility Lekkerka, booster pump station V. Masterel, the mine workings of oil mines (with the involvement was performed on time. In 2021, the remediation of of a qualified contractor), as well as testing of contaminated lands at the pipeline location will be mobile technology for washing this waste at the oil completed. production site; • Pilot testing of polymer pipes made of with • rehabilitation of contaminated land. higher temperature resistance produced by the Stavrolen complex will begin in 2021. Facilities at Yareganeft’s Measures to improve reliability and safety of the pipeline fields have been selected for testing. system and improve the environmental situation in the Komi Republic are determined during the annual planning process We made an important decision to use UAVs to assess the and are also funded as part of the ISP and the ESP. In 2020, condition of the pipelines and adjacent infrastructure in RUB 8.9 billion was allocated to implementation of these. addition to the traditional types of monitoring (walk-round checks and snowmobile patrols in winter). UAV flights help to identify even minor oil transportation equipment Treatment facilities at Yarega malfunctions more quickly and with greater area coverage. In 2020, a hallmark event of long-term importance for Flights have been carried out since July 2020 according to an the region was the completion and commissioning of new approved schedules, and, based on the results, a database treatment facilities at all oil mines of the Yareganeft oil mine is being formed for further monitoring purposes. production enterprise. The old facilities did not provide the necessary treatment level of wastewater discharged into surface water bodies, which led to chronic pollution 94 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 95

In 2020, 14 applications on environmental issues were Another topic for discussion was the performance THE KOMI REPUBLIC received via the hotline (26 applications in 2019). Based of seismic exploration works in the floodplain of the on the review of the applications, all the applicants Pechora River in 2018, which caused concern among were provided with clarifications on LUKOIL-Komi’s residents in connection with forest devastation. Environmental performance of LLC LUKOIL-Komi production activity plans. After completion of the seismic work, LUKOIL-Komi organized flights over the territories where the work was 2018 2019 2020 We regularly hold meetings with local residents and performed, during which time photo and video recordings Pollutant emissions, thousand tonnes 72 64 57 heads of settlements, cooperate with many public of the disturbed land condition were made. In October 04 organizations, such as Komi Voityr (Komi People), Izvatas 2019 and in August 2020, repeated flights around the Intake of water from surface sources, thousand cubic meters 380 340 122 (Izhemtsy), Rus Pechorskaya and others. territories were made together with representatives Discharge of insufficiently treated water, thousand cubic meters 452 416 43 • Interaction with residents of the Ust-Usa village and of supervisory authorities and representatives of the the Novikbozh village (Usinsky District) villages. As a result, formal notes were drawn up on the Discharge of polluted water, million cubic meters 0 0 0 absence of comments on the quality of cleaning of wood Total weight of pollutants contained in wastewater discharged to surface water 571 701 42 Both settlements are located at a distance of about residues in the cuttings. Seedlings of spruces were then bodies, thousand tonnes, 15 km from the Usinskoye field, so the Company is planted. constantly in contact with the local residents. In • Interaction with the residents of Shellyayur and Diyur • including hazard classes 1 and 2, tonnes 0.33 0.5 0.03 2019, the Company’s plans to construct a production villages (Izhemsky District) Waste generated, thousand tonnes 42.2 206.9 421.1 facility (prospecting well) were discussed at the public control meetings. Based on the discussion results, LUKOIL’s plans to build a solid and liquid oil sludge Waste disposed of, thousand tonnes 42.7 209.6 421.4 LUKOIL decided to move the construction site farther landfill that would enable LUKOIL-Komi to neutralize oil Volume of oil spilled in accidents, tonnes 19.6 13.8 33.2 away from the villages. In 2020, as a continuation sludge, without risks to the environment initially led to of the dialogue, a working group was created that protests by the environmental community and residents Remediated lands, ha 41.2 49.6 40.0 included representatives of LUKOIL-Komi management, of two villages of the Izhemsky district. Following the administration of the Usinsk urban district and the public hearings, it was decided to move the construction Treatment facilities at the Ukhta oil refinery Social interaction initiative group of the residents. Repeated hearings on of the facility to the territory of the Makaryelskoye field the project were organized and the dialogue continues. of the TPE LUKOIL-Ukhtaneftegaz. The territory where One of the tasks to be solved is related to the condition We also take actions to improve the social situation the landfill was supposed to be built is being reclaimed. of treatment facilities at the Ukhta oil refinery. The in the republic. On an annual basis, LUKOIL supports facility was designed and built in the late 1960s; it projects of local administrations, municipal and public SAFETY SAFETY receives both wastewater from the plant’s production organizations. In 2020, the funding for social projects in processes and municipal wastewater, which accounts the Komi Republic amounted to about RUB 229 million1. for more than 80% of the total wastewater volumes to Examples include purchase of medicines for disabled be treated. After mechanical and biological treatment children, numerous projects to repair schools, hospitals, and disinfection, wastewater is discharged into the cultural institutions and other socially important Ukhta River. facilities.

As part of the investment project to upgrade the oil Applications from local organizations are considered as refinery treatment facilities, this important facility is part of external social programs. When an application being re-equipped to significantly improve the quality is received, the request is evaluated based on the of wastewater treatment. Total investments will exceed following criteria: the cost of implementing the project; RUB 1 billion. territory of implementation; audience coverage; reputation of the organization. LUKOIL-Komi assesses In the first stage, new equipment of settling basins, the effectiveness of the projects by monitoring social aeration systems and biological treatment was networks and mass media for positive feedback. installed, which led to a significant reduction in the pollutant concentrations. The second stage was Interaction with residents and public completed in 2020 with the re-equipping of the organizations mechanical cleaning system. As a result, wastewater treatment quality significantly improved in terms At key stages of projects, LUKOIL holds consultations of phosphorus compounds, nitrates, and organic with residents whose interests may be impacted by substances. corporate plans. Various communication channels are used for this purpose, including public hearings on By the end of 2023, it is planned to complete the last projects, personal meetings between LUKOIL Group stage (i.e., to complete mechanical and biological management and specialists and residents, and a treatment facilities and to equip the facility with an permanent hotline to interact with the public. The automated system of industrial environmental control) opinion of local residents is taken into account when and to bring the quality of wastewater to regulatory deciding on project implementation parameters. requirements.

1. Excluding the costs of the agreement between PJSC LUKOIL and municipal administrations. 96 LUKOIL Group 97

05

Eco-friendlyEco-friendly

ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL BUSINESSBUSINESS

Our strategic goal is to consistently reduce technogenic impact on the environment by introducing the best available technologies and equipment, as well as by

increasing the automation level ENVIRONMENTAL PROTECTION of controls of technological processes. 98 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 99

KEY CHANGES AND RESULTS CONTEXT IN THE REPORTING YEAR Tackling the ecological issues The decision5 to include ocean and 20308, and the World Bank has associated with human impact coastal ecosystems in the scope analyzed the economic, health, and on the environment continues of the UN Framework Convention environmental damage caused by to require1 considerable public on Climate Change as factors contaminated water9. attention, as the future of humanity contributing to climate change depends directly on the sustainable adaptation and reducing human The environmental crisis we face can 05 use of limited territory and the impacts on climate should be serve as an opportunity to take bold remaining natural resources. By viewed positively. As a result, measures, such as incorporating AIR POLLUTANT EMISSIONS ACROSS LUKOIL GROUP RUSSIAN LUKOIL ENTITIES CUT WATER 2020, LUKOIL planned to fulfill eight projects to conserve the ocean the valuation of natural capital WERE REDUCED BY 8 PERCENT CONSUMPTION FOR THEIR OWN NEEDS objectives related to biodiversity and coastal ecosystems qualify as into financial decision-making BY 8.1 PERCENT conservation (SDG 15) and marine activities under the Paris agreement, and making more significant ecosystems (SDG 14)2. Thanks which serves to boost investment in investments in preservation, so to a real team efforts by all SDG this area. as to move from transforming supporters, target 14.5 was met3. We nature to reformulating humanity’s see more sustainable use of forests, Among the most pressing issues relationship with nature10. while more land, freshwater, and are the importance6 of increased mountain areas are now under efforts to conserve fresh water LUKOIL contributes to SDG 14 protection. There has also been an and significantly lower pollution (Life Below Water) by conducting increase in public environmental levels, transitioning to integrated constant monitoring of THE WASTE MANAGEMENT KPIS WERE ALL PRE-PRIVATIZATION DAMAGE AT THE VOLGOGRAD awareness, which is crucial for water resource management, and environmental impact of production COMPLIED WITH IN RUSSIAN ENTITIES: THE VOLUME REFINERY WAS FULLY ELIMINATED catalyzing change. Nonetheless, improving water supply quality7. sites on shoreline and offshore OF WASTE DISPOSAL MATCHED THAT OF WASTE progress on most of the other The World Resources Institute areas. GENERATION objectives is still rated4 as moderate has revised its forecasts of water or weak. supply/demand shortages by CONTRIBUTION TO IMPLEMENTATION OF SDG ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL

Environmental and satellite monitoring covers the shoreline within the licensed areas, the Varandey marine terminal territory, and offshore area.

PLANS FOR 2021 AND THE MIDTERM

Implementation of the Environmental Safety Program for 2021–2023.

1. Source: The Sustainable Development Goals Report, United Nations, 2020. 2. Target 14.5: By 2020, conserve at least 10% of coastal and marine areas, consistent with national and international law and based on the best available scientific information. 3. Source: ibid. According to the report, 17% or 24 million square kilometers of coastal marine areas (up to 200 nautical miles from shore) received protected area status at the national level in various countries. 4. Source: ibid. 5. Source: Biodiversity and Ecosystem Services: Horizon Scanning Report. IPIECA, UN Environmental Program, WCMC, 2021. 6. Source: CDP report on behalf of 525 investors. Cleaning up their act, CDP Global Water Report, 2019. 7. Source: http://iwrmdataportal.unepdhi.org/ 8. Source: Strong, C., Kuzma, S., Vionnet, S., and Reig., P. Achieving Abundance: Understanding the Cost of a Sustainable Water Future. World Resources Institute, 2020. 9. Source: Damania, R., Desbureaux, S., Rodella, A., Russ, J., Zaveri, E. Quality Unknown: The Invisible Water Crisis. World Bank, 2019. 10. Source: Making Peace with Nature: A scientific Blueprint to tackle the climate, biodiversity and pollution emergencies. UN Environmental Program, 2021. 100 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 101

Our goals Indicator boundaries (PETROTEL-LUKOIL SA), and Bulgaria Below is a summary of the Our strategic goal is to gradually reduce the environmental (LUKOIL Neftohim ); production quantitative indicators. These are Our production activities in all footprint resulting from human activity by introducing the best The reporting boundaries for project operator in Uzbekistan (LUKOIL disclosed in detail according to the business segments have an available technologies and equipment and by increasing the level environmental indicators include all Uzbekistan Operating Company); oil requirements of the non-financial impact on the environment. LUKOIL of automation in all technical processes. Russian entities having a significant product supply companies abroad reporting systems in Appendix 7. recognizes its responsibility to environmental impact as well (IOOO LUKOIL Belorussia in Belarus society and future generations and as the following foreign entities: and LUKOIL-BULGARIA EOOD in works continuously to preserve a refineries in Italy (ISAB S.r.l.), Romania Bulgaria). healthy environment, and to use of the countries of operation, the Detailed description natural resources sustainably in requirements of international of ESIA procedure and industrial 05 the regions where the Company financial , and LUKOIL’s environmental control system can Indicators of LUKOIL Group’s Environmental Safety Program operates. corporate standards. The results of be found on the website. this assessment form an integral Goals In compliance with statutory part of the project documentation 2019 2020 for 2021 requirements and voluntary and are later used in environmental principles, LUKOIL assesses monitoring. Overseas exploration APG utilization rate Maintaining the 95% APG utilization and monitors the impact of its and mining activities also require operations at all stages, from social and environmental impact LUKOIL Group rate at the Company level and further increasing it design to completion. Through assessments before project launch. Environmental safety program continuous identification of risk, we (See the relevant case study in Pollutant emissions into the atmosphere, strive to prevent negative scenarios the “Principles of Sustainable The Environmental Safety Program thousand tonnes Maintaining air pollutant emissions no LUKOIL Group higher than the 2020 level from occurring whenever possible. Development in Production Projects for 2020–20221 consists of nine outside Russia” section). subprograms and includes more than 429 395 We continue to improve the 900 events; 45 Russian and foreign Wastewater discharged into surface water awareness and competence of entities of LUKOIL Group participate Interaction with local objects, million cubic meters A further reduction in the indicator’s specialists and managers of in the program. The program is communities Russian entities value the Group’s entities regarding planned for three years, and targets 10.7 8.8 environmental protection activities. Interaction with local residents, are set annually. The structure of ater consumption for our own needs For this purpose, we hold annual public and environmental activities is determined by the nature W , million cubic meters competitions across the Group’s organizations, administrations, of the primary production’s impact A reduction in the indicator’s value Russian entities entities and at the corporate level of and government agencies to on the environment taking into PJSC LUKOIL. The authors of the best exchange information on our account continuous improvements 358 329 eco-projects receive rewards. The scheduled activities and find the in management. Under the program, Disposal of waste accumulated during ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL Safety Days program always covers best solutions to problems is an we build environmental protection the pre-privatization period, thousand tonnes A reduction in waste by 50 thousand best environmental protection essential part of our business. We facilities and upgrade and expand LUKOIL Group tonnes across the entire Group in practices and also deals with other use the ISO 14001:2015 standard, the extensive fleet of machinery and 69 52 2021–2023 challenging issues. which requires a mandatory equipment used for environmental response to inquiries regarding purposes. Rehabilitation of contaminated land, hectares About 10 hectares a year The Environmental Management the environmental management Russian entities System is a part of the Integrated system of our company. We hold As a result of dedicated work to ensure 56.6 44.4 Health, Safety and Environmental public hearings on new projects compliance with legal requirements, Protection Management System and current operations (as part of the share of excess payments2 for detailed in the “Safety” section of the ESIA) in our operating regions; adverse environmental impacts has Minimizing the impacts of operations of LUKOIL Group entities on the biodiversity of vulnerable territories, including the Arctic Zone of the Russian Federationи this report. many Group entities provide local been steadily decreasing over the residents with an opportunity past five years. At the same time, the Providing in-production environmental Providing in-production environmental Confirmation based on in-production to submit their concerns and share of excess payments in the total Assessment and monitoring controls and monitoring of controls and monitoring of environmental controls and monitoring suggestions via our hotline. All amount of payment for such impacts environmental components environmental components of environmental components to As part of the current risk LUKOIL’s entities organize annual in 2020 was 13.6 percent (4 percent Identifying indicative animal species check that Company activities have management system, LUKOIL environmental campaigns to clean in 2019). Higher indicator values were for inclusion in the Biodiversity no adverse impact on biodiversity; employs a precautionary up natural areas and plant trees, due to the delay in obtaining permits Conservation Program improvement of management approach in the performance of bushes, and plants. caused by the new requirements of mechanisms Environmental and Social Impact Russia’s Ministry of Natural Resources Assessment procedures and in and Environment3 coming into planning Environmental Safety force, according to which only the Program activities. The ESIA methodologies on the regulator’s list operations are performed at the may be used to calculate the impact design stage as per the legislation indicators.

1. During the previous reporting period, the target program for 2019–2021 was in effect. 2. Excess payments may arise, inter alia, due to delays in obtaining approvals and permits. 3. Order of the Ministry of Natural Resources and Environment of the Russian Federation No. 341 of July 31, 2018, On Approval of the Procedure for Establishing and Maintaining a List of Methodologies for Calculating Emissions of Harmful (Contaminating) Substances into the Atmosphere by Stationary Sources. The Ministry of Natural Resources of the Russian Federation is responsible for maintaining the list of methodologies. To date, the methodologies used to calculate emissions of oil and gas production enterprises have not been included in the list. Information on over-the-limit payments refers to LUKOIL-Kaliningradmorneft LLC 102 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 103

WATER RESOURCES

YEARS Water is used at all production cycle stations for steam generation, in Thus, we are fully committed to the stages — from exploration and preparation of make-up water for rational use of natural resources, of Sustainable Development. Ecology is our technology production of hydrocarbons to the boilers, cooling towers, and steam reducing the use of fresh water, delivery of finished products to the generators, as raw material and and eliminating the discharge of consumer. In oil and gas production reagent for chemical production, and contaminated wastewater on land 05 From the very beginning LUKOIL has understood the urgent need to make production greener. Most of the plants operations water is mainly used to in other processes. Power generation and in water. that became part of the Company were built mainly in the 1950–60s. Therefore, plans to retrofit and renovate maintain reservoir pressure and companies need water to produce these facilities were bound to include environmental protection solutions. desalinate produced oil. Refineries steam and cool the equipment of and petrochemical plants use water thermal power plants. At the same Each of LUKOIL’s environmental programs produced a notable effect, such as a reduction in air pollutant emissions in cooling and condensation units for time, water is essential for human life and the volume of contaminated runoffs, waste, and disturbed land. A uniform approach within the environmental distillation products, in heat-power and vital for healthy ecosystems. management system was applied across all Russian entities, ensuring improvements in all regions where the Company operates. New projects were thoroughly developed, producing unique solutions that the Company is proud of even today. (For example, the “Zero Discharge” principle for offshore facilities, integrated environmental Water withdrawal by LUKOIL Group entities, million cubic meters monitoring, and others). 2018 2019 2020

We completed the first projects to remediate the Soviet-era accumulated pollution in Western Siberia, Volgograd, LUKOIL Group 450 694 611 and Perm. LUKOIL-Nizhnevolzhskneft was one of the first in Russia to launch an oil sludge processing unit. including: Production and refining entities were outfitted with state-of-the-art equipment to facilitate responses to potential emergency spills of oil and oil products. • Russian entities 429 441 395 – including by electric power generation entities 298 304 253 Despite the considerable complexities of the production processes, already by 2000, the specific indicators of environmental impact from LUKOIL entities were lower than the industry average. • Foreign entities 21 253 216

Notes. 1. Data exclude water produced as a by-product with hydrocarbons and subsequently used for maintaining formation 1990s 2020 pressure. ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL 2. Detailed information, including changes in reporting boundaries year-on-year, is provided in Appendix 7.

The Department of Industrial and Environmental Safety >> Integrated HSE Management System put in place and Labor Protection was established Water usage for our own needs by types of activity across LUKOIL Group, million cubic meters

Specific air pollutant emissions at refineries were >> Specific air pollutant emissions were 0.8 kg/t of 05 about 5 kg/t of processed stock processed stock 50

Water consumption in the refining process was about >> Water consumption in the refining process was 1.5 cubic meters/t of processed stock 0.5 cubic meters/t of processed stock E Refining, Marketing and Distribution P P P

Note. Withdrawn water is used for own needs of LUKOIL Group’s entities, and part of water volume is transferred to third-parties without being used by the Group’s entities. 104 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 105

Our actions Sea water back to the sea to almost natural refinery process units. To reduce 85 percent of LUKOIL Group’s total water usage1 comes temperature without being used in water consumption at the plant, Our principal approach to solving from circulating and recycling systems, and in Russia Some of the Group’s oil and gas other production processes and free part of the steam condensate circuit the issue of sustainable water this figure is 90 percent. Over the last five years, the production, transportation, and from contamination. The Varandey and the recovery system has been use is the application of water indicator for the Russian entities increased by one refining entities use seawater in terminal withdraws water from the optimized, and measures have recycling and reuse systems, percentage point. their production processes. to cool equipment. been taken to reuse sea water after increasing wastewater treatment, treatment. and reducing water losses during LUKOIL-Nizhnevolzhskneft uses The Italian refinery brings production. densely populated areas with a regions. We do not restrict access water from the Caspian Sea to desalinated seawater from the high concentration of economic of the local population to water cool equipment and returns it Mediterranean Sea to cool its 05 Power generating facilities, activity in the Southern part of the sources. In addition, our charitable refineries, and petrochemical plants country. These territories have work includes projects to improve in Russia and abroad are equipped average values of the Baseline water supplies and municipal Total water withdrawal by LUKOIL Group entities, by water withdrawal sources, million cubic with circulating and recycled water Water Stress Indicator2. However, infrastructure and to provide meters supply systems. At production we consider five regions to be arid in drinking water to local communities entities, reservoir water is reused the national context, as confirmed in Iraq and Uzbekistan. 2018 2019 2020 for the needs of reservoir pressure by Russian sources3. The share of LUKOIL Group 450 694 611 maintenance. New production water withdrawn in these regions Freshwater facilities are required to be equipped is about 60 percent of the total Russian entities 429 441 395 with circulating and recycled water water withdrawal by the Group’s Freshwater accounts for 58 percent Foreign entities 21 253 216 supply systems and treatment Russian entities, with more than of the total water withdrawal by facilities. half the volume of water withdrawn LUKOIL entities. Including from surface sources: 287 341 286 being compensated with volume of • Russian entities 268 270 228 We analyze water consumption clean standard-quality wastewater In Russia, the amount of freshwater issues, including in arid regions, discharged into water bodies. withdrawal was 84 percent (2020). – Including sea water 11 11 17 while updating the register • Arid regions in Russia are Almost all of the water is supplied • Foreign entities 19 71 58 of environmental factors and the Krasnodar and Stavropol by LUKOIL’s own water intake incorporate the related risks into Territories, Astrakhan, Volgograd, from surface and underground – Including sea water 0 51 41 the general risk management and Rostov Regions. water reservoirs. Water is mainly system. withdrawn from the Ob, Pechora, Notes. The Baseline Water Stress Indicator Volga, Don, and Kuban river basins 1. Data exclude water produced as a by-product with hydrocarbons and subsequently used for maintaining formation Activities on sustainable in five countries outside of Russia under respective permits and within pressure. water management under the has high and very high levels, and established quotas. The main focus 2. Detailed information on water withdrawal from different sources, including changes in reporting boundaries year-on- ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL Environmental Safety Program the availability of freshwater supply of environmental activities is the year, is provided in Appendix 7. have been integrated into the Clean in those countries may worsen due reduction of production water Water subprogram. To improve to climate change. losses. the system of water consumption, • Arid regions abroad are located Wastewater removal and measures are undertaken every in Italy, Romania (Prahov), The share of freshwater wastewater quality In 2020, the share of clean and treated water as per the year to build, renovate and re-equip Uzbekistan, Iraq, and Egypt. withdrawals by foreign entities current standards for the total amount of discharges water treatment and wastewater was 10 percent (in 2020) of the The Company constantly monitors into surface water bodies remained high at 97.5 percent treatment systems. Regular operations of LUKOIL total water withdrawal, and comes wastewater quality, paying particular (97 percent in 2019). Group entities have no significant mainly from surface water sources. attention to its chemical and physical Arid regions impact on the water content properties. Improving the quality of mechanical, biological, and physical- Commissioning of treatment in natural sources or on water wastewater is one of the objectives chemical treatment methods. facilities at Yareganeft oil mines Most of our Russian entities quality, nor do they impact the of the Environmental Safety Program. Measures are taken to identify and (LUKOIL-Komi) resulted in a operate in regions with ample availability of water resources to Compliance with established prevent any potential negative significant reduction of wastewater freshwater resources, except for other consumers in low-water standards is monitored by LUKOIL impact associated with wastewater and pollutant discharges to surface laboratories as part of in-production disposal. In 2020, the Company water bodies of the Ukhta municipal environmental controls, as well as by finalized some projects or continued district of the Komi Republic. independent certified organizations. with other investment projects to improve wastewater quality. Wastewater generated from the production process is transferred to treatment facilities that use 1. Total water usage includes consumption of water for own needs and storage/use of water in circulating and reused water supply systems. 2. Aqueduct data from the World Resources Institute were used to identify arid regions. Source: https://wri.org/applications/aqueduct/country-rankings/. Country territories are compared on the Baseline Water Stress indicator, which measures the ratio of total water withdrawals to available renewable surface and groundwater supplies. Water withdrawals include household, industrial, irrigation, and non-recoverable use in livestock production. Available renewable water resources include surface and groundwater supplies and consider the impact of upstream water consumers and large dams on the downstream water availability. Higher indicator values suggest increased competition among users. 3. National Report On the Condition and Use of Water Resources in the Russian Federation 106 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 107

• The project to renovate treatment • Starting in 2019, Saratovorgsintez solids. In 2019, the old equipment facilities at the Ukhta refinery is plant began to renovate its was dismantled. In 2020, the Ensuring environmental safety during hydraulic fracture treatment (HFT) underway. Commissioning of the biological treatment facilities, installation of bioreactors began. second stage of the production including the replacement • Gas stations continue to undergo The Company has been performing hydraulic Before work commences, contractors sire allowed to decrease the of four old aeration tanks. In annual storm-water system fracture treatment for over ten years, with provide up-to-date certificates of volume of polluted wastewater addition, bioreactors will be improvements. discharges. (More details on installed to increase the degree more than a thousand fracture jobs per compliance for the process fluids used these projects can be found in the of purification of the plant year. This technology helps to get a more with legal requirements and voluntary Komi Republic case study). wastewater from suspended intensive oil influx at wells, increasing certification systems (if available), and production volumes. However, hydraulic safety data sheets as an integral part of the 05 fracture treatment is one of the stimulation technical documentation. Water discharges by LUKOIL Group entities, million cubic meters techniques that require close attention to technology and safety. Fluids used during Regardless of the fracturing method and 2018 2019 2020 fracturing include toxic substances (such location of the well, technological fluids LUKOIL Group 353 568 485 as hydrochloric acid). In the event of a containing reagents and all the operational Russian entities 338 344 298 spill or accident during hydraulic fracture waste are transported by the service treatment, groundwater is negatively company to its production base for further Foreign entities 15 224 188 impacted (although only within a small area, disposal upon completion of the work. Including: by destination at LUKOIL Group unlike incidents involving well integrity Residual water unused during hydraulic water discharge into surface water bodies 218 217 162 failure). For safety reasons, we use special fracturing is utilized for other technological equipment and control methods and hire operations. water discharge into the sea 11 221 188 personnel with appropriate qualifications water discharge into underground formations 104 107 110 to minimize the possibility of incidents, Ground and surface water quality is reducing them to the level of traditional monitored on a contractual basis by water transferred after use to a third party 18 23 26 extraction methods. specialized contractors who oversee other 0.5 0.1 0 compliance of the work performed with When preparing wells for hydraulic industry standards and requirements. fracturing, the workover crew, Geographic Each licensed area is assigned a local Notes. Information Systems, and oilfield service environmental monitoring project, as 1. Data excludes water produced as a by-product with hydrocarbons and subsequently used for maintaining formation agreed with the state authorities. The pressure. contractors work together. All operations 2. Detailed information on water discharges by destination, including changes in reporting boundaries year-on-year, are carried out in full by contractors whose projects define sampling points and ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL is provided in Appendix 7. activities are monitored at each stage sampling frequency. Water is withdrawn 3. The total indicators may differ from the sum of components due to rounding. by the Oil and Gas Production Equipment from designated water intake points, and supervisory service, including in the form instrumental measurements are taken. The of field audits. Control is exercised as per results of environmental monitoring are Water discharges into surface water bodies, by wastewater quality across LUKOIL Group, the approved project which has passed submitted to the government authorities on million cubic meters governmental expert review and received all an annual basis. necessary permits. 2020

2019

2018 0 C P Note. Detailed information, including changes in reporting boundaries year-on-year, is provided in Appendix 7. 108 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 109

EMISSIONS WASTE

Oil and gas production companies in ESP budget) is allocated annually In 2020, oil and gas production Our main approach to industrial We employ a pitless drilling Novgorod and Volgograd refineries, Russia account for the biggest share for its implementation. The key entities continued the Program for waste management lies in applying technology on environmentally dismantling operations to build of air pollutant emissions across initiatives of the Environmental the sustainable use of APG (including the most advanced technologies, exposed areas in Russia, according process facilities, and a 1.5-fold LUKOIL Group (about 77% in 2020), Safety Program aimed at reducing the Russian fields in the Caspian Sea preventing excessive build- to which generated drilling waste increase in the volume of production mainly due to APG flaring along with pollutant emissions include: and Yamal, and also the Imilorskoye ups of waste at the facilities of is not stored or landfilled at drilling drilling at LUKOIL-Komi LLC. 05 power generating entities burning • equipment replacement or field) and activities to upgrade flaring LUKOIL Group entities, and placing sites, but sent away for use or fuel for power and heat generation. upgrade, application of the systems, including the availability of waste at specialized facilities that neutralization. Most of the long-term storage waste best available technologies at sootless flaring. meet modern requirements. (596 thousand tonnes) still consists In 2020, emissions generated by production sites; The share of hazardous waste of waste-activated sludge generated LUKOIL Group entities decreased by • application of emission capture Gas stations are being equipped with Waste management (Hazard Classes I–III) was about during wastewater treatment of 8%, while emissions from Russian oil and treatment systems; breathing valves and oil product 2 percent as at the beginning and the Saratovorgsintez plant and is and gas producers were down 7%. • upgrade and construction of vapor recirculation and recovery Most production waste in Russia and end of 2020. Classes I and II wastes stored at the deposition site. The site Carbon monoxide accounts for the new generation capacities in systems, significantly reducing abroad falls under non-hazardous or containing substances that are is included in the State Register of biggest share of emissions (36%). power generating entities with atmospheric emissions. The program low-hazard categories (classes). dangerous to human life and health Waste Disposal Facilities. improved automated systems for transferring petroleum storage and cause permanent changes in eco- The reduction of pollutant emissions for regulating combustion depots to a bottom loading system In Russia, more than 60 percent of systems are subject to mandatory We monitor the quality of waste into the atmosphere is a priority processes, heat losses, and was set into motion. The share of non-hazardous and low-hazard disposal by specialized organizations. management operations performed area of the Environmental Safety minimization of pollutant production sites with implemented waste (classes IV and V under the Hazard Class III (moderate) waste by contractors by examining how Program integrated into the Clean Air emissions. bottom loading system is expected Russian classification) consists includes a portion of oil-containing they handle waste, the state of the subprogram. Significant funding (an to increase from 36 percent to of drilling waste and used drilling waste (with an oil product content production control system, and average of at least 50 percent of the 95 percent by 2024. mud generated during drilling and above 15 percent). That is also subject availability of adequate resources to well operation. These are mostly to mandatory disposal. fulfill their contractual obligations. recycled1. Their volumes depend

Gross emissions of pollutants into the atmosphere (net of CO2) by LUKOIL Group entities, primarily on the extent of drilling In 2020, waste generation increased thousand tonnes and repair work, and they are mainly because of a higher share of disposed of by contractors. construction waste at the Nizhny 2018 2019 2020

LUKOIL Group 451 429 395 ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL Waste by hazard class at LUKOIL Group, thousand tonnes Russian entities 433 402 376 2019 2020 Foreign entities 18 27 19 Waste at the Waste Waste Waste at the Waste Waste including by pollutant type: beginning of generated at the end of beginning of generated at the end of the reporting per year the reporting the reporting per year the reporting NOX emissions 49 50 45 year year year year

SO2 emissions 37 41 31 Hazardous waste - - - 46 447 46 solid particle discharges 15 15 14 Russian entities (Hazard 23 253 21 21 304 21 СО emissions 156 155 143 Classes I–III)

hydrocarbon emissions 74 61 49 Foreign entities NA NA NA 25 143 25

volatile organic compounds (VOC) 116 106 111 Non-hazardous and low- 863 1,418 899 901 1,731 867 hazard waste emissions of other pollutants 4.2 1.3 1.7 Russian entities (Hazard 863 1,418 899 899 1,656 863 Classes IV–V)

Note. Foreign entities - - - 2 75 4 Detailed information, including changes in reporting boundaries year-on-year, is provided in Appendix 7.

Note. Detailed information, including changes in reporting boundaries year-on-year, is provided in Appendix 7.

1. Hereinafter, the term “disposal” is used to mean “use, neutralization, landfilling, or handing over to a specialized organization for these purposes”. 110 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 111

Pre-privatization waste, thousand tonnes The waste management KPI was introduced to prevent accumulation of waste in Russian entities (the volume of waste generation has to match Waste at Waste Waste at the end 1 the beginning eliminated of the reporting the volume of waste disposal ). In 2020, this KPI was met. of the reporting in the reporting year year year

2018

Waste movement at LUKOIL Group, thousand tonnes LUKOIL Group 773 107 666

2018 2019 2020 Russian entities 319 50 269

05 Waste at the beginning of the reporting year 956 910 947 Foreign entities 454 57 397

Russian entities 933 886 920 2019

Foreign entities 23 19 27 LUKOIL Group 666 69 601

Waste generated during the reporting year 1,556 1,783 2,178 Russian entities 269 51 223

Russian entities 1,529 1,671 1,960 Foreign entities 397 18 378

Including oil-containing waste 264 294 401 2020

Foreign entities 27 112 218 LUKOIL Group 601 52 549

Received from third parties 6 5 4 Russian entities 223 39 184

Russian entities 6 5 4 Foreign entities 378 13 365 Foreign entities 0 0 0 Note. Amount of waste used, neutralized, and handed over to 1,609 1,751 2,217 In implementing the scheduled measures to eliminate pre-privatization damage at LUKOIL-Volgogradneftepererabotka LLC specialized entities, as well as landfill waste for 2020, the scope of pre-privatization damage was revised as part of a geodesic survey at the end of 2019. The total pre- Russian entities 1,582 1,642 2,000 privatization damage was changed from 218 thousand tonnes to 223 thousand tonnes.

Foreign entities 27 109 217

Waste at the end of the reporting year 905 947 912 Russian entities 886 920 884 Waste disposal at the Volgograd refinery ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL Foreign entities 24 27 28 The best environmental project of LUKOIL Group in 921 thousand cubic meters of old oil-containing the Eco-Project 2020 competition was the project sludge were processed over 17 years. The Notes. for the complete disposal of pre-privatization environmental effect from this multi-year 1. Detailed information, including changes in reporting boundaries year-on-year, is provided in Appendix 7. waste at the Volgograd refinery. project was to reduce air pollutant emissions by 1.5 thousand tonnes per year and to remediate 2. Thermal treatment is mainly used for waste neutralization. The Volgograd refinery was one of the first refining and restore large areas previously occupied by facilities to join the LUKOIL Group in the early 1990s. treatment facilities (evaporation ponds). The refinery began operations in 1957. The plant’s Pre-privatization damage Europe were privatized, significant RITEK, and the Volgograd refinery management wastewater treatment system was designed to In 2015–2019, more than 80 thousand drought- volumes of oil-containing waste (oil in Russia. The refinery in Bulgaria meet the then-existing standards: buffer ponds and salinity-resistant shrubs were planted on sludge in special sludge collectors continues to operate on schedule were dug out on an area of about 20 hectares, an the grounds of the former sewage treatment The Group entities continue and evaporation ponds) had and in compliance with government emergency pit and sludge collectors were built to plants. Even though all the shrubs were planted in their efforts to dispose of pre- accumulated at production facilities. funding. According to Bulgarian receive all the refinery’s wastes. Open structures untreated soil, thanks to modern planting and care privatization waste; in 2020, the The Company refers to these as national legislation, the state is the holding liquid waste were sources of air pollutant techniques, they took root and quickly began to amount across LUKOIL Group ”pre-privatization environmental owner of this waste. emissions. grow. In the meantime, steppe vegetation started decreased by 52 thousand tonnes (in damages”. LUKOIL disposes of this overgrowing the area. As a result, it was possible 2019, by 69 thousand tonnes). waste at its own expense at most of In 2004, the refinery began processing oil- to restore the soil fertility on lands previously its facilities. As of 2020, such waste containing sludge. These operations were unusable. Today, the verdant shrubs are home to Before some of the oil producing and was fully processed at the refinery completed in 2020. A total of more than hares and foxes, birds, and insects. refining assets in Russia and Eastern in Romania and LUKOIL-West Siberia,

1. The KPI calculation does not take into account the volume of rock generated during shaft works at LUKOIL-Komi sites and placed at specialized waste dumps. 112 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 113

Land remediation The remediation comprises the the most effective method is the following stages: microbiological decomposition of oil Contaminated land remediation at LUKOIL-West Siberia Remediation of oil-contaminated • technical (collecting as many at the spill site. Once the content of land is carried out by Russian oil and pollutants as possible and hydrocarbons in the soil is reduced Land contamination resulting from long-term oil on the results of the research, we developed and production is one of the principal environmental began implementing our remediation projects. gas production entities at all fields. replacing contaminated surface to low levels, the restored areas are concerns in the Khanty-Mansi Autonomous Area — In 2020, 44 hectares of land were soil, applying oil-oxidizing replanted for phytoremediation of Yugra. In 1998, there was even a discussion about Thanks to the implementation of these projects, reclaimed. biopreparations, loosening soil for the land. If the contamination degree declaring the Khanty-Mansi Autonomous Area — the accumulated waste at the licensed areas of better aeration); is average, plant cover of the site Yugra an emergency disaster area. This issue also LUKOIL-West Siberia was completely remediated Following an oil spill and after • biological (sowing seeds or takes two years, bringing the entire concerned the areas where LUKOIL entities had by 2019. Since 2019, remediation has been the cleanup of the leaks and site seedlings, fertilizing). remediation process to two-three acquired licenses with a significant concentration underway at all sites contaminated as a result of containment, the contaminated land years. of contaminated land. The Company adopted its current incidents. By taking measures to improve 05 remediation stage begins. Specialized Remediation may involve complete first reclamation programs to restore ecosystems reliability of pipelines, detect leaks and respond to organizations carry out the entire removal of the contaminated layer, After the remediation, the respective and began extensive and systematic work to return them in real time, we are able to annually reduce scope of reclamation activities on which is moved to specialized state authorities inspect the these areas to their natural state. During the initial the average area of contamination. Our goal is a contractual basis following the bioremediation sites, while clean reclaimed areas for compliance with stage of the programs, LUKOIL conducted research to steadily increase the period of accident-free remediation projects. These projects soil is brought to the reclaimed area the established criteria. and exploration work and developed remediation operation of pipelines. are developed and approved under for biological remediation. When the technologies using microbiology which were specifically tailored to northern territories. Based established procedures. contaminated area is significant,

Dynamics of generation and remediation of contaminated land, hectares Changes in the contaminated land area Land area at the Land remediated Land Land area at the Indicator boundaries L beginning of the during the year contaminated end of the year 0 00 C year during the year 0 0 2018 0 0,5 Total across LUKOIL Group 61.3 50.3 52.1 63.1 0 Russian entities 57.5 50.3 52.1 59.3 0,5 0 Foreign entities 3.8 0 0 3.8 5 0 2019 5 5 Total across LUKOIL Group 63.1 56.6 40.0 46.4 05 5 Russian entities 59.3 56.6 40.0 42.6 ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL 0 Foreign entities 3.8 0 0 3.8 0 5 0 2020 0 0 Total across LUKOIL Group 46.4 44.4 136.6 138.6 0 Russian entities 42.6 44.4 136.6 134.8 0

Foreign entities 3.8 0.03 0.03 3.8 Note. Data for LUKOIL-West Siberia LLC are given in hectares (1 hectare = 2.47 acres). Notes. 1. Data for foreign entities for 2018 pertain to LUKOIL Neftohim Burgas, PETROTEL-LUKOIL SA, LUKOIL Uzbekistan Operating Company, for 2019–2020 — to the above entities and to ISAB, IOOO LUKOIL Belorussia, and LUKOIL-BULGARIA EOOD. 2. The increase in contaminated land in 2020 was due to the land contaminated after the 2019 water spill the in Komi Republic was factored in. 114 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 115

Contribution to SDGs highly populated areas where natural The detailed information BIODIVERSITY CONSERVATION ecosystems have been irreversibly on meeting the target is available We understand that any industrial altered over many decades. That on the website activity impacts the natural is why we focus on the principal environment to some extent. Our biodiversity risks from hydrocarbon Management of biodiversity issues objective is to identify the sources of exploration and production activities the most significant impact, monitor and the operation of transportation ELEMENTS OF THE MANAGEMENT CORPORATE DOCUMENTS AND them, and take remedial action when systems, especially in offshore SYSTEM EXTERNAL REQUIREMENTS necessary. Our refineries and most projects. of our gas stations are located in 05 COMMITMENTS AND PRINCIPLES Our principle is ’prevention – mitigation – restoration LUKOIL Group’s HSE Policy in the 21st Century approved Target 14.5 (SDG 14) calls for covering at least 10 percent of coastal and marine areas – compensation’ by the resolution of PJSC LUKOIL Management Committee with environmental actions by 2020. LUKOIL has met this target: environmental and dated May 25, 2020 satellite monitoring covers the shoreline within the licensed areas, the Varandey marine terminal territory, and offshore area. IMPACT ASSESSMENT MECHANISMS Impact Assessment of planned projects on biodiversity is Corporate Standard STO LUKOIL 1.6.9-2019 “Health, Safety undertaken during the preparation of project documents and Environment Management System. Pre-project Environmental and satellite monitoring is organized and Project Documentation. Business Case Preparation. Our actions General Requirements”. Local laws in countries of operation RESPONSE MECHANISMS Our goal is to preserve the natural biosystem • constant monitoring of the oil film formation on water; A center has been set up to deal with the impact of “Plan for Prevention and Remedy of Animal Habitat diversity in the regions where we operate and to • use of systems to protect fish; emergencies on animals, birds and flora and to implement Pollution with Oil and Oil Products in the Event of a Spill ensure sustainable use that does not threaten their • maintaining no-take zones in ecologically measures to rescue them in the Caspian Sea from LUKOIL-Nizhnevolzhskneft Facilities” ability to regenerate. The main activities to preserve significant areas; marine ecosystems include: • introduction of biotechnologies to accelerate the self-cleaning processes of the marine environment • optimization of water withdrawal, wastewater and ensuring protection from oil contamination recycling, and reuse of drilling mud; (artificial reefs). PROGRAMS, PROJECTS, AND INITIATIVES The Biodiversity Conservation Program is in place for The Program was approved by order of PJSC LUKOIL No 136 In these activities we are guided by Impact assessment Ecological monitoring of marine facilities operating in the Arctic zone of the Russian dated July 23 ,2015. ecosystems Federation (the Varandey Terminal, LUKOIL-Komi, the Arctic Council’s document, the

ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL Action plans on biodiversity conservation have been Guidelines for Oil and Gas Companies The state of affected ecosystems LUKOIL-West Siberia) developed for entities operating in the Arctic region. For entities operating in other regions, biodiversity on the Arctic Shelf, and Performance and biodiversity in the territories and The specifics of using the conservation measures form an integral part of the Standard 6: Biodiversity Conservation water areas is assessed or monitored environmental management system Environmental Safety Program and Sustainable Management of at every stage of operations. Our in offshore projects — in addition to Natural Resources of the International partners and contractors include more the “zero discharge” technology — are Finance (IFC). than 50 research and environmental environmental and satellite monitoring COLLABORATION organizations, ensuring a scientific of the production facilities and In view of the importance of the approach to ecosystem studies and conditions in the affected area. These Russia: joint projects with WWF Russia, nature reserves Cooperation agreements and specially protected areas Earth’s biodiversity conservation, the ability to use the data for scientific monitoring methods are a voluntary especially in the ecosystems of high and remedial purposes. initiative of LUKOIL Group entities. value, the Company has committed We regularly monitor a wide range FURTHER INFORMATION not to conduct operations in any Based on the results, measures of parameters in areas which may be of the World Heritage sites and are designed, among other things, impacted by our operations, including The results of environmental monitoring have been published on the corporate website since 2003 the IUCN (International Union for to preserve rare and endangered the condition of marine and coastal Conservation of Nature) Protected animal species and their habitats. ecosystems and the biodiversity Areas of categories I–IV. At each stage Activities implemented in most around our production sites. of a project, we strive to balance any Group entities are part of the ESP. impacts that our operations might Preserving ecosystems in the Arctic There are lists of indicator species have and implement a variety of (the Barents Sea, part of the onshore typical to ecosystems and indicative projects and activities to preserve territory in the Komi Republic, the of their sustainability for all offshore ecosystems. We seek to avoid Nenets Autonomous Area, and the projects. conducting work in habitats of valuable Yamal-Nenets Autonomous Area) is of and highly protected plant and animal particular concern. The components of ecological species or to minimize such impact monitoring include studies of where it cannot be avoided. atmospheric air, meteorological 116 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 117

conditions, sea waters, bottom are performed as required by state during the observation period2. The Indicator species of marine ecosystems in licensed areas sediments, and marine biota1. Vessel standards. At the suggestion of our ecosystems’ self-restoring capacity surveys, time-lapse shoreline and partners and contractors, we introduce can naturally compensate for one- 1 CASPIAN SEA 2 BARENTS SEA (THE ARCTIC) 3 BALTIC SEA coastal monitoring, stationary new research, data processing, and time and short term damage resulting observations, and bottom station analysis methods. in loss of phyto- and ichthyoplankton, studies are parts of the monitoring fish, and algae during construction of Animals (mammals) Animals (mammals) Animals (mammals) process. LUKOIL was the first to use The comprehensive approach wells and seawater withdrawal. There bottom station monitoring. applied makes it possible to identify were no production impacts that 1 species 13 species, including 1 species contamination sources, receive significantly changed the habitats of • Caspian seal (Phoca caspica)* • Carnivores (Sea Cow, Greenland • Harbour seal (Phoca vitulina)* Satellite monitoring information on chronic pollution birds and animals and affected their Seal, Ringed Seal, Bearded Seal, 05 in a timely manner, and respond populations. The natural environment Birds White Polar Bear) Birds Satellite monitoring helps detect accordingly. Monitoring results are components are in a satisfactory contamination from oil spills and published on the website as reviews. condition and although there were 89 species, including Birds 4 species predict drift directions of oil patches local instances of increased content • Dalmatian Pelican*; • Long-Tailed Duck; (including the time it takes for an oil No significant impact of our industrial of pollutants in bottom sediments • Spoonbill*; 5 species • Common Velvet Scoter; patch to reach natural objects), and facilities on the state of the marine and seawater near LUKOIL production • Black Stork*; • Barnacle Goose; • Ringed Plover; measure water temperature, salinity, environment which would require sites, no long-term contamination was • Pink Flamingo*; • King Eider; • Sea ducks and chlorophyll content. Such surveys a response has been detected detected. • Red-breasted Goose; • Eider; take place every month, and from 10 to • Lesser White-fronted Goose*; • Black-legged Kittiwake; Fish 70 images are taken depending on the • Marbled Teal*; • Glaucous Gull time of the year. • White-headed Duck*; 2 species Since 2003, we have been carrying out integrated • Osprey* Fish • Baltic Sprat; Other types of monitoring (e.g. environmental vessel surveys in the Baltic Sea from the • East Baltic Cod geodynamic, engineering and Professor Shtokman and Shelf research vessels. Fish 1 species environmental monitoring) are also fauna is monitored from the AtlantNIRO vessels. The Fish • Long Rough Dab used to identify anomalies, toxic results of field observations are submitted to LUKOIL- pollution, and significant deviations KMN’s Ecology Department, which is the center for data Rare species* 2 in the characteristics of ecosystems collection and monitoring management. The information • Russian Sturgeon (IUCN Red List); based on the specifics of local is stored in a database that serves as a foundation • Caspian vimba (Red Book of conditions. for developing the specialized geoinformation system Astrakhan Region);

“ECOMORNEFT.” • Black Sea Roach (Red Book of the Barents Sea Data analysis Russian Federation, Red Book of Astrakhan Region) ENVIRONMENTAL PROTECTION PROTECTION ENVIRONMENTAL We use mathematical, statistical, and analytical methods to assess the 3 anthropogenic impact on the marine environment, including comparison ussia with the historical background (prior Baltic Sea to the construction of LUKOIL facilities) Note. and the parameters of offshore areas *Species is subject to protection. furthest from the Company assets and other production sites. Sample analysis and measurement techniques Caspian Sea

Endangered species 1 Western Siberia Biodiversity Program protection

In 2020, LLC LUKOIL-West Siberia launched a and developed a program for monitoring the bird Vagit Alekperov, President of measures under the federal project joint project with the Tomsk State University to population in the licensed areas. The entity keeps PJSC LUKOIL, supported the “Preservation of Biodiversity and monitor zoological diversity and improve the action records of indicator flora and fauna species. initiative of WWF Russia to include Development of Ecological Tourism” program to preserve the wildlife of the Arctic zone measures for the conservation of of the national project “Ecology.” The of the Russian Federation which is within LUKOIL’s Furthermore, over the past six years, LUKOIL-West saiga antelope biodiversity into the agreement adds implementation of operation areas. Because of the COVID-19 pandemic, Siberia completed restoration of cedar and pine LUKOIL Group Environmental Safety measures for saiga conservation to the project was postponed until 2021. Earlier in 2019, forests on over 750 hectares by hand-planting two- the university specialists counted bird species, since year-old greenhouse-grown seedlings. Program. In 2020, the Ministry of the current corporate program for birds are the most numerous wildlife component, Natural Resources and Environment biodiversity conservation. of the Russian Federation and

1. PJSC LUKOIL signed a cooperation Biota comprises all living organisms. 2. The longest observation period of the Baltic Sea is 17 years. agreement to implement 118 LUKOIL Group 119

06

The largest

OUR EMPLOYEES EMPLOYER OUR EMPLOYEES Our goal is to develop an effective management system that meets international standards to ensure high labor productivity and employee motivation. 120 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 121

KEY CHANGES AND RESULTS CONTEXT IN THE REPORTING YEAR Early estimates1 suggest that the in the share of the digital economy. a responsible approach to labor COVID-19 pandemic had a significant These innovations can give a distinct remuneration, forecasting of highly and disproportionate impact on the boost to productivity and result in the desirable labor skills, attracting labor sector, resulting in extensive creation of new jobs. talents, and forming an integrated losses of work hours, higher employee pool based on hybrid unemployment rates, and income In the face of rising transformational employment terms, while ensuring losses for workers and their families. factors and risks3, companies will personnel diversity, equality, and At the same time, the spread of have to rethink their strategies for involvement. 06 A NEW EDITION OF THE HUMAN CAPITAL A REMOTE WORK MODE WAS INTRODUCED FOR the coronavirus accelerated (when employment, hiring and retaining MANAGEMENT POLICY WAS APPROVED EMPLOYEES OF LUKOIL GROUP ENTITIES compared to pre-crisis forecasts) employees, as well as find new ways In 2020 LUKOIL’s main contribution to trends2 which will affect the to train and redeploy staff with a SDG 3 (Good Health and Well-being) employment structure across all focus on highly sought after tasks. The was due to the complex actions of the industries. That may include growing year 2020 has reaffirmed the need Company to mitigate deterioration of automation and the introduction of to change personnel management the current epidemiological situation new information technologies into processes4 and plan them out at the Group’s enterprises and offices. CONTRIBUTION work processes, a shift to remote or thoughtfully. The main focus areas of 5 TO IMPLEMENTATION OF SDG hybrid work modes, and an increase such changes are health protection,

A favorable epidemiological situation at entities is maintained, workers are provided with protection by all available means. OUR EMPLOYEES PLANS FOR 2021 AND THE MIDTERM

Maximum coverage of employees with vaccination against the coronavirus, continuing disease control measures, ensuring sanitary and hygienic practices.

1. Source: COVID-19 and the World of Work. International Labor Organization (ILO), 2020. 2. Source: The future of work after COVID-19. McKinsey Global Institute, 2021. 3. Source: The Global Risks Report 2020. World Economic Forum, 2021. 4. Source: Win with Empathy. Global Talent Trends 2020–2021. Mercer, 2021 5. Source: ibid. 122 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 123

PRIORITIES OUR GOALS IN EMPLOYMENT RELATIONS

Management system in employment relations LUKOIL’s Human Capital The Human Capital Management advanced development of employee Management Policy, approved by Policy is the fundamental document competencies, the use of a flexible the Board of Directors in 2020, mandatory for all LUKOIL Group system of incentives and the ELEMENTS OF THE MANAGEMENT CORPORATE is based on our robust corporate entities. It defines the HR strategy establishment of key personnel, and SYSTEM DOCUMENTS culture and a solid system of and guidelines to ensure the steps to manage the effectiveness corporate values. Driven by many Company’s consistent leading of workforce planning. factors, the Company’s success position as an “employer of choice” 06 GOALS, PRINCIPLES is primarily due to our staff at all on the international labor market. All employees are required to The main task is to create a management system that will give Human Capital Management Policy, approved by levels, joined together as a close- familiarize themselves with the Company the recognized status of an “employer of choice” in Minutes of the Board of Directors of PJSC LUKOIL No. 19 knit team of professionals. The Policy is based on transparent Company Policy at informational the labor market dated December 15, 2020 principles aimed at creation of a events held by LUKOIL Group PRIORITIES / CORPORATE STANDARDS In our employment relations, stimulating work environment; entities and contribute to its The main principles in the area of employment relations are: The Code of Business Conduct and Ethics1 No. 17 we are guided by the laws of the involvement of all personnel in implementation. • Compliance with statutory requirements; approved by Minutes of the Board of Directors of countries where we operate, the achieving the Company’s strategic • Respect for human rights; PJSC LUKOIL on December 11, 2018 conventions of the International goals; fair assessment of each Improvement of the HR • Equal rights and opportunities for employees; The Corporate Culture Rules No. 31 approved • Respect for the culture and customs of countries where we by Minutes of the Management Committee of Labor Organization , the principles employee’s contribution to overall management system and its operate; OJSC LUKOIL No. 31 on December 27, 2010 of the UN Global Compact and the success; fair compensation for structure is ongoing and in line • Cooperation with trade unions and employees The Social Code of PJSC LUKOIL No. 16 approved by Universal Declaration of Human performance and internal continuity with our strategic goals and Minutes of the Board of Directors of PJSC LUKOIL on Rights, as well as the experience of by attracting, nurturing, and objectives and is intended to October 24, 2017 international cooperation under the retaining talent. ensure the economic efficiency of KEY PERFORMANCE INDICATORS Industriall Global Union. LUKOIL Group’s operations. In 2020, Labor productivity The KPI Regulations approved by the Management The Policy sets out ground rules, as part of developing the service Committee of PJSC LUKOIL on September 16, 2019 mandates respect for human rights, management model, it was decided Our goals are as follows: equal rights and opportunities to establish LUKOIL-Multifunctional TARGETED PROGRAMS, PROJECTS, AND INITIATIVES • maximum flexibility of the for all employees, zero tolerance Business Support Center LLC The main areas of social policy: Programs in all the areas have been approved for violation of human dignity or to consolidate most services, OUR EMPLOYEES Company in response to • The remuneration and incentive system; changes in the external discrimination in any form or on any including accounting, financial, HR • Social support; environment, encouraging grounds. administration, etc. • Training; innovation and labor • Working with young professionals and employees mobility among employees; The document reflects the Before undertaking this change, • development of an effective rapid development of the digital employees met with their EMPLOYEE SATISFACTION SURVEY talent management environment and technology, immediate supervisors and Research: Held at least once every 2 years system compliant with leadership philosophy, and current heads of LUKOIL-Multifunctional international standards • Monitoring of the socio-psychological climate at work places; trends in the labor market. Changes Business Support Center LLC, and providing equal • Employee engagement and satisfaction surveys have been introduced in the main where the terms of the transition opportunities to unlock the maximum potential of each sections of the Policy. For example, were explained and all questions FURTHER INFORMATION team member to ensure there have been adjustments to the answered. More details are available The Social Code of PJSC LUKOIL: high performance and on our corporate website: productivity.

1. The new edition of the Code of Business Conduct and Ethics. The document approved in 2010 was in effect earlier. 124 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 125

PROTECTING WORKERS DURING Awards of 2020 PJSC LUKOIL won the ComNews Awards in the across Russia into a unified information space and THE CORONAVIRUS PANDEMIC Best solution for remote work of geographically the actions of the Company’s specialists to ensure separated specialists category. In 2020, the award continuous operation of all business processes celebrated the best digital solutions during the and to secure data transfers. We plan to expand period of enforced self-isolation. The award the platform’s functionality to continue improving Our top priority in 2020 was transitioning a considerable part personnel to all production facilities recognized the creation of an IT system that the Company’s responsiveness to changes in the protection of employees from the of our office staff to work from and work terms in quarantine integrated all subsidiaries and service companies external environment. coronavirus pandemic and quickly home — a new experience both areas were modified; and ongoing restructuring production processes for the Company and many of our monitoring of workers by trained to adapt to the new conditions. All employees. The Russian labor medical professionals in these 06 Group entities (in Russia and abroad) legislation has been amended areas introduced. Additional medical made great efforts to prevent mass concerning remote work, and personnel were engaged to monitor The COVID-19 pandemic became the cities, our gas stations remained workers were allowed to enter the infection and ensure continuous the Company is now considering sick employees around the clock. first serious test of the effectiveness practically the only open public oilfields only if they tested negative operation of production facilities, the possibility of introducing of our medical departments. places. for coronavirus and after completing transport terminals, and gas stations. new approaches to organizing Unfortunately, we also had The results of 2020 proved the a pre-quarantine. labor activities, including hiring employees come down with effectiveness of measures previously In addition to enhanced safety We established a system of COVID- employees to work from home on severe cases of the virus and it taken: we managed to prevent measures for LUKOIL employees, we 19 emergency response centers a full-time basis or alternating was imperative to provide medical massive infection and contained also supplemented our contractual to make timely decisions and periods of remote work and work assistance to them. The Company’s isolated local outbreaks. All entities agreements by requiring mandatory coordinate actions; PJSC LUKOIL at an office location (combined specialists promptly developed and gas stations continued to compliance with sanitary regulations supervised the centers’ operation. employment). evacuation plans for very sick operate during the lockdown. In some to contain the infection. In particular, Every week the centers reviewed patients and established relations the infection rates and determined From the very beginning of the with the leading regional and federal relief measures, including treatment pandemic, all personnel were medical institutions. arrangements in severe cases. provided with personal protective All high-volume corporate events equipment (PPE) and disinfectants LUKOIL combined measures such as major meetings, drills, and and were subject to mandatory to protect its employees with other, as well as business trips, health screenings at the entrance to assistance to medical institutions except for shift personnel, were the facilities and in the workplace. in the regions where the Group OUR EMPLOYEES canceled or moved to a later date. The process and form of food operates in order to keep families Oil product supply entities, where catering on the production and office of our employees healthy and employees were at the highest risk premises were modified as well. decrease the overall infection rate. of contracting the virus because We delivered large quantities of of direct contact with customers, We also revised our primary health personal protective equipment, new were provided continuous outreach care system. Welfare services of devices, and expensive medications and updates, including prevention the Group’s entities, together with to treat patients. The Company brochures, and daily safety health care contractors, successfully funded the construction of a new announcements. Customers were adjusted the operation of corporate laboratory in Kogalym, which now invited to fill up using the mobile app health care centers to the new provides testing for coronavirus to minimize contact with gas station environment. Additional medical antibodies. personnel. procedures were introduced, such as examination and testing More information about LUKOIL’s The principal change in production of workers before starting their assistance to the regions of processes was associated with shifts; transportation methods for operation can be found in the “Society” section of this Report. 126 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 127

EMPLOYMENT RELATIONS Local employment in LUKOIL MID-EAST LIMITED (Basra, Republic of Iraq) In Iraq, candidates are hired from the local We provide mandatory and continuous safety and HSE employment center database and external sources training for all local personnel (new hires and existing LUKOIL is a large employer in Russia Human Capital Management Policy approach to local applicants abroad, (media, recruitment agencies, and so on). Applicants employees). On-the-job training for employees is from communities located near the deposit are organized to improve qualifications and get promoted. and abroad. We endeavor to apply dictates that we conduct our to men and women, to applicants considered first. Created specifically for the project, In addition, annual professional training is offered to uniform principles and approaches activities under the principle of equal with limited health abilities1, the Joint Local Recruitment Committee, which specialists at training centers in Iraq, the UAE, Turkey, to working with our employees in all rights and opportunities and consider to members of the indigenous includes representatives of LUKOIL and national and Egypt, along with internships at the Group’s countries and regions of operation, any form of violation of human minorities of the North, and to other partner companies, conducts the initial screening on a Russian entities. taking into account local cultural dignity and discrimination on any social groups. competitive basis (testing and interviews). Candidates specifics and legislative features. The grounds unacceptable. who have successfully passed the screening sign an LUKOIL provides employees with career development 06 principles and standards set forth employment contract, which must include salary, opportunities. In 2020, more than seventy employees in our Human Capital Management The Company does not tolerate schedule for additional payments and cash incentives, successfully completed a workplace internship Policy and other local regulations discrimination based on gender, race, working hours, and the procedure for determining program (Shadowing) and were appointed to are mandatory for all LUKOIL Group age, or other grounds. The hiring terms of each shift. supervisory (junior management) and engineering entities. process applies an equal opportunity positions; three people interned to fill superintendent level positions (mid-level operations manager).

Employees with appropriate order to promote the same corporate is mitigated and the need for highly Recruitment in foreign countries qualifications are hired for culture throughout LUKOIL Group qualified and managerial personnel management positions in our and to expand their capabilities by is promptly satisfied, regardless of Our basic approach in all countries foreign entities. If personnel with gaining professional experience the situation in local labor markets. where we operate is to comply with the necessary qualifications and in international projects. For this At the same time, the opportunity legal requirements and employ capabilities are not available on local purpose, the Company has a pool to work in different business and the best professionals. In the markets, Russian employees are of employees who can be rotated. cultural environments is a motivation Republic of Iraq, for example, foreign appointed to managerial positions in Thus, the risk of a loss to efficiency for employees who value diversity. 1 companies are required to hire at least 50 percent of the average headcount from local candidates. Information about local managers in foreign LUKOIL Group entities in significant regions OUR EMPLOYEES In the Republic of Uzbekistan, this 2 of operation 3 number is at least 80 percent. (This 4 2018 2019 2020 requirement applies to both full-time 5 employees and contractors.) We Senior managers, people 89 89 88 offer opportunities for locals to fill including locals 28 29 31 vacant positions and provide training if needed. In Bulgaria, Italy, Romania, Share of local senior managers, % 31 33 35

and Belarus the share of local hires 6 was 99 percent, in Uzbekistan — Notes. 93 percent, and 60 percent in Iraq2. 1. The indicators of the “Our employees” section are calculated based on the headcount of employees in accordance with the GRI approaches, unless otherwise stated. At the same time, similar indicators may be presented in the Annual Report based on the average headcount. 2. Senior managers include the CEO (Managing Director / General Director) and their deputies for functional areas. 3. Local senior managers mean employees who are permanently registered in or are citizens of foreign countries.

1 Belarus 4 Bulgaria 2 Romania 5 Uzbekistan 3 Italy 6 Iraq

1. For applicants from special groups, jobs are provided based on statutory regulations and job openings that meet labor requirements. For example, the quota for hiring people with limited health abilities in the Company is 2–3% of the average number of full-time employees and is set separately for each region of LUKOIL’s operations. 2. Given our broad geographic presence, some indicators such as the share of local hires and the average salary are disclosed for each significant region. See Appendix 6 for the definition of a significant region. In 2020, six foreign countries mentioned in this paragraph of the Report are considered significant regions. Local employees are all employees of Group’s organisations, excluding seconded employees (defined in Appendix 6). 128 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 129

Gender equality PERSONNEL CHARACTERISTICS Despite the specifics of the oil and employees. Gender monitoring of initiatives to develop groups based gas industry and the traditional personnel job categories is carried on specific interest. For example, a prevalence of male employees, out regularly. In doing so, we respect women’s club has been functioning LUKOIL has maintained a balanced the desire of employees to achieve at the refinery in Nizhny Novgorod In 2020, the LUKOIL Group entities LUKOIL Group’s headcount and average headcount, people gender structure for many years. a balance between family and since 2013. employed more than 100,000 2018 2019 2020 work. Parental leave, for example, people, most of whom worked We provide equal career is available to both women and under permanent employment Headcount 105,991 105,624 104,264 development opportunities to all our men. We also encourage employee contracts (93 percent) and full- Average headcount 102,508 101,374 100,768 time (99.7 percent)1. The personnel structure has remained stable for Turnover rate [%] 7.8 7.5 6.7 06 the last three years in terms of Personnel gender structure of LUKOIL Group in 2020 employee categories and age. The Note. average headcount decreased by The headcount decrease in 2020 was due to the reorganization measures 1.7 percent over the three years, and the withdrawal of LUKOIL-INFORM LLC from the Group. HEADCOUNT mainly due to normal retirement 61,183 104,264 43,081 and, to a lesser extent, due to PEOPLE optimization of the organizational structure of business segments. Breakdown of LUKOIL Group Breakdown of LUKOIL Group employees by region, % employees by type of activity, %

INCLUDING About half of the employees work in the Refining, Marketing and 2,8 2,4 0,1 5 12 Distribution business segment, more 10,4 than a third work in exploration EMPLOYEES ON A PERMANENT 36 CONTRACT BASIS and production entities, and about 0 14 percent are employed on a 12 rotational basis. The employee 57,854 38,805 84,3 turnover rate decreased in 2019 BREAKDOWN BY EMPLOYEE CATEGORY and continued dropping in 2020 (by 35 0.8 percentage points relative to OUR EMPLOYEES MANAGERS % OF THE CATEGORY HEADCOUNT 2019). 6 R Oil and gas production 9,380 12,694 3,314 Details on personnel breakdown E Oil product supply, Transportation PEOPLE Power generation by different criteria (type of Middle East and Africa Oil refining and petrochemicals employment, type of contract, North America Other SPECIALISTS category) and other information % OF THE CATEGORY HEADCOUNT according to GRI Standards are given 13,458 28,319 14,861 in Appendix 7. PEOPLE

WORKERS AND OTHER PERSONNEL % OF THE CATEGORY HEADCOUNT 6 38,345 63,251 24,906 PEOPLE

EMPLOYEES HIRED % OF THE TOTAL NUMBER OF HIRED EMPLOYEES 6,468 13,295 6,827 PEOPLE

Note. The “Managers” category includes: CEO of a LUKOIL Group entity, Deputy Heads, Chief Engineer, Chief Accountant, Head

1. of a branch, TPU, or another standalone business unit, other managers. Hereinafter in the section, the estimates are based on the employee headcount as of December 31 of the reporting year (unless otherwise stated). 130 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 131

Young professionals and employees

Recruiting and retaining young The share of young professionals of Share of young professionals professionals is an important the headcount of LUKOIL Group was Доля молодых работников component of LUKOIL’s HR policy. 35% in 2020. The goal is to ensure continuity 35% in management and production Research and technology activities. Its elements include competitions and conferences Choosing the best 35% internships for students at for young professionals are млн руб. LUKOIL Group entities and held annually. Councils of young mentorship1 and initiatives professionals have been established Since 2011, LLK-International has been implementing Winners receive a recommendation for a one- that facilitate the continuity of to help young people adapt to the Prospects project targeting graduates of technical year internship as a management trainee at 06 professional experience, best working conditions and maximize and economic higher education institutions. The main LLK-International companies with an individual mentor production traditions, and the their professional talents. objective of the project is to recruit professionals assigned. Each project participant receives modular corporate culture. in lubricant development and technology, and in training to develop their soft skills and works with a commercial, economic, and financial sectors, on a mentor to expand their professional knowledge. This Indicators related to working with young employees and professionals, people competitive basis. approach enables young specialists to develop the necessary competencies in just one-two years in their 2018 2019 2020 The Prospects partners include 19 universities in 10 area of responsibility and enables them to be included Number of young employees 41,174 39,179 36,955 cities (Moscow, St. Petersburg, Perm, Rostov-on- in the management reserve. Don, Ufa, , Tomsk, , Polotsk, Number of young professionals 1,639 1,423 1,317 Volgograd). The project has grown significantly thanks to Over the ten years of the Prospects project, two of Young employees recruited, including: 14,624 9,427 7,603 the high involvement of the project team, which consists its participants became managers in the Group’s of more than 50 employees of LLK International, foreign entities; two are department heads, and six • young professionals 589 631 523 including the CEO, top managers, and even young are heads of Moscow office divisions; 13 people have Number of students studying under agreements with LUKOIL Group entities 173 281 325 interns. The competition is very popular, and the rivalry been promoted to senior management positions1. Thus, among contenders is quite intense: out of more than LLK-International has created a talent pool which is 5 thousand candidates, about 150 graduates have gaining unique knowledge through mentorship. Also, Note. joined LLK-International over the past ten years. The the Prospects alumni participate in scientific and The decline in the total number of young employees aged under 35 and in the share of young employees in total headcount competition consists of three qualifying rounds: commercial projects and contribute to LUKOIL Group’s is due to employees exceeding the age threshold for the young employee category and the start of the pension reform • I round: testing and interviews with candidates in overall business results, which was recognized during OUR EMPLOYEES in Russia in 2018, which mandated a gradual increase in the retirement age, as well as the general demographic situation. chemistry, economics, and finance; their performance evaluation: 15 employees won the • II round: completion of individual assignments; corporate competition and were awarded the title “Best For more information • III round: in-person interviews with the CEO, Young Specialist.” on the adaptation activities for new managers, and employees of structural subdivisions young workers and professionals in the LLK International office in Moscow. and on the mentorship, please visit the website.

1. The mentorship procedure is described in the Regulations on Induction of New Employees at LUKOIL Group Entities approved by a Resolution of the Management Committee of OJSC LUKOIL on December 15, 2008 (Minutes No. 33). The Regulations establish the procedure for organizing and holding induction events for new 1. employees at LUKOIL Group entities. Data is as of 2020. 132 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 133

In 2020, PJSC LUKOIL and the • The estimated average salary for The Agreements form the SOCIAL POLICY International Association of Trade determining additional sick leave basis for concluding collective Union Organizations of PJSC LUKOIL benefit was increased. bargaining agreements in the (IATUO) signed the 10th agreement • A lump sum payment is stipulated Group’s organizations. All rights between the employer and the on the termination of an and guarantees set forth in the We strive to maintain an effective Russian Federation and international foreign entities and employees trade union for 2021–2023. The employee due to retirement. collective bargaining agreements employee remuneration system standards are set out in the Social can participate in these programs supplements and amendments • Unified amounts of financial aid to shall apply equally to all employees to facilitate social stability and Code of PJSC LUKOIL and the irrespective of their employment covered 841 points of the document. employees with disabled children of LUKOIL Group entities, regardless to enhance the quality of life of agreement between the employer terms (whether they are employed New social support obligations were and financial aid on the birth of a of their trade union membership. our employees and their families. and the trade union. Services full or part-time). included, such as: child were established. Company obligations which under employee social programs • The lump sum payment as • The monthly wage rate of social For detailed information supplement those of the laws of the are provided in both Russian and compensation for health damage benefits for employees and on the trade unions social 06 in the event of an accident at non-working pensioners was partnership system see work has been increased. increased. the website LUKOIL Group staff costs, RUB million 2018 2019 2020

Total 145,706 147,284 151,528

including:

• payroll 136,475 138,180 142,809 Awards of 2020 • social benefits and payments, social support for employees 8,403 8,125 7,977 • The winners of the contest “Best Collective • The winners and awardees of the Contest of the • training 828 979 742 Agreement in the Oil and Gas Complex” of the Ministry of Energy of Russia for the best socially- including in Russian entities Russian Oil, Gas and Construction Workers Union oriented company in the oil and gas industry were collective agreements of the oil refinery in 2020 were the oil refineries in Volgograd • payroll 97,386 98,883 101,446 in Nizhny Novgorod, “LUKOIL-West Siberia” and and Perm, the Stavrolen plant, as well as “LUKOIL-Integrated ”. LUKOIL-AERO, LUKOIL-Tsentrnefteprodukt and • social benefits and payments, social support for employees 5,876 5,670 5,403 the LUKOIL Sport Club. • training 641 714 583 OUR EMPLOYEES Notes. Motivation and wages 1. Details of the scope of social services for employees are provided in Appendix 7. 2. Expenses on social benefits and payments and social support of employees include payments under collective In Russia, the minimum subsistence The compensation strategy is refining and energy entities operate, bargaining agreements and do not include social payments from the wage fund. level is regulated by law, as is the constantly being improved in doubled the average wages in almost minimum wage2 and how often it is accordance with best practices. The all these regions. In addition, the paid. In 2020 the minimum rate of Company is introducing a grade- growth rate of wages in LUKOIL Cooperation with trade unions and employees pay of LUKOIL entities in significant based incentive system3, which exceeded the growth rate of average regions of operation in Russia was will make it possible to ensure the wages in the regions. LUKOIL enters into voluntary collective safety and health measures, the Each new agreement on the level in line with or exceeded the regional unity of payroll systems in different agreements and agreements between level of wages and the provision of of commitments is a next step to minimum wage. The minimum rate of Group entities. In 2020, special Information about the ratio of the administration and trade unions agreed social benefits and guarantees. improving the social benefits package pay is the same for men and women attention was paid to building an average wages to average salaries in Russia and abroad governing The Company does not prevent the and the level of social protection for and is determined based on duties incentive system for project staff: in significant regions of operation is mainly additional norms to the activities of trade union organizations employees increases as compared to performed, the complexity of work the possibility of awarding bonuses provided in Appendix 7. requirements of labor legislation, and maintains an ongoing the mandatory legislation. tasks and level of responsibility, and to employees at each stage of such as employment, observance of constructive dialogue with trade union is established for each employee project implementation and based working and rest hours, occupational representatives. considering their education and on project results was introduced. practical experience. The initial Measures were also taken to improve salary at LUKOIL Group foreign the incentive system for oil product entities is also at least equal to the supply employees. minimum wage rate established by the labor laws of the country where At the end of 2020, average wages LUKOIL Group operates, collective in significant operating regions in agreements, and/or local regulations. Russia, where large production,

1. Including working and rest hours, occupational safety, employment of women in rural areas, support of non-working pensioners, etc. 2. According to the Labor Code of the Russian Federation, the minimum wage must not be lower than the subsistence level established for each constituent entity of the Russian Federation. 3. The grading system is the ranking of positions according to their value for the entity 134 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 135

Social support

The employee incentive system Housing program in LUKOIL. The other type of the includes benefits and compensation pension plan is calculated in established by the agreement and As part of the corporate Basic proportion to the salary level. YEARS collective bargaining agreements Housing Policy of LUKOIL Group, These plans are financed solely between the employer and the invited and young professionals by LUKOIL Group entities. Also, trade union, collective bargaining may receive assistance from the employees have an opportunity to of Sustainable Development. “LUKOIL Is One Family” agreements and other local Company in acquiring housing in contribute to pension savings with regulatory acts. A significant part the form of partial payment of the Company’s participation (up of benefits and compensations interest on bank loans. In 2020, to 4 percent of employees’ annual Thirty years ago, LUKOIL united three Siberian fields in Langepas, Urai and Kogalym (Western Siberia), which were is geared towards enhancing the 853 employees participated in the salary). joined by two oil refineries in Volgograd and Perm. It was then that the slogan “LUKOIL Is One Family” appeared, 06 quality of life of our employees program (2019: 1.4 thousand people which in many ways defines the Company’s social policy towards its employees. through maintaining their health, participated). 44.1 thousand employees from providing support to them and their the Group’s entities participate In a fundamentally changed economic environment, it was important not only to ensure the stability of the families, offering them housing Pension benefits in the joint pension program entities’ operation, but also to preserve the unique nature of our Company’s communities while learning to assistance, etc. Social benefits are (2019: 43.6 thousand). Employees work together in a new way. Thanks to a forward-looking business strategy and constant interaction between also provided to retired employees. Russian entities finance a of foreign entities are provided the Company’s management and employees during collective bargaining negotiations, jobs at key production corporate-defined pension plan that pension benefits in line with the facilities were retained, as were many social forms of support. The corporate principles on wages and social Voluntary health insurance covers most employees. One type laws of the country of operation benefits ensured a decent standard of living for the employees’ families even in times of crisis. of plan is based on the number of as well as the local regulations of According to the Unified Rules for years of service to the Company, the entities. Some pension plans are The collective bargaining agreements of many LUKOIL Group entities have been repeatedly recognized as the Voluntary Health Insurance (VHI) for salary level as of the end of 2003, financed solely by employers, while best in the industry at the regional and federal level in Russia. This confirms LUKOIL’s responsible position in Employees of LUKOIL Group1 entities, and any awards received during others are based on contributions implementing the human resources management policy. all the employees working in LUKOIL the entire period of employment from both employees and Group’s entities (as a primary job) employers. 1990s 2020 are entitled to VHI insurance. In Non-state pension coverage 2020, amendments were made to 2018 2019 2020 the document, according to which The level of wages and the scope of social benefits >> A unified approach to social policy implementation newly hired employees (new hires) Pension liabilities, LUKOIL Group, 8,910 12,544 13,794 varied significantly among entities in different was used, which was set forth in collective are subject to VHI from the end of RUB million industries bargaining agreements, the Social Code, and the OUR EMPLOYEES Human Capital Management Policy the trial period stipulated by the Number of former employees receiving a 49,441 52,854 53,519 employment contract, i.e. within corporate pension, in Russia, people one calendar month from the date Average non-state pension level in 2,272 2,134 2,241 of hiring. Employees can at their Russia, RUB own expense widen the coverage of In 1994, a corporate non-state pension coverage >> Corporate social programs help employees to health insurance programs to meet program was launched solve the most important issues for any family their specific needs. (difficult life situations, housing, health care, children’s education, etc.)

Five entities in 1993 >> Over 180 companies1 within LUKOIL Group

1993: approximately 80 thousand employees >> Over 100 thousand people

1993: three regions of Russia >> More than 30 countries and 65 regions of Russia

1. The document establishes the requirements for the implementation of VHI for the employees in Russian entities of the Group. In foreign entities of the Group the 1. Unified Rules are not binding, the employees are subject to VHI in accordance with the local regulations and employees’ labor contracts. As per IFRS, the list is provided in Appendix 1. 136 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 137

Employee training at LUKOIL Group entities TRAINING AND DEVELOPMENT 2018 2019 2020 Number of trained employees, people 74,684 78,026 80,119

Share of trained employees by position, % Corporate training is a long-term for staff with the right qualifications prevents unemployment in the regions priority area of our HR management and expertise but also keep where we operate and strengthens the • managers n/a n/a 15% policy. Our investments in employee employees’ professional skills up to well-being of families. training and development not only date, keeping them in high demand • specialists n/a n/a 27% secure the Company’s strategic needs in the labor market. This approach • workers and other employees n/a n/a 58%

Amount of training, person-courses, 243,467 258,728 584,621 06 Our actions including share of employee category, %

The Human Capital Management need for professional development. under established procedures, • managers n/a n/a 14% Policy sets out the principle of A supervisor may recommend or the request is incorporated into • specialists n/a n/a 14% advanced development of employees’ assign an employee to complete a the Personnel Training Plan. The competencies and their continuous specific training program depending effectiveness of every completed • workers and other employees n/a n/a 72% improvement. on the need for skills that need to be training is evaluated during the Average number of training hours per one trained employee, hours n/a 84 141 improved to fulfill the tasks at hand. year-end employee performance Job descriptions, employee Employees are encouraged to be assessment. Average annual training costs per one trained employee, RUB n/a 12,548 9,266 performance evaluations, and proactive and submit a training request individual training plans determine the to their supervisor. After approval Note. Average number of training hours per one trained employee = Total number of hours of training events held at Russian and foreign entities divided by Total number of employees that received training in the reporting year. Average annual training costs per one Training programs trained employee = Total costs to train employees that received training in the reporting year divided by Total number of employees that received training in the reporting year. In Russia, employee training sessions expand specialization in related trainers actively work with filling are held at least once every three areas. Training is conducted in station line personnel (operators years for all target groups and different formats: seminars, and managers of filling stations) Distance learning personnel categories, considering their practical courses, lectures, round in Russia, based on the programs In 2020, the total number of training hours using OUR EMPLOYEES specialization, work experience, and tables, business games and of the Corporate Competency The largest part of training, including distance learning programs was about 7 million hours role in the Company’s development. others. Center. courses and programs on mastering (in 2019: 2 million hours). • Trades. The vocational education new areas of knowledge and types The following types of training are of workers is provided on a Training is available for all target of activity, as well as on acquiring Employee training at LUKOIL Group entities in distance learning used: permanent basis throughout an groups and personnel categories in modern competencies, is held in the 2020 • Mandatory training (additional employee’s entire working life. Russia: managers, specialists, office Distance Learning System (DLS). professional education) is Employees may be seconded to clerks, workers, corporate employee Scope of training, hours 6,963,587 provided for the purpose of educational institutions, undergo pool, Group entities’ employee The main goal of the DLS is to Russian entities 6,886,936 vocational training or advanced training directly at the workplace, pool, “Mobile personnel”, young ensure that employees have the training. It is the employer’s as well as through self-education. employees. level of knowledge required by the Foreign entities 76,651 responsibility to organize this type The purpose of professional Company. This goal is achieved Scope of training, person-courses 470,355 of training. Employees are sent training of employees at the through training and communication, for training to various educational workplace is to constantly keep assessment, and testing. The Russian entities 461,644 organizations. Mandatory their skill level up to date with DLS helps to effectively achieve Foreign entities 8,711 programs also include training changing industrial and social large-scale training objectives, and certification of employees in conditions. to test employee knowledge for By employee category occupational health and safety • Program for project teams Basic compliance with corporate and managers 53,242 and are conducted both remotely and specialized courses are held statutory requirements, and to and in person. for project teams as part of the develop professional and managerial specialists 60,231 • Corporate training is conducted Integrated Project Management competencies, as well as to enhance workers and other employees 356,882 as necessary in specialized System. In 2020, 400 employees the personal effectiveness skills of educational organizations received an opportunity to employees. of higher education or in the complete this type of training. Corporate Training Center • Internal trainers and mentors. The Company also has a talent pool program (Astrakhan). The main purposes The Institute of Corporate Trainers and qualification centers; Detailed information of this type of training are to and the Institute of Mentoring is available on the website: improve employees’ qualifications are also elements of the overall or professional retraining, and to training system. Internal business 138 LUKOIL Group 139

02

Social SOCIETY SOCIETY

INVESTOR SOCIETY

Our external social policy is formed in accordance with the principles of constructive cooperation and responsible partnership. We recognize the importance of regular interaction with residents of Russian regions and foreign countries where LUKOIL organizations operate. 140 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 141

KEY CHANGES AND RESULTS CONTEXT IN THE REPORTING YEAR The World Economic Forum (WEF) workers. Therefore, supporting The crisis has also revealed gaps in predicts1 that a drop in household jobs for young people, small and the public education system, such income is one of the most probable family-owned businesses, and as the lack of developed distance and significant long-term risks social entrepreneurs is critical to learning methods. This needs to for local communities in the post- rebuilding communities. be addressed by improving the crisis period, particularly in less infrastructure and the education of developed countries. This will be Another equally pressing social the teaching staff. LARGER SALES OF PRODUCTS WITH IMPROVED LUKOIL GAS STATIONS’ MOBILE APPLICATION driven by a spike in unemployment issue is the long-term implications ENVIRONMENTAL CHARACTERISTICS INTEGRATED WITH CUSTOMER INTERACTION during the pandemic, when not of the pandemic for public health, Productive and ongoing social LOYALTY PROGRAM HAS BEEN SUCCESSFULLY even those able to work will the effects of which remain as yet dialogue and coordination IMPLEMENTED. THE NUMBER OF APPLICATION USERS regain a stable income, should largely unknown. Such factors as among all parties involved will 07 EXCEEDED 4.2 MILLION PEOPLE BY THE END OF 2020 the economy begin to recover. COVID-19 side effects and delayed be crucial in developing effective (YOY GROWTH OF MORE THAN 1.4 MILLION PEOPLE) The crisis has had a particularly treatment will maintain pressure countermeasures at the regional detrimental global effect on the on local health care systems and level. LUKOIL is ready to play demographics most exposed affect the ability of the population an active role in effecting these to the adverse dynamics of the to resume regular work schedules. changes labor market, such as young

A SHARED SERVICES CENTER FOR MONITORING THE TOTAL EXTERNAL SOCIAL SUPPORT EXPENSES WERE QUALITY AND QUANTITY OF PETROLEUM PRODUCTS RUB 8.4 BILLION AT ALL GAS STATIONS IN RUSSIA WAS OPENED, ALLOWING AN ANALYSIS OF THE OPERATIONS OF THE GAS STATION NETWORK DOWN TO EVERY FUEL TANK TRUCK, STORAGE TANK, AND OPERATOR SOCIETY SOCIETY

CONTRIBUTION TO IMPLEMENTATION OF SDG

Total COVID Relief support (external social support) amounted to about RUB 1 billion

PLANS FOR 2021 AND THE MIDTERM

Development of an ecosystem for Technology research for the Continued implementation of gas station customers as part of further development of energy social projects in the regions and the partnership program service; efficient hydraulic oils. countries of operation. continued digitalization.

1. Source: The Global Risks Report 2020. World Economic Forum, 2021. 142 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 143

LUKOIL is one of the largest suppliers A monitoring system for lubricants, Improving the quality of PRODUCT QUALITY AND of bunker fuel in Russia and for vehicles, and permanent facilities services at filling stations ports in Bulgaria and Romania. was implemented in 2020. The Environmentally safe marine fuel monitoring system represents a The four-year program for the CUSTOMER RELATIONS (RMD-80/TSE) with 0.1 percent sulfur software and hardware complex reconstruction of filling stations content meets MARPOL1 requirements powered by industrial internet along the federal highways of related to the content of air pollutants technologies, which makes it Russia and in regional centers in exhaust gas in SECAs2 and aquatic possible to remotely monitor the was completed in 2020. 236 filling LUKOIL Group entities produce a Sales of fuel products and lubricants areas of the European Union. This condition of lubricants, as well stations underwent renovations wide range of products for various product has been sold in the Baltic as mobile and fixed facilities to during this period. This program industries and vehicle owners Type of product 2018 2019 2020 Sea aquatic area since 2014. preserve their quality. made it possible to improve the in Russia, Europe, Asia, and the ECTO brand fuel, thousand tonnes 9,603 9,022 8,299 quality of service and expand the Americas. Our priorities are focused In the reporting year, range of services provided. on meeting customer expectations, Bunker fuel, thousand tonnes 4,742 4,269 2,732 Production of energy LLK-International continued to developing and launching Aviation bunker fuel, thousand tonnes 3,198 3,357 2,539 efficient and environmentally develop collaboration with several Three (LPG) 07 new products with enhanced friendly oils and lubricants leading world manufacturers sales facilities with a total volume operational and environmental Branded oils (premium group), thousand 594 574 611 of equipment and machinery. of about 3 tonnes per year were tonnes properties, and continually Our priority in developing For example, we expanded our commissioned in 2020 to expand improving quality management Biofuel blends2, million liters 6,515 7,093 6,733 production of oils and lubricants is relations with Volkswagen, a the fuel product line and promote approaches1. We make great efforts to create innovative products for major car manufacturer in Russia more environmentally friendly to get feedback from our clients Note. promising new types of equipment and Europe. LUKOIL became the fuels. In 2021, we plan to open on the quality of our products and A temporary decrease in sales of branded oils in 2019 versus 2018 is the result and machinery, as well as highly principal supplier of lubricants for additional LPG facilities with a total related services. LUKOIL filling of the MARPOL convention which came into effect on January 1, 2020. effective specialized products for MAN engine plant in Nuremberg, sales volume of over 28 thousand stations have a loyalty program various industry sectors. . tonnes per year and to launch a for customers, which has grown in • LLK-International develops and pilot project for the installation of popularity each year. supplies low-viscosity Genesis FE LLK-International had been a a compressed module (Fuel Economy) oils to consumers member of the Waste Recycling (with a capacity of over 9 thousand Manufacturing and selling in various countries. These oils Association since 2018 until 2020. tonnes per year) at a products with enhanced LUKOIL’s strategic focus is on The combustion products of these help reduce fuel consumption by in Nizhny Novgorod. SOCIETY SOCIETY properties continuously seeking opportunities new types of fuel contain less internal combustion engines and to enhance the quality of its motor sulfur, soot, carcinogens, and boost energy efficiency. In 2020, Average satisfaction level Transition to the Guaranteed Oil LUKOIL branded products have fuels and lubricants and adopting an other hazardous substances. The we successfully developed a low- of consumers6 Product Delivery system from enhanced properties that enable approach of anticipatory compliance Company also produces innovative viscosity engine oil for hybrid tank farms to end user remains lower fuel consumption and reduce with the requirements of the markets products for marine shipping, engines, approved under the new on track. For instance, the LUKOIL- the content of hazardous substances where our products are sold. aviation, and industrial companies. Daimler specification3, and a low- 2020 94 Tsentrnefteprodukt filling stations in exhaust gases. The use of new viscosity engine oil for MAN trucks4. have completely switched to and innovative products fosters The composition of our motor fuels 2019 90 this system; so have the LUKOIL- improvements in safety and reduces was 100 percent compliant with We also produce environmentally Severo-Zapadnefteprodukt filling negative environmental impacts. environmental standard Euro-5 friendly oils. Biodegradable products 2018 90 stations in six regions, and LUKOIL- (environmental class 5) as early as under the BIO brand (BIOLUBE, Uralnefteprodukt in four regions 2012. BIOCHAIN, and BIOFLUIDE) are of operation — a total of about supplied to the European market5. 67 percent of filling stations have Share of products with enhanced properties, % Over time these oils degrade into been enrolled in the system to date. components that, unlike synthetic The guaranteed delivery system 2018 2019 2020 oils, do not harm the environment. ensures the quality and quantity of Share of ECTO branded fuels (motor gasoline and diesel) in total retail sales of 63 64 61 • We continue to develop fully transported fuel and reduces the petroleum products in Russia and abroad biodegradable hydraulic fluids number of technological operations and coolants. that expose filling station personnel Share of environmentally safe marine fuel in total sales of bunker fuel 23 23 16 • Special hydraulic oils that can be to hazards. Share of energy efficient lubricants in total production of lubricants (PVL + CVL)3 8 10 16 degraded in Arctic conditions are being developed.

1. The 1973 International Convention for the Prevention of Pollution from Ships, as modified in 1978, MARPOL 73/78. 2. Sulfur emission control areas (SECA) are aquatic areas in the North and Baltic Seas and part of the US coast. 3. LUKOIL GENESIS MCB 225.33 0W-20 engine oil. 1. 4. Additional information published on the website: https://lukoil.ru/Products. LUKOIL AVANTGRADE PROFESSIONAL XLE 5W-30 engine oil, compliant with M3777 specification. 2. 5. Biofuel blends are blends of motor and ethanol (up to 10%) or diesel fuel and fatty acid methyl esters (allowing for a motor gasoline density of 0.755 kg/L LUKOIL’s 2020 lubes portfolio includes five lines of biodegradable oils: hydraulic (LUKOIL GEYSER BIO), gear oils (LUKOIL STEELO BIO), chain oils (LUKOIL BIOCHAIN, and a diesel fuel density of 0.845 kg/L). These products are sold in European countries (the largest volumes are sold in Belgium, Romania, Bulgaria, and Turkey). LUKOIL BIOSEGAROL), and spacer oils (LUKOIL LAYER BIO). 3. 6. The method of calculating the indicator “Share of energy efficient lubricants” was revised in 2019. Energy efficient lubricants are oils with low rates of high The approach for calculating the indicator was changed in October 2020. The survey is conducted among retail and wholesale clients — oil and lubricant consumers. temperature viscosity (less than or equal to XXW-30) for light-duty and cargo product lines. 2018 data was updated. Percentage of responses attributed to clients satisfied with product quality is indicated. Corporate customer satisfaction in 2020 reached 100%. 144 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 145

A Corporate Competence Center and for area managers and filling station development of interactive Organizational Development Unit employees. Constant training customer channels, and digital were established on the basis of guarantees improved quality of services for corporate clients on the LICARD1. This helped centralize the customer relations. In addition, in mobile application and in personal standardization and unification of 2020 all filling station employees account. The new concept of YEARS the activities of NGOs and quality in Russia were equipped with new catering at filling stations is based scaling of business processes uniforms which were designed in on strict quality control of food from required to support core activities. response to their comments and the preparer to the customer. of Sustainable Development. Oil for people The implemented “Business idea” requests. feature enables the Company’s personnel to offer suggestions for Plans for further improvement Following extensive upgrades, LUKOIL’s oil refineries began to produce world- improving the business segment. of the quality of services involve class motor fuels, including high-octane automobile gasoline, low-sulfur “I believe in the future of training and motivational events as diesel fuel, and universal motor oils as early as the mid-1990s. The social our Company. There can Thanks to the extensive efforts of part of the Year of Service (2021), the result of these changes was evident as people in the areas of operations be no progress without the Corporate Competence Center, introduction of innovative customer- gained access to affordable and safer fuel, and the air in the cities became continuous development.” 07 we diversified our training courses oriented service scenarios, cleaner. V. Alekperov, President of PJSC LUKOIL, Apart from the goal of improving product quality, since its founding the 2020 In 2020, LUKOIL Group filling stations ranked number one in the Retailer of Company has been building partnerships in the Russian regions. We recognize the Year award in the “Filling Stations” category. the social significance of offering charitable support not only to those who need help but also to people who have valuable ideas and the energy to bring them to fruition. This philosophy was behind the work of the LUKOIL Charity Fund and defined the main priorities of external social policy, which have been Relations with filling station By the end of 2020, the number The customer relations system maintained and developed over the past 30 years. customers of LUKOIL GAS STATIONS mobile we have developed helps us boost application users surpassed 4.2 overall operational efficiency and We maintain constant contact with million customers (YoY increase – create a welcoming environment at 1990s 2020 the retail customers of our filling over 1.4 million people). filling stations. stations and analyze feedback from The formerly most mass-produced domestic A-76 and >> LUKOIL fuels no longer contain lead compounds; SOCIETY SOCIETY them in order to improve the quality A large-scale information campaign Customer service unit answers AI-93 gasolines contained lead, sulfur, and benzene, sulfur content is reduced to 0.03 percent, tar not of services as well as the level of was launched during the pandemic clients’ questions via any convenient substances that cause severe health problems more than 5 mg per 100 cubic cm, and benzene satisfaction with our products and for the customers of LUKOIL filling communication channel: content is reduces to 0.8 percent services. The main methods of stations. It was designed to: customer interaction are surveys • Reduce the amount of human and analyses of client requests and interaction. This was achieved by In 1992, emissions for gasoline (Euro 1) and diesel use >> 0.5 g/km (diesel) and 0.1 (gasoline) reflect the proposals received via the Unified actively promoting contactless contained 2.72 g of carbon monoxide per km traveled emission levels for LUKOIL products as early as Hotline directly at filling stations payments using the LUKOIL 2002 and through social networks. mobile app. LICARD LLC’s Big Data analytics tools • Ensure compliance with disease facilitate customer segmentation, control measures while at the Distribution of LUKOIL Group Permanent population in Kogalym in 1992 — about 48 >> About 68 thousand people which in turn facilitates more same time preventing negative filling stations among thousand people accurate feedback. reactions to them. To achieve this, countriesРаспределение2, as ofАЗС December Группы «ЛУКОЙЛ» 31 на 31 filling stations were supplied with eachдекабря year каждого года Feedback is used to improve the informational materials on the 2,474 2,531 work of regional managers at need to use personal protective 2020 5,005 filling stations: every month their equipment. In 1994, four cooperation agreements with constituent >> 29 cooperation agreements with constituent 2,469 2,575 entities of the Russian Federation were signed entities of the Russian Federation in effect performance is benchmarked • Encourage customers to use 2019 5,044 against criteria that take into online stores via the “For Those 2,556 2,612 account requests and complaints Who Are Home” campaign 2018 5,168 received via the Unified Hotline as designed to promote LUKOIL’s Russia Abroad well as the rating received in the partnership program. 37 grants were awarded as part of the first Social and >> The winners of the contest received 769 grants mobile application. Cultural Projects Competition1

1. LICARD LLC is a Russian company of the LUKOIL Group; information on its operations is available at https://licard.ru/en/ 2. Data includes LUKOIL Group’s owned, leased, and franchised filling stations, as well as suspended and leased filling stations (as of December 31, 2020). In 2020, the 1. Group continued to optimize its filling station network by cutting down the number of unprofitable leased and franchised stations. The first Social and Cultural Projects Competition was held in 2002. 146 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 147

Our actions Natalia Komarova

EXTERNAL SOCIAL POLICY We recognize the importance Governor of the Khanty-Mansi Autonomous Area — Yugra of regularly interacting with the PRIORITIES residents of the Russian regions where LUKOIL entities operate. There is an oriental wisdom: friendship doubles joy and halves grief. Our external social policy focuses Fortunately, Yugra has a friend who operates according to this rule, — and this on the interests of territories and is LUKOIL Company. Our collaboration is not a game, predictable mechanisms External social program management system local communities, and is based are in place. We highly value this kind of collaboration.” on the principles of constructive cooperation and responsible ELEMENTS OF THE MANAGEMENT CORPORATE partnership. SYSTEM DOCUMENTS Our charity programs are focused The Social Code of PJSC LUKOIL: Thanks to its state-of-the-art on improving the social climate and production facilities and stable quality of life of the population, our 07 PRINCIPLES employment, the Company is a employees and their family members The Company’s social responsibility principles are defined as The Social Code of PJSC LUKOIL, approved by the big employer and taxpayer and and embody the Company’s follows: continuity of business; economic feasibility; control PJSC LUKOIL Board of Directors, Minutes No.16 contributes to maintaining a stable response to pressing social issues. over the performance of obligations and public reporting. dated October 24, 2017 social and economic situation in Our social priorities have remained The Company’s charity and sponsorship priorities and the most Russian regions where the unchanged for over a quarter of a mechanisms for their implementation and assessment have Group’s entities operate. century, and are the same for all The LUKOIL Charity Fund Non-Profit also been established the regions and countries where Organization: The Company’s tax payments LUKOIL Group entities operate. Many to budgets of all levels in 2020 programs and regional projects are PRIORITIES amounted to RUB 782.7 billion, long-term and are financed by the Environmental protection, the development of science and including about RUB 71 billion to LUKOIL Charity Fund (the LUKOIL CF education, the preservation of national and cultural identities, the consolidated budgets of the or the Fund) and directly by LUKOIL and sponsoring culture and sports and supporting socially constituent entities of the Russian Group entities. vulnerable groups Federation1.

SOCIETY SOCIETY LUKOIL’s base towns in Western The Social and Cultural Projects Even amid challenging conditions Siberia — Langepas, Urai, and Competition: caused by the pandemic and Kogalym — celebrated anniversaries INTERACTION WITH THE REGIONS WHERE economic downturn, the Company in 2020.They are now among the WE OPERATE AND WITH LOCAL COMMUNITIES succeeded in implementing its most well-equipped and comfortable production plans and investment places on the map of Russia. PJSC LUKOIL’s external social policy is executed using the PJSC LUKOIL’s Policy on Interactions with program, ensured steady operation following mechanisms: Subsidiaries on Key Lines of Activities of the Public of its industrial facilities, the • social and economic cooperation agreements with Relations Department approved by the Minutes of output of petroleum products, and constituent entities of the Russian Federation the Management Committee of PJSC LUKOIL dated timely payment of taxes and other Our partner in the “More than Just • Social and Cultural Projects Сompetition December 23, 2019 payments to all levels of the budget. a Purchase” program is the “Our • charity projects and programs There were no staff layoffs despite Future” foundation of regional social • support for the indigenous minorities of the North volume drop-offs under the OPEC+ programs: • corporate volunteering agreement and severe restrictions as • sponsorship part of the anti-COVID-19 measures.

ASSESSMENT OF PROJECTS

The main criterion for selecting projects we will support is their potential contribution to resolving local issues.

Our methods of assessing the efficacy of implemented projects include: • meetings with stakeholders to discuss the effective implementation of cooperation agreements • regular monitoring of the social and economic situation in Russian regions

• meetings with residents of Russian regions (roundtables, 1. Excluding excise taxes on petroleum products (motor and straight-run gasoline, diesel fuel, motor oils), which are distributed among the budgets of the constituent dialogue sessions, conferences) entities of the Russian Federation at the Treasury level. 148 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 149

Social projects make it possible to Dmitry Makhonin Regular areas of support build and renovate kindergartens,

schools, sports facilities, medical Governor of the Perm Territory centers, hospitals, cultural SUPPORT FOR ORPHANED CHILDREN, DISABLED PERSONS institutions, and other socially Together we have conducted numerous projects: we have built new significant facilities. In 2020, due schools and kindergartens, build and repaired health centers, improved to the COVID-19 pandemic, we gardens and parks. Having signed the agreement, we are confident Areas of external social policy improve their health, and help them The Company provides special concern prepare for adult life. and caring to World War II veterans had to cancel mass events that our collaboration will continue. This is important for us: we have 300th We support public institutions that By supporting disabled people, we working in the oil industry. Every year, anniversary of Perm ahead with many large events planned, and we will were supposed to take place as look after orphaned and abandoned not only provide them with financial on the eve of Victory Day, they receive part of several projects and adjust continue conducting projects in territories, for instance, on the development children, as well as the children assistance, but also help them master monetary aid and gifts. The Company other plans: some events were of rural culture centers.” themselves. Our programs promote new life skills. also supports the families of military rescheduled and some were held children’s personal development, servicemen who died in local conflicts. using other formats. information booth with development Selected social policy initiatives and educational games were built. Irina We partner with public agencies and Information on the Yugra wildlife and Chelysheva 07 In 2020, LUKOIL Group external social support expenses amounted foundations that provide support culture of indigenous people and the to RUB 8.4 billion, including charity social projects and events under to children, including those with art of Yugra artists have been included 29 cooperation agreements with constituent entities of the Russian disabilities. For example, the Children in special education programs. Director of “Alyi Parus” social shelter Federation. Concurrently, significant funds were allocated to protect with Cerebral Palsy Support Foundation Cognitive aids were purchased, and (Nizhny Novgorod Region) people from the COVID-19 pandemic. received custom-made wheelchairs sensory maps were prepared to for children in Kogalym, Langepas, facilitate the museum experience for We are grateful to LUKOIL visitors with disabilities. Urai, Pokachi, Novgorod, Pskov, Company and LUKOIL Charity Budennovsk, in the Komi republic, and In Uzbekistan, families with disabled Foundation for sensitive and careful in the republic of Udmurtia. The Yamine children from the Dekhkanabad district Charity Foundation (the Khanty-Mansi of Kashkadarya province, low-income attitude towards our establishment Regional support in the fight against COVID-19 Autonomous Area — Yugra), with families, and people with disabilities and the children. Annually, they the Company’s support, organized received charitable assistance during provide substantial support, and Since the outbreak of the coronavirus pandemic, • supplying fuel to medical institutions and volunteers; diagnostics, and medical treatment for the lockdown following the request never refuse to help solve our LUKOIL has been providing support both in Russian • purchasing food packages for elder citizens and 140 children with disabilities as well as from the Khokimiyat of Alat district of problems. For example, this year the regions and abroad to treat patients and fight the e-learning tablets for students from low-income Bukhara province. rehabilitation and correctional therapy Company assisted us in carrying out spread of the disease. The Company donated about families. in specialized centers nationwide. We also provided support to charitable

SOCIETY SOCIETY full repair of girls’ bedroom. Many RUB 1 billion to 25 Russian regions and 14 foreign The “Museum without Borders” project foundations that addressed the spread LUKOIL volunteers assisted the elderly across countries. (Pokachi, Khanty-Mansi Autonomous of the coronavirus infection (Mehr va thanks for your contribution!” different regions and handed out medical masks to Area — Yugra) helped to create a Shavkat, Kashkadarya and Syrdarya the local population. branches of the Soglom Avlod Uchun The primary areas of assistance are: barrier-free environment for children and adults with disabilities: a ramp charitable foundation). • procurement of essential equipment for medical LUKOIL made a major contribution to the fight against with a call button and a sensory institutions (artificial lungs ventilation machines, the pandemic through its in-house production of oxygen tanks, and compressors for intensive and antiseptics and disinfectants. The Kogalym Chemical resuscitation medical care for patients with severe Reagent Plant produced and delivered more than cases of infection, CT scanners, X-ray machines, 820 tonnes of disinfectants to Yugra entities. LLK- EDUCATIONAL PROGRAMS ECG recorders, and others); International also launched the production of • construction, repair, and re-outfitting of medical modern antiseptics for individual and industrial use, of society. The Company is working from the Company to create research facilities (the hospital for infectious diseases in the effectively preventing the spread of a wide range of Areas of external social policy with oil industry higher and secondary centers, laboratories, and academic region, the multifunctional laboratory in viruses, including COVID-19. We believe that our programs for the educational institutions to ensure that departments; purchase equipment; and Kogalym, among others); younger generation and young oil the educational process is organized in publish new textbooks and collections of • procurement of personal protective equipment In Iraq, we supplied equipment, sanitizers, and industry specialists will make a valuable accordance with the highest standards. articles about the oil and gas industry. (masks, protective clothing for medical workers, supplies to medical facilities and hospitals in the contribution to the future well-being The institutions use financial support sanitizers, etc.); districts of Ezzeddine Salim, Qurna, and Madeina. Selected social policy initiatives In 2020, the scholarship program implement programs that have wide covered 14 higher education institutions coverage. In 2020, we also continued to support and three colleges, and the grant In 2020, LUKOIL became the key partner traditional education programs. Since program covered one high school, of the “I am a Rescuer!” educational 2000 we have been sponsoring high- eight higher education institutions, and event for schoolchildren to mark the potential students, young teachers, and four colleges. LUKOIL Group entities 30th anniversary of the EMERCOM of job training instructors by providing also support educational initiatives Russia. According to the preliminary individual scholarships and grants. in regions where they operate and reports on the competition, 12 children spent a day with an emergency 150 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 151

response worker and received letters of Operating Company. Two pilot ENVIRONMENTAL PROJECTS recommendation for admission to the robotics classes were opened at Natalia Academy of State Fire-Fighting Service secondary schools and fitted with the Ageldina Areas of external social policy throughout the Company’s existence. these campaigns, our employees and of EMERCOM of Russia. latest equipment. Children will learn They are a part of our corporate partners plant trees and flowers, clean

The Company also completed a large- programming, mathematics, physics, Environmental campaigns have culture deeply cherished by our up natural areas and remove litter from young mother, resident of the village scale project for the construction of and algorithmic fundamentals, which been held at LUKOIL Group entities employees. Traditionally, as part of riverbanks and rivers. “Neftegrad” interactive playgrounds will later help them decide on their of Ust-Tzilma (the Komi Republic) for children. These playgrounds help future education and career. in the historical center of Perm, was educate children about the oil and My four-years old son Sasha is Selected social policy initiatives Area) received support for the upkeep gas industry in the form of interactive of aircraft used to patrol the forest land completed in 2020 in the Perm More details can be found enrolling in the new kindergarten; The Wings of the Arctic Federation Territory. The route is used for games. we live in this district on Lugovaya to locate hot spots and flood areas. The “Universe and Us” project (Urai, on our corporate website: of General and Ultra-Light Aviation Supported by LUKOIL Group entities, adventure games, educational tours for street. We have been waiting for Khanty-Mansi Autonomous Area-Yugra, (Salekhard, Yamal-Nenets Autonomous a Trail to Yegoshihya, a loop eco-trail schoolchildren, and birdwatching. Youth and Supplementary Education the place watching the construction Center) organized field trips to schools works. In our village children have using a mobile planetarium and long been waiting for their turn, a astronomy equipment. kindergarten was essential! For now 07 In 2020, robotics classes were opened kindergarten placement issue has SOCIAL AND CULTURAL PROJECTS COMPETITION in Bukhara and Karshi (Uzbekistan). been solved for many parents”. The project was implemented by the from local citizens and entities to help and “Sports”. One more category was Innovation, Technology and Strategy Areas of external social policy resolve issues that impact local areas, introduced in 2020 in addition to the Center under the Ministry of Education Evgeniy The Social and Cultural Projects and to facilitate conditions that will traditional ones — “The Great Deed”, of the Republic of Uzbekistan with Competition has been organized by increase the number of active citizens commemorating the 75th anniversary the support of the LUKOIL Uzbekistan Vershinin LUKOIL CF in partnership with LUKOIL capable of implementing worthwhile of the victory in World War II. Group entities since 2002 and is the social ideas. The Competition considers Sponsorship programs for students and teachers of higher and Head of Taimyr Dolgano-Nenets most well-known corporate program. entries in three main categories: secondary education organizations in Russia Municipal District of the Krasnoyarsk Its main goal is to support initiatives “Environment”, “Spirituality and Culture”, Territory 2018 2019 2020 Nunnery. The shop is open to everyone, activities, which will pave the way for Selected projects that were and excursions and masterclasses are the ecological education of the public. We are grateful to LUKOIL Company Student scholarships financed in 2020 held for social groups. The Romanian project to establish a for their assistance in the construction Number of scholarship holders, people 190 195 196 Improving the social climate in Cultural Center for Human Impact on of a school building; no doubts it Russian regions Environmental improvement Nature and Environmental Education SOCIETY SOCIETY Level of financing, RUB million 5.9 6.2 6.4 will become a point of attraction for The Happiness Factory project made it During the implementation of The in Cheia, Prahova County, received many boys and girls from the village possible to complete the construction Kindness Journey project (organized support as part of the Social and Grants to teachers of Khatanga. The new site is really and furnishing of the blacksmith shop by the District Community Center in Cultural Projects Competition. The the village of Ust-Tsilma and Ust- center was opened at the Museum Number of teachers, people 79 79 86 necessary for the villagers, 173 people recreated using the old designs in the Tsilma Administration district in the of Rocks in Cheia, a branch of the have already applied for extra- Krasnoye Estate in Chernushinsky Financing amount, RUB million 9.0 9.2 10.2 Komi Republic), the funding was used Prahova Regional Museum of Natural curricular workshops”. District of the Perm Territory. Improvements were also made to the to improve and landscape the territory History. Practical fieldwork was adjoining territory. The blacksmith shop of the Ust-Tsilma Cultural Center, carried out during the pandemic to integrated perfectly into the tourist including the sidewalks. The area study the habitat and biodiversity is designed to host environmental of the Cheia-Menechu area jointly SUPPORTING HEALTHCARE INSTITUTIONS route that takes pilgrims to St. Nicholas

Areas of external social policy regional hospitals, out-patient protecting the population during the clinics, and first aid stations, as well coronavirus pandemic. More information about social Social and Cultural Projects Competition Results The Company has for many years as improving medical services in the supported a number of large regions of operation. Most of the projects LUKOIL supports can be specialized medical centers and spending in 2020 has been directed at found on the Facebook page. 3,461 A total of over 70 hospitals and medical worked together during Mercy Ships 2020 769 Selected social policy initiatives centers received support, and over Cargo Day to raise support for Mercy 157 Our main efforts in 2020 were focused 281 million rubles were spent on Ships, an NGO operating the world’s 3,607 on providing support to healthcare equipment. largest private hospital ship, serving in 2019 785 institutions across Russia and abroad At the same time, we continued to the poorest countries in the world as 159 (see above for details). support projects of social organizations. ranked by the United Nations Human 3,645 Most of the funding was used to MERCY SHIPS CARGO DAY Project Development Index. 2018 772 purchase medical equipment, including LITASCO SA / EIGER SHIPPING SA have In Uzbekistan, LUKOIL has funded an 141 artificial lung-ventilation machines, participated in the fund raising for this insurance program covering accidents drugs, protective clothing for medical sustainable Swiss non-profit Association and infectious diseases for about 1 Number of projects Number of winning Financial support project. For the first time ever, the global thousand children from six boarding participating projects, units for winning projects, personnel, sanitizers, and other PPE, as in the Competition, units RUB million well as to re-equip medical institutions. shipping and trading community has schools and orphanages. 152 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 153

with the Menechu Forestry Service SUPPORTING SPORTS TEAMS AND EVENTS in compliance with all the prescribed Elmira Zaripova precautions. The research identified Areas of external social policy Olympic movement, and organize sports: soccer, racing, basketball, valuable areas and elements of natural Minister of Labor, Employment and Social Policy of the Republic of corporate wellness programs. Special competitive skiing, water polo, heritage less known to the public, such LUKOIL’s sports program is geared emphasis is placed on the development handball. The Company also assists in as the spruce nursery, the Caucasian towards promoting healthy lifestyles of children’s sports. All sports projects organizing various competitions and

spruce, the Centennial Spruce Reserve, Company’s support covers many issues relevant to families raising many and sports. We help both professional are operated by the LUKOIL Sports Club. city sports festivals. and areas of virgin and quasi-virgin children, and also the ones with disabled children, for instance. The projects and amateur teams, support the We continuously support the following forests. This work will help the Prahova contest facilitates the restoration of historic and cultural heritage, strengthening County Museum of Natural Sciences volunteer movements. 100 social welfare institutions have become grant holders. and the Menechu Forestry to map out There have been 493 projects implemented in this area. A number of project forests of high natural value as well as guidance of Olympic champions. Every practices have been rolled-out across the whole republic.” More details on the activities essential elements of flora and fauna Selected social policy initiatives year from 10 to 15 winners are selected. of LUKOIL Sports Club can be found in the region. Thanks to the Company’s support, Since 2018, the Company has been Russian car racers (Lukoil Racing building a running community. The on the Company website Team), FC Spartak, the national skiing corporate LUKOIL TRIATHLON TEAM, team, United Basketball League as well as the LUKOIL RUNNING CLUB, 07 athletes, and numerous regional teams established in 2020, bring together CULTURAL HERITAGE PRESERVATION PROGRAMS have recorded impressive victories in running enthusiasts among the various sports. All professional clubs Company’s employees in Russia and supported by LUKOIL develop children abroad. Areas of external social policy where cultural monuments are located, and preserving national values. For including those representing valuable many years we have supported sports. In 2020, the Urai Arena sports complex and in social networks The Company is committed to fostering or particularly vulnerable cultural museums, theaters, performance In addition, the Company supports was opened in the Khanty-Mansi conditions that preserve national heritage sites. Numerous projects to groups, and festivals. We take part the development of youth soccer at Autonomous Area-Yugra with an area and cultural traditions and crafts in preserve cultural heritage have been in organizing exhibitions and concert the international level (Children’s of about 2 thousand square meters, regions of operation, and supports implemented. tours, restoring cultural heritage sites, Champions Cup, Lukoil Cup; Children’s built entirely with the Company’s various types of art, especially This program is aimed at developing and repairing cultural and art centers in Soccer league). Attention is also paid to charitable donations. The complex classical, as well as the territories Russian culture, promoting spirituality, Russian regions. sports veterans — LUKOIL is a founder was designed in accordance with of the Russian Olympians Foundation. international standards and features The initiatives of the LUKOIL Sport a hockey field, a gym, and other of the Nizhny Novgorod State Art also received support. A project was Selected social policy initiatives Club are intended for young athletes, facilities. The sports complex “OLYMP” Museum.” also organized with the Novaya Opera amateur and professional athletes, was reconstructed in Kogalym; it Children’s Champions Cup, Lukoil The Company has traditionally The cultural and exhibition center of soloists V. Ladyuk and A. Tatarintsev and disabled people. will accommodate students of the supported numerous cultural events: the Russian Museum was opened to give “Our Favorite Melodies” benefit Cup

SOCIETY SOCIETY Children’s tournaments were held wrestling and sambo clubs. in the Moscow Kremlin Museums with the Company’s support. Its first concerts in Volgograd and Kotovo. with LUKOIL’s support in 2020, The Key to Start project (Urai, Khanty- — the exhibitions “Carl Fabergé and exposition was a collection of paintings In addition to the above-mentioned including: handball tournament Mansi Autonomous Area—Yugra) Feodor Rückert. Masterpieces of by Vasily Kokorev, a prominent patron projects, the Company also supported among schoolchildren (Astrakhan equipped a training facility for rocket Russian enamel,” “Alexander Benois. and businessman of the 19th century, cultural centers and performance Region), traditional ballroom dancing and aeromodelling classes, which On the 150th Anniversary of the Artist’s which included about 50 works by Karl groups in various towns and villages tournament Dancing Metelitsa (Nizhny helped encourage more children to Birth,” “Collection of V. Kokorev”; at the Bryullov, Alexey Venetsianov, Vasily across Russia. Novgorod Region), Usinsk Football participate in technical sports. Ten club State Historical Museum — “Fyodor Tropinin, and others. There are plans to Since 2000, LITASCO has been League (Komi Republic), first city trainees have won first and second Rokotov. Collection of the Historical open a Museum and Exhibition Center proud to partner with the Geneva tournament in adaptive equestrian places in the open city and regional Museum” exhibition; at the Tretyakov in Kogalym — a branch of the Russian Chamber Orchestra, renowned for its Children’s Soccer league sports for athletes with disabilities competitions. Gallery — “Maria Yakunchikova. On Museum, similar to the previously unique sound, based on a historical (Nizhny Novgorod), district and city In Perm, a tourist trail around the 150th Anniversary of the Artist’s opened branch of the Maly Theater. interpretation of works in classical competitions and figure skating Yugovskoye Pond was equipped for Birth”; at the Vyatka Art Museum. V.M. Kogalym is becoming the true cultural and baroque styles. Together with the championships in the Yamal-Nenets hiking, biking, nordic walking, and Vasnetsov and A.M. Vasnetsov — the center of Ugra. Geneva Chamber Orchestra LITASCO is Autonomous Area. school physical education classes. “Magic Bolshoi” exhibition; at the P.M. The Tchaikovsky Symphony Orchestra, participating in extraordinary musical “Refueling through Sport” grant. This The project of the Kogalym Municipal Dogadin Astrakhan State Art Gallery — The Moscow State Tchaikovsky events such as the now traditional nationwide charity project is aimed Paralympic Sports Federation “Outstanding artists in the collection Conservatory, and other companies Geneva Christmas Concerts. at sponsoring athletes between six encouraged children and adults with and fourteen years of age. In addition disabilities to take regular table tennis to monetary prizes, winners receive lessons. sportswear and train under the 154 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 155

Corporate volunteering • Charity fairs and city festivals largest network of operating social to encourage residents of entrepreneurs in Russia who are The practice of volunteering in cities and villages to provide also represented online. SUPPORTING INDIGENOUS campaigns and events for the charitable aid to their neighbors. benefit of the residents of cities In light of the challenging MINORITIES OF THE NORTH and villages has long been part economic situation faced by of LUKOIL’s corporate culture. Social entrepreneurship many businesses, including social Our young employees organize entrepreneurs, due to the spread their own volunteer projects and The “More Than Just a Purchase” of the coronavirus infection, the The first three organisations that ECG unit for use in the future once the There were no cases of involuntary participate in local initiatives. project1 is a unique joint initiative Our Future Foundation allocated joined LUKOIL in 1991 operated in the quarantine is over. resettlement of indigenous people Despite the large variety of between LUKOIL Group Russian RUB 11.6 million to support Khanty-Mansi Autonomous Area — during the LUKOIL Group’s operations campaigns, our volunteers from entities supplying oil products social entrepreneurs during the Yugra, home to the indigenous The Company has established and in the traditional settlement areas all regions where LUKOIL operates and the “Our Future” Foundation pandemic. peoples of Siberia — the Khanty successfully operates mechanisms and/or areas of economic activities of have shared priorities. These of Regional Social Programs2. and Mansi. That is why relations that allow indigenous minorities of the indigenous minorities of the North include the following types of Its purpose is to support social More details about the project can with the Indigenous Minorities of the North and their organizations to in the reporting year. Also, no inquiries 07 support and social participation: entrepreneurs3 who get the be found on the website: the North (IMN) have been a focus contact the Company and request were received regarding violations of • Support for war and oil industry opportunity to sell their products of development since the Company assistance or protection of their rights. the rights of indigenous people of the veterans: visiting the elderly, at the Company’s filling stations. started its operations. In the 2000s, North. helping them around the house, Buying project-branded goods LUKOIL’s areas of operation were In 2020, the Group’s entities operating and giving them gifts. help provide jobs for people with expanded to include new northern in Khanty-Mansi Autonomous Further details on the system • Care for children — visits to disabilities, retirees, and other regions (the Nenets Autonomous Area Area-Yugra and NAO received no of relations with the IMN can be found orphanages and patronage socially vulnerable groups. The and the Yamal-Nenets Autonomous requests from the IMN regarding on our website of child welfare institutions, project remained active during the Area). COVID-19 or assistance to prevent organizing related events and pandemic. In 2020, 15 new social the spread of infection. At the same campaigns. entrepreneurs started offering their We share the principles enshrined in time, personal protective gear and • Environmental campaigns — products at LUKOIL’s filling stations. the UN Declaration on the Rights of medical equipment were sent to cleaning up natural sites, Indigenous Peoples, the UN Global the administrations of both areas to planting trees in cities. As of December 31, 2020, Compact, and the Resolution of the provide on-site treatment. • Sporting events — bicycle rides, 122 suppliers were participating in World Conference on Indigenous

SOCIETY SOCIETY races, relays, rafting, hiking, etc. the project (107 in 2019). This is the Peoples, and are committed to ensuring a harmonious balance Dmitry Artyukhov between the economic activities of

LUKOIL Group entities in the territories Governor of the Yamal-Nenets Autonomous Area of indigenous minorities of the North and the latter’s interests in preserving We see Company’s careful and professional attitude towards our region. The their traditional lifestyle and economic document we have signed today — the agreement on collaboration — continues activity. good traditions that have been established between LUKOIL Company and Yamal, founded on mutual benefit and positive ground. It considers key issues of Yamal The Company has a history of signing people. Special thanks for assistance in the development of children’s sports and economic agreements with the heads children’s medicine; by providing financial support for many social projects we are of traditional resource use areas capable of solving the hardest challenges.” in the Khanty-Mansi Autonomous Area — Yugra and agreements on the social and economic development Supporting indigenous minorities of the North in Russia as part of deer farms in the Yamal-Nenets of licensing obligations, RUB million Autonomous Area. Compensation 359 31 includes cash payments, goods, 2020 390 transportation, and services. 355 31 2019 386 For almost 20 years, we have been implementing the Red Chum project 354 31 2018 384 to preserve the health of nomadic Khanty-Mansi Autonomous Area — Yugra Nenets Autonomous Area indigenous people of the Arctic in the Nenets Autonomous Area. In 2020, due to the pandemic, health check-

1. LUKOIL cooperates with the “Our Future” Foundation only as part of the “More Than Just a Purchase” project. PJSC LUKOIL has no involvement in the design and ups for reindeer herders and their implementation of the Foundation’s programs. families by mobile medical teams 2. Our Future Foundation was created on the initiative and using private funds of the President of PJSC LUKOIL, V. Alekperov (http://www.nb-fund.ru/). 3. had to be cancelled. However, LUKOIL Social entrepreneurship refers to a special type of activity aimed at resolving or mitigating social issues using income from economic activities. Both small businesses and social non-profit organizations can be social entrepreneurs. still donated funds to purchase an APPENDIX 1. LUKOIL GROUP’S STRUCTURE AS PER IFRS (PJSC LUKOIL SHARE OF MORE THAN 50%)

156 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 157

CONCLUSION APPENDICES

In this Report we have covered how LUKOIL tackled The Report reflects the major changes LUKOIL has Appendix 1. new challenges that our Company and the whole world introduced to production processes in response to LUKOIL Group’s structure as per IFRS (PJSC LUKOIL share of more than 50%) faced in 2020. Every Sustainability Report demonstrates the pandemic to facilitate the safety of our employees while changes made by LUKOIL, innovations in our work and ensuring stable operations of our Company. The support our investments, all of which support our commitment for regions where we operate remains high, and so is Russia to sustainable development principles and acknowledge the involvement of LUKOIL entities in solving the most our responsibility to reduce the climate impact of our urgent issues related to protecting the health and well- Exploration and production Transportation business sector Company. being of local populations. Oil and Gas Production in Russia business sector LLC LUKOIL-Trans LLC LUKOIL-AIK LLC Varandey Terminal We continue to develop our priority projects, thus helping For many years LUKOIL has been a pioneer in supporting to reduce GHG emissions and improve the sustainability of the sustainable development goals and responding to SP Neftestroy LLC LUKOIL-Varandey-AVIA the Company over the long run. We also invest in energy climate change risks facing the Company, Russia and LLC LUKOIL-West Siberia LLC RPK- LUKOIL-II 08 conservation and renewable energy programs. We have the whole world. We will keep upholding these views and demonstrated our commitment by using a responsible we will be presenting our contribution in future reports. LLC ChumpassNefteDobycha LLC LUKOIL-KNT approach to activities in the Arctic zone, including ongoing The responsibility we have demonstrated for the past LLC LUKOIL EPU Service JSC LUKOIL-Chernomorye efforts to enhance pipeline reliability. 30 years gives us every confidence as we look towards 09 the future! LLC LUKOIL-Kaliningradmorneft Oil Product Supply in Russia business sector LLC UTTiST LLC LUKOIL-Rostovnefteprodukt LLC LUKOIL-Komi LLC LUKOIL-Severo-Zapadnefteprodukt LLC LUKOIL-Nizhnevolzhskneft LLC LUKOIL-Uralnefteprodukt LLC LUKOIL-Nizhnevolzhskneft-Kalmykiya LLC LUKOIL-Tsentrnefteprodukt LLC LUKOIL-Perm LLC LUKOIL-Yugnefteprodukt

CONCLUSION LLC UralOil LLC LICARD (LUKOIL-Inter-Card) ПРИЛОЖЕНИЯ LLC Perm-Invest Other entities related to Refining, Marketing and Distribution business segment LLC RITEK LLC INTESMO LLC NK Yugranefteprom LLC LUKOIL-KGPZ LLC TURSUNT LLC LUKOIL MarinBunker LLC LUKOIL-Engineering JSC Morskoye Agentstvo Novotorik JSC Lychakgeologiya LLC Donbunker JSC Nizhnechirskgeologiya LLC LUKOIL-AVIA LLC Sports and Cultural Complex LLC LLK-International LLC Talinskoye LLC LLK Marin Rus Refining, Marketing and Distribution LLC LUKOIL-AERO Oil Refining in Russia business sector LLC LUKOIL-AERO-Domodedovo LLC LUKOIL-Volgogradneftepererabotka LLC LUKOIL-AERO-Zapad LLC LUKOIL-Nizhegorodnefteorgsintez LLC LUKOIL-AERO-Vostok LLC LUKOIL-Permnefteorgsintez LLC TZK- LLC LUKOIL-Ukhtaneftepererabotka LLC LUKOIL-Nizhegorodniinefteproekt Petrochemicals business sector LLC LUKOIL-Rezervnefteprodukt LLC Saratovorgsintez LLC LUKOIL-RNP-Trading LLC Stavrolen LLC LUKOIL-Aero LLC AERO-NEFTO 158 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 159

Power Generation business sector LLC LUKOIL-Rostovenergo Eiger Shipping SA LUKOIL Upstream Congo Anonymous Company Unipersonel LLC LUKOIL-Volgogradenergo LLC Volgodonsk Heat Supply Networks LUKOIL Lubricants International Holding GmbH LUKOIL Overseas Riyadh Ltd LLC Volzhsk Heat Supply Networks LLC Rostov Heat Supply Networks LICARD Euro Services GmbH Refining, Marketing and Distribution LLC KamyshinTeploEnergo LLC Volgodonskaya Teplovaya Generation Verolma Mineralol GmbH Oil Product Supply Abroad business sector LLC Kamyshin CHPP LLC LUKOIL-Ekoenergo AC Management Company Limited LUKOIL Eurasia Petrol Anonim Sirketi LLC Teplovaya Generation G. Volzhskogo LLC LUKOIL-ENERGOSERVIS ENERGIKO TRADING BULGARIA OOD LUKOIL-Azerbaidjan, ZAO LLC LUKOIL-Astrakhanenergo LLC LUKOIL-ENERGOSETI Corporate center and other activities LUKOIL-Georgia Ltd. LLC Astrakhan Heat Supply Networks LLC LUKOIL-TsUR LUKOIL Accounting and Finance Europe s.r.o. OOO LUKOIL Uznefteprodukt LLC LUKOIL-Kubanenergo LLC LUKOIL-Energoengineering LUKOIL Technology Services GmbH Other entities related to Refining, Marketing LLC LUKOIL-Stavropolenergo LUKOIL Securities B.V. and Distribution business segment Lukarco Finance B.V. Corporate center and other activities LUKOIL Lubricants Middle East Madeni Yag Sanayi ve Lukinter Finance B.V. Ticaret Limited Sirketi PJSC LUKOIL LLC LUKOIL-Business support center LUKOIL International Finance B.V. LUKOIL Lubricants Central Asia LLP LLC LUKOIL-Technologii LLC LUKOIL PERSONNEL LUKOIL International Upstream Holding B.V. LUKOIL Lubricants (China) Co., Ltd. LLC LUKOIL-Multifunctional business support center LLC Arkhangelskgeolrazvedka 09 LUKOIL International Secondment B.V. LUKOIL Lubricants Africa, S.A.R.L. LLC K.N. Holding LUKOIL Securities Limited Akpet Gaz A.S. LUKOIL Capital Markets Ltd Lukoil Istasyon Isletmeciligi Limited Şirketi LUKOIL International GmbH Akpet Akaryakit Dag. A.S. Abroad ARJ LTD Akdeniz Boru Natlari Nakliyat ve Isletmecilik Ic ve Dis Tic. Ltd Sti Europe LUKOIL Netherlands B.V. Asia, Middle East, Africa Istasyon Yonetimi Ve Petrol Urunleri Ticareti Anonim Exploration and Production LUKOIL Romania S.R.L. Sirketi APPENDICES Oil and Gas Production Abroad business sector LUKOIL Serbia PLC Belgrade Exploration and Production LLP LITASCO Central Asia LUKOIL Overseas Atash B.V. Oy Ab Litasco Middle East DMCC Oil and Gas Production Abroad business sector LUKOIL Overseas North Shelf AS Kiinteisto Oy Nurmijarven Liikennepalvelukeskus LUKOIL Overseas Shah Deniz IRAQ Petroleum Traiding DMCC LUKOIL Overseas Supply and Trading Ltd. LUKOIL Croatia Ltd. LUKOIL Overseas Shah Deniz Ltd. LUKOIL Asia Pacific PTE LTD. LUKOIL Upstream Senegal B.V. LUKOIL Montenegro DOO LUKOIL Uzbekistan Operating Company LLC LUKOIL Marine Lubricants DMCC LUKOIL Upstream Abu Dhabi GmbH IOOO LUKOIL Belorussia Soyuzneftegaz Vostok Limited Business sector “Entities Related to Exploration LUKOIL-Moldova S.R.L. Americas and Production Business Segment” LUKOIL Overseas Uzbekistan Ltd. Power Generation business sector LUKOIL Marine Lubricants USA INC. LUKOIL International Holding GmbH LLP LUKOIL Kazakhstan Upstream Land Power S.A. LUKOIL Lubricants Mexico, S.de R.L.de C.V. Lukarco B.V. Lumex Amatitlan B.V. Transportation business sector LUKOIL North America LLC LUKOIL Overseas Karachaganak B.V. Lumex Holding B.V. SIA Vars LUKOIL Pan Americas, LLC LUKOIL Overseas Kumkol B.V. Refining, Marketing and Distribution Other entities related to Refining, Marketing and Lukoil Americas Corporation Distribution business segment LUKOIL Mid-East Limited Oil Refining Abroad business sector LUKOIL International Upstream West Inc LUKOIL Aviation Bulgaria EOOD LUKOIL Overseas Iraq Exploration B.V. LUKOIL Neftohim Burgas AD Integrated Exploration And Production Services, S. de R.L. ISAB S.r.l. LUKOIL-Bulgaria Bunker EOOD LUKOIL Energy Limited de C.V. Petrotel-LUKOIL S.A. LUKOIL Lubricants East Europe S.R.L. LUKOIL Overseas Egypt Limited LUKOIL Upstream Mexico, S. de R.L. de C.V. Oil Product Supply Abroad business sector LUKOIL Lubricants Europe GmbH LUKOIL Overseas Etinde Cameroon Sarl Lumex Amatitlan Holding, S. de R.L. de C.V. LUKOIL-Bulgaria EOOD LUKOIL Lubricants , TOV LUKOIL Overseas Ghana Tano Limited Lumex Operacion, S. de R.L. de C.V. LUKOIL Belgium LUKOIL Marine Lubricants Germany GmbH LUKOIL Overseas Nigeria Limited Petrolera de Amatitlan, S.A.P.I. de C.V. LUKOIL Italia S.r.l. Litasco SA LUKOIL Upstream Production Nigeria LTD LUKOIL Macedonia LTD Skopje LUKOIL Benelux B.V. APPENDIX 2. IDENTIFICATION OF MATERIAL TOPICS OF THE REPORT

160 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 161

Appendix 2. Identification of material topics of the Report the results, the generic topic “Charity” among the most important reflects Report) these topics received was not estimated in scores. Instead, certain changes in the mood of single-digit votes. respondents were asked to indicate the residents of the regions. Five • The third group included issues on The procedure for determining Committee (once every two the Company’s activities in those projects that were relevant to years ago, environmental issues which most respondents probably the material topics of the Report years), ranking of material topics regions, was not the objective of the region. were not even included in the first have not yet formed a position is performed in accordance with and issues based on the results the survey. The general request half of the material issues list in due to limited information or lack the Global Reporting Initiative (scoring is applied). was worded as follows: “Please According to the response analysis, similar studies. of personal experience (climate, (GRI) standards, with a focus on select and mark the topics that you the most important issues for • Of the questions in the second COVID, Renewable Energy SASB standards and SDGs. The findings of the analyses are consider important in connection the residents of the regions were group (see table below, line Sources, the Arctic). The issue of presented as a list of relevant with LUKOIL’s activities for you/your issues of the quality of life or those “Medium importance”), it is engagement with the Indigenous Methodology issues. Based on qualitative analysis region/country to be reflected in that help to gain confidence in noteworthy that topics “Recycling minorities of the North was in (repeatability, scale, rating issued the report”. the future (the availability of jobs, of plastic waste” as well as this group because the topic is For the reporting purposes, by managers of PJSC LUKOIL, etc.), environmental well-being, and “Biodiversity conservation” and relevant to only two of the six a material topic is a topic that material issues are identified Survey participants. A total of prospects for the younger generation). “Forest restoration” are highly regions where the survey was reflects the Company’s significant and grouped into material topics. 154 completed questionnaires • The highest score was awarded to rated. Previously (including conducted. long-term economic, environmental The Sustainability Task Force approves were returned by respondents (see eight topics (see table below, line in the surveys conducted by and social impact (positive or the list of material topics. The Non- the chart). The largest number of “Most important topics”). The fact the Company for Sustainability negative) on the countries/regions Financial Reporting Regulations are responses was received from public that environmental issues are of operations and local communities, being developed by LUKOIL Group. and non-profit organizations and and/or affects the interests of Material topics and issues identified representatives of local authorities Survey results in six regions of Russia 09 / may affect stakeholders. Each for 2020 can be found in the opening (the “Society” stakeholder group). Level of 1 2 3 4 5 material topic includes a number of section of the Report. Importance issues that may be rather specific to Methodology of results Most important Regional Statutory Water bodies. Spills Accidents Products and a particular territory or a time period, Stakeholder survey processing and, accordingly, those may vary topics (mandatory expansion compliance Emissions customers from report to report. A stakeholder survey was The questionnaire included material reflection) (422 points) GHG emissions Opportunities for young conducted in 2020 in six regions topics and issues reflected in professionals Our goal is to continuously of operation of LUKOIL Group the LUKOIL Group Sustainability improve the quality of corporate entities in Russia (the Komi Republic, Report 2019. The participants were Medium Plastic waste Occupational Work with Employment Forest restoration sustainability reporting and its the Nenets Autonomous Area, given an opportunity to evaluate importance recycling safety contractors APPENDICES informative value to stakeholders. To the Kaliningrad Region, the Khanty- the degree of importance of each (desirable reflection) Payroll Education for Biodiversity attain this goal, we use the following Mansi Autonomous Area — Yugra, issue in terms of how it should young people procedures and tools: the Volgograd Region, the Stavropol be reflected in the LUKOIL Group • stakeholder engagement Territory). Sustainability Report 2020: “Most Low importance Safety in RES development Support of Climate Charity (no rating (brief reflection) the Arctic COVID-19 Indigenous (282 points) in points) during a reporting year in important topics (mandatory Produced water Minorities of various formats (roundtables, Purpose and content of the survey. reflection)”, “Medium importance spills the North responses to inquiries, surveys The purpose of the survey was to (desirable reflection)”, and “Low of customers and employees, analyse opinions on topics that importance (brief reflection)”. Each working groups, participation in are relevant to the regions and answer was given a score (3 being external initiatives, etc.); analysis which should/can be reflected in the highest and 1 — the lowest in Economy of the results of an audit and the 2020 Sustainability Report. terms of importance). Respondents Ecology external assurance of the report A sociological study of regional were also given the opportunity for the previous reporting period; residents’ opinions on current to add important topics missing Safety • participation in ratings (ESG and socio-economic and environmental from the list and to indicate their Social sector sustainability); territorial problems, as well as on materiality. When summarizing • analysis of sustainability reports of oil and gas companies; Survey participants, % Consideration of the recommendations on sustainability reporting from the Russian Union of Industrialists and • analysis of media publications; Entrepreneurs (RSPP) • analysis of legislative 12 Nonoernental oraniations requirements for non-financial non-profit organizations, individuals The Report reflects wherever strategic goals, including how the contents and objectives Enironental oraniations information disclosures, possible the recommendations measurable targets on the key of these programs correspond 38 Contrators requirements of financial Municipal (budgetary) organizations received after the public assurance of areas of sustainable development to the corporate programs and platforms, monitoring of non- Government authorities the Sustainability Report for 2019. and priority SDGs in the reports. It is the specific results obtained by 02 Mass media financial reporting systems and • It is recommended that recommended that the Company’s them. (Partially done in accordance major initiatives in this area; the results obtained be linked to contribution to the national with the Company’s practice of 34 • surveys of PJSC LUKOIL unit the implementation of LUKOIL’s projects be included, as well as setting measurable targets. In heads, heads of LUKOIL Group 1 entities, members of the Board of 3 12 Directors and the Management APPENDIX 3. INCIDENTS AND FINANCIAL SANCTIONS

162 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 163

particular, targets for GHG emission • It is recommended that reporting The positive practice of pipeline Kharyaginskoye field On October 18, 2020, a municipal operative report and information reduction were disclosed and on contaminated land remediation reliability disclosure should (the Komi Republic) state of emergency was introduced about the incident to government the achievement of targets for be supplemented with information continue. (Done.) in the municipalities of Usinsk authorities. key environmental impacts was on the total area of land in need • It is recommended that On October 17, 2020, employees of (the Komi Republic) and Zapolyarny shown.) of remediation to provide a better the following reports include LUKOIL-Komi discovered a spill at District (the Nenets Autonomous Within two hours of the incident, • It is recommended that more understanding of the Company’s evidence of feedback from a section of an inactive oil pipeline Area). The emergency state was Pokachevneftegaz employees details be provided on measurable objectives and results. (Done.) program participants, provide 25 meters from the Kolva River’s lifted after completion of all work on installed four lines of booms to results of biodiversity conservation • It is recommended that information examples of their assessment in bank. Within three hours, the task October 23. prevent the movement of oil products measures (as part of updating be disclosed on the volumes of relation to the development and force flew over the territory, identified down the river, treated water with information on sustainable waste buried on land, considering implementation of social programs. hazardous zones, established factors Representatives of LUKOIL-Komi, sorbent, and collected used sorbent. development, information on the importance of these issues (Done — quotations of diverse complicating operations to mitigate the Investigative Committee and Machinery and mobile units were used areas covered by environmental for the current environmental stakeholder groups representatives the consequences (high speed of the Federal Service for Supervision of to localize the consequences of the spill monitoring is published on agenda. (The indicator is being of the regions of presence are the river flow, difficult terrain, adverse Natural Resources took water samples (skimmers, motor pumps, tanks, the Company’s website.) prepared for disclosure in included.) weather conditions). from the Kolva River at 10 locations sorbent, etc.). After clearing the incident Sustainability Report 2021). on a daily basis. By the time the work site, the contamination was eliminated, Rescuers from the emergency was completed, the maximum and the territory was cleaned in Appendix 3. Incidents and financial sanctions rescue team installed the first permissible concentration of oil accordance with the plan of measures line of barrier and sorbent products in water was no longer in place in advance for localization Oil spills According to the classification system Within four hours of the spill booms at the point of pipeline exceeded. The results of mitigating and mitigation of consequences of of Rostekhnadzor, this situation is detection, rescue teams installed depressurization. The water in the consequences of the incident were accidents at Pokachevneftegaz. Based 09 During the preparation of the Report, an emergency. Thus an emergency temporary oil traps along the route the river was treated with sorbent, reviewed by the State Commission on the investigation results, corrosion in May 2021, there was a significant regime at the municipal level was of the rainbow film, set the first three which was then collected and and environmental organizations. was recognized to be the cause of spill of oil (oil-containing liquid) in introduced in the region. LUKOIL lines of booms, washed the rainbow disposed of. To prevent the spread The head of the Federal Service for the depressurization of oil pipeline. the Komi Republic. delivered all necessary equipment film off the river banks, and sprayed of the oil spot and keep the oil Supervision of Natural Resources Reclamation of this area began in 2021. to eliminate the consequences of and collected the used sorbent. In from entering the Pechora River, noted the prompt response to Oshskoe field (Nenets Autonomous Area) the leakage to the emergency site. At addition, two more lines of booms the operational headquarters the situation by LUKOIL-Komi. Investigated occupational the time of preparation of the Report, were deployed to prevent the oil slick decided to install five additional injuries of 2019 On the May 11, 2021 during work was being performed to localize from moving towards the villages of lines of booms (with a total length The main reason for the pipeline the overflight of the territory the spill and collect oil-containing Shchelyabozh and Zakharvan. of 4 thousand meters) downstream depressurization was recognized The investigation of the car accident by employees of LUKOIL-Komi, liquid from the coastal territory and of the Kolva River. Taking into to be uncoordinated actions that occurred on 3 December 2019 at APPENDICES a leakage of oil-containing liquid the water surface of the Kolva river. On September 26, a local emergency account the difficult conditions of the personnel during UralOil was completed in 2020. was identified. The leakage was state was imposed, which was lifted at the site, the best methods of the performance of work. The following measures were taken caused by the depressurization of More detailed information will be on October 7 after full completion of mitigating the consequences were The investigation of the incident based on its results: the pipeline from the multiphase provided in the Report for 2021. work on mitigating the consequences applied. has not yet been completed. In • The information was pumping station of the Oshskoe of the spill. On October 14, • Uninterrupted real-time 2021, monitoring of the natural communicated to the regular field to booster pump station In 2020, there were four significant the Investigative Committee and transmission of data from environment for pipeline employees of UralOil and to No. 5 of the Kharyaginskoe field oil spills at the Russian entities of the Federal Service for Supervision of the scene of the accident depressurization site and on the employees of the contractor on the territory of the Nenets LUKOIL Group. Natural Resources (Rosprirodnadzor) to LUKOIL’s operational the Kolva River is scheduled. transport organization1. Autonomous Area. The spill occurred with the participation of headquarters and government Additionally, reclamation of land • Unscheduled training on Vostochno-Lambeyshorskoye field at a distance of about 300 meters (the Komi Republic) LUKOIL-Komi employees assessed agencies was organized. For disturbed during the mitigation of transportation safety was held from the coastline of the Kolva the environmental conditions and this purpose, a small satellite consequences from the oil spill is to for the contractor personnel. River, and part of the liquid ran On September 25, 2020, while water samples were taken from communications station was be carried out. into the river. Information about conducting a routine flight over the Laya River in seven locations. delivered to the spill site, In order to prevent similar incidents Klyuchevoye field (the Khanty-Mansi the identified leak was promptly the pipeline route using a UAV, an The analysis results showed video cameras were installed Autonomous Area — Yugra) in the future, circumstances communicated to the regional iridescent oil film was detected that the maximum permissible at the work sites, and teams and causes of the accident were bodies of the Federal Service for near the bank of the Laya River. concentration of oil products in were organized to ensure On 13 April, an incident involving communicated to employees of all Environmental, Technological and The route runs through a swampy the water was not exceeded at any of uninterrupted operation of the entry of an oil-contaminated the Company’s entities and it was Nuclear Supervision (Rostekhnadzor) and hard-to-reach area, so prompt the collection points. communications facilities. liquid into the Nong-Egan River proposed to use the investigation and the Federal Service for detection of the incident without • UAVs were used to transmit was discovered during patrols results when identifying future Supervision of Natural Resources a UAV would have been impossible. The reason for the depressurization real-time images that enabled along the routes of the pressure hazards and risks. (Rosprirodnadzor), as well as to The LUKOIL-Komi employees of the oil collection reservoir was experts to forecast the speed and oil pipeline. Employees of the unified duty and dispatch service immediately communicated the news due to violations made during its direction of the oil film spreading the territorial production enterprise for the Nenets Autonomous Area. to PJSC LUKOIL and government construction. Depressurization on the river surface. Pokachevneftegaz sent an authorities. resulted from high internal stress.

1. Description of the accident is presented in the Sustainability Report 2019. APPENDIX 4. GRI CONTENT INDEX

164 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 165

Significant environmental was significantly limited by weather to the budget of the Usinsk urban Index Indicator Section and page of the Report Boundaries fines in 2020 conditions and the territorial district municipality. LUKOIL-Komi of topics and remoteness of the sites. These developed and implemented a land indicators In 2020, LUKOIL-Komi was circumstances hindered completion reclamation plan to accelerate forest 102-7 Scale of the organization About the Company: highlights of the year, LUKOIL Group subject to five decisions imposing of all the work within the established area rehabilitation. At the time of p. 18 significant1 administrative fines timeframe, which resulted in preparation of this report, measures totalling RUB 105 million. All the imposition of administrative to restore forest plots had been 102-8 Information on employees and other Our employees LUKOIL Group the fines were related to damaged sanctions. The sanctions imposed for completed, and it is planned that workers soil rehabilitation in forest areas in these violations were the maximum this plot of land will be accepted The information on employment agreements is consolidated by the Company without a breakdown by order to eliminate the consequences amount due to their repeated nature. by the Republican Commission for permanent and temporary employees. Workers who are legally recognized as being self-employed, or of accidental oil (oil-containing Acceptance of Oil-Contaminated and individuals other than permanent and temporary employees of LUKOIL Group entities are not significantly liquid) and formation water spills. After the court ruling entered into Recultivated Lands in autumn 2021. engaged in operations The speed of work by LUKOIL-Komi force, LUKOIL-Komi transferred funds 102-9 Supply chain Stakeholder Engagement, p. 37 LUKOIL Group Supply chain, p. 42

102-10 Significant changes to the organization and its supply chain

Data on the supply chain are not consolidated Appendix 4. GRI content index 102-11 Precautionary principle “Safety”, p. 69 LUKOIL Group 09 and “Environmental protection”, p. 97 102-12 External initiatives Two-page opening Material topics of LUKOIL Group This report has been prepared and published the Report in accordance with the GRI Standards (Core option) 102-13 Membership of associations Appendix 5. Individual GRI Standards and LUKOIL Group Indicators

2. Strategy

102-14 Statement from senior decision-maker Message from the President of PJSC LUKOIL, LUKOIL Group 102-55 GRI Standards and Indicators Table р. 2 102-15 Key impacts, risks and opportunities Risk management, р. 29 LUKOIL Group APPENDICES Index Indicator Section and page of the Report Boundaries 3. Ethics and integrity of topics and indicators 102-16 Values, principles, standards and norms of https://www.lukoil.com/Company/ LUKOIL Group behavior CorporateProfile GRI 101. Reporting Principles Appendix 5. Individual GRI Standards and Indicators, p.172 Ethics and human rights, р. 33 102-17 Mechanisms for advice and concerns about Ethics and human rights, р. 33 LUKOIL Group GRI 102. General information.(General Disclosures 2016) ethics

1. Organizational profile 4. Governance

102-1 Name of the organization About the Company: highlights of the year 102-18, The corporate governance system is detailed in the Annual Report for 2020, page 27, as well as on the corporate 102-19 website: https://www.lukoil.com/Company/CorporateGovernance 102-2 Activities, brands, products, and services About the Company: highlights of the year, LUKOIL Group p. 18. Two-page openings: Business Model, 102-20 Executive-level responsibility for economic, Governance system, p. 27 LUKOIL Group Geography environmental, and social topics Carbon management system, p. 50

102-3 Location of headquarters About the Company: highlights of the year LUKOIL Group 102-21 Consulting stakeholders on economic, Stakeholder engagement, p. 37 LUKOIL Group Conclusion environmental, and social topics

Other sources: 102-22– The corporate governance system is detailed in the Annual Report for 2020, page 27, as well as on the corporate https://www.lukoil.com/Company/contacts 102-28 website: https://www.lukoil.com/Company/CorporateGovernance

102-4 Geography of operations Two-page opening Geography LUKOIL Group 102-29 Identifying and managing economic, Two-page opening LUKOIL Group’s strategic LUKOIL Group environmental, and social impacts goals in sustainable development https://www.lukoil.com/Company/BusinessOperation/GeographicReach 102-31 Review of economic, environmental, Stakeholder engagement, p. 37 LUKOIL Group 102-5 Ownership and legal form Annual Report and social topics

Information about the share capital and securities of PJSC LUKOIL is available on the corporate website: 102-32 Highest governance body’s role Governance system, p. 27 LUKOIL Group https://www.lukoil.com/InvestorAndShareholderCenter/Securities/sharecapital in sustainability reporting Carbon management system, p. 50 102-6 Markets served Two-page opening Geography LUKOIL Group

1. In accordance with the Company’s definition of significant fines, see Appendix 6. 166 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 167

Index Indicator Section and page of the Report Boundaries Index Indicator Section and page of the Report Boundaries of topics and of topics and indicators indicators

102-33 Communicating critical concerns Governance system, p. 27 LUKOIL Group GRI 103. Management Approach 2016 Carbon management system, p. 50 103-1 Explanation of the material topic and its Appendix 2. Identification of material topics 102-35– The corporate governance system is detailed in the Annual Report for 2020, page 88, as well as on the corporate boundary of the Report 102-37 website: https://www.lukoil.com/Company/CorporateGovernance The boundaries of material topics are specified in the respective Report sections. 102-38 Highest-paid employees’ compensation Annual report 2020, p. 116 LUKOIL Group The indicator boundaries are specified in the relevant sections of the Report as well as to average pay of the other employees of in Appendix 7 and Appendix 8 (published in the web-version of the Report) the Company (excluding the highest-paid staff) ratio 103-2 The management approach and its components The indicator is disclosed partially, as concerns compensation of the Board of Directors and Management Committee members The management approach is disclosed in the Report before each material topic or issue.

5. Stakeholder engagement 103-3 Evaluation of the management approach

102-40 List of stakeholder groups Stakeholder engagement, p. 37 LUKOIL Group Management approaches are evaluated within the framework of certification and supervisory audits of relevant management systems, and as part of corporate inspections. Information on those activities is contained in 102-41 Collective bargaining agreements Website https://www.lukoil.com/ LUKOIL Group the Report. Sustainability/Ouremployees/ Socialpartnership GRI 201. Economic Performance 2016 09 Ethics and human rights, p. 33 201-1 Direct economic value generated and Appendix 7 LUKOIL Group 102-42 Identifying and selecting stakeholders Stakeholder engagement, p. 37 LUKOIL Group distributed economic value Two-page opening Material topics of 201-3 Defined benefit plan obligations and other Social Policy, p. 132 LUKOIL Group 102-43 Approach to stakeholder engagement the Report, p. 12 retirement plans 102-44 Key topics and concerns raised GRI 202. Market Presence 2016 6. Reporting practice 202-1 Standard entry level wage by gender in Social Policy, p. 132 LUKOIL Group 102-45 Entities included in the financial statements Appendix 1. LUKOIL Group’s structure as per LUKOIL Group significant areas of operations IFRS 202-2 Proportion of senior management hired Labor relations, p. 126 LUKOIL Group APPENDICES 102-46 Defining report content and topic About the Report, p. 16 LUKOIL Group from the local community (foreign boundaries Appendix 2. Identification of material topics operations) of the Report GRI 203. Indirect Economic Impact 2016 102-47 List of material topics Appendix 2. Identification of material topics LUKOIL Group of the Report 203-1 Infrastructure investments and services External social policy priorities, p. 146 LUKOIL Group supported 102-48 Restatements of information The indicator is disclosed partially. GHG emissions and energy consumption for production purposes indicators were recalculated for 2020 and previous periods in accordance with the Company’s approved boundaries and approaches to accounting for and GRI 204. Procurement Practices 2016 reporting on greenhouse gas emissions 204-1 Proportion of spending on local suppliers in Supply chain, p. 42 Russian entities 102-49 Changes in the list of material topics and Appendix 2. Identification of material topics LUKOIL Group significant areas of operations of LUKOIL Group material topic boundaries of the Report GRI 206. Anti-competitive Behavior 2016

The list of material topics remained the same as in the Sustainability Report for 2019. The boundaries of material 206-1 Legal actions for anti-competitive behavior, Ethics and human rights, p. 33 LUKOIL Group topics are specified in the respective Report sections. The indicator boundaries are specified in the relevant anti-trust, and monopoly practices sections of the Report as well as in Appendix 7 and Appendix 8 (published in the web-version of the Report) GRI 207. Tax 2019 102-50 Reporting period About the Report, p. 16 LUKOIL Group 207-1, Management approaches Ethics and human rights, p. 33 LUKOIL Group 102-51 Date of most recent report 207-2, 207-3 102-52 Reporting cycle State Payments Reports have been published on the corporate website since 2015: 102-53 Contact point for questions regarding p. 156 https://www.lukoil.com/InvestorAndShareholderCenter/RegulatoryDisclosure/ the report reportonpaymentstogovernments 102-54 Statement of compliance with the GRI Appendix 4. GRI Content Index Standards

102-55 GRI Standards and Indicators Table Appendix 4. GRI Content Index

102-56 External assurance About the Report, p. 16 Appendices 157 168 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 169

Index Indicator Section and page of the Report Boundaries Index Indicator Section and page of the Report Boundaries of topics and of topics and indicators indicators

GRI 302. Energy 2016 306-2 Waste by type and disposal method Waste, p. 109 LUKOIL Group 103-1, Management approaches Energy conservation, p. 61 Russian entities of Appendix 7 103-2, LUKOIL Group 306-3 Significant spills Pipeline transport reliability in Russia, p. 79 Russian entities 103-3 Department responsible – Department of Energy Efficiency and of PJSC LUKOIL of LUKOIL Group

302-1 Energy consumption within the organization Energy conservation, p. 61 LUKOIL Group 306-4 Transport of hazardous waste LUKOIL Group

302-3 Energy intensity Energy conservation, p. 61 LUKOIL Group LUKOIL Group entities do not transport hazardous waste. See details on waste disposal in the Waste section.

302-4 Reduction of energy consumption Energy conservation, p. 61 LUKOIL Group GRI 307. Environmental Compliance 2016

GRI 303. Water and Еffluents 2018 307-1 Non-compliance with environmental laws Statutory compliance, p. 35 LUKOIL Group and regulations Appendix 3 303-1, Interactions with water as a shared Water resources, p. 103 LUKOIL Group 303-2 resource. GRI 308. Supplier Environmental Assessment 2016 Management of water discharge-related 103-1, Management approaches Supply chain, p. 42 LUKOIL Group impacts 103-2, Regulations: Regulations on Holding Tenders to Select Suppliers and Contractors of LUKOIL Group Entities; HSE Department responsible – Environmental Safety and Decarbonization Department of PJSC LUKOIL 103-3 09 Policy of PJSC LUKOIL in the 21st Century; PJSC LUKOIL Standard Health, Safety and Environment Management 303-3 Water withdrawal Water resources, p. 103 LUKOIL Group System: Contractors Requirements. Appendix 7 308-1 New suppliers that were screened using Supply chain, p. 42 LUKOIL Group 303-4 Water discharge Water resources, p. 103 LUKOIL Group environmental criteria Appendix 7 GRI 401. Employment 2016

GRI 304. Biodiversity 2016 103-1, Management approaches Employment, p. 126 LUKOIL Group 103-2, 304-1, Protected or rehabilitated areas Biodiversity conservation, p. 114 Department responsible — HR Policy Department of PJSC LUKOIL 304-2, 103-3 304-3 401-1 New employee hires and employee turnover Employment, p. 126 LUKOIL Group APPENDICES GRI 305. Emissions 2016 401-2 Benefits provided to full-time employees Appendix 7 LUKOIL Group 103-1, Management approaches Emissions, p. 108 LUKOIL Group that are not provided to temporary or part- 103-2, Appendix 7 time employees 103-3 Department responsible – Environmental Safety and Decarbonization Department of PJSC LUKOIL Social benefits are granted to all employees, regardless of the type of employment.

305-1 Direct GHG emissions (Scope 1) Reporting, p. 53 LUKOIL Group GRI 402. Labor/Management Relations 2016 Appendix 7 402-1 Minimum notice periods regarding Appendix 5. Individual GRI Indicators LUKOIL Group 305-4 GHG emissions intensity (Scope 1) Reporting, p. 53 LUKOIL Group operational changes Appendix 7 GRI 403. Occupational Health and Safety 2018

305-5 Reduction of GHG emissions Reporting, p. 53 LUKOIL Group 403-1 Occupational health and safety Integrated management system, p. 73 LUKOIL Group Appendix 7 management system Occupational health and safety, p. 85

305-6 Emissions of ozone-depleting substances LUKOIL Group Department responsible – Environmental Safety and Decarbonization Department of PJSC LUKOIL (ODS) 403-2 Hazard identification, risk assessment, and Industrial safety, p. 76 LUKOIL Group The Company does not use ozone-depleting substances (ODS) on an industrial scale. incident investigation 305-7 Nitrogen oxides (NO ), sulfur oxides (SO ), Emissions, p. 108 LUKOIL Group X X Additional information published on the website xxx and other significant air emissions Appendix 7 403-3 Occupational health services Occupational health and safety, p. 85 GRI 306. Affluents and Waste 2016 Additional information published on the website xxx 103-1, Management approaches Water resources, p. 103 LUKOIL Group 103-2, Waste, p. 109 403-4 Worker participation, consultation, and Information published on Website https:// LUKOIL Group 103-3 communication on occupational health and www.lukoil.com/Sustainability/Safety Department responsible – Environmental Safety and Decarbonization Department of PJSC LUKOIL safety

306-1 Water discharge by quality and destination Water resources, p. 103 LUKOIL Group 403-5 Worker training on occupational health and Appendix 7 LUKOIL Group Appendix 7 safety 170 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 171

Index Indicator Section and page of the Report Boundaries Index Indicator Section and page of the Report Boundaries of topics and of topics and indicators indicators GRI 409. Forced or Compulsory Labor 2016 403-6 Employee health Occupational health and safety, p. 85 LUKOIL Group The management approach Human rights, p. 33 LUKOIL Group 403-7 Prevention and mitigation of occupational Occupational health and safety, p. 85 LUKOIL Group health and safety impacts directly linked by Worker protection during the pandemic, Additional information published on the website https://www.lukoil.com/Sustainability/Ouremployees business relationships p. 124 GRI 411. Rights of Indigenous Peoples 2016 Additional information published on the website https://www.lukoil.com/Sustainability/Safety 103-1, Management approaches LUKOIL Group 403-8 Workers covered by an occupational health Integrated HSE management system, p. 73 LUKOIL Group 103-2, and safety management system 103-3 Information published on the website https://www.lukoil.com/Sustainability/Humanrights. Unit responsible — Regional Communications Department of PJSC LUKOIL Since the Company has in place an integrated HSE management system certified under ISO 14001 and ISO 45001 standards, the proportion of employees covered by this management system is the same in terms of 411-1 Incidents of violations involving rights of Support of Indigenous Minorities of LUKOIL Group environmental protection management and labor protection management. indigenous peoples the North, p. 155

403-9 Work-related injuries Occupational health and safety, p. 85 LUKOIL Group GRI 412. Human Rights Assessment 2016

GRI 404. Training and Education 2016 103-1, Management approaches LUKOIL Group 103-2, 103-1, Management approaches Training and development p. 136 LUKOIL Group Additional information published on the website https://www.lukoil.com/Sustainability/Humanrights 103-3 103-2, Department responsible – Department of Personnel Assessment and Development of PJSC LUKOIL 09 103-3 412-1 Operations that have been subject to human Human rights LUKOIL Group rights reviews or impact assessments 404-1 Average hours of training per year per Training and development p. 136 LUKOIL Group employee GRI 413. Local Communities 2016

404-2 Programs for upgrading employee skills and Appendix 5 LUKOIL Group 103-1, Management approaches External social policy priorities, p. 146 LUKOIL Group transition assistance programs 103-2, 103-3 Department responsible – Public Relations Department of PJSC LUKOIL 404-3 Percentage of employees receiving regular Appendix 7 PJSC LUKOIL performance and career development 413-1 Operations with local community External social policy priorities, p. 146 LUKOIL Group reviews engagement, impact assessments, and development programs

APPENDICES Information is provided without breakdown by gender and categories of employees, as this information is not consolidated and is not used to manage this issue in the Company. All the Company’s subsidiaries of the business segments “Exploration and Production” and “Refining, Marketing and Distribution”, as well as major entities of the “Corporate and GRI 405. Diversity and Equal Opportunity 2016 Other” business segment have programs in place related to local community engagement 405-1 Diversity of governance bodies and Appendix 7 LUKOIL Group GRI 415. Public Policy 2016 employees GRI 415-1 Political contributions Anti-corruption policy, p. 34 LUKOIL Group 405-2 Ratio of basic salary and remuneration of Social Policy, p. 132 women to men According to the Anti-corruption policy of PJSC LUKOIL, the Group is not involved in any political activity either in Russia or abroad, does not exert, either directly or indirectly, any influence on any decisions of public officials or Additional information published on the website https://www.lukoil.com/Sustainability/Ouremployees any other persons that affect the preservation or expansion of the Group’s operations or may be treated as such. The Group provides no financing for political parties and movements or any other activity benefiting political GRI 406. Non-Discrimination 2016 parties and their representatives (either in Russia or abroad). 406-1 Incidents of discrimination and corrective Ethics and human rights, p. 33 LUKOIL Group In 2020, political contributions — none; incentive payments to representatives of state authorities — none. actions taken

GRI 407. Freedom of Association and Collective Bargaining 2016

The management approach Human rights, p. 33 LUKOIL Group

Information published on the website https://www.lukoil.com/Sustainability/Ouremployees

GRI 408. Child Labor 2016

The management approach Human rights, p. 33 LUKOIL Group

Additional information published on the website https://www.lukoil.com/Sustainability/Humanrights APPENDIX 5. INDIVIDUAL GRI INDICATORS

172 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 173

Asia Index Indicator Section and page of the Report Boundaries ve Sıkıştırılmış Doğalgazcılar Derneği) The Association of Fuel Distribution of topics and and the Union of Chambers and Companies of Turkey (ADER): Akpet indicators Georgia. Georgian Business Commodity Exchanges of Turkey Akaryakit Dagitim A.S. seats on Associations: LUKOIL-Georgia Ltd. is (ТОВВ): Akpet GAZ A.S seats on the governing bodies GRI 419. Socioeconomic Compliance 2016 a member the governing bodies and actively 103-1, Management approaches Ethics and human rights, p. 33 LUKOIL Group participates in discussions of practical 103-2, Regulations: Anti-monopoly Policy. Department responsible: Legal Support Department of PJSC LUKOIL Turkey. The Turkish LPG Association issues related to the development of 103-3 (Türkiye LPG Derneği), LNG and CNG the Turkish gas market 419-1 Significant fines and non-financial sanctions Statutory compliance, p. 35 LUKOIL Group Companies Association (Sıvılaştırılmış for non-compliance with laws and Appendix 3 regulations in the social and economic area 402-1 Minimum notice periods regarding operational changes

Region Minimum notice period Appendix 5. Individual GRI indicators Belgium 3 months GRI 102 General information Russia, Azerbaijan, Bulgaria, Moldova, Serbia, and 2 months EOOD seats on the governing bodies of the Management Board of Uzbekistan 102-13 Membership of associations of these organizations and is also the Union of Energy and Extractive Austria 6 weeks PJSC LUKOIL and LUKOIL Group a member of the Donor Assembly of Industry of Montenegro 09 entities participate in a number of the Energy Efficiency And Renewable Germany, Switzerland, Italy, Macedonia, Norway 1 months national trade and professional Sources Fund Netherlands. Netherlands Romania For specialists 20 days; for executives 45 days. associations. Organisation for the Energy sector: Croatia. Croatian Energy Regulatory LUKOIL Netherlands B.V. is a member Finland, Turkey 14 days Russia Agency (Hrvatska energetska Kazakhstan 15 business days or 1 month The National Council for Professional regulatorna agencija) and Croatian Republic of Moldova. The Chamber Qualifications under the President of National Tourism Board (Hrvatska of Commerce and Industry of Belarus 7 days (2 months in the event of staff reductions or the Russian Federation: PJSC LUKOIL turistička zajednica): LUKOIL the Republic of Moldova: LUKOIL- the liquidation of the enterprise) is a member of the Council Croatia Ltd. is a member of these Moldova SRL is a member and Egypt 1 week organizations (membership is participates in its projects APPENDICES The Council for Professional mandatory), as well as a member of Georgia 3 days Qualifications in the Oil and Gas the Croatian Chamber of Commerce Serbia. The National Petroleum Iraq, Montenegro, Mexico No notice period is established for employees Industry of Russia: PJSC LUKOIL is and Industry (Hrvatska gospodarska Committee of Serbia (a member of a member of the Council komora) WPC, the ) The USA No universal period has been established for substantial and the Association of Oil Companies changes to working conditions. Under certain circumstances, state or federal law may prescribe certain recommendations Russian Union of Industrialists and Italy. UNEM Unione Energie per la of Serbia (Udruženje Naftnih or procedures. Entrepreneurs (RSPP): PJSC LUKOIL is Mobilità: LUKOIL Italia Srl is a member Kompanija Srbije): LUKOIL SERBIA PLC a member of the Union Belgrade sits on the governing bodies Macedonia. The Macedonian- of these organizations and takes an The Airport Civil Aviation Association: Russian Chamber of Commerce and active part in their initiatives LUKOIL-AERO is a member Industry: LUKOIL MACEDONIA LTD Skopje is a member Europe

Belgium. The Belgian Petroleum Montenegro. The Association of Oil Federation and BUSINESSEUROPE: and Petroleum Product Distributors LUKOIL Belgium N.V. is a member of of Montenegro and the Chamber these organizations of Commerce of Montenegro: LUKOIL MONTENEGRO DOO is Bulgaria. The Bulgarian Oil and Gas a member of these organizations, Association and the BULGARIAN while a representative of LUKOIL ECONOMIC FORUM: LUKOIL-BULGARIA MONTENEGRO DOO is also a member APPENDIX 6. REFERENCES: ACRONYMS AND ABBREVIATIONS, DEFINITIONS AND CALCULATION FORMULAS

174 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 175

404-2 Programs for upgrading employee skills and transition assistance programs GHG — greenhouse gases MMW — minimum monthly wage

Programs for upgrading employee skills GIS — geographic information system MTR — material and technical resources

Type of training Training programs and courses HF — hydraulic fracturing OR — oil refinery In-house training courses DLS: over 300 educational courses on the following topics: Quality Management and Lean Manufacturing, Organizational Change HSE — health, safety, and environment ORC — oil refining complex Management, Project Management, Management, Personal Effectiveness, Foreign Languages, Corporate Spirit, IT Courses IFRS — International Financial Reporting Standards PPE — personal protection equipment (Outlook, Excel, PowerPoint), Public Speaking and Presentations, People Management, Human Resources Management, Effective Negotiations, Production Orientation, Oil Product Supply, Risk IMN — indigenous minorities of the North RES — renewable energy sources Management, IT Security, Civil Defense and Emergency Protection, Industrial Safety, Occupational Safety, Fire Safety. IMS — The Integrated System of Management of SPP — solar power plant Industrial, Fire, Radiation Safety, Emergency Prevention External training or education Professional retraining, education in MBA, EMBA, DBA programs. and Liquidation, the Protection of Civilians, Occupational SPRP — Spill Prevention and Response Plans The Company pays 50 percent of the cost of employee education. Safety and Environmental Protection If the employee receives an additional professional education, SR — LUKOIL Group Sustainability Report including a postgraduate degree, where the employer is not IPEC — in-production environmental control the initiator, then educational leave is granted, and the respective STF — Sustainability Task Force employee receives a guarantee that they will not lose their ISP — Industrial Safety Program positions while studying. 09 STO — standard of an entity KPI — key performance indicator UAV — unmanned aerial vehicle LLC — limited liability company Appendix 6. VMI — voluntary medical insurance References: acronyms and abbreviations, definitions and calculation formulas Media — all types of mass media WECM — wholesale electricity and capacity market

Names of LUKOIL Group entities

APPENDICES Nizhny Novgorod oil Oil refinery in Bulgaria — LUKOIL Neftochim Burgas AD Names of entities and initiatives, refinery — LLC LUKOIL-Nizhegorodnefteorgsintez geographical names Perm oil refinery — LLC LUKOIL-Permnefteorgsintez Ploesti oil refinery, oil refinery in Romania — PETROTEL- CDP — Carbon Disclosure Project OECD — Organization of Economic Cooperation and LUKOIL S.A. Oil refinery in Italy, ISAB — ISAB S.r.l. Development Climate Action 100+ — Global Initiative Climate Ukhta oil refinery — LLC Ukhtaneftepererabotka Action 100+ (http://www.climateaction100.org/) OPEC — Organization of the Petroleum Exporting Countries EU — European Union PJSC LUKOIL — Public Joint-Stock Company “Oil Company Abbreviations EU ETS — European Union Emissions Trading System ‘LUKOIL’”

AMS — automated management systems EIA — environmental impact assessment GRI — Global Reporting Initiative RSPP — Russian Union of Industrialists and Entrepreneurs APG — associated petroleum gas ERU — emergency rescue divisions and units IATUO — International Association of Trade-Union Organizations of PJSC LUKOIL SDGs — UN Sustainable Development Goals BEPS — base erosion and profit shifting ESG — environmental, social and governance (the UN 2030 Agenda for Sustainable Development) ILO — International Labour Organization CF — charity fund ESP — Environmental Safety Program ТCFD — Task Force on Climate Related Financial KhMAO-Yugra — Khanty-Mansi Autonomous Disclosures, https://www.fsb-tcfd.org/ CHPP — combined heat and power plant FEC — fuel and energy complex District — Yugra UN — United Nations DLS — distance learning system FFS — fuel filling station MARPOL — International Convention for the Prevention of Pollution from Ships UNCTAD — United Nations Conference on Trade and EBITDA — earnings before interest, taxation, depreciation FPM — formation pressure maintenance Development & amortization MES — Ministry of Emergency Situations FS — feasibility study WWF — World Wildlife Fund EE — emergency event NAD — Nenets Autonomous District of the Russian Federation 176 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 177

Unit of measurement Definitions Material claim relating to approved by Order of Rosstat of the breach of environmental law October 12, 2008 No. 278 with boe — barrel of oil equivalent toe, kg of oil equivalent — tonne (kilogram) of oil Circulating water means water that means a claim meeting one of amendments and additions approved equivalent is consistently and many times used the following criteria: by Order of Rosstat of November p. p. — percentage point in processes based on the principle 1. a resolution has become effective 3, 2009 No. 240. Payroll includes

CO2e — CO2 equivalent of closed systems without within a calendar year calling labor pay to employees in monetary discharging into surface water PJSC LUKOIL, LUKOIL Group and non-monetary forms accrued Indicators, calculation formulas bodies or sewage systems. entities and/or their officials for by an entity (including personal administrative responsibility income tax and other withholdings) Refinery yield is calculated by the following formula: Lost Time Accident Frequency Rate, LTAFR = number of Claim relating to the breach of law for the offense provided for for worked and non-worked time, accidents / employee headcount for a reporting period × means an administrative or criminal in Chapter 8 of the Code of compensation payments related Q – (FFO+L) Refinery yield= * 100%, 1,000 employees. claim filed against PJSC LUKOIL, Administrative Offenses of to the work schedule and working Q LUKOIL Group entities, an employee the Russian Federation, with conditions, additional payments Lost Time Injury Frequency Rate, LTIFR = number of of PJSC LUKOIL or an employee of the imposition of the maximum and increments, bonuses, one- where: lost time injuries / number of man-hours worked × LUKOIL Group entity. For the public possible fine provided for time incentive payments, as 1,000,000 man-hours. reporting purposes, only completed in the relevant article and/ well as regular allowances for Q is the actual volume of oil feed processed in crude cases in which a final decision or a sanction in the form of food and accommodation in distillation units (Atmospheric and Vacuum Distillation Units Rate of Fatalities as a Result of Work-Related Injury = has been rendered and which are administrative suspension of accordance with the methodology and Atmospheric Distillation Units), as well as received feed number of fatalities as a result of work-related injury / not subject to further appeal are operations for up to 90 days; for filling in the payroll field in form from the secondary refining processes (catalytic cracking, number of hours worked × 1,000,000 man-hours. taken into account. Cases in which 2. a court decision has become No. P-4 “Information on Headcount 09 delayed coking, etc.); the entity was found not guilty effective to collect from and Labor Pay”. Rate of High-Consequence1 Work-Related Injuries = are not taken into account for PJSC LUKOIL, LUKOIL Group FFO is the gross amount of furnace fuel oil (fuel oil for sale + number of high-consequence work-related injuries the disclosure of indicators. entities damages caused to Reused water supply is the use liquid fuel for technological (own) needs); (excluding fatalities) / number of hours worked × the environment in accordance of water that has retained its 1,000,000 man-hours. Key performance indicators are with the requirements of quality indicators after being used L is the amount of irretrievable losses of oil refining, a set of indicators characterizing the Russian Federal Law “On in a technological process and is excluding the losses at crude oil electric desalting and The turnover rate is defined as the ratio of the number the key success factors of LUKOIL Environmental Protection”, in supplied without treatment for dehydration plants. of employees dismissed due to turnover to the average Group, taking into account industry the amount not less than the one reuse or returned to natural bodies. headcount for a reporting period. The number of employees specifics and determining the level determined in accordance with The water produced along with oil When calculating the aggregated “Oil refinery yield” dismissed due to turnover includes employees dismissed of achievement of strategic goals. the Regulations on Collecting that is sent to the needs of formation APPENDICES indicator, the actual volume of oil feed (Q) comprises for absenteeism and other violations of labor discipline, as and Processing Data on Material pressure maintenance (FPM) is the feedstock (oil, gas condensate) processed in crude well as due to the employee’s unsuitability for their position Material claim relating to Contingent Liabilities and considered reused. distillation units (Atmospheric and Vacuum Distillation because of lack of skill; those who left on their own without the breach of anti-monopoly law Uncertainties with Regard to Units and Atmospheric Distillation Units), excluding other serious cause (due to relocation, retirement, care for a child means a claim meeting the following Income Taxes for the purposes Seconded employees — employees types of feed processed in secondary refining processes (in under 14 years of age, etc.) or by agreement between criteria (any one or several): of the consolidated financial with the necessary competence the framework of the intragroup supplies). the parties (except for employees who were re-employed • criminal prosecution of officials statements of PJSC LUKOIL for and meeting the job requirements on the next day). of PJSC LUKOIL or LUKOIL Group a respective year. of the accepting entity, temporarily entities in accordance with assigned to an accepting entity from the sentence passed and entered Material digression/weakness the region of permanent residence into legal force; means a violation of mandatory to perform certain job functions with • administrative action in the form requirements, as well as the following return to the seconding of disqualification of officials shortcomings in the activities of entity or termination of the labor of PJSC LUKOIL or LUKOIL Group LUKOIL Group entities that have relations with the seconding entity. entities in accordance with resulted or could have resulted the sentence passed and entered in incurred financial losses and Significant incident with into legal force; risks that are assessed at least environmental impact means an • entry into force of any resolution as significant in accordance with emergency with environmental to impose an administrative fine the provisions of the Group’s internal impact. An environmental impact against PJSC LUKOIL or LUKOIL documents. can include destruction of facilities Group entities calculated based and/or technical devices used at on the amount of revenue of Payroll means the indicator the facilities of LUKOIL Group entities, the relevant entity or the amount calculated in accordance with or any other event resulting in one of the offender’s expenses for the instructions for filling out forms or a combination of the following the purchase of goods (work, of federal statistical monitoring, environmental impacts: service).

1. High-Consequence Work-Related Injury is an injury having the following consequences: the employee died or was injured, and within six months of being injured the employee is unable to recover, has not recovered his health, or is not expected to recover his health. APPENDIX 7. MAIN ESG INDICATORS

178 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 179

1. pollution of surface and Complex” dated January 24, Substantial violation of human Appendix 7. Main ESG indicators underground water bodies, 2018 No. 29, approved by Order rights means a violation of national which resulted in exceeding of Rostechnadzor of January 24, human rights legislation. Corporate governance the established standards for 2018 No. 29. permissible impact. Young employees – employees GRI 102–18; 102–20; 102–22; 102–23; 102–27; 102–32; 102–35. GRI 405–1 2. uncontrolled release of hazardous All spills into water bodies are of PJSC LUKOIL and LUKOIL Group Corporate governance: Independence of Board members, Gender equality, Competence substances, i.e. a release of significant, regardless of the volume entities aged under 35, including a hazardous substance into of the spilled oil. The minimum size young specialists. the environment not provided for of a significant spill on land with by technical regulations and/or environmental consequences is Young specialists — employees 2019 2020 2019 2020 project documentation without 10 tonnes. under 30 years old, who have Independence of Board members and Board involvement in Gender composition of the Board of Directors restricting or containing it by obtained higher or professional sustainability matters Men 9 9 emergency protection systems Significant regions of LUKOIL education, that started their job Chairman of the Board of Directors 1 1 Women 2 2 and/or other systems and Group’s operation mean countries duty in the Company corresponding Independence of the Chairman of the Board NO NO means of accident prevention or constituent entities of the Russian to their degree, including working of Directors at appointment Share of women 18% 18% and containment provided for Federation where LUKOIL Group occupations, within six months after Independent directors 6 6 Average age of Board members 65 67 by technical regulations and/ entities operate, including affiliates graduation from higher education Non-executive directors 2 3 Gender composition of the Management Committee or project documentation, and territorial departments institution or within three months Executive directors1 3 2 Men 14 14 or release in the absence of compliant with the following criteria: after service in the Military Forces of Total number of Board members 11 11 Women 0 0 sufficient containment capability 1. In Russia — constituent entities the Russian Federation. Share of women 0% 0% 09 in such systems and means where headcount of one LUKOIL Share of independent directors 55% 55% Membership in the Board of Directors in the amount exceeding Group entity is 500 or more; Number of sustainability and climate-related 20 13 Rounding values issues addressed at Board of Directors Up to 5 years 4 7 the threshold values for accidents 2. Outside Russia — countries where meetings presented in Tables 1 and at least one organization with The total values of the indicators Up to 10 years 2 1 Attendance at in-person meetings 93% N/A 2 of Annex 4 to the Safety a headcount of 500 employees given in the Report may differ from Over 10 years 3 3 Share of independent members of the Board of Directors Manual “Methodological or more operates; respective the sum of the indicators as a result committees Qualification balance of the Board of Directors members Recommendations for indicators are calculated of rounding. Strategy, Investment, Sustainability and 100% 50% Share of members of the Board of Directors 73% 73% the Classification of Man-made including all other organizations Climate Adaptation Committee of PJSC LUKOIL competent in sustainability and climate-related issues Events in the Field of Industrial (with the headcount less than Audit Committee 100% 100% Safety at Hazardous Production 500 employees) operating in Persons responsible

APPENDICES Human Resources and Compensation 100% 100% Facilities of the Oil and Gas the country or significant region. Committee Number of vice-presidents responsible 0 1 for the Company's climate change-related Health, Safety and Environmental Committee of PJSC LUKOIL activities Number of members 11 15 Number of vice-presidents responsible for 1 1 sustainability matters Number of meetings 2 2 Task Forces Number of addressed sustainability 7 8 and climate-related issues • Decarbonization and Climate Change Adaptation Task Force Share of women 0% 0% Number of members 15 Strategy, Investment, Sustainability and Climate Adaptation Number of meetings 1 Committee of the Board of Directors of PJSC LUKOIL Number of issues addressed 9 Number of members 4 4 • Sustainability Task Force Number of meetings 7 7 Number of members 13 13 Number of addressed sustainability and 20 10 climate-related issues Number of meetings 4 7 Share of women 25% 25% Number of addressed sustainability 7 20 and climate-related issues

1. According to the recommendations of the Corporate Governance Code, executive directors are defined not only as members of the Management Committee of PJSC LUKOIL but also as persons employed by the Company. 180 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 181

Climate The materiality criterion was approved Organizational reporting boundaries GRI 305–1, 305–2 GHG emissions

by the Decarbonization and Climate (Scope 1 + Scope 2) for Russian Indicators 2016 2017 2018 2019 2020 Based on the results of the inventory, Change Adaptation Task Force. entities include all production assets, Flaring emissions (Scope 1), million tonnes of CO E 3.415 2.721 1.637 1.490 1.512 the boundaries of climate reporting oil refining, petrochemical and 2 were clarified taking into account Based on this criterion, direct electric power entities, oil product Emissions avoided by using self-generated energy from renewable 5,573 energy sources (emissions reduction), million tonnes of CO E the following materiality threshold GHG emissions from oil product supply entities , as well as KGPZ and 2 criterion developed: GHG emissions supply entities in Russia and abroad, LLK International. For foreign entities, that amount to at least 99% of LLC LUKOIL-KNT (the Transportation the reporting boundaries include the total emissions for each scope in business sector), as well as from a hydrocarbon production project in Indicators 2016 2017 2018 2019 2020 accordance with the full inventory of entities of the Other Entities Uzbekistan and three refineries in 1. GHG emissions by Russian and foreign entities, million tonnes of CO2E emission sources shall be accounted of the Refining, Marketing and Europe (in Romania, Bulgaria and Italy), 1.1. Russian entities for, while an entity can be excluded Distribution Business Segment as well as 13 oil product supply entities. Scope 1 34.723 35.025 34.415 33.925 31.732 from reporting for the respective scope (except for the Korobkovsky Thus, the data presented in this Scope 2 8.642 8.089 7.603 7.532 6.246 provided that its GHG emissions are Gas Processing Plant (KGPP) Report cover more than 99% of GHG less than 0.1% of total LUKOIL Group and LLK-International) were excluded emissions (Scope 1) and 100% of GHG Scope 1 + 2 43,365 43,114 42,018 41,457 37,978 emissions for the given scope. from the reporting for Scope 1. emissions (Scope 2) of LUKOIL Group. 1.2. Foreign entities Scope 1 6.259 6.343 6.0283 6.612 5.596 Scope 2 0.927 0.934 1.005 0.928 0.924 Scope 1 + 2 7,186 7,277 7,0333 7,54 6,52 2. Emissions by Russian entities by types of activity, million tonnes of CO E 09 GRI 302–4 Energy savings from implementation of the Energy Conservation Program of 2 2.1. Exploration and production, million tonnes of CO E LUKOIL Group entities in Russia, million GJ 2 Scope 1 11.797 10.994 10.824 11.124 10.003 For 2017-2019 For 2018-2020 Scope 2 7.056 6.543 6.109 6.009 4.712 Scope 1 + 2 18,853 17,537 16,933 17,133 14,715 Energy 1.2 1.4 2.2. Oil refining and petrochemicals (including LLK-International, KGPZ), million tonnes of CO2E Heat 1.6 1.5 Scope 1 10.219 11.491 11.299 11.237 10.612 Boiler and furnace fuels 12.7 9 Scope 2 1.346 1.296 1.193 1.215 1.099 Scope 1 + 2 11,565 12,787 12,492 12,452 11,711 Total 15.5 11.9 APPENDICES 2.3. Power Generation, million tonnes of CO2E Note. Scope 1 12.62 12.462 12.206 11.473 11.023 The following coefficients under GOST R 51750-2001 were used when converting the data to Joules: Scope 2 0.13 0.138 0.132 0.125 0.267 1 thousand kWh = 3.6 GJ, 1 Gcal = 4.19 GJ, 1 tonne of oil equivalent = 29.3 GJ Scope 1 + 2 12,75 12,6 12,338 11,598 11,29

2.4. Transportation, million tonnes of CO2E Scope 1 0.087 0.078 0.086 0.091 0.094 Scope 2 0.031 0.03 0.034 0.037 0.033 Scope 1 + 2 0,118 0,108 0,12 0,128 0,127

2.5. Oil product supply, million tonnes of CO2E Scope 2 0.079 0.082 0.135 0.146 0.135

3. Emissions by foreign entities by types of activity, million tonnes of CO2E

3.1. Exploration and production (Central Asia), million tonnes of CO2E Scope 1 0.046 0.25 0.424 0.383 0.297 Scope 2 0.065 0.105 0.19 0.203 0.125 Scope 1 + 2 0,111 0,355 0,614 0,586 0,422

3.2. Oil refining and petrochemicals (the EU), million tonnes of CO2E Scope 1 6.213 6.093 5.6043 6.229 5.299 Scope 2 0.809 0.775 0.761 0.671 0.742 Scope 1 + 2 7,022 6,868 6,3653 6,9 6,041

3.3. Oil product supply entities, million tonnes of CO2E Scope 2 0.053 0.054 0.054 0.054 0.057 182 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 183

Water GRI 303–3 Water withdrawal by LUKOIL Group entities by water withdrawal sources, million cubic meters The 2018 foreign entity reporting boundaries include: LUKOIL Neftohim Burgas, PETROTEL-LUKOIL SA, 2016 2017 2018 2019 2020 LUKOIL Uzbekistan Operating Company. The 2019 boundaries include: the above entities plus ISAB, IOOO LUKOIL Belorussia, and LUKOIL-BULGARIA EOOD. 1. Water withdrawal, total across LUKOIL Group (1 = 1.1 + 1.2 + 1.3) 449.8 694.0 611.0 Within the boundaries for 2018 449.8 464.0 416.5 GRI 303–1 Water withdrawal and use, million cubic meters Within the boundaries for 2019 694.0 611.0 2016 2017 2018 2019 2020 Water withdrawn by water withdrawal sources, including: 1.1. From surface sources 287.0 340.5 285.5 1. Water withdrawal across LUKOIL Group 449.8 694.0 611.0 Within the boundaries for 2018 287.0 290.0 244.4 Within the boundaries for 2018 449.8 464.0 416.5 Within the boundaries for 2019, including: 340.5 285.5 Within the boundaries for 2019, including: 694.0 611.0 sea water 57.8 Russian entities 522.2 511.1 428.5 441.0 394.8 from other surface sources 227.7 including electric power entities 345.1 331.9 297.7 303.6 252.7 Russian entities 297.4 279.7 267.6 269.7 227.5 Foreign entities 21.3 253.0 216.2 2. Water consumption for own needs (household, industrial, other) 374.4 609.0 543.2 Sea water 11.4 11.0 16.7 across LUKOIL Group Water from other surface sources 256.2 258.7 210.8 374.4 379.0 348.7 Within the boundaries for 2018 Foreign entities 19.4 70.8 58.0 609.0 543.2 Within the boundaries for 2019, including: Sea water 0.0 50.5 41.1 415.9 376.4 354.9 358.0 328.7 09 Russian entities Water from other surface sources 19.4 20.3 16.9 Foreign entities 19.5 251.0 214.5 1.2. From underground sources 99.0 104.8 114.0 3. Other transactions 34.5 28.9 0.0 Within the boundaries for 2018 99.0 102.3 111.3 LUKOIL Group, including: 34.5 28.9 0.0 Within the boundaries for 2019 104.8 114.0 Within the boundaries for 2018 34.5 28.9 0.0 Russian entities, including: 77.1 76.1 97.1 99.7 108.3 Within the boundaries for 2019 28.9 0.0 Fresh water 64.7 61.2 60.1 Russian entities 24.2 34.5 28.1 0.0 Other water 32.4 38.5 48.2 Foreign entities 0.0 0.8 0.0 Foreign entities, including: 1.9 5.1 5.7 4. Unused water transferred to third-party consumers 40.9 56.1 63.1 Fresh water 0.04 2.5 2.7 APPENDICES LUKOIL Group, including: 40.9 56.1 63.1 Other water 1.9 2.6 3.0 Within the boundaries for 2018 40.9 56.1 63.1 1.3. From other sources, including: 63.8 248.7 211.5 Within the boundaries for 2019 56.1 63.1 Within the boundaries for 2018 63.8 71.7 60.8 Russian entities 39.1 54.9 62.0 Within the boundaries for 2019 248.7 211.5 Foreign entities 1.8 1.2 1.1 Russian entities 147.6 155.3 63.8 71.6 59.0 Notes. Foreign entities 0.0 177.1 152.5 1. Data excludes water produced as a by-product with hydrocarbons and subsequently used for formation pressure maintenance (FPM). Notes. 2. The approach to accounting for “Other operations” was revised: before 2020, this category included volumes of water 1. Data excludes water produced as a by-product with hydrocarbons and subsequently used for FPM purposes. pumped into subsurface formations and residential waste water received from third parties and used in the Group’s 2. Data on the volume of water withdrawal from underground sources includes water produced as a by-product production processes. Since 2020, these water volumes are accounted for in the «Water for own needs» and «Unused with hydrocarbons and subsequently pumped into underground formations. water transferred to third-party consumers» categories. 3. Water withdrawal from other sources includes withdrawals from centralized water supply sources, and also residential 3. The difference between water withdrawal and water use (water for own needs + unused water of LUKOIL Group waste water received and transferred to treatment facilities without being used by the Group’s entities. transferred to third-party consumers) is due to the specifics of water usage in power generation entities: at energy 4. The increase in the volume of water withdrawal from underground sources in 2020 by the Group’s Russian entities was generating units water is used for equipment cooling, this results in water wastage due to evaporation. due to industrial needs (facilitation of the technological processes and well drilling). 4. In 2018, the water use accounting methodology in the Russian entities was refined - it excluded the duplicate accounting for water used in intra-group transfers (between the LUKOIL Group entities). 184 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 185

Specific water consumption for own needs by the LUKOIL Group’s Russian entities GRI 303–4 Water discharges by LUKOIL Group entities, million cubic meters by type of activity 2016 2017 2018 2019 2020 1. Total water discharges across LUKOIL Group 2016 2017 2018 2019 2020 352.5 568.0 485.3 (1 = 1.1+ 1.2 + 1.3 + 1.4 + 1.5) Oil and gas production, 1 1 1 1 1 cubic meters/tonne of oil equivalent in hydrocarbon resources Within the boundaries for 2018 352.5 357.6 308.1 Oil refining, 0.6 0.5 0.5 0.5 0.5 Within the boundaries for 2019, including: 568.0 485.3 cubic meters/tonne of processed oil Russian entities 244.0 236.4 337.6 344.3 297.5 Petrochemicals, 6.2 7.3 6.4 6.9 6.8 cubic meters/tonne of processed raw materials Foreign entities 14.9 223.7 187.8 Oil Product Supply, 0.06 0.07 0.1 0.07 0.07 Water discharge by destination cubic meters/tonne of oil products sold 1.1. Water discharge into surface water bodies for LUKOIL Group (excl. 218.1 216.6 161.7 Transportation, 0.04 0.02 0.02 0.01 0.02 water discharge into the sea) cubic meters/tonne of oil, oil products transported Within the boundaries for 2018 218.1 216.5 161.7 Power Generation, 40.1 34.4 34 35.3 32.9 cubic meters/tonne of oil equivalent in consumed fuel Within the boundaries for 2019, including: 216.6 161.7 Russian entities 203.4 203.4 151.3 Foreign entities 14.7 13.2 10.4 Notes. 1. Specific indicators are calculated based on the volumes of water consumed by LUKOIL Group entities for their own 1.2. Water discharge into the sea 11.3 221.2 188.4 needs. Within the boundaries for 2018 11.3 10.9 12.7 2. Fluctuations in the indicators of petrochemical companies are mainly caused by changes in the production volume. Within the boundaries for 2019, including: 221.2 188.4 09 3. Changes in the indicator in the Power Generation business seсtor are attributable to the fact that in 2019, together Russian entities 11.3 10.9 12.7 with a decrease in production due to the warm winter, LLC LUKOIL-Kubanenergo and LLC LUKOIL-Astrakhanenergo Foreign entities 0.0 210.3 175.7 conducted several technological maintenance activities. 1.3. Water discharge into underground formations 104.2 106.7 109.7 4. Indicators for specific water consumption in The Power Generation business sector are calculated using the formula: Within the boundaries for 2018 104.2 106.7 109.7 volume of withdrawn water /fuel consumed for production (electricity). LLK LUKOIL-Ekoenergo (due to the lack of fuel consumption) and LLK LUKOIL-Energoseti (due to the fact that the organization does not carry out electricity production Within the boundaries for 2019, including: 106.7 109.7 activity) are excluded from the calculation. Data on organizations that transfer heat is included in data on generating Russian entities 104.0 106.5 109.5 organizations, which is explained by the specifics of technological processes. Foreign entities 0.2 0.2 0.2 1.4. Water transferred after use to a third party (excluding intra-group 18.4 23.4 25.5 exchanges) APPENDICES Within the boundaries for 2018 18.4 23.4 24.0 Within the boundaries for 2019, including: 23.4 25.5 Russian entities 18.4 23.4 24.0 Foreign entities 0.0 0.0 1.5 1.5. Other water discharge LUKOIL Group, including: 0.5 0.1 0.0 Russian entities 0.5 0.1 0.0 Foreign entities 0.0 0.0 0.0

Notes 1. Data excludes water produced as a by-product with hydrocarbons and subsequently used for FPM. 2. Water discharges into underground formations include water produced as a by-product with hydrocarbons and subsequently pumped into underground formations. 3. In 2018, the water use accounting methodology in the Russian entities was refined — it excluded the possibility of duplicate accounting for water used in intra-group transfers (between the LUKOIL Group entities). 4. The increase in the volume of water discharge into underground formations (1.3) in 2020 was due to geological specifics of licensed blocks. 5. The increase in the volume of water transferred to a third party (1.4) in 2020 was due to the increased water consumption of third parties. 186 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 187

GRI 306–1 Water discharge into surface water bodies by wastewater quality across Specific discharges of insufficiently treated wastewater into water bodies by Russian entities LUKOIL Group, million cubic meters of LUKOIL Group

2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 1. Total water discharged into surface water bodies across 216.6 161.7 Oil and gas production, 0.008 0.004 0.004 0.0005 LUKOIL Group (1 = 1.1 + 1.2 + 1.3) cubic meters/tonne of oil equivalent in hydrocarbon resource Russian entities 244.0 236.4 214.7 203.4 151.3 Oil refining, 0 0 0.037 0.2 cubic meters/tonne of refined oil Foreign entities 13.2 10.4 Oil Product Supply, 0.004 0.003 0.002 0.002 Water discharge into surface water bodies by wastewater quality, including: cubic meters/tonne of oil products sold 1.1. clean standard-quality wastewater 185.0 126.4 Transportation, 0.008 0.009 0.008 0.008 cubic meters/tonne of oil, oil products transported Russian entities 223.7 206.2 186.3 176.1 126.4 Foreign entities 8.9 0.00 Notes. 1.2. wastewater treated to standard quality 20.2 26.7 1. No insufficiently treated water is discharged into water bodies by the petrochemical and power generating entities Russian entities 19.5 29.1 27.5 16.8 16.3 (excluded from the table). 2. The specific discharges of insufficiently treated wastewater by the oil refining entities are calculated based Foreign entities 3.4 10.4 on the volume of production wastewater from LUKOIL-Ukhtaneftepererabotka, excluding any utility wastewater 1.3. polluted wastewater 11.4 8.6 received from MUE Ukhtavodokanal. Russian entities 0.7 1.1 0.9 10.5 8.6 Foreign entities 0.9 0.0 2. Water discharges into the sea across Lukoil Group 221.2 188.4 09 (2 = 2.1 + 2.2 + 2.3) Russian entities 10.9 12.7 Foreign entities 210.3 175.7 Volumes of circulating water supply and reused water across LUKOIL Group entities, Water discharge into surface sea water bodies by wastewater quality, including: million cubic meters 2.1. clean standard-quality wastewater 220.6 188.0 2016 2017 2018 2019 2020 Russian entities 10.7 12.5 Russian entities 3,302.5 3,128.6 3,180.7 3,106.0 2,967.6 Foreign entities 209.9 175.5 Volume of circulating water supply 2,371.9 2,253.1 2,284.2 2,240.9 2,160.9 2.2. wastewater treated to standard quality 0.4 0.2 Volume of reused-sequentially used water 930.6 875.5 896.5 865.1 806.7 Russian entities 0.001 0.000

APPENDICES Foreign entities 200.0 216.2 210.6 Foreign entities 0.40 0.2 Volume of circulating water supply 198.9 214.0 207.8 2.3. Polluted wastewater 0.2 0.2 Volume of reused-sequentially used water 1.1 2.2 2.8 Russian entities 0.18 0.2 Foreign entities 0.0 0

Notes. Water produced as a by-product with hydrocarbons and subsequently used for FPM 1. Data excludes water produced as a by-product with hydrocarbons and subsequently used for FPM. 2. The difference in water withdrawal and discharge volumes is explained by the fact that some of the water is transferred 2016 2017 2018 2019 2020 to third parties without being used by LUKOIL Group entities and some is used in circulating water supply systems Volume of water for LUKOIL Group 350.057 or reused-sequentially used (to be deleted). Russian entities 350.038 3. The increase in discharges of clean standard-quality wastewater into surface sea water bodies in Russian entities Foreign entities 0.019 in 2020 was due to the increase of the volume of water withdrawal for the purposes of well drilling at LLC LUKOIL- Nizhnevolzhskneft and further discharge of the water into the sea. 4. Polluted wastewater includes insufficiently treated wastewater and wastewater that is not treated. 188 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 189

Emissions GRI 305–7 Gross emissions of pollutants into the atmosphere (net of CO2) by LUKOIL Group entities, thousand tonnes The 2018 foreign entity reporting boundaries include: LUKOIL Neftohim Burgas, PETROTEL-LUKOIL SA, LUKOIL Uzbekistan Operating Company. The 2019 boundaries include: the abovementioned entities and ISAB, 2016 2017 2018 2019 2020 IOOO LUKOIL Belorussia, and LUKOIL-BULGARIA EOOD. Total pollutant emissions 451.3 428.8 394.3 Within the boundaries for 2018 451.3 420.4 387.7 Within the boundaries for 2019, including: 428.8 394.3 Specific emissions of pollutants into the atmosphere by Russian entities of LUKOIL Group by types of activity Russian entities 627.5 502.5 433.3 402.3 375.7 Foreign entities 18.0 26.5 18.6 2016 2017 2018 2019 2020 including by pollutant type: Oil and gas extraction, 4.1 3.4 3.2 3.3 NOХ emissions 49.4 49.9 44.7 kg/tonne of oil equivalent in extracted hydrocarbon resources Within the boundaries for 2018 49.4 47.5 42.9 Oil refining, 0.9 0.8 0.9 0.8 kg/tonne of refined oil Within the boundaries for 2019, including: 49.9 44.7 Petrochemicals, 1.3 1.1 1.4 1.6 Russian entities 44.0 49.6 47.1 46.2 41.7 kg/tonne of processed raw materials Foreign entities 2.3 3.7 3.0 Oil product supply, 0.8 0.8 0.7 0.7 kg/tonne of oil products sold SO2 emissions 37.5 40.8 31.3 Transportation, 0.1 0.2 0.2 0.2 Within the boundaries for 2018 37.5 35.7 27.1 kg/tonne of oil, oil products transported Within the boundaries for 2019, including: 40.8 31.3 09 Power generation, 2.6 2.9 2.9 3.5 kg/tonne of oil equivalent in consumed fuel Russian entities 59.7 23.0 25.1 22.0 19.2 Foreign entities 12.4 18.8 12.1 solid particle emissions 14.9 15.1 13.9 Notes. 1. The increase in the indicator in the Power Generation business sector was due to the combustion of reserve fuel (fuel oil) Within the boundaries for 2018 14.9 15.0 13.9 at several CHPPs. Change in the indicator in the Petrochemicals business sector was caused by an increase in production Within the boundaries for 2019, including: 15.1 13.9 output. Russian entities 26.9 24.3 14.7 14.9 13.8 2. Specific emissions of pollutants in The Power Generation business sector are calculated using the formula: mass air Foreign entities 0.2 0.2 0.1 pollutant emissions /consumed fuel for the production of products (electricity). LLK LUKOIL-Ekoenergo (due to the lack of fuel СО emissions 155.9 154.7 142.8 consumption) and LLK LUKOIL-Energoseti (due to the fact that the organization does not carry out electricity production

APPENDICES Within the boundaries for 2018 155.9 154.0 142.3 activity) are excluded from the calculation. Data on organizations that transfer heat is included in data on generating Within the boundaries for 2019, including: 154.7 142.8 organizations, which is explained by the specifics of technological processes. At the same time, emissions from organizations that transmit thermal energy are 0. Russian entities 295.9 216.6 153.9 152.2 141.0 Foreign entities 2.0 2.5 1.8 hydrocarbon emissions 73.9 61.0 48.8 Within the boundaries for 2018 73.9 61.0 48.8 Within the boundaries for 2019, including: 61.0 48.9 Russian entities 199.2 187.8 72.8 59.8 47.3 Foreign entities 1.1 1.2 1.6 volatile organic compounds (VOC) 115.5 105.9 111.0 Within the boundaries for 2018 115.5 105.9 111.0 Within the boundaries for 2019, including: 105.9 111.0 Russian entities 115.5 105.9 111.0 Foreign entities 0.0 0.048 0.0 emissions of other pollutants 4.2 1.3 1.7 Within the boundaries for 2018 4.2 1.3 1.7 Within the boundaries for 2019, including: 1.3 1.7 Russian entities 1.8 1.2 4.2 1.3 1.7 Foreign entities 0 0.01 0.02

Notes. 1. Hydrocarbon emissions for 2016-2017 include VOCs. 2. Emissions of other pollutants include specific substances, except for those listed in the table, according to the state statistical forms, and the share of which is less than 1% of total emissions. 3. In 2020, the methodology for accounting other pollutants category for foreign organizations was refined: substances belonging to emissions pollutants indicated in the table were identified and taken into account in the corresponding categories (lines of the table). Data for 2019 has been recalculated. 190 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 191

Waste GRI 306–2 Waste by hazard class across LUKOIL Group, thousand tonnes

The 2018 foreign entity reporting boundaries include: LUKOIL Neftohim Burgas, PETROTEL-LUKOIL SA, 2019 2020 LUKOIL Uzbekistan Operating Company. The 2019 boundaries include: the abovementioned entities and ISAB, Waste at Waste Waste at Waste at Waste Waste at IOOO LUKOIL Belorussia, and LUKOIL-BULGARIA EOOD. the beginning generated the end of the beginning generated the end of of the year during the year the year of the year during the year the year GRI 306–2 Waste movement at LUKOIL Group, thousand tonnes LUKOIL Group 946.8 2178.4 912.4 Hazardous 45.5 447.1 45.7 2016 2017 2018 2019 2020 Non-hazardous and low-hazard 901.3 1731.3 866.7 Waste at the beginning of the reporting year 956.0 910.0 946.8 waste Within the boundaries for 2018 956.0 904.8 943.1 1–5 hazard class waste 885.4 1671.8 919.7 919.7 1960.3 884.1 Within the boundaries for 2019 910.0 946.8 at Russian entities of LUKOIL Group Russian entities 912.0 765.0 933.0 885.4 919.7 including: Foreign entities 23.0 24.6 27.1 oil-containing 22.2 294.1 19.9 19.9 401.0 20.1 Waste generated during the reporting year 1,556.0 1,783.1 2,178.4 drilling waste 108.4 1131.4 148.2 148.2 1200.2 109.2 Within the boundaries for 2018 1,556.0 1,747.2 2,138.7 Hazard Class 1 0.0008 0.033 0.002 0.002 0.0392 0.0016 Within the boundaries for 2019 1,783.1 2,178.4 Hazard Class 2 0.0014 0.0937 0.0043 0.0045 0.1277 0.0089 Russian entities 1,033.0 1,434.0 1,529.0 1,671.8 1,960.4 Share of waste of Hazard 0.0002% 0.01% 0.0007% 0.0007% 0.0085% 0.0012% Foreign entities 27.0 111.3 218.0 Classes 1 and 2 09 Received from third parties 6.0 4.6 4.3 Hazard Class 3 (incl. 22.8 253.2 20.6 20.6 303.8 20.9 Russian entities 6.0 4.5 4.2 oil-containing) Foreign entities 0.0 0.1 0.1 Share of waste of Hazard 2.6% 15.2% 2.2% 2.2% 15.5% 2.4% Classes 1, 2, and 3 Amount of waste used, neutralized, and transferred to specialized 1,609.0 1,750.9 2,217.1 Share of waste of Hazard entities, as well as landfill waste 22.8 253.3 20.6 20.6 304.0 20.9 Classes 1, 2, and 3 Within the boundaries for 2018 1,609.0 1,713.6 2 177.7 Hazard Class 4 830.7 1287.2 868.0 868.0 1396.1 828.8 Within the boundaries for 2019 1,750.9 2,217.1 Hazard Class 5 31.9 131.3 31.1 31.1 260.2 34.4 Russian entities 1,115.0 1,396.0 1,582.0 1,642.1 2,000.2 TOTAL non-hazardous and low- 862.6 1418.5 899.1 899.1 1656.3 863.2 Foreign entities 27.0 108.8 216.9 hazard waste (Classes 4 and 5) APPENDICES Waste at the end of the reporting year 905.0 946.8 912.4 Waste at Foreign entities of 27.1 218.1 28.3 Within the boundaries for 2018 905.0 943.1 908.4 LUKOIL Group Within the boundaries for 2019 946.8 912.4 Hazardous 24.9 143.1 24.8 Russian entities 765.0 933.0 886.0 919.7 884.1 Non-hazardous 2.2 75.0 3.5

Foreign entities 19.0 27.1 28.3 Note. The discrepancy between the amount of waste at the end of 2019 and the start of 2020 was due to the inclusion Notes. of LLC KamyshinTeploEnergo indicators into LLC LUKOIL-Volgogradenergo reporting in 2020 (LLC KamyshinTeploEnergo was 1. The amount of waste at the beginning and end of the reporting year (waste remaining in accumulation) depends added to LLC LUKOIL-Volgogradenergo structure in 2019) on the organization of the production process and the schedules for recycling/neutralizing the generated waste. Drilling waste comprises the main share of waste remaining in the accumulation. Drilling waste generated as a result of construction of cluster sites, the drilling of which began at the end of the year, is disposed of during the following reporting year, after finalization of drilling at the entire site. Thus, the volume of «transition» waste depends on the scope of drilling operations. 2. The rise in waste generation in 2020 across Russian entities is caused by an increased amount of sewage sludge and construction waste, that was generated during the dismantling of buildings and structures for the construction of technological facilities at the Nizhny Novgorod and Volgograd refineries. In addition, the amount of oil-contaminated waste at LLC LUKOIL-Komi increased due to the significant formation of oil-contaminated soil as a result of pipeline depressurization. 3. The dynamics of the amount of waste used, neutralized and transferred to specialized organizations depends on the dynamics of the amount of waste generated. Generated waste is fully disposed of, neutralized, transferred to specialized organizations. 4. Data on waste across Russian entities are given without taking into account rock formed as a result of mine oil production at LLC LUKOIL-Komi. 192 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 193

Safety Indicators of LUKOIL Group Russian entities preparedness for emergencies

GRI 403–9 Number of occupational accidents and employees injured in workplace accidents 2016 2017 2018 2019 2020 at LUKOIL Group entities Number of trainings conducted, including: 193 178 200 163 training on the elimination of a potential oil/oil product spill 109 91 117 94 Indicator 2016 2017 2018 2019 2020 Number of staff involved in trainings, people 6,640 5,810 6,692 4,631 Total number of occupational accidents, including: 19 20 21 19 28 Number of site drills 10,566 11,996 10,739 12,812 fatal 4 4 1 2 2 Number of staff involved in the drills, people 75,649 88,300 97,852 83,859 high-consequence work-related injuries 5 8 7 number of minor injuries 15 9 19 number of microtraumas 3 7 4 Note. The dynamics of the indicators depend on training frequency and topics. For example, federal and regional training sessions Number of employees injured in workplace accidents (total number of 28 22 23 25 28 injuries), including: under the Spill Prevention and Response Plans are conducted once every two years, with staff drills between breaks. Emergency commissions of the Russian Federation constituents determine the procedure and frequency of preparedness number of fatalities (FA) 4 4 1 2 2 checks of personnel and equipment involved in local, regional, and territorial SPRPs training. Because of the pandemic, number of lost time injuries (traumas) (LTI) 24 18 22 23 26 training schedules changed.

Note. If during the reporting period an employee suffered more than one injury, each case is counted as a separate injury. The term GRI 403–8 Percentage of employees covered by the management systems certified to be “microtrauma” is used according to the GRI definition. compliant with the ISO 14001 and OHSAS 18001 international standards 09 2016 2017 2018 2019 2020 GRI 403–9 Indicators related to occupational injuries at contractor organizations in Russia LUKOIL Group, % 90 84 83 95 and abroad

2016 2017 2018 2019 2020 Total number of occupational accidents, including: 26 20 9 13 10 fatal 8 7 1 6 3 high-consequence work-related injuries 4 3 1 1

APPENDICES Number of employees injured in workplace accidents (total number of 32 25 9 16 11 injuries), including: number of fatalities (FA) 8 10 1 7 4 number of lost time injuries (LTI) 24 15 8 9 7

LUKOIL Group HSE training indicators

2016 2017 2018 2019 2020 Scope of training, person-courses 47,560 56,481 60,106 59,314 65,220 Russian entities 33,898 42,114 46,485 1,894 52,685 Foreign entities 13,662 14,367 13,621 2,330 12,535 By employee category (Russian and foreign entities) Managers 14,385 16,334 Specialists 11,194 12,257 Workers and other personnel 33,735 36,629 Training costs ("Employee training and advanced vocational training" 329.8 327.9 323.2 263.8 339.8 category), RUB million

Note. Data on the amount of training refer to mandatory HSE employee training and certification programs and include both in-person and remote employee training. 194 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 195

Employees GRI 102–8 Personnel characteristics by category and age as at December 31 of each reporting year GRI 102–8 Personnel characteristics by type of employment, employment contract, and gender, people (headcount) 2016 2017 2018 2019 2020 Total for LUKOIL Group 110,101 107,405 105,991 105,624 104,264 2018 2019 2020 Breakdown by category Headcount 105,991 % 105,624 % 104,264 % Managers 13,322 13,323 12,840 12,806 12,694 Employee breakdown by gender Specialists 30,106 28,829 28,091 28,691 28,319 Men 62,205 59% 62,007 59% 61,183 59% Workers and other personnel 66,673 65,253 65,060 64,127 63,251 Women 43,786 41% 43,617 41% 43,081 41% Employee breakdown by type of employment Including: Full-time 86,319 99.5% 105,168 99.6% 103,972 99.7% Russian entities of LUKOIL Group 90,112 89,323 88,019 88,434 87,858 Part-time 406 0.5% 456 0.4% 292 0.3% Managers 11,535 11,365 10,873 10,853 10,845 Employee breakdown by type of employment contract Specialists 24,824 24,557 23,950 24,538 24,141 Permanent 79,542 92% 98,020 93% 96,659 93% Workers and other personnel 53,753 53,401 53,196 53,043 52,872 men (% of total men headcount) 58,808 94.8% 57,854 95% Foreign entities of LUKOIL Group 19,989 18,082 17,972 17,190 16,406 women (% of total women headcount) 39,212 89.9% 38,805 90% Managers 1,786, 1,958 1,967 1,953 1,849 Temporary 7,167 8% 7,604 7% 7,605 7% Specialists 5,279, 4,272 4,141 4,153 4,178 men (% of total men headcount) 3,202 5.2% 3,329 5.4% Workers and other personnel 12,924, 11,852 11,864 11,084 10,379 09 women (% of total women headcount) 4,402 10.1% 4,276 9.9% Breakdown by gender Note. Across LUKOIL Group 110,101 107,405 105,991 105,624 104,264 Breakdown by type of employment and by type of employment contract for 2018 is accounted for a limited number of Group Under 35 43,787 42,772 41,174 39,179 36,955 entities in Russia. 36 to 40 years 17,807 17,253 17,346 17,670 17,962 41 to 50 years 28,727 28,564 29,069 29,793 30,266 51 and above 19,780 18,816 18,402 18,982 19,081 Russian entities of LUKOIL Group 90,112 89,323 88,019 88,434 87,858 Under 35 36,361 35,931 34,700 33,310 31,615

APPENDICES 36 to 40 years 14,039 14,007 14,142 14,624 15,085 41 to 50 years 22,944 23,274 23,725 24,545 25,136 51 and above 16,768 16,111 15,452 15,955 16,022 Foreign entities of LUKOIL Group 19,989 18,082 17,972 17,190 16,406 Under 35 7,426 6,841 6,474 5,869 5,340 36 to 40 years 3,768 3,246 3,204 3,046 2,877 41 to 50 years 5,792 5,290 5,344 5,248 5,130 51 and above 3,003 2,705 2,950 3,027 3,059 196 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 197

Percentage of female managers of total number of managers of the respective level Financial indicators at LUKOIL Group entities (headcount), % 201–1 (2016) Direct economic value generated and distributed, RUB mln Employee category 2016 2017 2018 2019 2020

CEO of a LUKOIL Group entity 1 2 2016 2017 2018 2019 2020 Deputy Heads, Chief Engineer, Chief Accountant 18 18 Direct economic value generated 5,256,250 6,010,089 8,058,338 7,876,876 5,655,070 Head of a branch, TPU, or another standalone business unit 4 7 Revenue 5,227,045 5,936,705 8,035,889 7,841,246 5,639,401 Heads of departments 26 27 Income from financial investments 14,756 15,151 19,530 25,134 13,051 Income from disposal of tangible assets 14,449 58,233 2,919 10,496 2,618 Distributed economic value -4,746,967 -5,394,491 -7,267,222 -6,985,273 -5,472,090 Operating expenses -3,413,258 -3,908,114 -5,297,908 -5,076,133 -3,753,470 GRI 401–2 Scope of services provided under social programs at LUKOIL Group Wages and salary -136,035 -127,851 -135,671 -143,602 -154,093 Indicator 2016 2017 2018 2019 2020 Other employee payments and benefits -20,370 -1,135 -31,300 -31,366 -31,366 LUKOIL Group, total 468,150 430,323 456,495 456,750 Payments to capital providers, including: -180,423 -180,371 -200,286 -226,376 -449,998 including: dividends paid -130,728 -141,499 -160,365 -184,787 -410,898 Health protection, services 325,711 286,746 322,795 321,215 interest paid to creditors -49,695 -38,872 -39,921 -41,589 -39,100 Social support for families with children, services 65,311 62,241 59,480 60,267 Budget contributions -984,821 -1,168,011 -1,593,272 -1,498,568 -1,074,740 Non-state pension coverage, people 12,453 12,263 12,115 13,361 09 Societal investment -12,060 -9,009 -8,785 -9,228 -8,423 Support for pensioners, people 43,281 44,990 42,825 43,468 Undistributed economic value 509,283 615,598 791,116 891,603 182,980 Other, services 21,394 24,083 19,280 18,439 Notes. Specifically for Russian entities, total, 402,709 357,277 387,154 386,541 The calculation of the following indicators has been clarified: including: - Income from disposal of tangible assets (2019): other types of income are excluded, except for income from the disposal Health protection, services 276,063 229,781 267,830 265,984 or retirement of assets; Social support for families with children, services 61,461 58,664 55,308 56,650 - Interest paid to creditors (2016–2018): interest expenses are recalculated on a cash basis; Non-state pension coverage, people 5,795 6,363 6,345 7,308 - Budget contributions (2018–2019): deferred taxes are excluded.The data is presented on the accruals basis, except Support for pensioners, people 43,116 44,884 42,689 43,265 for the «Payments to capital providers» indicator, for which the cash basis approach was used. Income from financial investments = Income from interest on deposits + Income from interest on loans issued + Other

APPENDICES Other, services 16,274 17,585 14,982 13,334 financial income. Note. Income from disposal of tangible assets = Income from sale and disposal of assets. A service provided to an employee under social programs constitutes the provision of various types of social assistance Operating expenses = Operating expenses + Cost of purchased oil, gas and refined products + Transportation expenses + and support at the employee’s request in kind (e.g. vaccinations) or in cash, to pay for the service or to compensate Selling, general and administrative expenses – Wages and salaries – Other employee payments and benefits + Exploration for its cost. expenses. Wages and salaries = Labor pay (including labor pay, estimated liabilities, compensation and incentive payments, pension insurance, voluntary health insurance, voluntary accident insurance). Other employee payments and benefits = Employee reward program payments. GRI 404–3 Percentage of employees receiving regular performance and career development Dividends paid = Dividends paid on Company shares + Dividends paid to non-controlling interest holders. reviews at PJSC LUKOIL Interest paid to creditors = Interest expense Budget contributions = Taxes (other than income tax) + Excise taxes and export duties + Current income tax. Indicator 2016 2017 2018 2019 2020 Societal investment = Charity expenses. PJSC LUKOIL headcount, people 2,331 2,351 2,406 2,204 Total PJSC LUKOIL employees who received an official performance 2,109 2,121 2,210 2,012 review, people Percentage of the total number of PJSC LUKOIL employees 90% 90% 92% 91% 198 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 199

Average salaries at Russian LUKOIL Group entities Economic effect of the implementation of the Energy Conservation Program, RUB million

2018 2019 2020 2016 2017 2018 2019 2020 Existing regions of operation Average salary Average salary Average salary Average salary Average salary Average salary Total across Russian LUKOIL Group entities 1,185 1,165 1,445 1,261 (LUKOIL) in the region (LUKOIL) in the region (LUKOIL) in the region

(January– (January– (January– December December December 2018) 2019) 2020) Financing of APG use activities, RUB billion Regions where production facilities are located 2016 2017 2018 2019 2020 Astrakhan Region 88,215 33,748 92,620 35,792 95,488 39,037 Total across Russian LUKOIL Group entities 24 15 8 10 5 Volgograd Region 62,445 30,350 65,277 32,737 66,904 35,599 Kaliningrad Region 89,637 32,634 89,645 34,357 87,477 37,497 Note. Nenets Autonomous Area 124,451 82,754 128,702 86,815 138,227 91,677 The indicator covers the expenses on the construction and reconstruction of APG preparation, transportation, and processing Nizhny Novgorod Region 73,081 32,909 71,593 35,692 73,828 37,449 facilities, as well as heat and electric power generation facilities in Russia. The change in the indicator is attributed to the schedule of activities under the effective APG use program. Perm Territory 75,455 35,577 79,152 38,562 79,877 41,203 Komi Republic 97,993 50,186 103,113 53,162 106,758 56,780 Samara Region 56,702 33,620 60,156 36,362 57,384 38,747 Saratov Region 51,443 26,821 57,996 28,503 64,010 33,365 Stavropol Territory 58,071 28,651 54,736 31,867 56,880 33,708 SASB indicators 09 Khanty-Mansi Autonomous 104,709 71,000 109,058 74,525 112,514 79,057 Segment: Area — Yugra Code Definition Response / reference to indicators in Documents E — Extraction, Sustainability Report for 2020 Yamal-Nenets Autonomous 124,257 96,846 131,225 100,456 136,883 110,759 R — Refining, Area Marketing, Regions where only oil product supply entities operate, as well as LUKOIL Technologies and LUKOIL-Engineering and Distribution, S — Services Moscow (excluding 104,845 83,678 137,143 94,011 111,262 100,506 (drilling, others), PJSC LUKOIL) T — Transportation Republic of 67,986 33,017 73,090 36,495 73,561 38,706 Vologda Region Less than 35,545 45,144 39,132 45,549 42,779 Management 500 people

APPENDICES Krasnodar Territory 50,214 33,583 52,249 36,155 51,517 37,666 ЕМ-ЕР 110а3) Long- and mid-term E, R In 2020, the development of a climate Annual Report ЕМ-RM 110а3) strategy to reduce strategy and GHG reduction targets Moscow Region 60,779 50,723 56,660 55,270 58,533 57,087 ЕМ-MD 110а3) direct GHG emissions. continued Rostov Region 36,232 30,653 38,443 33,490 39,109 35,563 Reduction targets. Analysis of activities Saint-Petersburg 71,004 60,123 73,440 63,157 73,101 68,383 related to these targets Sverdlovsk Region Less than 37,593 47,567 40,900 48,866 43,154 500 people ЕМ-ЕР 160 а1) Description of the E, T A unified environmental management environmental system — part of the Integrated Health, Tyumen Region 154,102 68,671 165,436 72,221 164,825 77,795 management system Safety, and Environment Management Chelyabinsk Region 40,004 34,980 44,437 37,308 46,664 38,693 System — is in place for all business segments

Note. Given the large number of countries in which LUKOIL Group entities operate, certain indicators (such as «Share of local employees,» «Average salary») are disclosed for significant regions. The definition of significant regions is given in Appendix 6. Average salary in the regions where one Group entity operates = Average salary in this particular organization. In the regions where several Group entities operate, the average salary (weighted average) for these organizations is indicated. Changes in the list of regions are due to fluctuations in the headcount of the Group’s entities. 200 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 201

Code Definition Segment: Response / reference to indicators in Documents Code Definition Segment: Response / reference to indicators in Documents E — Extraction, Sustainability Report for 2020 E — Extraction, Sustainability Report for 2020 R — Refining, R — Refining, Marketing, Marketing, and Distribution, and Distribution, S — Services S — Services (drilling, others), (drilling, others), T — Transportation T — Transportation

Greenhouse gases Extraction

ЕМ-ЕР 110а1) Total gross GHG E, T, R P. 54-55, 181 Annual Report EM-ER-160а2) Total number and E Partially, p. 82 ЕМ-RM 110а1) emissions, including volume of hydrocarbon ЕМ-MD 110а1) the share of methane, spills, including the share of emissions a) in the Arctic, b) by countries with legal impacting coastlines regulation of GHG in categories 8-10 of emissions the Environmental Analyst’s Handbook Sensitivity Index (ESI) (mangroves, marshes, rocky shores, and others), percentage of recovered sites

EM-EP 210 a3) Engagement with E P. 33, 37-39, 155 09 Emissions stakeholders and risk assessment with EM-EP 120 a1) Volume of NO , SO , E, T, R P. 189 X X respect to human rights, EM-RM 120 a1) and other pollutant rights of Indigenous EM-MD 120 a1) emissions to the Minorities of the North, atmosphere, VOCs, and and activities in the PM10 dust conflict zone Water EM-EP 420 a1) Sensitivity of E ЕМ-ЕР Amount of freshwater E, R P. 104, 183 hydrocarbon reserves to 140 а1 ЕМ-RM withdrawn, share of future price projection 140 а1 total consumption, scenarios that take into APPENDICES share in regions with account carbon price or severe water scarcity emissions

Occupational safety EM-EP 420 a3) Investments in RES, P. 67 share of income received EM-RM 320 a2) Description of the E, R Improving safety culture is one of the from RES management system to mechanisms of the Integrated Health, improve safety culture Safety, and Environment Management EM-EP 420 a4) Assessment of price E System, p. 73-75 and demand for hydrocarbons and / EM-EP 320 a1) Total Recordable Injury E, R, S P. 88, 89, 192, 193 or climate regulation ЕМ-RM Rate (TRIR), Fatality affecting capital 320 а1 ЕМ-SV Rate, Near-Miss investment strategy for 320 а1 Frequency Rate (NMFR), exploration, acquisition, Average Duration of OHS and development of Training for a) Staff, b) assets Contractors, c) Short- Term Employees APPENDIX 8. INDICATOR BOUNDARIES

202 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 203

Segment: Code Definition Segment: Response / reference to indicators in Documents Code Definition Response / reference to indicators in Documents E — Extraction, E — Extraction, Sustainability Report for 2020 Sustainability Report for 2020 R — Refining, R — Refining, Marketing, Marketing, and Distribution, and Distribution, S — Services S — Services (drilling, others), (drilling, others), T — Transportation T — Transportation

EM-EP 510a1) Percentage of 1) proved E The share of reserves located in Iraq Analyst’s Handbook Transport and 2) prospective and the Republic of Congo (according to PJSC LUKOIL share) of LUKOIL Group's EM-MD 520 a1) Total losses from T P. 35 reserves in countries lawsuits related to that rank in the bottom proved reserves abroad was 9.6% in 2018, and 15.4% in 2019 pipelines and storage 20 of Transparency facilities International's Corruption Index EM-MD 540 a1) Number of pipeline- T P. 82 related incidents ЕМ-ЕР-510а2) Management system E Partially, p. 34, 43 Anti-Corruption Policy of reported, share of for the prevention significant incidents of corruption in the PJSC LUKOIL company and supply EM-MD 540 a2) Share of inspected T P. 59 chain gas pipelines (natural gas) and pipelines ЕМ-ER-540 а2) Describe the risk E, S P. 76, 77 for transportation of 09 management system for hazardous materials catastrophic events and accidents EM-MD 540 a3) Number of emergency T All railway transportation operations and non-emergency are performed by contractors. Refining and distribution spills during railway Contractors are liable for EM-RM-110 a2) Long- and mid-term T, R P. 56, 57 transportation transportation safety strategy to reduce GHG Services (contractors) emissions (Scope 1), established targets and EM-SV 510a1) Share of income in S The Company does not generate analysis of the achieved countries that rank significant revenues in these countries. results in the bottom 20 The share of reserves located in Iraq of Transparency and the Republic of Congo (according

APPENDICES LUKOIL’s refineries are located in cities EM-RM 120 a2) Number of plants R International's to PJSC LUKOIL share) of LUKOIL Group's located in or in the with a population of 10,000 or more. The largest population is in Volgograd Corruption Index proved reserves abroad was 9.6% in vicinity of heavily 2018, and 15.4% in 2019. The share populated cities (about 1 million people), Perm (about 1 million people), Nizhny Novgorod of reserves located in Iraq and the (1.3 million people) and Saratov Republic of Congo (according to PJSC (842 thousand people). (all cities are «LUKOIL» share) of total reserves of located in Russia). LUKOIL Group was 1% in 2018, and 1.5% in 2019 EM-RM 150 a1) Amount of hazardous R P. 109, 191 waste generated, share EM-SV 150 a2) Strategy and plans S Partially p. 107, 109 of recycled waste to mitigate risks associated with the use EM-RM 520 a2) Number of court- R P. 35 of chemicals ordered penalties for price-gouging and ЕМ-SV 160 а2) Strategy and plans to S Partially, p. 107, 109 price-fixing mitigate risks associated with environmental impacts in services

Appendix 8. Indicator boundaries

Appendix 8 is published in the interactive version of the Sustainability report on the website. INDEPENDENT ASSURANCE STATEMENT

204 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 205

Appendix 9. Independent assurance statement

09 APPENDICES 206 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 207

09 APPENDICES CONCLUSION OF THE BOARD OF NON-FINANCIAL REPORTING OF THE RUSSIAN UNION OF INDUSTRIALISTS AND ENTREPRENEURS ИЛИ CONCLUSION OF THE BOARD OF NON-FINANCIAL REPORTING OF THE RSPP

208 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 209

Appendix 10.

Financial Reporting of the Russian Union of Industrialists and Entrepreneurs, the Board confirms the following: Conclusion of the Board of Non-Financial Reporting of the Russian Union of Industrialists and Entrepreneurs on the Public Assurance The Sustainability Report of the LUKOIL Group for 2020 contains significant information on key Review Results of the Sustainability Report of LUKOIL Group for 2020 areas of responsible business practice in accordance with the principles of the Social Charter of Russian Business, and adequately discloses information on the Company’s operations in these areas.

At the initiative of PJSC “LUKOIL”, the Board of Non-Financial Reporting of the Russian Union of The recommendations of the RSPP Board based on the results of public assurance of the previous Industrialists and Entrepreneurs (RSPP) (hereinafter, the Board) formed in accordance with the decision of report for 2019 are reflected in the Report for 2020. It includes information on the Company’s the Administrative Office (Resolution of 28 June 2007) have reviewed the Sustainability Report for 2020 contribution to the achievement of the UN SDGs, which is also measured against national projects; (hereinafter, the Report) of LUKOIL Group (hereinafter, the Company, the Group, LUKOIL). data on land reclamation is presented, information is disclosed, and explanations are given regarding the dynamics of greenhouse gas emissions; a detailed description of the procedure for identifying The Company requested RSPP that the Board arranges a public assurance review of the Report. The Board material topics with the participation of various groups of stakeholders is provided. has formed an opinion on the relevance and completeness of the information disclosed in the Report in relation to the Company’s performance in accordance with the principles of responsible business practice The Company’s report for 2020 contains relevant information on the following aspects of responsible which are set out in the Social Charter of Russian Business and comply with the provisions of the UN business practices: Global Compact and Russian and international social responsibility standards. 09 Economic freedom and responsibility: The Report covers the main areas and geography of operations, From 16 June to 5 July 2021, members of the Board studied the contents of the Report submitted by the the structure of the Company, and presents strategic goals and long-term target indicators. The global trends Company and prepared this Conclusion in accordance with the Regulations for the Public Assurance of the industry development are reflected, growth opportunities in the context of the transition to a low- Review of Corporate Non-Financial Reporting approved by the Board. Members of the Board have the carbon economy are considered. The main financial and production results for business segments for the necessary expertise in corporate social responsibility, sustainability, and non-financial reporting, comply reporting year are disclosed. Plans to adapt to climate change and decarbonization are reported as part of with ethical requirements pertaining to independence and objectivity, and express their personal opinions the work to update the Group’s Strategic Development Program. Information on the implementation of as experts, and not the opinions of the organizations they represent. digitalization programs and key growth projects is presented. The Company’s production model from production to sales of products and services is described. The system of quality management is reported, a The Report was assessed based on the following criteria on the completeness and relevance of the description of the corporate integrated management system is given. Certification of the HSE management APPENDICES information contained therein: system for compliance with international standards ISO 14001 and ISO 45001 at the Group’s production entities was noted. It is reported that amendments have been made to the HSE Policy in connection with Information is considered relevant to the extent it presents the Company’s activities in implementing the the Company’s transition to the new standard ISO 45001 and plans for climate adaptation. The principles of responsible business practices disclosed in the Social Charter of Russian Business organizational structure of the sustainability management system is shown. The Report contains (www.rspp.ru). information characterizing the involvement of the Board of Directors in sustainable development issues, The completeness implies that the Company has comprehensively presented its activities in the Report – including on the climate agenda, and the results of the work of the committees of the Board of Directors. its underlying values and strategic benchmarks, governance system and structure, achievements, and key Four of the Group’s strategic sustainable development goals are reported, which are related to the 12 UN performance indicators, as well as its system of interacting with stakeholders. SDGs, and the Company’s contribution to national projects is shown. The activity of the Business Ethics Commission is described. The Company’s participation in the fight against the COVID-19 pandemic in The application by the Company of the international reporting system is considered during the public Group entities, regions of presence in the Russian Federation and foreign countries is shown. The report assurance review of the Report. However, confirming the Report’s level of compliance with international contains information on the approval of the corporate Anticorruption Policy and the Antimonopoly Policy. reporting systems is outside the scope of this Conclusion. It also reports on sustainability awards and LUKOIL’s participation in international ratings.

The Company is responsible for the information and statements contained in the Report. The reliability of Business Partnership: The Report covers stakeholder engagement issues, communication channels and the data contained in the Report is not the subject matter of this public assurance review. tools, and key events in the reporting period. It covers interaction with government bodies and business partners in Russia at the federal, regional, and local levels, as well as participation in the international This Conclusion has been prepared for the Company which may use it for internal corporate purposes and dialogue on issues of industry development and the climate agenda. It is noted in the Report that for communications with stakeholders, publishing it without any changes. representatives of the LUKOIL Group participate in the discussion of legislative initiatives, in the work of advisory groups and expert platforms, including on crisis measures in pandemic conditions. The key principles of the Company’s human resources and social policy are given. The system of social partnership CONCLUSIONS is highlighted; it is reported that an agreement was concluded between the Company and trade unions for 2021–2023, which stipulates an increase in a number of guarantees, and the coverage of employees by On the basis of the analysis of the Report, as well as public information on the official corporate website of collective agreements is indicated. The experience of organizing work in the conditions of the COVID-19 the Company, and a collective discussion of the results of the independent assessment of the Board of Non- pandemic is shown. It is reported that there are requirements on contractors and suppliers to comply with industrial and occupational safety standards, as well as to comply with anti-corruption standards, and the 210 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 211

Company’s control system is shown. The report informs about the preparation of ratings of contractors to Final provisions involve them in improving the safety culture. The mechanisms of interaction with clients are described, The Sustainability Report of the LUKOIL Group for 2020 reflects the scope and strategy of the Company’s feedback channels and results of monitoring of their satisfaction are presented. The Company’s membership in international and Russian industry and professional associations and unions is highlighted. The Report operations, its contribution to the development of the oil and gas sector and the economy of the country, highlights the cooperation with the International Labor Organization. priorities and management system in the field of sustainable development. A comprehensive approach to disclosure of information on key areas is implemented, and a significant number of performance indicators Human Rights: The report declares the Company’s commitment to respect for human rights in accordance on economic, environmental, and social aspects is contained. The Report shows the balance of performance with the principles reflected in UN documents and the legislation of the countries in which it operates. The with the UN Sustainable Development Goals and their implementation objectives, which meet the Company states that it does not allow discrimination against employees on any grounds. Corporate Company’s strategic benchmarks. The Reports consistently expand information on sustainability factors in documents setting forth the principles of observing human rights are described. Information is provided on the Company’s foreign assets. social partnership, respect for labor rights, including measures for training and development, improving working conditions and protection of labor, and ensuring the rights of indigenous minorities of the North. In preparing the Report, Global Reporting Initiative sustainability reporting standards (GRI Standards), Human rights monitoring mechanisms, including feedback channels, and activities to manage human rights SASB, UNCTAD were used, as well as other Russian and international documents, including the UN risks in the supply chain are reported. Information on the participation of representatives of the indigenous Global Compact, the Social Charter of Russian Business and the Basic Performance Indicators of the minorities of the North in decision-making on projects that affect their rights, on the implementation of Russian Union of Industrialists and Entrepreneurs, the Sustainability Reporting Guidance for the Oil and projects in their support, and expenses for these purposes is included. Gas Industry (IPIECA), which ensures continuity of information in various reporting cycles, as well as 09 comparability with the reports of other companies. Environmental preservation: The Report informs about the strategic goal of reducing the human impact on the environment through the implementation of the best available technologies. The implementation of The report for 2020 is the Company’s eleventh non-financial report, which attests to the consistent the Environmental Safety Program for 2020–2022, its results and goals for 2021 are shown. The development of the non-financial reporting process. The Company uses various forms of independent establishment of the Working Group on Decarbonization and Adaptation to Climate Change, the evaluation and confirmation of reporting information (professional audit and public assurance), thereby performance of an expanded inventory of emission sources, and the publication of climate reporting in the confirming a responsible attitude to the quality of information disclosed. international Carbon Disclosure Project (CDP) are reported. Information on emergency situations is RECOMMENDATIONS disclosed, measures to improve the reliability of the pipeline system and to prevent oil spills are reflected. The main results in energy consumption and energy efficiency, including the implementation of the Energy- While noting the merits of the Report, the Board draws the Company’s attention to several aspects that are

APPENDICES Saving Program of the Group’s entities for 2019–2021, are highlighted, and information on the management important for stakeholders and relate to the relevance and completeness of the information disclosed and system in this area is presented. Approaches to solving the problem of sustainable water use, including in recommends taking them into account in future reporting. low-water regions, are described. Data on reducing the use of water for own needs, on measures to optimize water consumption is given. The Report shows the Company’s biodiversity conservation activities, The Board notes that the recommendations based on the analysis of the Company’s previous reports will including in the Arctic zone. Environmental monitoring is reported to improve the safety of marine prove useful in the future reporting practices of the Group. ecosystems. The main goals and areas of implementation of the Company’s renewable energy projects are The Report contains the analysis of the implemented strategic goals and the assessment of the Company’s presented. Projects aimed at reducing the negative impact on the environment and reducing waste are contribution to the achievement of the priority UN Sustainable Development Goals – 2030, including those highlighted. Gross and specific environmental impact indicators are disclosed. Data on costs on from the climate agenda. It also outlines plans for further implementation of these goals. The Board environmental protection measures for Russia and foreign assets are given. The implementation of projects recommends developing this practice in subsequent reporting cycles and highlighting measurable targets under the World Bank initiative Zero Routine Flaring by 2030 is reported. for priority SDGs, specifying estimated deadlines to achieve them. Participation in the development of the local community: the Report informs about the areas of the Taking into account that LUKOIL is an operator of or participant to a number of foreign projects of Group’s external social policy in the regions, the mechanisms used, including cooperation agreements with prospecting and producing of hydrocarbons in various countries worldwide, it seems advisable to provide the administrations of 29 regions, and agreements with the heads of territories of traditional resource use. more information in subsequent reporting cycles on the activities conducted under these projects for the The priority areas of social activity common to all regions and countries in which Group organizations purposes of sustainable development. operate are shown, and the long-term nature of several regional programs and projects is reported. The volume of the Company’s social investments in the regions of presence is reflected, including expenses on Furthermore, it is advisable to consider presenting not only consolidated figures of foreign companies in assistance in connection with the COVID-19 pandemic. Information on the results of the contest of social the subsequent reporting cycles but also figures with a breakdown by segment (production, refining, sales) and cultural projects held by the Charity Fund together with the Russian enterprises of the Group is or by entities. presented. Criteria for assessing the effectiveness of implemented projects are shown. Information on annual environmental campaigns is included. The development of volunteering practice is reported. The Noting the disclosure in the Report of changes in figures over three years as its positive feature, it should implementation of the “More Than Just a Purchase” social entrepreneurship support project implemented be emphasized that clarifications on the changes in the indicators need to be provided. It is advisable to jointly with the “Our Future” Foundation of Regional Social Programs. Information is provided on the main provide comments on the reported accounting indicators, especially when significant changes have measures aimed at supporting orphans, the disabled, veterans of war and labor and other groups of the occurred. population in need of assistance, as well as medical organizations and sports groups. 212 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 213

The Report comprises information on implementing operational excellence programs and digitalization of the Group’s operations. The Board recommends paying more attention in future to sustainable development opportunities and risks of the Group, which arise out of the developing digital technologies and implementation thereof in the Company’s business processes.

The Report contains information on the Company's external social policy aspects, specific programs and activities in the regions of its presence. For a less biased assessment of the Group’s social impact in future, it is advisable to disclose the cost structure of key aspects of the external social policy and present the efficiency of specific projects.

The Report covers the interaction with stakeholders on a wide range of issues. It seems reasonable to develop in future the practice of stakeholder engagement in the preparation of reports, e.g. by arranging events such as dialogues, hearings of reports, obtaining of feedback from representatives of basic stakeholder groups on the social, economic, and environmental impact of the Company’s enterprises, and giving coverage to the outcomes of these events.

It appears from the Report that the climate agenda has been integrated in the strategies and activities of the 09 Company. In view of the relevance of this topic, it deserves continued focus and coverage in reports including the information on the Company’s response to challenges in this area, financial appraisal of climate risks, and description of approaches to their mitigation.

We recommend that in future the information on the interaction of PJSC “LUKOIL” with subsidiaries on the Company’s strategic sustainable development goals and the system of control of applying of corporate policies and internal regulatory documents should be included in reports.

Having issued a positive assessment of the Report, having supported the Company’s commitment to the

APPENDICES principles of responsible business practices, and having noted the consistency in the development of its reporting, the RSPP Board of Non-Financial Reporting does hereby confirm that the LUKOIL Group Sustainability Report for 2020 has passed the public assurance procedure.

The Board of Non-Financial Reporting of the Russian Union of Industrialists and Entrepreneurs 214 LUKOIL Group

CONTACT INFORMATION

Contact information for any matters related to the Report content:

Coordination Center for Corporate Activities Tel.: +7 (495) 981 7977

Email: [email protected]

Capital Markets Department Tel.: +7 (495) 627 1696

Email: [email protected]

Press Service 09 Tel.: +7 (495) 627 1677

Email: [email protected]

The data on future production and investment plans contained in the Report are based on forward-looking information. Such words as “believe”, “anticipate”, “expect”, “estimate”, “intend”, “plan” and similar expressions indicate the forward- looking nature of the statement. Actual results may differ from expected results, estimates and intentions contained in forward-looking statements. PJSC LUKOIL does not guarantee that the anticipated operating results contained in the forward-looking statements will in fact be achieved. In each case, such statements represent only one of many possible outcomes, and thus they should not be considered as the most likely outcome. APPENDICES