Oil Refining at Joint Venture Oil Refineries

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Oil Refining at Joint Venture Oil Refineries 2015 ANNUAL REPORT Contents ABOUT NAVIGATING Link THE COMPANY THE REPORT to the Annual Report Link to the website 2015 key indicators 2 The Company today 4 Regions of operation 4 View the online version Major events of 2015 5 of the 2015 Annual Report at: http://ar2015.gazprom-neft.com/ 06 08 MESSAGE FROM MESSAGE FROM THE CHAIRMAN THE CHAIRMAN OF THE BOARD OF THE MANAGEMENT OF DIRECTORS BOARD 10 36 OPERATING STRATEGIC REPORT RESULTS Market challenges 12 Hydrocarbon balance 38 Raw materials base 38 Oil and petroleum products market 14 Production 39 Global energy balance 14 Global oil consumption 15 Oil refining 43 Global oil production 18 Oil refining assets 44 Global investment in oil 20 Oil refining at joint venture oil refineries 45 Global market in 2016 20 Sale of oil and petroleum products 46 Oil production and refining Sales of oil and petroleum products in the Russian Federation 21 on the domestic market 46 Strategy in action 23 Export sales 47 Strategic benchmarks for 2025 23 Sale of petroleum products Results of 2015 and strategic priorities for 2016 27 by product business units 49 Petrochemistry 53 Highly-efficient business model 28 R&D and innovation 54 Investment appeal factors 30 Innovations in production 54 Focus on high value-added products 30 Innovations in refining and sales 56 Leadership 31 Opportunities for investors 32 Success of the chosen strategy and future growth 34 58 82 FINANCIAL MANAGEMENT RESULTS SYSTEM Key financial results 60 Corporate governance 84 Message for shareholders and investors 84 Sales revenue 61 Description of corporate governance practice 85 Expenses and other costs 65 Corporate governance system 87 EBITDA and net profit 68 Key risk factors 113 Cash flows 69 Interaction with investors; debt and equity capital 121 Capital investments 70 Equity capital 121 Debt and liquidity 70 Listing 122 Participation in depository receipts programme 124 Financial ratios 71 Debt portfolio management and credit ratings 124 Dividend history 127 Main macroeconomic factors affecting Mechanisms of interaction with investors 128 performance results 72 Q&A 130 Taxation 73 Transportation of oil and petroleum products 80 130 146 SUSTAINABLE APPENDIX DEVELOPMENT Industrial, environmental Independent Auditor’s Report on 2015 148 and occupational safety 133 Appendix 1. Consolidated IFRS Industrial and occupational safety 134 financial statements 150 Environmental responsibility 135 Appendix 2. Major transactions Energy efficiency 139 and related party transactions 209 Exploration and production unit 139 Logistics, processing and sales unit 140 Appendix 3. Company history 217 Human resource development 141 Appendix 4. Structure of the Company’s Group 221 Profile of personnel 141 Remuneration and social support for personnel 142 Appendix 5. Glossary 223 Personnel training and development 142 Appendix 6. Information about the use Regional policy and development of energy resources by Gazprom Neft PJSC 227 of local communities 143 Disclaimer 228 ‘Native Towns’ 143 Corporate volunteering 145 Addresses and contacts 229 The Gazprom Neft PJSC Annual Report was approved by the Annual General Meeting of Company Shareholders on 10 June 2016, Minutes No. 0101/01 dated 14 June 2016. About the Company 2015 key indicators PRODUCTION OF MARKETABLE HYDROCARBONS PROVEN HYDROCARBON RESERVES1 (PRMS-SPE) // mn TOE BY GAZPROM NEFT // mn TOE Source: Company data Source: Company data 79.70 1,443 1,518 1,343 ↗5.2% 66.25 ↗20.3% 62.26 1,130 1,200 59.71 1,518 mn TOE 57.25 79.70 mn TOE 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 1 Excluding NIS a.d. Novi Sad. OIL REFINING // mn t SALES // RUB bn Source: Company data Source: Company data 43.34 43.48 40.49 42.63 43.07 ↘0.9% ↘2.1% 1,691 1,656 1,519 1,504 43.07 mn t 1,292 RUB 1,656 bn 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 PROFIT ATTRIBUTABLE TO GAZPROM NEFT PJSC SHAREHOLDERS // RUB bn ADJUSTED EBITDA // RUB bn Source: Company data Source: Company data 176.3 177.9 ↘10.2% 405 ↗18.2% 160.4 323 337 343 RUB bn 300 122.1 109.7 RUB 405 bn 109.7 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 The text of the Report may contain inaccuracies in the calculation of proportions, percentages and amounts when rounding estimated values. The data cited in the Annual Report may differ slightly from previously published data due to the difference in rounding. 2 GAZPROM NEFT // 2015 ANNUAL REPORT PREMIUM SALES OF JET FUEL2 // mn t PREMIUM SALES OF MARINE FUEL2 // mn t Source: Company data Source: Company data 2.84 2.80 ↘1.4% 4.20 ↘6.7% 3.92 2.39 2.07 2.80 mn t 3.22 3.92 mn t 1.64 2.58 2.16 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 PREMIUM SALES OF BITUMEN2 // mn t PREMIUM SALES OF OILS AND LUBRICANTS2 // mn t Source: Company data Source: Company data 0.06 ↗50.0% 0.23 ↗21.1% 0.19 0.06 mn t 0.17 0.23 mn t 0.04 0.14 0.03 0.03 0.12 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 NET CASH GENERATED FROM OPERATING ACTIVITIES // RUB bn 2 Premium sales include: – Sales of petroleum products through premium sales channels – retail Source: Company data and wholesale. This group includes all sales of petroleum products via petrol stations 277 284 285 ↗0.4% and petroleum storage depots, for aircraft and vessels and small-scale 248 wholesale from refuelling facilitieфs at airports and port terminals. – Sales of packaged petroleum products. 181 RUB 285 bn This group includes all oil sales in barrels and canisters as well as bitumen sales in clovertainers, etc. – Sales of premium petroleum products, i.e. petroleum products that generate added value due to the presence of certain qualitative features compared with other products of their kind. This group includes the sale of premium bulk lubricants (Gazpromneft, G-Family, Texaco), premium bituminous materials (polymer-bitumen binders, PMB, bituminous emulsions, etc.) and the possible wholesale of premium 2011 2012 2013 2014 2015 motor fuels – G-Drive, etc. www.gazprom-neft.com 3 About the Company The Company today Gazprom Neft is a vertically integrated oil company whose principal activities include the exploration, development, production and sale of crude oil and gas as well as the production and sale of petroleum products. In terms of proven hydrocarbon reserves according to SPE (PRMS) classification, Gazprom Neft is comparable with the top 20 largest oil companies in the world. The Company operates in Russia’s largest oil and gas regions and also has production projects outside of Russia in such countries as Iraq and Venezuela, among others. The Company’s primary refining facilities are located in Russia’s Omsk, Moscow and Yaroslavl Regions in addition to Serbia. Gazprom Neft is currently a major player on the energy market. The Company produces and supplies a broad range of petroleum products for a number of industries both in Russia and abroad. Regions of operation The online version of the Annual Report contains additional information about the distribution by region of: Angola Italy Romania Bulgaria Kazakhstan Serbia ↗ new projects; Bosnia and Herzegovina Kyrgyzstan Tajikistan geological prospecting; ↗ Hungary Latvia Ukraine ↗ production projects; ↗ refining and sales assets; Venezuela Republic of Belarus Estonia ↗ average number of employees. Iraq Russia 4 GAZPROM NEFT // 2015 ANNUAL REPORT Major events of 2015 MILESTONES OF 2015 JANUARY 2016 MARCH 2016 ↗ Gazprom Neft’s project to develop catalyst ↗ Took over operational control of the Sarqala production was granted national status; field in the Kurdish region of Iraq. ↗ Start of work to explore Bazhenov Formation reserves at the Vyngayakhinskoye field in the Yamalo-Nenets Autonomous Distric. 2016 FEBRUARY 2016 DECEMBER ↗ Successful testing of the first Russian-made hydrotreating catalyst at the Omsk Oil ↗ Completed reconstruction of a crude oil Refinery; processing complex at the Omsk Oil Refinery ↗ The Company is awarded the title of best and reconstruction of the KT-1/1 atmospheric employer in Russia; residue deep conversion complex. NOVEMBER ↗ Acquisition of a 75% stake in the charter capital of LLC NOVA-Brit, the owner of an innovative bitumen materials plant. ↗ Production of the one millionth tonne of oil at the Prirazlomnoye field; OCTOBER ↗ Start of construction on the first icebreaking supply vessel for the Novy Port project. ↗ Obtained a certificate of compliance with the ISO 50001 Energy Management System Standard. SEPTEMBER ↗ Launch of the South Priobskoye Gas Processing AUGUST Plant jointly with SIBUR; ↗ Completed construction on the Arctic terminal at the Novoportovskoye field. ↗ Start of offshore geological exploration of the East Siberian and Chukchi Seas; ↗ First pilot batch of needle coke obtained at the Omsk Oil Refinery; ↗ The Company’s stake in SeverEnergia (Arcticgas) JULY increased to 46.7% from 45.1%. ↗ Construction launched on Russia’s largest complex gas treatment plant at the JUNE Novoportovskoye field. ↗ Establishment of a technopark in Omsk with advanced industrial automation developments. APRIL ↗ The Moscow Oil Refinery becomes the first Russian oil refining enterprise to install MARCH an automated air monitoring system. ↗ Chinese rating agency Dagong assigns Gazprom Neft a high credit rating of ‘АА-’; ↗ The Company’s stake in CJSC Northgas increases FEBRUARY to 50%; ↗ Acquisition of a large-capacity bunkering tanker for operations in the Black Sea. ↗ Completed the first stage of the exploration of Bazhenov Formation reserves at the South Priobskoye field in the Khanty-Mansi Autonomous District-Yugra; ↗ Start of commercial production at the Garmian Block (Kurdistan). 2015 www.gazprom-neft.com 5 Message from the Chairman of the Board of Directors 6 GAZPROM NEFT // 2015 ANNUAL REPORT MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS Dear Shareholders and Investors, Such difficult times test just how resilient business is to For companies working in the oil and gas sector, the year 2015 the influence of an unstable macroeconomic environment.
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