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SGM GROUP OF COMPANIES 2

SGM GROUP OF COMPANIES

SGM Group of Companies employs over 20 000 people

SGM Group has over 20 000 employees of construction and other professions, among them welders, doggers, pipelayer operators, excavator operators, etc.

More than 90% of its employees are workers, technicians and engineers of highest qualification. Every third employee of the Group has a university degree, 71% of the workforce has secondary (vocational and other) education.

SGM Group supports the succession strategy and has quite a number of dynastic families; some of them are in business for more than 70 years!

The Group has well-developed mentoring system, encourages traditions transfer to succeeding generations and respect for elders. 3

SGM Group SGM Group Staff Composition by Category Staff Composition by Gender

22% 11% Management Female Professionals and office staff Male Production workers, labourers 67% 22% 78%

SGM Group SGM Group Staff Composition by Level of Education Staff Composition by Age

29% 20% 25% University education Under 30 Secondary 31–50 (vocational or other) 51 and over education 71% 55%

Every fourth employee of SGM Group is under the age of 30 4

SGM GROUP STRUCTURE

SGM Group of Companies consists of: > LLC «STROYGAZMONTAZH» – the parent company of the group;

And major construction enterprises: > JSC «Lengazspetsstroy» > JSC «Krasnodargazstroy» > LLC «SCC Gazregion» > LLC «Neftegazkomplektmontazh» > JSC «Volgogaz»

> JSC «Volgogradneftemash» – the largest high-tech gas, oil and petrochemical equipment manufacturer. The Group’s subsidiaries, territorial-production construction departments and standalone divisions operate in more than 50 towns and settlements in .

SGM Group

LLC «STROYGAZMONTAZH»

JSC «Lengazspetsstroy» JSC «Krasnodargazstroy»

LLC «SCC Gazregion» JSC «Volgogradneftemash»

JSC «Volgogaz» LLC «Neftegazkomplektmontazh» 5

STROYGAZMONTAZH Volgogradneftemash Volgogaz Est. 2008 Est. 1941 Est. 1958 STROYGAZMONTAZH (SGM) is the parent One of the Volgograd’s primary taxpayers. Over the years of operation Volgogaz has company of SGM Group. Volgogradneftemash is the largest manufacturer of commissioned about 13,000 km of gas high-tech equipment for the gas, oil and pipelines and gasified over 2.5 million The company is involved nearly in all major petrochemical industries. Volgogradneftemash households. For the first time the local infrastructure projects for the oil and gas comprises the Volgograd Oil Machine-Building company has participated as the general industry, namely: construction of the Dzhubga – Plant and the Kotelnikovo Steel Reinforcing Mill. contractor in the construction of 12-string Lazarevskoye – , Gryazovets – , Virtually all Russian gas producing and gas crossing over the Kuibyshev water storage Pochinki – Gryazovets gas pipelines, construction transportation plants, oil refineries of the largest reservoir, modernized some large Heat and of the Sakhalin – Khabarovsk – Vladivostok, oil companies are fitted with the process Power Plants to use gas fuel and took part in Southern Corridor, Bovanenkovo – , Ukhta equipment manufactured by construction of Urengoy – Pomary – – Torzhok trunk gas pipeline systems, Russian Volgogradneftemash. Uzhgorod, Urengoy – Center gas pipelines. regions gasification programme, etc.

Lengazspetsstroy SCC Gazregion Est. 1968 Est. Lengazspetsstroy corporation was founded on 2010 the basis of Mosgazprovodstroy SMU-7 SCC Gazregion specializes in construction of trunk (Installation and Construction Department), but pipelines, inter-settlement gas pipelines, was then reorganized into Lengazspetsstroy, compressor stations and gas distribution facilities. Joint-Stock Company. During 45 years of The company takes an active part in the Russian operation it participated in virtually all state Regions Gasification Programme ( OJSC) pipeline construction projects, beginning from and performs nearly 40% of all related works. the Yamal Peninsula to the Central Asia, from the Baltic States to the Sakhalin Island, where the key projects are the Urengoy – Pomary – Uzhgorod, Yamal – Europe, Blue Stream trunk Neftegazkomplektmontazh gas pipelines, etc. Est. Krasnodargazstroy 2005 NGKM was founded on the basis of the Est. enterprise specializing in repairs of the local 1979 and imported machinery. Nowadays NGKM is Krasnodargazstroy participated in construction of one of the youngest and rapidly developing the Pochinki – Gryazovets, Ukhta – Torzhok, Yamal construction companies working in the Russian – Europe, Blue Stream, SRTO – Torzhok trunk gas oil and gas sector. pipelines, etc. The company successfully The company took part in construction of the operates in in the CIS states and the following Ukhta – Torzhok (1st stage), Pochinki – countries: Algeria, India, Iran, Iraq, Libya, Nigeria, Gryazovets, Izobilny CS – Nevinnomyssk, Finland and Cuba. Southern Corridor trunk gas pipelines, etc. 6

SGM Group takes part in almost all major infrastructure projects of strategic value to Russia

km compressor 4 850 29stations of high and medium with a total capacity of pressure gas pipelines were constructed 2 097 MW were built

Since its establishment SGM Group has constructed over 4,850 km of high and medium pressure gas pipelines.

During this period the Group has built and commissioned 35 onshore facilities: 29 compressor stations with a total capacity of 2,097 MW, where 114 gas pumping units were installed along with 6 inventory bases and local construction offices. The Group has also modernized the underground gas storage facility (3 units of 15 MW GPUs). 7

populated 3 000 centers were gasified 15 290 km of low pressure gas pipelines were constructed

SGM is a participant of the Russian Regions Gasification National Programme, originated by Gazprom OJSC, from 2008 till 2014. SGM Group has constructed 15,290 km of inter-settlement gas pipelines and 1,023 gasification facilities; 3,000 populated centers in 66 regions were gasified.

Such area of activity as capital repairs rapidly develops in SGM Group, thus from 2009 to 2014 were repaired 3,404 km of trunk gas pipelines, 286 gas distribution stations, 89 underwater crossings and 60 process pipelines for CS. 8

SGM Group’s main areas of activity:

> trunk pipelines and onshore facilities construction > offshore construction > Russian regions gasification > master overhaul of gas pipelines > production of various equipment for the oil and gas industry > engineering > procurement, provision of spare parts, etc.

STROYGAZMONTAZH is a member of the following institutions:

> SRO "Association of gas and oil complex builders" > SRO NP "Design Engineer" > SRO NP "Prospecting Engineer" > International Pipe Line & Offshore Contractors Association (IPLOCA), and licensed for geodesic activities.

The Quality Management System of the STROYGAZMONTAZH LLC. complies with GOST ISO 9001-2011, ISO 9001:2008, GOST R ISO 14001-2007, ISO 14001-2004, OHSAS 18001:2007 and confirmed by the relevant certificates. 9

SGM Group’s Construction Machinery Composition of the Fleet

1% 2% 3% 11% 7% 12% 17%

16%

29% 2%

Bulldozers Process machines Pipelayers Cranes Excavators Hoisting machines Backhoe loader Tractors Welding machines Loaders 10 DZHUBGA – SGM LAZAREVSKOYE – SOCHI GROUP’S TRUNK GAS PIPELINE

Total length Length of the offshore MAJOR of the pipeline is section is PROJECTS 177 km 159,5 km

RUSSIA

Dzhubga-2 AGDS

Dzhubga-1 AGDS Dzhubga Novomikhailovsky Novomikhailovskaya AGDS Tuapse AGDS

Lazarevskoye

Sochi Adler AGDS Kudepsta AGDS

Kudepsta ABKHAZIA 11

During the Dzhubga – Lazarevskoye – Sochi gas pipeline construction the most advanced technologies were applied and special emphasis was placed on compliance with ecological requirements and execution of environment-oriented activities. SGM was named the winner of the 100 Best Companies of Russia, Environment and Environmental Management contest, within the Technologies of the Year category, for the Dzhubga – Lazarevskoye – Sochi gas pipeline construction. The competition expert committee considered the project as the best implementation of The gas pipeline was built and commissioned in available technologies to decrease the negative June 2011. impact on the environment.

The Dzhubga – Lazarevskoye – Sochi gas pipeline is a part of the Olympic Facilities Construction and Development of Sochi as a Year-Round Alpine Resort Programme, approved by the Government of the Russian Federation. The gas pipeline was built to provide a reliable supply of energy to Sochi and the Olympic facilities under construction. It will facilitate the Tuapse District gasification and Gas pipeline installation on the seabed Horizontal Directional Drilling decrease the lack of energy in the Black Sea Offshore section Tie-in Drilling “in outward direction”, coast of the Caucasus. The gas pipeline length installation without seabed interference 132and with overlying soils on the well amounts to 177 km, 159.5 km of which are Pipelaying bottom (3.5 m above the seabed) installed on the seabed of the Black Sea, and vessel Point 17.5 kilometers represent the onshore section. Welding of penetration The pipe diameter is 530 mm. The pressure is 9.8 MPa. Drill The onshore and offshore gas pipeline sections string are connected by five crossings, built by the horizontal directional drilling method (HDD), thus minimizing the negative effect on the ecological system of the Territory. Construction of all crossings was performed in extremely complicated soils accompanied by significant altitude differences, fractures and hidden cavities. Reamer Protective casing

Offshore Exit Drilling “in outward direction”; section point pushing the steel casing and pulling gas pipeline through it from the pipe laying vessel 12 SAKHALIN – KHABAROVSK – VLADIVOSTOK TRUNK GAS PIPELINE

Length of the section Length of the pipeline constructed by SGM installed in the Group is mountainous area is 537 km 128 km

ОХОТСКОЕ МОРЕ Komsomolsk- on-Amur

Южно- RUSSIA Сахалинск Khabarovsk JAPAN

CHINA

Vladivostok DPRK SEA OF JAPAN 1313

The Sakhalin – Khabarovsk – Vladivostok In the Primorye and Khabarovsk Territories the gas-transport system enabled gas to be route of the gas pipeline runs through zones of supplied to consumers of the Khabarovsk and active tectonic faults, and this fact was also Primorye Territories (Sakhalin Region), taken into account while selecting construction including facilities of APEC Summit 2012. The technologies. commissioning of the Sakhalin – Khabarovsk – Vladivostok gas pipeline became the starting SGM Group has built the unique 3-km long point of large-scale gasification of the eastern crossing under the Eastern Bosphorus, Russian regions. Complete development of the Primorye Territory, using HDD technique, thus system will allow transportation of up to 35 – providing Russky Island and facilities of 24th 37 billion m3 of gas annually. The fields of the APEC meeting with gas. Construction of the Sakhalin continental shelf are the main source second (backup) string has been completed in of resources. May 2012 following uninterrupted supply of gas to the consumers. The total length of the Sakhalin – Khabarovsk – Vladivostok gas transmission system is 1,830 km. The first start-up complex of the gas pipeline with the capacity of 6 billion m3 of gas per year and the length of 1,350 km was brought into operation in September 2011. STROYGAZMONTAZH was the general contractor for the construction of the linear section of the gas pipeline and Sakhalin head compressor station. Almost a half of the pipeline route was laid in the earthquake-prone areas. The system of geotechnical monitoring was installed there entry points of a drill bit to allow ground and pipe movements to be (exit points of a pipe string) continuously monitored. Cape Novosilsky Eastern Bosphorus Cape Nazimov

128-km section of gas pipeline was installed in Entry points of a drill bit +69 m the mountainous terrain of the Primorye (exit points of a pipe string) Territory, being characterized by significant altitude differences.

+34 m Three zones of active tectonic Drilling faults were passed through Drilling 138 m

2 840 m Main pipe Backup pipe Borehole axis, HDD string string (pipeline) KAZAKHSTAN

GEORGIA

Penza Region

Saratov Region

Region

Rostov

grad

RUSSIA

Republic of Mordovia

Region MW GPUs) (14

Pochinki CS

Volgo

Mokshanskaya CS

Region

Zhirnovskaya CS

Salskaya CS

Novopetrovskaya CS

ABKHAZIA Nizhny NovgorodNizhny

Volgogradskaya CS

Territory

Region

Kubanskaya CS

Krasnodar

Voronezh Voronezh

Pisarevka CS

Shakhtinskaya CS 448 The capacity of Russkaya CS is

Kazachya CS

Russkaya CS

Korenovskaya CS

SEA

BLACK SEA km

UKRAINE

OF AZOV THE SOUTHERN CORRIDOR TRUNK GAS PIPELINE SYSTEM The length of the section constructed by SGM Group is 1129 14 1515

The construction of the Southern Corridor gas The Southern Corridor Project comprises the pipeline system is aimed at the expansion of the required expansion of the Gas Transportation Unified Gas Supply System and exporting System of Russia: the construction of 2,506 Russian gas via the Black sea. kilometers of the pipeline (its linear portion) and 10 compressor stations with aggregate capacity The Southern Corridor gas pipeline runs through of 1,516 MW. the Russian territory and terminates at Russkaya CS; after completion it will be the most powerful SGM Group is in charge of the pipeline gas-compressor station in the world. The construction on its eastern and western routes. construction contract for the pipeline was Also the company is responsible for awarded to SGM. The aggregate capacity of construction of the Russkaya CS, Kubanskaya Russkaya CS (1st and 2nd sections) will be 448 CS, Korenovskaya CS and Shakhtinskaya CS. MW. The station will be equipped with 14 units The Group’s section of the pipeline runs through of 32 MW Ladoga GPUs thus providing output the Krasnodar Territory, Rostov Region, gas pressure of up to 28.45 MPa. Voronezh Region, Volgograd Region, Saratov Region, Penza Region, Nizhny Novgorod Region and the Republic of Mordovia. Almost 65 kilometers of the pipeline was laid over rice paddies of the Krasnodar Territory with no harm to the harvest.

Planned Russkaya expansion compressor station 16

BOVANENKOVO – UKHTA TRUNK GAS PIPELINE SYSTEM

The length of the Baydaratskaya CS section constructed was built beyond by SGM Group is the Polar Circle 197 km 17

The Bovanenkovo – Ukhta trunk gas pipeline The construction is carried out in severe climatic system is constructed to transport natural gas conditions of the Far North with almost from Bovanenkovo field to the central regions of complete lack of infrastructure at a significant Russia with its subsequent transportation to the distance from procurement bases. European customers. Implementation of this project is one of the major stages of Yamal All sections of the trunk gas pipeline, which are industrial development. Its gas pipeline system to be constructed by SGM Group, cross the has to become over time the key element of the territory of continuous permafrost distribution. Unified Gas Supply System. As a part of the project Intinskaya CS and The Bovanenkovo – Ukhta trunk gas pipeline is Baydaratskaya CS are to be constructed. notable for the unique combination of Baydaratskaya CS is located beyond the Polar technological parameters: it was designed for Circle and is known to be the northernmost 11.8 MPa operating pressure and Russian compressor station. manufactured from high-strength pipes of the next generation with a diameter of 1,420 mm and wall thickness up to 33.4 mm. These innovative technological solutions more than doubled the pipeline’s capacity. SGM Group is responsible for construction of seven sections of the Bovanenkovo – Ukhta gas pipeline within its 2nd string with the total length of about 197 km.

BARENTS SEA Bovanenkovo

Novy NORWAY Urengoy Nadym Teriberka NADYM-PUR- Murmansk SWEDEN TAZOVSKY REGION Peregrebnoye Surgut Ukhta Yugorsk

FINLAND RUSSIA

Helsinki Vyborg Tyumen

СЕВЕРНЫЙ ПОТОК Tallinn Saint-Petersburg Gryazovets Perm ESTONIA Riga Torzhok Ufa LATVIA Astana Kazan LITHUANIA BELARUS Voskresensk KAZAKHSTAN Vilnius Minsk Tula 18

IMPORT SUBSTITUTION Practical Value: > the possibility emerged to equip GPUs with gas turbine drivers and radial-flow compressors produced by different SGM Group with the support of the Association Works within the project were performed under manufacturers of equipment manufacturers “New the guidance of the Association and combined > interchangeability of the main GPU’s units Technologies of Gas Industry” takes an active the forces of 70 enterprises. The presentation produced by different manufacturers part in the import substitution programme. of the unified gas-pumping unit has been held > common work order for the foundation of Execution of the programme aids the in April 2014. In the shortest time SGM Group GPU’s units produced by different implementation of cost-effective technical completed all installation operations for manufacturers solutions, thus giving Russian enterprises a GPU-16U within Nyuksenitsa CS of the Punga – > common type of utility systems and GPU’s stimulus to modernize the production facilities Ukhta – Gryazovets gas pipeline. The unit has hookup. and provide a greater level of financial support been tested and put into operation in January to scientific and research activities. Designing 2015. Economic Efficiency: and implementation of the unified

gas-pumping unit, which has only locally > reduction of expenses incurred by compressor produced parts, is the most vivid example of a stations engineering (up to 20%) positive outcome of combined efforts. > reduction of compressor station delivery terms, designing and construction periods. Compressor station construction cycle has become shorter by 10 month (somewhere 37 month instead of previous 47 month) > as a result of tenders for delivery of GPU-16U Association of equipment The costs (16 units) for compressor stations of the manufacturers New Technologies for the compressor Southern Corridor trunk gas pipeline in 2015 of Gas Industry comprises stations engineering the amount of savings will be 1.1 billion RUB were reduced by > as a result of tenders for delivery of GPU-16U (18 units) for compressor stations of the enterprises % trunk gas pipeline in 2017 the amount of savings will be 2.4 billion RUB 70 20 > energy savings due to operation of one unit will be 450 million RUB per year. 1919

MANUFACTURING

SGM Group of Companies includes Volgogradneftemash, which is one of the largest Russian oil and gas equipment manufacturers

By the Resolution of the Government of the It should be noted that Volgogradneftemash Russian Federation the Volgogradneftemash is able to produce a large-size and heavy JSC was included in 2015 in the list of equipment prefabricated (diameter up to 11 systemically important enterprises of the meters; weight up to 700 tons) excluding the country, which significantly influence the necessity of assembly on-site, thus reducing development of the oil and gas industry. the period of its commissioning.

Volgogradneftemash produces a wide range The Volgogradneftemash JSC produces of process equipment for oil and gas refining modular equipment of maximum factory units, including reactors, columns, coke readiness consisted of hooked-up units with drums, heat exchangers, separators, vessels, shut-off and control valves, instrumentation pumps, etc. and maintenance areas. 20

The enterprise also produces radial-flow oil Convenient geographical position of the pumps to transfer oil, petroleum products and enterprise and its own jetty, located on the liquefied hydrocarbon gases with fluid Volga River, with the access to the sea port temperatures up to 400ºC. Configuration of the enable the delivery of the equipment of the pumps and manufacturing methods are largest size possible to any part of the world. constantly improved. Besides, Almost every refinery, long-distance gas Volgogradneftemash produces equipment for pipeline, oil and gas field of Russia and the CIS 1,400 mm-diameter trunk gas pipelines such is equipped with Volgogradneftemash’s as pipeline pigs, ball valves (ground and products. underground type), check valves and other types of valves.

Moreover it produces instrumentation for underground gas storage facilities and general purpose pipe fittings.

Nearly 40% of total output is delivered to the facilities of the gas industry and about 60% of the products are delivered to the oil and petrochemical companies. 21

Volgogradneftemash takes all necessary supplied for Mozyrsky refinery JSC (Belarus). steps to execute import substitution These 500-ton reactors (aggregate weight) programmes of its customers: are made o f chromium-molybdenum- vanadium heat resistant steel with cladding > In 2014, ten special high-strength steel layer of stainless steel in accordance with the adsorption devices were manufactured for ASME Code. Such devices are also highly Kazachya compressor station (the Krasnodar demanded by the Russian oil companies; Territory). Each unit has length of 20 m, > Large-scale production of axial check valves diameter of 4.6 m and weight of over 200 t. has been started (700 and 1,000 mm in Such devices were manufactured for the first diameter, 8.0-12.5 MPa; tight shut-off by time in Russia. All relevant works were metal-to-metal sealing) to substitute the performed in accordance with the strictest valves of Mokveld Valves BV (the standards of ASME; Netherlands). Such devices withstand > High-pressure heat exchangers with temperatures of operating fluid up to 180ºC Breechlock-type closing device, being the and exposure to the fluid with higher first devices of such type manufactured in methanol concentration. The company plans Russia, were manufactured for Gazprom Neft to produce a wider range of the devices; JSC; > The company has drawn up the > Within the last five years 10 coke drums were documentation for its own electric fluid produced for Lukoil and Tatneft in power actuators to substitute Rotork and compliance with the requirements of foreign Fasek actuators. In 2014, a pilot sample of licensors. The weight of 7-8-meter units electric fluid power actuator was amounts to 250 t; manufactured and tested to be used in the > In 2015 two 3.7-meter reactors with wall ball valves (300 mm/PN 8.0-12.5 and thickness of 95 mm (max) were successfully 1,000 mm/PN 8.0-12.5). 22

SOCIAL POLICY

SGM Group is one of the SGM Group provides donations and sponsorship to support the cultural and sport activities, largest corporate groups heritage and social initiatives: of Russia, which contributes > Provides trustee support to the orphanages to prosperity of the country, and disease control foundations, as well as facilitates its development patronage assistance to the educational institutions and welfare growth > SGM uses funds of the Group to improve war cemeteries and the Great Patriotic War STROYGAZMONTAZH was named the winner of memorials, repair recreational institutions the National Pride of Russia award, within the and renovate churches Company of the Year category, arranged by the > Sports teams are established and financially Argumenty i Facty, weekly newspaper. The supported; sporting and corporate events are winners were chosen in 16 categories from held entities and individuals, outstanding public > Employees and their relatives get holiday personalities and business leaders with a vouchers with special discounts to visit proactive attitude, which had the greatest health and recreation centers, resorts and impact on the development of the economy, children’s holiday camps science, culture and sports. These particular > Sightseeing tours and cultural events are persons and entities should be called the best organized for the staff and their families; representatives and the pride of Russia. children get New Year gifts

STROYGAZMONTAZH was also named the Best Taxpayer of the Year. This award was established by the Fund for Entrepreneurial Development.

SGM Group is a top-rated socially responsible employer. Careful attitude to employees is the cornerstone for its social and workforce policies. 23

Russian regions, which are the territory SGM Group puts a lot of effort into employees’ SGM Group provides a lot of career development of SGM Group construction activity, have its motivation: opportunities to employees: support: > Employees are praised for their outstanding > Different trainings are arranged to enhance > The local workforce is actively engaged within contribution with special awards and professional skills as well as various skill facilities under construction incentives assessment programmes are in effect > > Local authorities are supported to develop Short-term loans may be granted for > New employees have an opportunity to towns and settlements, restore natural educational and accommodation purposes. participate in certain professional contests In case of marriage, child birth, death of the resources and mitigate the impact of natural > Introductory trainings are arranged for disasters. relatives the employees are provided with potential employees, who are the students of certain benefits and legal aid relevant institutes and universities. > The participants of the Great Patriotic War, labor veterans and retired employees can count on certain financial support. 24

CONTACT INFORMATION

53 Prospect Vernadskogo Moscow 119415, Russia Tel: +7 (495) 782-06-06 Fax: +7 (495) 782-07-06 E-mail: [email protected] www.ooosgm.ru