Publication of LUKOIL Lubricants Company (LLK-International) June

Publication of LUKOIL Lubricants Company June 2013 (LLK-International)

LLK-International is developing well in Russia and abroad, having opened an office in Kazakhstan this year and continuing to expand its presence in the European market. LUKOIL lubricants are the only goods sold in retail stores. As an efficient company, we retain leadership, while intensifying our efforts to upgrade LUKOIL plants. As a result, nowadays all our refineries are unique facilities and we manufacture the best products in Russia…

LUKOIL President Vagit Alekperov

CONTENTS

2 CORPORATE AFFAIRS LUKOIL’s Lubricants Business: Results and Perspectives 2 5 PRODUCT LUKOIL GENESIS: A Premium Product from Finland

7 PARTNERSHIP LUKOIL GENESIS Engine Oil: New Premium Oil for the Clients of Franchised Workshops

9 PARTNERSHIP LUKOIL STEELO 150 Gear Oil Awaited in India and the United States 13 11 CORPORATE AFFAIRS New Victories in the Balkans

13 PARTNERSHIP LUKOIL Gear Oil for HeidelbergCement Plants in Ukraine

14 PRODUCT Alexei Strelchenko: Our Base Oils Enjoy High Reputation 15 15 FORUM ChemCamp – Science and Business Go Hand in Hand

17 CORPORATE AFFAIRS WTCC: LUKOIL GENESIS’ Russian Premiere

19 PARTNERSHIP LUKOIL Launches Production of UZAUTOOIL Oils for Uz-Daewoo

20 NEWS 17

«МАСЛА@ЛУКОЙЛ» #3 June 2013 "Масла@ЛУКОЙЛ" is a publication of LLK-International Publisher: RPI Address: LLK-International, 6 Malaya Yakimanka, Moscow 119180 Phone: +7 (495) 980 39 12 e-mail: [email protected] Press run: 2 000 экз.

The magazine is registered by the Federal Service for Media Law Compliance and Cultural Heritage. Registration certificate ПИ №ФС77-28009

1 LUKOIL’s Lubricants Business: Results and Perspectives CORPORATE AFFAIRS CORPORATE

In March 2013, LUKOIL’s First Vice President Vladimir Nekrasov held a meeting that was attended by the management of LLK-International and its subsidiaries, with 2012 performance results and challenges for 2013 on the agenda. Last year’s main achievements include a record high level of profit, and also an absolute all-time high in export sales of packaged goods. Moreover, the Company delivered the largest volume of drum-packaged lubricants to the domestic market in its history.

UKOIL’s lubricants business with the Uzbekistan-based General hydraulic oil and LUKOIL STEELO Lcontinues to expand at a rap- Motors Powertrain company, which gear oil. id pace. The volume of investments in manufactures 250,000 engines per Another large Moscow-based con- this business segment is rising stead- year. The company has reached simi- sumer is Mosgortrans, to which ily: according to Vladimir Nekrasov, lar success in Kazakhstan, as LUKOIL LLK will be supplying annual vol- the company’s investments in down- first fill for Chance automobiles made umes of LUKOIL AVANTGARDE stream operations topped $3 bln in on the basis of the Chevrolet Lanos PROFESSIONAL motor oil. 2012. LUKOIL also invested heavily in and agricultural machinery will be Key achievements in operations with the retail sales business in Russia and purchased by AgromashHolding key clients include the commencement abroad. In particular, a number of fill- (Almaty), the leading auto as- of deliveries of diesel locomotive oil to ing station chains were purchased in sembly enterprise in Kazakhstan. Tajik Railways, the approval of the first Ufa, Nizhny Novgorod, the prov- The Company’s new partner in dealer in Mongolia and the continuation ince of Mordovia and the Kursk region, as well as in Belgium and the Netherlands. In 2013, total capital In 2013, total capital expenditure in the downstream sector is expenditure in the downstream sector expected to increase to $3.7 bln is expected to increase to $3.7 bln.

PLANS AND ACHIEVEMENTS Uzbekistan is SAMAVTO, and Isuzu of stable deliveries of lubricants in small Operations with key clients remain the bus assembly enterprise, which will and large packages to Afghanistan. This pivotal success factor. To remind, last be purchasing LUKOIL motor oils for year, collaboration with Afghanistan March LLK won a tender for the sup- assembly-line filling. will continue and according to the fore- ply of first-fill motor oil to the Avtotor Another important achievement for the casts of LLK Deputy General Director assembly line (at issue is the supply of Company was its entry into the seg- Alexei Strelchenko, the volume of sup- a premium product LUKOIL GENESIS ment of oil filling at franchised work- plies will amount to about 1,000 tons by FE 5W-30 into Opel and Chevrolet shops. Last year, LLK signed a five- the end of this year. cars which are manufactured at a year partnership agreement with Last year, LLK managed to ramp up Kaliningrad plant). In addition, a SpetsAvtoTsentr Group, under the sales volumes for all types of pack- partnership agreement was signed terms of which the partner will pour aged goods, as sales of lubricants in for the delivery of LUKOIL lubricants LUKOIL GENESIS into Infiniti, Nissan large packages increased by more to Russian dealers of UZ-Daewoo, and Citroen automobile engines. than 10 percent. Sales volumes of which manufactures the Nexia and Last year, LLK continued to collabo- products in medium and small-sized Matiz brands. The Korean auto manu- rate with leading companies in the containers also rose. The sales of car facturer’s dealership network in Russia metallurgical industry after being care chemicals rose by almost 15 numbers 150 companies, while the declared the winner of a tender to percent. The year-end results can be aggregate volume of lubricants con- supply branded LUKOIL lubricants summed up as follows: LLK maintained sumption will be 2,500 tons per year. to Magnitogorsk Metallurgical Plant leadership on the domestic market, A three-year contract for first fill of (MMK). The purpose of the deal marketing about one third of the total LUKOIL lubricants was also signed was the supply of LUKOIL GEYSER volume of lubricants sold in Russia.

2 The production of branded lubricants has continued in recent years. One of the most striking illustrations in this regard is the experience of LLK’s Tyumen branch. Over the past four years, the company has steadily raised the proportion of branded oils, which rose during that period from 29 percent in 2008 to 73 percent last year. Furthermore, oil packaging capacities were boosted in Tyumen and a section for blending hydraulic oils was launched, enabling the company to expand its product mix and increase the productivity of oils with a high level of purity. Attached to the Tyumen branch is the only test center in Russia that specializes in lubricants research. Since its inception, the center has developed and reformulated over 150 oils, with most of these operating being carried out in the workshops of this branch. ACCORDING TO LUKOIL FIRST VICE PRESIDENT VLADIMIR NEKRASOV, ERASING BORDERS INVESTMENTS IN THE COMPANY'S DOWNSTREAM BUSINESS TOPPED $3 BLN IN 2012 Meanwhile, the Company has been expanding the footprint of its opera- LLK Ukraine also attained impressive ers Metinvestholding, Zaporozhstal, tions on the global market. According success as the company’s operating DUEK and also ArcelorMittal. to LLK International General Director profit surged, considerably outpacing Alongside this, the company contin- Maxim Donde, LLK in the reporting the plan for sales of branded oils. The ued to ramp up its presence in the re- year “continued to move steadily most dynamic growth was posted in the tail sales segment, supplying prod- towards the realization of one of its segment for passenger transport oils, ucts under direct contracts or through main goals – to rank as one of the top where the volume of LUXE oils soared the dealers of a number of large retail five world leaders in the industry.” by 85 percent over the past year. chain outlets and hypermarkets. Work Nowadays, the Company’s business Major growth in sales volumes were al- continued to develop a dealer network spans nearly all continents (except so recorded in the branded packaged and each one of the company’s six re- for Australia), and LLK’s products are oils segment for industrial consumers. gional dealers reported growth in sales available in 102 countries around the globe. Last year also witnessed strong perfor- LLK maintained leadership on the domestic market, marketing mance on the part of LLK’s subsidiaries about one third of the total volume of lubricants sold in Russia located outside of Russia, as well as those whose activity is geared towards foreign consumers. In the marine oils According to LLK Ukraine Director volumes. Last year was also marked segment, LLK Marine’s business turno- Yaroslav Litvintsev, since last year the by the modernization of the investment ver achieved major expansion. Thanks company has been delivering LUKOIL program in operations with automo- to the company’s entry into the mar- LUXE oils under direct contract to bile service centers: equipment rang- kets of South Korea, Taiwan, Saudi Melitopol Meat-Packing Plant, and es were expanded, new partners were Arabia, India and Bangladesh, the for the first fill into the engine units of attracted and powerful marketing sup- company boosted its sales volumes Forza and Sens automobiles manu- port was carried out, which resulted in by 76.4 percent compared to 2011. factured by Zaporozhsky Auto Plant a 50-percent rise in sales volumes of This growth enabled LUKOIL to raise (ZAZ). A strategic partnership agree- lubricants via franchised workshops. its share on the global market of ma- ment was signed in the commercial Many years of partnership with rine oils to 3 percent. LLK Marine al- transport segment with Chernigov Belarussian colleagues at Naftan so managed to strengthen its positions KAMAZ Center, Ukraine’s main im- (Novopolotsk) last year again also in the most promising segment of large porter of KAMAZ trucks in Ukraine. yielded handsome rewards. The com- tonnage vessels and vessels under In the industrial oils segment, agree- pany is rapidly expanding output of construction – container vessels and ments were signed and direct deliv- new additives and packages for them. supertankers, winning more than 50 eries of LUKOIL packaged goods While in 2006 their proportion was tenders for deliveries in 2012, 2013 (including branded goods) were nearly zero, last year it shot up to 54 and 2014. begun by Ukrainian metal mak- percent, and this year it is set to reach

3 an operator of municipal bus transport in Izmir, İZULAŞ. LLK also got a new client, state-owned Turkish Petroleum Corporation, which ranks among the country’s top three companies in terms of exploration, production and pro- cessing of crude oil, and which owns a network of 125 filling stations. The past year also marked the beginning for the delivery of the LUKOIL GENESIS PREMIUM family of lubricants to the networks of METRO hypermarkets, Mercedes and BMW franchised workshops. Concerted efforts got under way to roll out sales through VW, Renault, MAN, Ford, Nissan, Suzuki, Volvo Truck, Temsa Mitsubishi Bus, Lada, Hyundai, Fiat and Honda franchised workshops. Collaboration continues with Turkish auto manufacturers BMC (municipal buses, minibuses, and trucks), TEMSA (buses), and OTOKAR (buses). During the same year LLK Eurasia entered LLK'S SUCCESSES IN 2012 INCLUDE THE DEAL WITH AVTOTOR TO USE PREMIUM LUKOIL GENESIS new export markets: in Kuwait a net- MOTOR OIL IN THE ENGINES OF OPEL AND CHEVROLET CARS MANUFACTURED work of branded oil change outlets IN KALININGRAD was opened, a new system of marketing and sales support was launched 61 percent. The range of products supply LUKOIL STEELO gearbox oil in Iraq, and a dealer agreement was is also rapidly expanding, as just 14 to British Rexam, a global leader in signed in Nigeria with NIPCO, a large products in 2006 ballooned into 85 the manufacturing of aluminum pack- oil and gas company. last year. The company’s marketing aging (see interview on page 10). In Great opportunities are opening strategy in 2013 calls for a fourfold addition, the company last year won up for LLK in Central Asia. In order rise in the volume of sales of additives a tender for the delivery of lubricants to strengthen LUKOIL’s positions in and additive packages compared to to Norilsk Nickel. Kazakhstan, which is the largest re- the level of production in 2006. gional market for lubricants, a deci- LLK’s subsidiary in charge of business EXPANSION sion was taken last November to build in Eastern Europe, LUKOIL Lubricants IN ASIA AND AFRICA a lubricant manufacturing plant in this Eastern Europe (LLEE), also posted LLK Eurasia is another LLK subsidiary country. A little later the management fairly good performance. Compared which posted strong growth last year. of LLK adopted a decision to establish with the previous year, revenue and Over the reporting period the compa- LUKOIL Lubricants Central Asia. One sales volumes were on the rise. In ad- ny, which is in charge of the LUKOIL’s of the new company’s main challeng- dition, LLEE was successful in promot- lubricants business in Turkey, Middle es will be to boost the market share ing LUKOIL lubricants which last year East countries, Central Asia and Africa, of LUKOIL products in the region (in were placed on the list of the author- tripled its operating profit, while the Kazakhstan LUKOIL commands strong itative German association DEKRA, sales volume of branded oils rose by leadership among suppliers of lubri- which performs vehicle roadworthy nearly one third. In the above-men- cants for passenger vehicles, con- inspections. In 2012 LLEE also be- tioned regions the company currently trolling 30 percent of the market). gan to promote eight new brands of has a footprint in 20 states, and dis- LUKOIL Lubricants Central Asia also LUKOIL lubricants, including LUKOIL tributors in Turkey are able to cover 90 faces the task of expanding the deal- GENESIS, a premium motor oil brand, percent of the country’s territory. er network, maximizing the profit of and signed a contract with Romanian According to the company’s General LLK Group and getting feedback be- Dacia-Renault Auto Works to produce Director Adam Akhriyev, LLK Eurasia tween producer companies and large Motrio brand motor oil. in 2012 entered into the first fill supply consumers. Growth potential remains LUKOIL Lubricants Europe Oy contract with GAZel’s Turkish assem- quite large, since the sales volume (Finland) had a successful year. bly plant that opened in November. of LUKOIL’s lubricants is expected to Specifically, the proportion of In addition, the company won tenders grow 161 percent in the markets of the TEBOIL lubricants reached 30 per- to supply lubricants immediately to countries in this region (Kazakhstan, cent on the Finnish market. Highlights three transport enterprises – Railways China, Uzbekistan, Turkmenistan, in key client operations include the of Turkey, a manufacturer of locomo- Kyrgyzstan, Tajikistan, Afghanistan signing of a four-year contract to tives for the latter, TÜLOMSAŞ, and and Mongolia) compared to 2011.

4 LUKOIL GENESIS:

A Premium Product from Finland PRODUCT

LUKOIL Lubricants Europe Oy, a Finnish subsidiary of LLK-International, has launched production of a new-generation engine oil, LUKOIL GENESIS. The product is designed for the Russian market and initially will be available only to customers of franchised workshops. LUKOIL’s Western colleagues refer to LUKOIL GENESIS as a first-class lubricant and are confident that it will generate demand on the Russian market.

NEW OWNER MEANS NEW plication and adaptation of the lubri- А5/В5. It’s a first-class, high-technol- LUBRICANT PRODUCTS cants to specific conditions. ogy premium product. Its advantages The trip from Helsinki to Hamina (the In addition to engine (LUKOIL GENESIS, include considerable fuel economy town near which the LLK manufactur- LUKOIL AVANTGARDE ULTRA and and lower emissions. I am confident ing facility is located) takes about two LUKOIL AVANTGARDE EXTRA) and that we will have no problems sell- hours. The 5.5-hectare plant stands industrial oils (LUKOIL STEELO and ing LUKOIL GENESIS in Russia,” says close to the Bay of Finland, much clos- LUKOIL GEYSER), the plant also pro- LUKOIL Lubricants Europe Oy plant er to the land border with Russia than duces marine oils, which are successful- director Mika Leppamaki as he walks to the Finnish capital. The plant used ly marketed by LLK Marine, an LLK sub- to the conveyor belt accompanied to be owned by Teboil and Suomen sidiary. Other customers include Castrol by guests at the production launch Petroli sister companies. In 2005 Marine and Total Marine. ceremony. He is wearing a black tie. LUKOIL acquired their manufactur- “The color of GENESIS, I put it on ing assets. Unlike Suomen Petroli, the THE GENESIS ERA specifically for today’s event,” jokes Teboil brand successfully survived and On April 25, 2013, the company Leppamaki (black is the dominant is widely known today both in and launched production of a new-gener- color in the brand’s logo). outside the Finnish market. ation lubricant, LUKOIL GENESIS (to The guests include Jan Spjuth, custom- Since the takeover by LUKOIL, the list learn more about its main features see er relations manager at GREIF. GREIF of target markets for the plant’s lubri- interview on page 7). “We are launch- is a world leader in industrial packag- cants has grown. The company began ing production of LUKOIL GENESIS ing production and owns more than exports of Teboil lubes to Russia (for instance, one of LUKOIL customers us- ACCORDING TO TOMMI LUHTANEN, THE FORMULATIONS OF LUKOIL GENESIS MOTOR OIL ing this brand is Surgtneftegaz.) And, ARE BASED ON THE FRONT-END TECHNOLOGIES AND MEET THE LATEST REQUIREMENTS according to Alexei Moskalenko, OF THE WORLD'S LEADING AUTOMAKERS the Supply Director with LUKOIL Lubricants Europe Oy, Teboil lubes have recently hit Italian hypermarkets. In parallel, the Finnish plant has expanded its lubricant product line. “Thanks to LUKOIL, we now have en- hanced research and development capabilities to design new formulations and products on a scale, which was impossible before because of the high cost of these tests”, says LUKOIL Lubricants Europe Oy Laboratory Manager Tommi Luhtanen. The research laboratory also studies used oil samples submitted by customers. Study results are analyzed and used for future recommendations for the ap-

5 are reported to the Moscow headquarters – this is a typical interface procedure for new formulation development,” says Luhtanen. Also found here is a formulation spec- imen of LUKOIL GENESIS А5/В5, a lubricant recently put into production. The oil has a distinguished golden sheen. “The color depends on the base oils and additives but modern top-tier passenger car engine oils typically have light golden color indicat- ing use of highly refined base oils and high level of cleanliness,“ explains 245 manufacturing facilities across ratory also thoroughly tests product Luhtanen. 60 countries. This company produced samples. It is noteworthy that the laboratory 200-liter drums for LUKOIL GENESIS. “If we find even the slightest devia- is accredited by FINAS, the Finnish “A premium product should be pack- tion from the norm, production will not Accreditation Service – the national aged appropriately. That is why each start. Each batch must strictly meet the body responsible for organizing ac- drum is a work of art. The whole job standards,” explains Luhtanen. “For creditation activities according to in- – from design development to pre- each batch, we issue a report and ternational criteria. This means that production – took about a month. It enter the data in the electronic LIMS accreditation procedures are 100 is much longer than usual. To achieve (Laboratory Information Management percent supervised by Finnish author- the right color depth, the paint must System), specifying the batch number, ities. It is very important for custom- be applied in several coats, which re- product name and other significant ers because it provides an addition- quires additional surface protection. details, including the test results. al guarantee of quality and evidence As for the images of horses – it’s a In the laboratory, among other that the plant’s products are monitored completely exclusive element. I don’t things one can find the first sample at the highest level. remember any of the clients ordering of the LUKOIL GENESIS PREMIUM something like that,” says Spjuth. 5W40 engine oil, which was taken in FOCUS ON MODERNIZATION It is important that before reaching November 2012. “We work closely Today the company produces 32,000 the manufacturing shop, a lubricant with LLK’s Research and Development tons of commercial off-the shelf lubri- undergoes the most rigorous testing Department headed by Andrei cants. And this is not the limit. “Our at the on-site laboratory. It is here that Sterkhov. Once a formulation is ap- capacities allow us to produce more. quality control is routinely performed proved, we conduct a detailed anal- We could also support production of on absolutely all materials delivered ysis. If more exotic testing is required, LUKOIL small-package lubricants – to the plant, such as base oils, addi- we send samples to other independent we just need to figure out procurement tives and other chemicals. The labo- European testing laboratories. Results of cans,” explains Leppamaki, adding that the closest can manufacturers are THOROUGH QUALITY CONTROL OF FEEDSTOCK IS ONE OF THE KEY COMPONENTS IN located in Scandinavia. PRODUCTION OF LUKOIL LUBRICANTS “The plant is going to grow. Our big- gest objective is to increase the flex- ibility and speed of production while ensuring its quality and reliability, and to guarantee good customer service,” says Production Manager Jouko Tolvanen. “One of the top operating priorities today is to support availability of packaged products. The plant’s warehouse can currently store approximately 10,000 steel drums. Drum storage is now topped up given LUKOIL’s plans to increase sales. As the sales grow we’ll need investments to modern- ize production in order to improve the turnover of packaged goods. Otherwise, additional storage space available elsewhere will be needed to support market needs,” concludes Leppamaki.

6 LUKOIL GENESIS Engine Oil: New Premium Oil for the Clients of Franchised Workshops PARTNERSHIP

LLK-International (a wholly-owned LUKOIL subsidiary) announces the launch of LUKOIL GENESIS premium engine oil into the Russian market. The collaborative product developed by LUKOIL and Infineum (world leading crankcase additives provider) will soon be available to the clients of franchised workshops (FWS). The Head of Infineum Representative Office in Russia Valery Verstelle tells us about new technologies used in reformulated LUKOIL engine oils.

– What kind of technology did All of these features characterize Infineum propose to LUKOIL in new LUKOIL GENESIS oils. generation LUKOIL GENESIS oils? – Since April 2013 LUKOIL GENESIS – The first draft of the specifications oil has been produced at LLK’s Finnish was presented to LUKOIL in 2009 and plant and in the near future the prod- its R&D department made a big effort uct will become available to clients at to combine a new portfolio. As a tech- franchised workshops in Russia. Next nology leader we provided our latest year the oil will be sold in retail stores. state-of-the-art technology. As I under- What’s your opinion about future stand it, LUKOIL’s decision to promote Russian market trends? this product is currently driven by market demand. – Changes in car fleet have result- We focus on the latest industry driv- ed in stricter engine requirements and ers: an example of such policy is the led to higher consumption of synthet- choice of viscosity modifier for formu- ic oils. Infineum technology which is lations – unique hydrogenated sty- used in LUKOIL GENESIS synthetic oils rene-diene polymers (HSD), which delivers the top quality global OEM have proven their outstanding perfor- specifications. Consumers have also mance in different climates. This is very changed their approach to car ser- important when we look at Russia with vice. Every year the number of owners different climatic zones as well. In re- who prefer to turn to franchised work- ality it means retention of oil pressure shops is growing. Development of co- during hot condition and excellent flu- operation with franchised workshops VALERY VERSTELLE, idity of oil in extremely cold condition. in Russia is well-timed, and will grow HEAD OF INFINEUM’S REPRESENTATIVE To my knowledge this product is used from year to year, gradually becoming OFFICE IN RUSSIA in the GENESIS product line. more similar to the European market. The second industry driver is the use of Renault RN 0700, 0710; Ford WSS- after-treatment devices on passenger – The reformulation of LUKOIL engine M2C913-C; MB-Approval 229.3; cars. This requires using special chem- oils, which began in 2011, required VW 502.00/505.00/, and deliver- istry in additive package, which will be huge investments. What was done ing these approvals required substan- friendly with them and make it possible and what was the aim of it? tial investments. Programs of this na- to deliver maximized compatibility and ture typically cost in excess of $1 mln. advanced protection of hardware. – We finished the testing program The analysis of testing results requires And the third driver, which is be- for high TBN LUKOIL LUXE engine great precision: for example, engine coming more and more important in oils and provided a customized ad- wear test mode is measured to an ac- Europe, is fuel economy which can ditive package to LUKOIL. This tech- curacy within microns. This new tech- be delivered by using special product nology made it possible to obtain nology will meet the latest ACEA spec- chemistry and viscosity. leading OEM approvals such as ifications.

7 LUKOIL GENESIS – ASK FOR IT AT FRANCHISED WORKSHOPS At the beginning of 2013 LLK International set up the Department for Development of Sales in Franchised Workshops headed by Tatyana Maltseva (see pho- to, center). So far the results have been impressive: in spring the Company signed a five-year cooperation agreement with Sollers Trading House, which owns 127 dealer centers. The agreement envisages production and sales of lubricants for Ssangyong cars with two motor oil brands on offer – Ssangyong and GENESIS (both brands are produced at LUKOIL plants). Negotiations are under way to sign agreements with other subsidiaries of Sollers Group. In addition to this, LLK signed a contract with Rolf company for the supply of LUKOIL LUXE and LUKOIL GENESIS motor oils to Renault’s dealerships in St. Petersburg. To date, LLK-International has concluded some 40 contracts to supply LUKOIL LUXE and LUKOIL GENESIS motor oils to Russia’s largest cities and regions (Moscow and the Moscow region, Nizhny Novgorod, Pskov, Perm, Kazan, Tyumen, Kemerovo, Volgograd, Krasnoyarsk, Barnaul and others). The Company has also launched deliveries of UZAUTOOIL and LUKOIL LUXE motor oils to all Uz-Daewoo dealerships in Russia. It should be noted that LLK-International’s marketing strategy envisages sales of premium LUKOIL GENESIS motor oil exclusively via car manufacturers’ franchised workshops (FWS). This means that FWS customers will have the exclusive opportunity to duly assess this premium new generation high-tech product.

Another important development pro- there are many other OEMs who are –What are the key factors underpin- gram is to deliver brand new Infineum present in Russia. I believe some of them ning success on the Russian market? technology for modern heavy-duty use LUKOIL oils for their first fill of ve- engines used in highway and off-road hicles manufactured in this region, re- – I believe that the key factors are to vehicles. In this case, we use another flecting their confidence in the quality be an expert of the market you are Infineum key technology – salicylate of these products. So there should not working on, to be aware of its needs. detergents. be any doubt about quality: such a high You also need to know the ins and outs level of confidence from global manu- of how cars run in Russia and specifi- – There is a stereotype that Russian facturers means recognition of quality. cally in big cities like Moscow, where oils may be used only for Russian cars. the engine works in start-stop mode, Can Infineum technology, which is – LUKOIL GENESIS, which is pro- filling stations still offer high-sulfur fu- used by LUKOIL, be suitable for for- duced using Infineum technology, is el and winter temperature sometimes eign cars as well? made in Europe. Is there any differ- drops below minus 30°C. It is impor- ence in the manufacturing standards tant to understand the market peculi- – The best proof is the fact that almost between Europe and other countries? arities and define its needs precisely all world-leading car manufacturers on the basis of such understanding. I have set up branches in Russia. Their – The European market is very im- think that LUKOIL has a clear under- activities range from CKD assembly to portant for Infineum. Over many standing of the Russian market and the the full production cycle. For example, years our technology has prov- strategy of its development. Infineum, Hyundai Solaris is 100 percent manu- en itself time and again in Europe. for its part, will continue to propose to factured in Russia, Chevrolet and GM Meanwhile, Infineum’s manufactur- LUKOIL its latest technology solutions. cars are assembled in Kaliningrad, ing specifications and formulations provided to LUKOIL Read the full version of the interview in the June are absolutely identi- 18 issue of the Moskovskiye Novosti newspa- cal regardless of the per and the Moskovskiye Novosti’s special is- place and country of sue on the 2013 St. Petersburg International production. Economic Forum (June 20-22)

HAVING INFINEUM AS A STRATEGIC PARTNER (THE COMPANY’S HEADQUARTERS IN MILTON HILL, UK, PICTURED ON THE PHOTO) GUARANTEES STEADY IMPROVEMENT OF QUALITY OF LUKOIL LUBRICANTS, AS WELL AS DEVELOPMENT OF LUKOIL’S LUBRICANTS BUSINESS IN DOMESTIC AND INTERNATIONAL MARKETS

8 LUKOIL STEELO 150 Gear Oil Awaited in India

and the United States PARTNERSHIP

LUKOIL’s cooperation agreement with UK-based Rexam, a leading global consumer packaging company, continues to expand its borders. After being launched at the company’s European and Middle East refineries, STEELO 150 gear oil will now be delivered to India and recently gained access to leading U.S. canmaking machinery supplier Stolle paves the way for entry into the U.S. market. Moreover, within a short period LLK International became one of Rexam’s key suppliers and attended the 10th Annual Rexam BCE/BCAMEA Supplier Awards in March. Rexam Regulatory Affairs Manager Ivan Mijatovic speaks at length about the recent development of ties between the two companies.

compared it with peer products made bricating properties. As a result of by Shell, Castrol, Mobil, and OMV. the tests, we noticed that the steel, of The results showed that STEELO 150 which the axis and cogs are made, was superior by a number of param- and also the bronze used to make eters, after which we recommended it bearings, did not oxidize. In addition, for use at Rexam’s Russian plants. the product performed well when its The tests lasted for three months and lubricating characteristics were test- then we began to use STEELO 150 oil ed, and when we tested its anti-fric- in our Russian plants. Its performance tion properties.

The results showed that STEELO 150 was superior by a number of parameters, after which we recommended it for use at Rexam’s Russian plants

over the past two years has been im- In this context, I would also like to pressive and we’ve expanded the mention two other key parameters of range of application for STEELO 150. STEELO 150. For us, as a manufactur- About a year ago, Rexam’s procure- er, it is important that the depth of the ment department took the decision to cross-section of a can be uniform, and REXAM REGULATORY AFFAIRS MANAGER select LUKOIL as its supplier of gear the measurements that we performed IVAN MIJATOVIC oil for our plants in Egypt, Turkey, during the experiment showed that Denmark, Sweden, Finland and Italy. STEELO 150 makes it possible to pre- LUKOIL currently meets half of serve its original features. – Are you generally pleased with Rexam’s demand for gear oil in Another important issue is the vibra- the results of your collaboration with Europe. Next in line is India, as we tion of the axis when cans are shaped LUKOIL? expect to start dispatching STEELO and pressed. An axis is indispensable 150 to our Mumbai plant. during the manufacturing process, but – Our collaboration with LUKOIL got thanks to the application of STEELO under way three years ago with re- – How would you describe the main 150 vibrations are minimal. This al- search on the application of gear oil in advantages of STEELO 150 oils? lowed us to minimize cases in which gear boxes used in canmaking. During cans are cut in half. The competitive laboratory experiments we tested out – First and foremost, this product of- ability of the product was also an im- not only LUKOIL’s gear oil, but also fers excellent anti-corrosive and lu- portant factor.

9 – The geographical footprint where Machinery, an authoritative manufac- resentation office in the Netherlands STEELO 150 is being used is rapidly turer of canmaking machinery, and (a subsidiary of LLK-International), on the rise as this lubricant is currently which, to the best of my knowledge, who has been in charge of the OEM being utilized both in northern Europe last issued such an approval 14 years segment with regard to supplies of and neighboring eastern latitudes. Is ago! It’s still too soon to talk about spe- LUKOIL lubes to seven Rexam plants. the product influenced by the fact that cific deliveries, proposals are under I would also like to note the qualita- it is used in various climatic conditions? discussion now, but this approval is tive, timely and precise support that we received in Hamina (Finland), and especially from LUKOIL LUKOIL STEELO 150 is amazingly resilient when it comes to Lubricants Europe Oy Laboratory major temperature fluctuations Manager Tommi Luhtanen. Technical support directly from Moscow was carried out by Nikolai Nikolaev and – Hardly any influence is felt. We’re further evidence of the high quality of Georgij Khoshtariya, who always talking about a product that maintains LUKOIL lubes, and the result of our pro- address our queries as quickly as its properties within a broad tempera- ductive collaboration which we can be possible. For example, it was not so ture range, which varies from -15 de- proud of. Having gained this approval long ago that they visited our plant grees to +50 °C. The temperature in means that STEELO 150 can be used in Egypt after local engineers com- factory workshops is virtually the same at any plant in the world where Stolle plained about alleged oxidation of everywhere, but it should be borne in Machinery’s equipment operates. oil and corrosion of the steel parts of mind that in some countries, for exam- gear units. Our Moscow colleagues ple, in Egypt, lubes are stored in open- – Aside from ensuring high-quality lu- set out to Egypt on a fact-finding mis- air warehouses. Furthermore, depend- bricants, LUKOIL also devotes great at- sion after which these reports were ing on the country of origin, products tention to service and technical support dropped. Needless to say, there is frequently undergo extremely high or of its clients. How would you rate the always room for improvement, and low temperatures during the transpor- quality of services provided by LUKOIL? if I had one suggestion it would be tation process, and STEELO 150 is for LUKOIL’s technical support team amazingly resilient when it comes to – As regards service I would like to in Egypt to have a larger number of such major fluctuations. mention Troy Wyngaard, the head of experts in the regions where they are LUKOIL Lubricants Europe Oy’s rep- needed. – What about the reputation of LUKOIL’s lubricants on the European LAST YEAR, LUKOIL SIGNED A CONTRACT WITH REXAM TO SUPPLY STEELO 150 GEARBOX OIL and global markets. And what is the TO THE BRITISH COMPANY’S PLANTS IN EUROPE AND ASIA economic effect from using them?

– As I said before, STEELO 150 oil is a high-quality product in terms of its manufacturing technology. I also noted that the product is compet- itively priced and this allows us to save on purchases of gear oil. Aside from STEELO 150, we use some other LUKOIL lubricants: LUKOIL Geyser ST 46, LUKOIL Geyser LT 32, Teboil Multipurpose EP, Тeboil Universal CLS-1 and Teboil Multipurpose HT. I can say that LUKOIL now offers a full range of products that can be used in manufacturing packaging goods.

– Taking into account your experience in using STEELO 150, do you think there will be an increase in the consumption of this product on foreign markets?

– Yes, that is the plan. It depends, first and foremost, on whether STEELO 150 is launched on the markets of South and North America. Thanks to our common efforts, STEELO 150 recently gained approval from the U.S.-based Stolle

10 New Victories in the Balkans CORPORATE AFFAIRS CORPORATE

LUKOIL Lubricants East Europe (LLEE) is the Romanian subsidiary of LLK- International which is actively developing collaboration with industrial consumers in Europe. The company’s main clients include Căile Ferate Române (CFR, Railroads of Romania), which uses LUKOIL AVANTGARDE ULTRA lubricating oils. In addition, in March 2013 LLEE signed its first six-month contract with CFR on using waste oils. The first 276-ton batch has already been dispatched and before the end of the year deliveries should top 400 tons.

n March, Romania’s Transport is an American corporation and one IMinistry (Autoritatea Feroviara of the world’s largest manufacturers of Romana – AFER) successfully tested diesel engines. LUKOIL AVANTGARDE ULTRA SAE All in all, in recent months, LLEE has won 10W-40 API CI-4/SL and LUKOIL three large CFR tenders for the supply AVANGARD ULTRA SAE 15W-40 of lubricants. The company will ship API CI-4/SL motors oils two years af- 540 tons of motor oils to the passenger ter sales. The ministry is in charge of transportation division (CFR Passenger), Romania’s railways and its strong and the volume of deliveries to CFR evaluation exerted a major impact on Merchandise (the Freight Transportation the successful rollout of LLEE’s business Department) will amount to 100 tons. in the country. After the tests were com- LLEE won the third tender, too, for the pleted, LUKOIL AVANTGARDE ULTRA supply of 10 tons of ATF SYNTH HD received AFER’s approval for use in transmission oil for CFR Passenger. the Siemens Desiro and Caterpillar This achievement looks all the more engines, which are operated by CFR. impressive since the subsidiary of LUKOIL AVANTGARDE ULTRA For reference, the Siemens Desiro is a LLK-International was the first certi- SAE 15W-40 API CI-4/SL OIL family of high-speed diesel or electric fied company in Romania supplying IS USED IN CATERPILLAR ENGINES multiple unit passenger trains manu- lubricants for the above-mentioned factured by Siemens AG. Caterpillar locomotives. It should also be noted that nowadays LLEE is the only company in Romania which has received AFER’s approval to accept LUKOIL ATF SYNTH HD, which is used in Desiro engines. In the context of collaboration with Romanian Railroads it should also be noted that an agreement on strategic partnership with CFR’s Passenger TransportationDepartment is being im- plemented, the purpose of which was a two-year post-sales monitoring of lubes used in Desiro and Caterpillar

ROMANIA’S TRANSPORT MINISTRY HAS ALREADY APPROVED THE USE OF LUKOIL LUBRICANTS IN THE ENGINES OF CATERPILLAR (PHOTO) AND DESIRO LOCOMOTIVES

11 ULTRA was shown to perform at a high level according to a number of indi- cators (viscosity at a temperature of 100 °C, the viscosity index and the flash point), and the results were fully compliant with the standards of the Romanian Transport Ministry. It should also be noted that LLEE today is the only company in Romania with AFER’s approval of LUKOIL AVANTGARDE ULTRA SAE 15W- 40 API CI-4/SL oil, which is used in Caterpillar engines. LLEE won the tender to supply more than 45 tons of this oil until the end of June. That said, the success story outlined LLEE MONITORS QUALITY OF LUKOIL LUBRICANTS IN ITS OWN LABORATORY above cannot be viewed in isolation from another important issue, which is engines. In line with the agreement, dit committee, including experts from becoming increasingly important, i.e. two teams of experts were set up at CFR, AFER and LLEE, conducted com- the environmental safety of goods and LLEE and AFER, operating indepen- parative analysis of the results. The environmental protection. The life cy- dently of each other as they carried out application tests on lubricating oils. Since the December 2011 start, In recent months, LLEE has won three large CFR tenders for the expert teams tested six samples of the supply of lubricants lubes and performed laboratory tests every month after an engine had run 1,000 km. The tests were completed findings of the committee brought cle of lubes is known to be longer than this year, after which an ad hoc au- good news, as LUKOIL AVANTGARDE that of fuel. For this reason, the environmental concerns of lube manufacturers cannot be limited merely to sup- REACHING OUT TO REACH* plying goods to the market. LLK-International appointed LLEE as the sole representative of all LLK According to the current Romanian Group refineries in the process of registration of chemical substances that legislation, 80 percent of the total will appear on the EU market. volume of lubricating oils in circula- LLEE has made continued efforts to register its chemical substances since tion is subject to collection and sub- November 2010. This work is being carried out in keeping with the cur- sequent regeneration. In March, LLEE rent EU REACH (Registration, Evaluation, Authorisation and Restriction signed the first agreement on utiliza- of Chemicals) regulations. To date, the company completed the second tion of used lubricating oils and recov- stage of registration of the following group of substances in the range of ered 500 tons of those. One month 100-1000 tons: prior to this event the LLK-International subsidiary entered into a contract with Products from NORSI Refinery: Mechel Targoviste group of compa- • Residual lube oils ( CAS 90669-74-2) (number 90669-74-2 in the nies, according to which the seller is register of the Chemical Abtracts Service– CAS, which is a compre- obliged to supply to LLEE 60 tons of hensive database on chemical compounds); spent transformer oil for subsequent • Petrolatum (CAS 8009-03-8). testing and utilization. As a result, LLEE’s contract with Mechel is an apt Products from NAFTAN Refinery: illustration of how the Russian com- • Calcium sulfonate – benzenesulphonic, С-14-44 bifurcated and pany is attempting to conquer strong linear aliphatic one-atom radicals, calcium salts, polyatomic (CAS positions in the segment of waste lu- 91696-74-1); bricating oils on the European market. • Calcium alkyl phenolate – dodecylphenol, calcium salts, polyatomic, It should be noted that nowadays LLEE sulfurated, saturated with carbon dioxide (CAS 68784-26-9). is Romania’s first and only producer, importer and trader of lubricants, *REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) is the cur- which has received Environmental rent system for controlling chemicals in Europe. It went into effect on June 1, 2007, when it Approval for direct collection of waste became law in the United Kingdom. From Dec. 1, 2008, chemicals that are manufactured oil in the Romanian market. This year, or imported into the EU have to be registered with the European Chemical Agency (ECHA) LLEE is expected to collect directly in Helsinki. from the waste oils generators more than 2,000 tons of oil.

12 LUKOIL Gear Oil for HeidelbergCement Plants

in Ukraine PARTNERSHIP

he pool of foreign buy- Besides this, the use of LUKOIL oil al- terials. The company has been active Ters of LUKOIL gear oil has lowed the Ukrainian group to reduce in the Ukrainian market since 2001. been expanded through a recent the number of used gear oils. This is pos- Today, the Group is involved in ce- inclusion of another reputed in- sible due to LUKOIL STEELO oil brand ment production (HeidelbergCement dustry giant. LLK Ukraine, a sub- being unified and used for lubricat- Ukraina owns cement plants in sidiary of LUKOIL Lubricants Co., ing industrial transmissions of different Krivoy Rog and Dneprodzerzhinsk, in signed a contract with Heidel- kinds, circulation systems, oil mist and Novoamrosievskoe village, Donetsk bergCement Ukraine Group of Com- splash lubrication systems. Moreover, it Region and Yenakievo), ready mixed panies (the Ukraine-based subsidi- also boasts a wide viscosity range. All concrete (HeidelbergBeton Ukraina ary of the well-known multinational of these factors chip in to improve the owns mixing plants in Krivoy Rog and Heidel-bergCement Group) to sup- quality of equipment maintenance and Lugansk) and granite macadam, with ply LUKOIL STEELO 150, 220 and meet all of the client’s needs in regard quarries in Dnepropetrovsk and Kiev 460 gear oil. to gear oil of this class. regions. The Group’s companies produce a wide range of high quality cement, LUKOIL STEELO’s performance features fully comply with concrete and sand-and-gravel mix, the client’s gear oil quality demands and provide an adequate and hold quality management certif- alternative to gear oil marketed by Western producers icate ISO 9001 and environmental management certificate 14001. “LUKOIL STEELO’s performance The buyer was able to testify firsthand HeidelbergCement, founded in 1874 features fully match the quality lev- to LUKOIL STEELO’s high quality during in Heidelberg, Germany, is the glob- el of imported lubricants (type CLP plant tests, which had been conducted al market leader in aggregates and a DIN51517p.3) and present an on the cement producer’s equipment. prominent player in the fields of ce- adequate alternative to them,” The results obtained through these tests ment, concrete and other downstream says Pyotr Zavaly, engineer at gave the best recommendations for activities, making it one of the world’s HeidelbergCement Ukraina’s Repair use of the LUKOIL product: during all largest manufacturers of building ma- Service. test runs no equipment breakdowns or failures were reported. THE CEMENT PLANT IN KRIVOY ROG IS ONE OF THE MANY INDUSTRIAL ASSETS OWNED LUKOIL STEELO’s performance fea- BY HEIDELBERGCEMENT GROUP IN UKRAINE tures fully comply with the client’s gear oil quality demands and provide an adequate alternative to gear oil marketed by Western producers. One of the main competitive advantages of LUKOIL STEELO gear oil is the ability to slash production costs related to equipment operation. This is possible due to LUKOIL STEELO’s highly efficient composition of hydro-treated mineral base oils and a multifunction- al set of additives. Their active components provide for better lubricating, antioxidant, corrosion-resistant, viscosity-temperature, antiwear and extreme pressure features. This helps maintain high performance features over the entire period of oil use, extending the life of industrial equipment and reducing downtime- and repair-related costs.

13 Alexei Strelchenko: Our Base Oils Enjoy PRUDUCT High Reputation

LUKOIL is a leader of the lubricants market in Russia, producing over 1.2 mln tons of base oils per year. In this interview, LLK-International Deputy General Director for Commercial Affairs Alexei Strelchenko talks about the company’s performance last year and the outlook for developing the base oils business further.

– What are LUKOIL’s priorities under these products spans North and South their oil consumption habits quickly or its export policy for base oils? America, Africa and Eurasia. switch over to other groups of oil. LLK does not currently sell base oils on the – Looking at the global distribution of – What is your forecast for export of Russian market. production and consumption of base base oils in 2013? The bulk of these oils are contracted oils on a worldwide basis, it becomes under long-term agreements with in- readily apparent that most markets – I’d say that we can expect month- dustry majors. Our base oils have are currently oversupplied. This is the ly exports in the amount of 50,000 to a sterling reputation given the strict case, first and foremost, in Europe, 60,000 tons. quality control of our products and where supply considerably exceeds their high technological level. Our demand in nearly all countries. Thus, – How does LLK intend to expand its compliance with the highest quali- if before 2008 LUKOIL’s base oils logistics capabilities so as to continue ty standards and the presence of ef- were largely represented in Europe, scaling up the footprint of its base oil ficient logistics infrastructure enables nowadays the supply geography of supplies? us to dispatch the maximum volume of base oils to over 35 countries around LLK DEPUTY GENERAL DIRECTOR – LLK-International is the only Russian the world. As regards the Russian FOR COMMERCIAL AFFAIRS manufacturer that delivers base oils market, our aim is to sell branded off- ALEXEI STRELCHENKO not only in bulk shipments (via tankers the-shelf oils. and rail), but also using flexitanks. LLK has had long-term contracts to supply – The volume of exports depends on Group I base oils to such globally well- the macroeconomic situation. How known companies as Chevron, Afton, quickly do you think LUKOIL can re- Petronas, as well as to state-owned spond to changes in the market envi- companies based in the Middle East. ronment? This year, we plan to supply base oils in flexitanks to South America, Mexico, – Quite quickly, I’d say, within about Jordan, India, the Middle East, Japan, a month. Last year the macroeco- the U.K. and Scandinavia. nomic environment was extremely unfavorable. Market prices on the – Over time the need for Group I base base oils market were marked by a oils will be reduced to a minimum on high degree of volatility, and the rate foreign markets. Does LLK plan to sell of sales of our products fell short of these oils on the Russian market? our expectations. Nowadays, we sell about 70 percent of the total volume – The need for Group I base oils is in de- of goods produced under long-term cline. The cost of production could soon contracts and despite the macroe- be higher than the selling price. That conomic environment we never fail said, there are still some industrial con- to honor the obligations taken upon sumers that for technical reasons will not ourselves. be able to abandon use of these oils. For example, manufacturers of marine The full version of this interview can be found in engines will hardly be able to change the Argus Base Oils report dated July 5, 2013

14 ChemCamp – Science and Business Go Hand in Hand FORUM

The Lomonosov Moscow State University (MSU) hosted the first International Student Forum ChemCamp from April 4-7. This was the first time LLK acted as an official partner of the event, which was attended by about 400 students of the chemistry department and graduate students from chemistry departments across Russia and neighboring states. The forum provided an opportunity to meet a large number of talented, ambitious and self-confident young specialists. The cream of the crop will have a chance to join the LLK team.

hemistry is a branch of bring together chemistry students from intellectual and psychological com- “Cscience that calls for various universities and institutes. This ponents are in the foreground,” said the largest number of specialties in idea turned out to be extremely useful LLK General Director Maxim Donde greatest demand,” said the Dean of and topical since the ChemCamp fo- in his speech at the forum. As part of the Chemistry Department of MSU, rum offered participants an excellent its partnership program, LLK provides Academician of the Russian Academy opportunity to show their knowledge regular updates to graduates on the of Sciences Valery Lunin. Regrettably, during the academic competition and current state of the market and its re- though, science is evolving along a team tournament, and also to learn quirements, thereby prompting tal- different track compared to big busi- about career options in their chosen ented young people to develop their ness. The situation in which large in- field of study. knowledge and harness the poten- vestments are being made in research “The oil and gas market is hard to tial of their chosen specialty within that has no practical application must predict, but is generally governed by the oil and gas industry. Furthermore, be changed, and scientific research logic. The main thing is that it is un- chemistry is among the most expen- results must find application in prac- dergoing a transformation – from sive fields of study and the state’s ma- tice, enjoy demand from business and raw commodities to trade in servic- jor layouts in training future specialists be geared towards solving contempo- es, technologies, and the transition are lost if these people go to work in rary problems. to a virtual marketplace where the other areas. One of the most important steps in achieving these goals should be the orientation of young specialists (university students and graduate students at the relevant higher education institutions with a view to solving the current challenges facing industry and business. For this reason, LLK has been rapidly expanding its partnership program targeting collaboration with leading higher education institutions in Russia and neighboring countries. This year, the company, which has gained the support of LUKOIL, supported MSU’s initiative to

VALERY LUNIN, THE DEAN OF THE MOSCOW STATE UNIVERSITY’S CHEMISTRY DEPARTMENT (RIGHT) AND LLK-INTERNATIONAL GENERAL DIRECTOR MAXIM DONDE

15 The was not the first time LLK had the Eva Shekunova. Another positive is- chance to meet with MSU chemistry sue is that the forum was attended not students, since the company has been only by MSU students, but also col- holding annual corporate presenta- leagues from St. Petersburg, Samara, tions aiming to recruit talented spe- Novosibirsk, Yekaterinburg and also cialists for several years already at Minsk, thus allowing us to go beyond leading institutions of higher learning, the borders of leading higher educa- including the country’s oldest univer- tion institutions in Russia. The forum al- sity. This year, however, the format of so provided an opportunity to get to collaboration was radically different. know potential candidates interested “Before this we collaborated with the in taking part in Internship, a corpo- Chemistry Department of MSU, but this rate project. As a matter of fact, some time around we’re reaching out to the of the people who aroused interest in whole student body. On the sidelines themselves due to their scores in the of the forum we arranged a headhunt- academic competition were called in ing fair,” said HR Head of LLK Olga for an interview at LLK. Proshutinskaya. Students and gradu- “As for our focus at ChemCamp, we ate students had the chance to hear were interested not only in strong straight from representatives of major chemistry specialists, but also candi- companies represented at the forum dates with a broad vision and deep (SIBUR, Rosatom and P&G, among erudition in other fields. Leadership others) that aside from research or sci- qualities are a whole separate issue. entific work in the field of chemistry, We’re looking to recruit people who and research results on new formulas show leadership potential so that we for lubricants, there are also positions could entrust them with projects, in- available for technical experts who cluding international projects, at a work with leading auto manufacturers later time. All the more, since LLK’s or large industrial companies. foreign business is expanding rap- “For us, this forum was, first and fore- idly, and each year the company most, an image-making event,” noted is entering new foreign sales mar- Senior Manager of the Department kets and gaining new assets,” said for Operations with LLK Personnel Shekunova.

SAE CONFERENCE IN DETROIT: DRIVING FORCE OF THE FUTURE The Society of Automotive Engineers (SAE) held a conference in Detroit, U.S.A., from April 16-18. This is one of the largest world-scale venues bringing together every year engineers, managers, teachers and students from 97 countries around the globe. The SAE conference may rightfully be considered a source of technical information and experience used in the development, production and servicing of transportation vehicles. The forum featured reports on development trends of the automobile industry and related changes in the requirements for lubricants. This was the first time that LLK-International took part in the conference. The Company was represented at the forum by managers of the OEM Department Yury Galkin and Ivan Drokin, who took part in the sessions devoted to the application of lubricants in advanced automobiles. The conference also featured an exhibition at which automakers and large suppliers of auto components displayed their cutting-edge solutions.

16 WTCC: LUKOIL GENESIS’ Russian Premiere CORPORATE AFFAIRS CORPORATE

LLK-International, leader of the Russian lubricants market, was hon- ored to unveil its premium brand LUKOIL GENESIS motor oil during the Russian stage of the FIA WTCC 2013 race.

he World Touring Car it offers not only a new high-quality for LUKOIL GENESIS on the Russian TChampionship (WTCC) may product – the next-generation LUKOIL marketplace. “LUKOIL is spot on here, without exaggeration be regarded as GENESIS synthetic oil – but also a mainly because the price/quality ra- one of the most important international whole range of services and market- tio of this product works just right. racing events. ing initiatives, which are unrivaled on Based on the feedback we got from Russians had the chance to get a the domestic lubricants market. a number of dealers we work with this close-up view of world-class driv- “As part of WTCC’s Moscow stage is really a high-quality product. I think ers competing in this race at the we presented LUKOIL GENESIS to our we’re going to start offering LUKOIL Moscow Raceway on June 9. It was guests, who had the chance to admire lubes to our clients before long,” the sixth round of the WTCC 2013 this high-tech premium product that Dyushko said. Championship, in which 11 teams has already won the motorists’ hearts Autocenter City Kashirka (an official and 23 drag racers took part, includ- and minds in many European coun- Volkswagen dealer) managing direc- ing the LUKOIL Racing Team, the only tries. Incidentally, this was the first tor Yury Moshurov also believes that Russian team on the circuit. After last public presentation of this brand of oil the LUKOIL GENESIS line of oils has a year’s race in Macao (China) and the in Russia,” Volodin pointed out. superb future, which, incidentally, de- 2013 season-opening WTCC stage in One of the guests in attendance was pends on the correct positioning of this Monza (Italy) that was held in March, Sergey Dyushko, head of market- product and the way it is perceived by the Moscow Raceway provided LLK ing at Block Motors (an official deal- the Russian representatives of foreign with another opportunity to meet with er of Hyundai, Mitsubishi, Opel, auto manufacturers. its business partners. Chevrolet, Renault, Volvo, Ford and “The declared features of GENESIS This time around, representatives of Nissan automobiles), who gave an oils are compliant with high quality large franchised workshops (FWS) were upbeat assessment of the prospects standards, and this brand can be used invited to attend, as they are one of the main channels used to promote products. Delegations from other large foreign auto manufacturers such as VW, Renault-Nissan, GM, UZ Daewoo, and others, also attended this event. The line- up of illustrious guests was no mere coin- cidence, since LLK is targeting direct relations with large multi-brand franchised workshops in light of changes in the consumption structure of lubricants. “This trend has shifted the focus in the Company’s commercial and marketing policy, encouraging it to scale up its footprint in this segment,” noted LLK brand manager Igor Volodin. The company has devised a unique FWS support program, under which

VIP VISITORS WERE ABLE TO ENJOY THE RACE IN A SEPARATE PAVILION THAT WAS ERECTED CLOSE TO THE RACEWAY

17 in premium price segment automobiles decision was made not to hold a for- or in top models of the mid-price seg- mal presentation. ment after the main warranty has ex- Visitors who showed interest in the pired,” Moshurov explained. new product had the chance to re- “Winning consumer trust is a lengthy ceive on-the-spot consultations from process and it comes with experi- LLK’s technical specialists. ence in the business. When automo- “LUKOIL GENESIS has already bile owners start to use a new brand passed the tests on our racing cars of of oil and realize that it’s up to par, the LUKOIL Racing Team. This says a the circle of consumers will broad- lot about the quality and properties of en. GENESIS oil has gained access GENESIS oil, since racings cars stand to leading world manufacturers, but at the pinnacle of engine evolution,” even more important than the facts said Volodin. and figures is how the oil behaves in The authorized use of GENESIS un- real-life conditions, how an engine der the umbrella of WTCC is the best runs, what kind of fumes are emitted, proof of the high quality of LLK’s pre- or how the engine starts up cold,” scribed formulas. The Company stays said Vitaly Klyushnikov, head of the abreast of state-of-the art global AvtoSpetsCenter Nissan franchised trends in engine design, including a workshop. higher engine operating temperature So far this product is available only and a smaller engine size. GENESIS at franchised workshops of a number technical specifications surpass the of large foreign automobile manufac- requirements set by international clas- turers. sifications, and this resilience cushion As a sponsor of the Russian stage of gives the brand its competitive edge, the WTCC, LUKOIL is entitled to pro- which we offer Russian and foreign vide the new brand to virtually the auto enthusiasts. entire world. The event, which was After learning about the advantag- broadcast to more than 100 coun- es of LUKOIL’s new motor oil, LLK’s tries around the world, likely cap- guests moved over to the race track tured the attention of viewers with an bleachers. This stage turned out to array of flashy billboards promoting be more than successful for LUKOIL, GENESIS oils. The billboards were as Yvan Muller won the first race placed both at the starting gate and and finished runner-up in the second. along the track. Muller’s total points tally rose to 246 A specially designed pavilion in the and he extended his lead over main VIP area also showed the GENESIS rival Gabriele Tarquini (133 points). brand and visitors had the chance to James Thompson, a member of the get their picture taken with the driv- Lada Sport LUKOIL team, managed ers, receive memorabilia and take to turn in the best performance in the part in interactive events. Given that world championship for his team, tak- this was an entertainment venue, the ing fifth place in the first race.

LADA SPORT LUKOIL TEAM DRIVER JAMES THOMPSON GIVES A FAN HIS AUTOGRAPH

18 LUKOIL Launches Production of UZAUTOOIL Oils

for Uz-Daewoo PARTNERSHIP

The annual dealer conference of Uz-Daewoo on May 23-24 marked the initial results of collaboration with LLK on the production of UZAUTOOIL motor oil. Igor Davydov, the executive director for the car manufacturer’s representation office in Russia, commented on the main aspects of mutual relations between the partners.

in the quality of the product. It was already tried and tested over time, since LUKOIL motor oil is the first fill oil used in the engines or automobiles manufactured at GM Uzbekistan. The second issue is the partner’s status and reputation. The third is the ability to roll out long-term relations. After holding a number of negotiations we decided to go with LLK, since this company fully meets the parameters of a strategic IGOR DAVYDOV, partnership. DMITRY LEONOV, HEAD OF LLK’S EXECUTIVE DIRECTOR OF UZ-DAEWOO’S DEPARTMENT FOR DOMESTIC MARKET REPRESENTATION OFFICE IN RUSSIA – What can you say about collabora- SALES, WAS IN CHARGE OF UZAUTOOIL OIL tion with LLK? PRODUCTION PROJECT ON BEHALF OF LLK

– How did you come up with the idea – I’d like to say that as soon as we izational issues were resolved rap- of producing original oils? reached an agreement the overall ap- idly and constructively. Not only did proach of the partners to the design, we find common ground, we were al- – All leading auto manufacturers have manufacturing and further promotion so able to completely outline our vi- their own brand of motor oil. The GM of the new product became very clear. sion of the new brand of motor oil – Uzbekistan plant in Asaka makes 10 Most of the technological and organ- UZAUTOOIL. models of automobiles, three of which are supplied to Russia under the Uz- Daewoo brand: the Nexia, Matiz and UZ-DAEWOO Gentra. Given the sales volumes of Uz- Daewoo on the CIS market, and also GM-Uzbekistan joint venture (called Uz-Daewoo Auto Co. until March the total output at GM Uzbekistan, the 2008) has manufactured Nexia and Matiz cars under the Uz-Daewoo appearance of motor oil under the brand at an automobile plant in Asaka since 1996 and 2001, respectively. UZAUTOOIL brand is an entirely jus- In 2013 a new brand was added to the production line, the C-class Gentra. tified move. And taking into account Localization of production is more than 60 percent. the size of the Uz-Daewoo dealer net- According to data from the Association of European Businesses’ work in the CIS, i.e. 128 dealers with Automobile Producers Committee, the brand traditionally ranks among 243 sales outlets, the new brand of the top 10 foreign makes sold in Russia. The Matiz has been the win- UZAUTOOIL oil is capable of becom- ner of sales ratings in its class for many years. In 2012, 112,000 Uz- ing a commercially successful product. Daewoo cars were sold in the CIS, of which 88,232 vehicles were sold in Russia. According to data from AA Avtostat, the Uz-Daewoo dealer – What criteria did you use to select network is one of the largest with nearly 250 trade and service centers in the partner? the CIS, including Russia. The brand is represented In Russia by 156 car dealerships in nearly 100 cities, ranging from million-plus cities down to – We used several criteria to select the regional centers. partner. In the first place, we factored

19 NEWS www.lukoil-masla.ru

Turkish Dealers Visit conference in Russia. During our trip sellers: they will be entitled to a gift – Moscow and Perm we were able to visit LUKOIL’s larg- a slide-resistant mobile phone holder est refinery, exchange our experi- (used in cars) named GECKO – for ences and information with other each can of oil sold. distributors, which is undoubtedly going to benefit all of us in our fu- Lukoil Marine Lubricants ture work. I would like to thank all Increases Turnover to $200 Mln who contributed to making this hap- pen,” added Melis Caglayan, rep- Specializing in lubricants for the mari- resenting the Izmir-based Caglayan time industry, Lukoil Marine Lubricants Metal company. Ltd. increased its sales revenue in the “I would like to thank our hosts for past financial year 2012 by 74 per- the hospitality they have shown dur- cent to around $200 million. The result LLK Eurasia organized a visiting con- ing our visit. We had the chance to was announced in late March by CEO ference on May 15-17 for 35 dealers take a close look at the impressive Viktor Zhuravsky in Hamburg. with the aim of developing the distri- production and manufacturing tech- Founded in 2008, Lukoil Marine bution of LUKOIL lubricants in Turkey, nologies in Perm, which made a last- Lubricants is a LUKOIL subsidiary. the Middle East and Africa. ing impression on me,” summarized The company’s recent performance Conference participants summed up MAKYAGSAN’s Mithat Guzel. marks a continuation of its headlong performance results in 2012 and got growth. “Having full support from acquainted with the program of inten- LLK Keeps Expanding in China the parent company we’ve man- sive business development in 2013- aged to build a truly global, effi- 2014. The event included a meet- cient organization which is now the ing with LLK-International General fastest growing company in the in- Director Maxim Donde, who devoted dustry. There are five operational particular attention to building a sys- offices in Russia, Germany, United tem of high-quality distribution of lu- Arab Emirates, Singapore and USA bricants in the above-mentioned re- and number of highly experienced gions and stressed that LLK’s dealers marine professionals all over the are its key link. The event also fea- world located in Greece, UK, Italy, tured a visit to LUKOIL’s largest oil re- Norway, Holland, India, China, finery – LUKOIL Permnefteorgsintez. Hong Kong, South Korea, Japan, “The visit to LUKOIL’s plant was ex- Taiwan, Australia and South Africa. tremely important as it demonstrat- On April 24-26, 2013, LLK- We have everything in our hands so ed the scale, the firm foundation of International participated in the car I’m confident we will continue to ex- LUKOIL’s corporate structure and the components and lubricants exhibition pand our business on a long-term key role the company plays in the in Beijing, China. basis,” Zhuravsky stated. Russian market. We have taken up- Stefan Claussen, Technical and on ourselves a great responsibility to LUKOIL GENESIS Sales Marketing Director at the Hamburg achieve ambitious goals and we need Kick Off in Serbia office of LUKOIL Marine Lubricants, to make tremendous efforts in order said, “By contrast with our competi- to grow LUKOIL’s share in the Turkish LLK-International announced the tors, we are persistently expanding market and generate maximum sales launch of sales of LUKOIL GENESIS our global network. Our lubricants growth. I’m taking home the most pos- motor oil in Serbia. The product will are now more readily available in itive impressions from this pleasant be marketed in retail stores, including many ports than those of other suppli- trip and our hosts were truly hospita- LUKOIL’s chain of gas stations through- ers. In addition, we focused at an ear- ble,” CAN-TEK LTD. STI representa- out the country. LUKOIL GENESIS was ly stage on the development of new tive Ismail Celikan said. unveiled at Belgrade’s internation- high-grade oils for ship’s engines, “I’m very grateful for having had al car show in March. The marketing which reduce both consumption and the opportunity to participate in this campaign includes an incentive for the wear and tear.”

20 LLK – PARTICIPANT IN THE 20TH INTERNATIONAL “RUSSIAN COAL AND MINING” TECHNOLOGY EXHIBITION

On June 4-7, Novokuznetsk hosted the 20th International Specialized Mining Technology Exhibition entitled Russian Coal and Mining. The event was supported by Russia’s Energy Ministry, the Union of Germany’s Machine-Building Companies, Germany’s Trade Association of Machine-Builders in the Mining Sector, the British Association of Mining and Shaft Equipment, the Czech Republic’s Industry and Trade Ministry, the Kemerovo Region administration, Novokuznetsk administration and the Siberian State Industrial University. LLK-International participated in the exhibition.