Global Energy Global Energy Company Company SCALE TECHNOLOGY RESPONSIBILITY Rosneft is the Russian oil Rosneft is the champion Rosneft is the biggest taxpayer Annual report 2013 industry champion and the of qualitative modernization in the Russian Federation. world’s biggest public oil and innovative change in the Active participation in the Annual report 2013 and gas company by proved Russian oil and gas industry. social life of the regions hydrocarbon reserves Proprietary solutions to of operations. and production. improve oil and synthetic Creating optimal conditions Unique portfolio of upstream liquid fuel production for professional development assets. performance. and high standards of social Leading positions for oshore Establishing R&D centers security and healthcare for development. in a partnership with global the employees. Growing role in the Asia- leaders in technology Unprecedented program Pacific markets. development and application. for land remediation. ROSNEFT Scale Technology Annual report online: www.rosneft.ru Responsibility www.rosneft.com/attach/0/58/80/a_report_2013_eng.pdf OUR RECORD ACHIEVEMENTS 551 RUB BLN RECORD NET INCOME +51% Page 136 4,694 RUB BLN RECORD REVENUES +52% Page 136 85 4 ,873 RUB BLN KBOED RECORD DIVIDENDS RECORD HYDROCARBONS PAID IN 2013 PRODUCTION +80.3%* Page 124 Page 28 90.1 42.1 MLN TONS* BCM** RECORD OIL GAS PRODUCTION, REFINING VOLUMES RUSSIA’s third largesT References to Rosneft Oil Company, Rosneft, or GAS PRODUCER the Company are to either Rosneft Oil Company or Rosneft Oil Company, its subsidiaries and affil- +46% iates, as the context may require. References to * TNK-BP assets accounted for from the date TNK-BP, TNK-BP company are to TNK-BP Group. of acquisition. The information in this Annual Report 2013 is as Page 46 Page 64 ** Pro forma data. (TNK-BP assets accounted of December 31, 2013, unless otherwise stated. for starting January 1, 2013) Rosneft is the leader of Russia’s petroleum industry and the world’s largest publicly traded petroleum company. Rosneft activities include hydrocarbon exploration and production, upstream offshore projects, hydrocarbon refining, and crude oil, gas Annual REPort 2013 and product marketing in Russia and abroad. TABLE OF CONTENTS Message of the Chairman of the Board of Directors ...........4 Building International Business ............................74 Message of the President and the Chairman Science and Innovation ...................................80 of the Management Board .................................6 Occupational safety and Health, Industrial Safety, Efficient Development Strategy .............................8 and Environmental protection .............................88 Occupational and Industrial Safety Rosneft Geography of Operations ..........................10 Environment Protection Emergency Prevention and Response Financial, Operating and Sustainable Energy Efficiency Improvement and Energy Saving Development Highlights ..................................14 Corporate Governance ..................................100 Exploration and production ...............................18 Exploration and Reserves Replacement Employees and Social Responsibility ......................128 Crude oil production Company Team Hard-to-Recover reserves Social Policy and Charity Offshore Projects Development – Rosneft Financial Highlights ..............................136 in the Forefront of the World Energy Sector .................36 Financial Highlights Debt Portfolio and Credit Ratings Improving Efficiency of Contractor/ Effective Investment Governance Supplier Relations .......................................44 Appendix ..............................................142 Refining, Commerce and Logistics .........................46 Crude Oil Refining: Quality, Efficiency, Safety Additional Information .................................. 287 Efficient sales of oil, gas and refined products General Information about Rosneft Glossary Gas Business Development ...............................64 Сontact Information ANNUAL REPORT WITH INTEGRATED REPORTING ELEMENTS Visit our website: www.rosneft.com Rosneft’s Annual Report 2013 contains elements of integrated reporting as defined in the «International Integrated Reporting Standard» published by the International Integrated Reporting Council (IIRC). it aims to present Company financial results and achievements in the area of sustainable development, highlighting the existing relationships among the competitive environment, Company strategy, business model, risk management structure and a clear corporate governance structure. Since 2012, Rosneft has been part of the IIRC pilot program intended to clearly define international stan- dards of integrated reporting. MessaGE OF THE CHAIRMAN OF THE BoaRD OF DIRectoRS Dear shareholders, exploration program in the Arctic. It in- Board of Directors of OJSC Oil Company and financial policies in the areas of cluded, first of all, the entire complex of Rosneft, in pursuance of an assignment cost control, liquidity improvements, The 2013 results are further proof that scientific hydrological and meteorolog- of the Chairman of the Government timely debt repayment and dividend Rosneft remains the unfailing leader ical studies, analysis of ice conditions, of the Russian Federation, adopted distributi ons. Our Company’s successes of Russia’s oil industry, and a reliable exploration and appraisal. Concurrently, a resolution on September 29, 2013 in 2013 underpin the effectiveness of our source of revenues for the national Company management has been highly to acquire the common and preferred strategy, the relevance of our defined budget. Our Company has become successful in securing tax incentives for shares of an OJSC Oil Company Ros- priorities and suggest that one may notably more active in its international offshore and tight oil developments. neft subsidiary, OJSC RN Holding, by count on Rosneft’s sustainable develop- projects, confidently occupying leading sending to the shareholders of OJSC RN ment for the benefit of its shareholders positions on the global oil and gas Special note should be made of the Holding a voluntary proposal to acquire going forward. market. policy pursued by Rosneft management, all of the shares in their ownership. The under the leadership of Company CEO voluntary proposal was accepted by During the reporting period, Rosneft I.I. Sechin, which aims to build a system 7.195 private individuals and 208 legal closed a record number of major acqui- of long-term contracts. In 2013, Rosneft entities including international financial sitions in the areas of oil and gas pro- made record additions to the portfolio funds. As a result, OJSC Oil Company duction, oil refining, and infra structure of these contracts across all indicators – Rosneft has consolidated almost 100% facilities. As the result of these deals, in- this is true as regards the sheer number of the shares of OJSC RN Holding. For cluding 100% integration of the acquired of such contracts, but also supply the veteran shareholders who received TNK-BP assets, Rosneft has become the timings and volumes. Besides, the some TNK-BP shares upon initial offering world’s largest public oil and gas com- majority of long-term contracts provide at the time of privatization, a mechanism pany. Successful consolidation of these for advance payments which allows was offered for them to subsequently new assets has allowed our Company to the Company to conduct its business buy the shares of OJSC Oil Company achieve sizeable synergies. efficiently. Rosneft for the money they receive from the sale of their shares of OJSC Based on the results of the hydrocarbon In 2013, following the acquisition of RN Holding. The aforesaid mechanism reserves audit conducted by DeGolyer TNK-BP assets, Rosneft’s shareholding was also used by several hundreds of & MacNaughton, the Company confir- structure changed. OJSC ROSNEFT- people. The ongoing activities shall lead med its status of the world’s leading EGAZ, wholly owned by the govern- to the consolidation of 100% shares of public oil company in terms of proven ment, remains its major shareholder OJSC RN Holding in the ownership of hydrocarbon reserves and resources. (69.50%). Following the deal, 19.75% OJSC Oil Company Rosneft in 2014. Rosneft’s proven hydrocarbon reserves is held by BP, one of the oil majors, replacement ratio has come close to with another 10.75% being in free float. In 2013 Rosneft confirmed its status 287%* according to the SEC and the In 2013 and current year, Rosneft shares as a socially responsible company by Company’s proven reserves life is 19 were bought by Company CEO and signing a number of bilateral agreements years, including 16 years in oil and 36 Vice-Presidents and many top managers with 10 subjects of the Russian Federa- years in gas. Reserves replacement increased their shareholdings, which is tion aimed at creating favorable econom- was supported by, among other things, in line with the world’s best practices, ic, legal and institutional conditions for efficient exploration activities, which and broadcasts confidence in Rosneft’s the development of social infrastructure received investments of RUB 38 billion continued successful development and of the subjects, implementing social proj- in 2013. As a result of the completed shareholder value growth. ects on their territory, developing invest- program of exploration activity, 6 fields ment activity and meeting the demand in and 70 new deposits were discovered. Setting a high benchmark